Generalized System of Preferences (GSP)

  • GSP is largest and oldest US trade preference programme introduced in 1976.
  • It is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries both developing and developed countries.
  • Under it, a wide range of industrial and agricultural products originating from certain developing countries are given preferential access to US markets.
  • India’s case, GSP enables duty-free entry of 3,500 product lines in US markets, which benefits exporters of textiles, engineering, gems and jewellery and chemical products. 
  • The total US imports under GSP in 2017 was $21.2 billion, of which India was biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion).  
  • The US Congress in March 2018 had voted to renew GSP through 2020.
  • Why in news? The United States Trade Representative (USTR) has formally announced that it is reviewing eligibility of India, Indonesia and Kazakhstan in Generalized System of Preferences (GSP) based on concerns about countries’ compliance with program. The reviews are based on Trump administration’s new GSP country eligibility assessment process as well as GSP country eligibility petitions

Impact on Trade with India

  • The withdrawal of the Generalised System of Preferences from India would result in the elimination of duty-free access for about 2,000 Indian product lines.
  •  This will hurt small businesses such as jewellery.
  • This will adversely affect Indian exports to the US.
  • After the withdrawal of the Generalised System of Preferences number of goods qualifying for preferential treatment could be reduced, or the whole programme could be withdrawn.

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