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US withdraws GSP benefits
Why is it in the news ?
- The US government withdrew GSP (Generalized System of Preferences) benefits to India worth $70 million on as many as 50 items.
- But Indian government deferred tit-for-tat retaliatory tariffs against 29 American products by 45 days.
- India's retaliatory move was to counter the US move to unilaterally raise import duties on Indian steel and aluminium products.
More in the news
- The imposition of extra tariff worth $235 million by India on 29 American goods will be delayed by 45 days, as India hopes to clinch a mutually-acceptable trade package from the ongoing negotiations.
- US President issued a presidential proclamation which leads to the removal of these products from the GSP privilege beginning 1 November.
- These are products that have gained competitiveness as their imports under GSP are more than 50% of the total import of the product by the US.
- These products will no longer qualify for duty-free preferences under the GSP programme.
- But the products may continue to be imported subject to regular Most Favoured Nation duty-rates.
- The small and medium-size businesses could be impacted, in particular the handloom and agricultural sectors.
What is GSP ?
- The Generalized System of Preferences (GSP) is a U.S. trade program designed to promote economic growth in the developing world.
- It provides preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.
- India’s case, GSP enables duty-free entry of 3,500 product lines in US markets.
- GSP was instituted on January 1, 1976, by the Trade Act of 1974.
- A wide range of industrial and agricultural products originating from certain developing countries are given preferential access to US markets.
India-US tussle
- Trade relationships between India and the US have soured under the current US administration.
- Trump unilaterally raising tariffs on steel and aluminium imports from India and challenging its export subsidy regime at the World Trade Organization (WTO).
- India has also dragged the US to the WTO on higher steel and aluminium tariffs and has threatened to impose retaliatory tariffs worth $240 million on US imports.
- India on 20 June notified that it will raise tariffs on 29 US products, including almonds, apples and phosphoric acid, worth $10.6 billion imports in retaliation to the steel and aluminium tariff hikes by the US.
- But India did not impose the tariffs immediately.
- The United States Trade Representative in April announced that it is reviewing the GSP eligibility of India.
Source
The Hindu, LiveMint.