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What Is The US-GSP Scheme And What Will Be The Loss To India On Its Removal

By Admin | 25th Mar 2019


Generized Systemized System of Preferences (GSP) is an American business program that offers Duty Free Entry in the United States to the products of Developmental Countries. That is, the countries in the United States GSP program are given special preference. The United States does not charge on imports of a fixed amount from those countries.

The policy of the Generized System of Preferences provides a free Duty Free entry in the United States to approximately 4,800 products in 129 development countries. Generated System of Preferences was established on 1 January 1976 by the Trade Act of 1974
It is known that the US has recently made India out of the list of countries taking advantage of this scheme, whose effects have been discussed in this article.

India and US Trade:
According to US statistics, the two countries make an annual trade of $ 126.2 billion in which the US exports to India $ 49.4 billion and imports $ 76.7 billion. That is, India's business with the US is in the $ 27 billion surplus.

India; America mainly exports textiles, fruit vegetables, handicrafts, chemicals, fishery related products and agricultural based products; America; India exports machinery, agricultural products, IT products, medical products, automobile vehicles, etc.

 

What will be the impact on India?
According to the Congress Research Service report released in January, India has got the most benefit of the GSP scheme. In the year 2017, India's export duty was $ 5.7 billion, while Turkey exported goods worth US $ 1.7 billion to the United States. India is the world's largest recipient of benefits under this scheme created in 1974.

So far, the 1930s going to India from India due to this policy would have escaped import duty in the US. With this change, India will have to pay import duty to India's handicrafts, chemicals, fishery related products and agricultural based products. If you talk about its impact, it could cause thousands of jobs.

But if Commerce Secretary Anup Wadhawan is concerned, then he says that India; GSP exports US $ 5.6 billion worth of goods, out of which only $ 1.9 million worth of items are in the category of no fee. Overall, the effect of the removal of GSP will not be very much on the Indian economy and it will be limited to a maximum of $ 1 million.

The expansion of GSP will harm the competitiveness of many manufacturing sectors. Most chemical products are expected to increase by around 5%, which is a major part of India's total exports, as well as it will also harm Indian consumers.

 

Why did the US do this?
The US says that due to restrictions in India, it is doing business losses. He has failed to meet the criteria of GSP. The United States began reviewing the conditions set for GSP in April last year. Last year, on June 1, 2018, America imposed 25% on steel and 10% tariff on aluminum.

Trump says that India did not give America 'equitable and fair' access to its market. With this, Trump has criticized the duties on many American products in India.
Keep in mind that India charges 100% tariff on a bike exported from the US (Harley Davidson), while the United States does not take any tax on similar goods coming from there. Trump said that we will also impose equal tariff on Indian imports.

 

It is known that America's trade deficit with India was $ 27 billion in 2017 and it is increasing, and through this policy, the US wants to reduce its trade deficit.
The US has long been demanding removal of pricing cap on medical devices in India, which is harming US companies. Apart from this, America wants that India; Provide more access to the market for IT products and agricultural products coming from the US.

Statistics show that India's trade with America is surplus, which means America; India imports more quantity than India and Indian exporters have a big market like America. Apart from this, India is also a major importer of arms for the United States. Therefore, the interests of both countries depend only on strong relations with each other. That is, the US should continue with Generized Extended System of Preferences (GSP) to India.

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