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Generalized System Of Preferences (GSP) Trade Privilege

  • 12 Nov 2020

  • India is likely to press Biden Administration for early restoration of the Generalized System of Preferences (GSP) trade privilege for India.
  • The privilege was withdrawn by outgoing President Donald Trump’s administration in Washington DC in June, 2019.

Reason for Withdrawal

  • India has implemented a wide array of trade barriers that create serious negative effects on United States’ commerce.Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.
  • The United States launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018.
  • India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.

Generalized System of Preferences (GSP)

  • GSP is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry of products from 129 designated beneficiary countries and territories.
  • GSP was instituted on January 1, 1976, by the Trade Act of 1974.
  • Under this, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by its Congress.
  • GSP had expired on July 31, 2013, and was reauthorized on June 29, 2015 by the former President Obama.

Objective

  • To give development support to poor countries by promoting exports from them into the developed countries.

Criteria for GSP

  • The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection and providing the US with equitable and reasonable market access.
  • Countries can also be graduated from the GSP programme, depending on factors related to economic development.

Products Covered Under GSP

  • It includes agricultural products including animal husbandry, meat and fisheries and handicraft products. These products are generally the specialised products of the developing countries.

Difference between GSP and Trade Arrangement under WTO

  • Under the normal trade laws, the WTO members must give equal preferences to trade partners. There should not be any discrimination between countries.
  • This trade rule under the WTO is called the Most Favored Nation (MFN) clause. The MFN instructs non-discrimination that any favorable treatment to a particular country.
  • At the same time, the WTO allows members to give special and differential treatment to from developing countries (like zero tariff imports). This is an exemption for MFN. The MSP given by developed countries including the US is an exception to MFN.

Significance

  • GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.
  • The GSP program provides additional benefits for products from least developed countries.