By admin July 6, 2019 17:50
  • Indeed, it is intended as a sanction towards India and Turkey, thus making the U.S. move a positive violation of the WTO norms. 

How will the withdrawal impact the US? 

  • In reality, withdrawing India from the list of GSP beneficiaries will also hurt the U.S. 

First, a trade war with India will reportedly cost American businesses over $300 million in additional tariffs, as per the Coalition for GSP’s executive director. 

  • Second, America’s stance is based on the opinions of its industries and corporations. 

That is, when the U.S. Trade Representative (USTR) judgments are based on its seed companies’ submissions. The problem is that these companies typically consider only what is good for their shareholders and not the local realities or issues of the importing country. 

  • Third, India may well decide to take this as a dispute to the WTO. The central question for the WTO will be whether the U.S. can suspend GSP benefits to two countries — India and Turkey — as a sanction for not allowing “equitable and reasonable access to its markets.” 
  • The world trading system is not based on the leadership of any one country. It is a mechanism to work with trade partners. The U.S. action, unfortunately, seeks leadership among its trading partners and that hurts America first and its allies next. 

What is the GSP? 

  • Under the GSP programme, the U.S. allows preferential duty-free entry for thousands of products from about 120-plus designated beneficiary countries, of which India is one. 
  • Thus, products from these countries enter the U.S. duty-free, provided the beneficiary developing countries meet the eligibility criteria. 
  • India, as a developing country, enjoyed special trade benefits which allowed duty-free entry of Indian goods worth $5.6 billion into the U.S. 

GSP legislation 

  • The GSP preferential trade term forms a part of the trade obligation of the U.S., and is designed to positively impact the “development, financial and trade needs of developing countries.” 
  • Internationally, the legal basis for the GSP programme is found in the Enabling Clause (EC), which is a platform established under the international trade regime of the World Trade Organization (WTO) for developed countries to offer preferential trade treatment on a non- reciprocal basis to products originating in developing countries. 
  • The reason for the non-reciprocal arrangement was that the Enabling Clause means to provide differential and more favourable treatment with a view to incentivising developing countries and promote their fuller participation in global trade. 
  • Nationally, the U.S. trade obligations have been codified as part of the Trade Act of 1974 under which the GSP system has been established. 

Does GSP benefit the US? 

  • In reality, the Coalition of GSP, which is a think-tank, estimates that the GSP programme ultimately benefits U.S. small businesses which import lower cost raw materials, which, in turn, lowers the cost of consumer products in the U.S. 

Is the withdrawal legal? 

  • Unfortunately, the withdrawal is not based on any criterion that is to be applied to other nations. 
  • Nor does this move by the U.S. benefit India. 
By admin July 6, 2019 17:50