GSP Benefit withdrawal by US against Indian Exports!

GSP Benefit withdrawal by US against Indian Exports!

Nations are guided by their self-interests either perceived or not.  US is no exception.  This fact has been proved again and again by the actions of the present Trump Administration.  We may choose to call it – inconsistency in approach but a closer look at their actions confirms that they are transaction oriented.  As long as the action and consequence suit purpose (read it as self interests) they do not mind crossing the lakshman rekha.  I am citing here two actions by the Trump administration that apparently seems quite contradictory but they are not.  Trump supported India wholeheartedly on its Balakote strike on Pakistan and almost at or about same time withdrew GST benefit to a class of Indian goods.  For a common folk this may look strange!

GSP is the acronym for Generalized System of Preferences.  Advanced nations like US, Certain Countries in Europe, Canada and Australia are part of this arrangement.  Under this arrangement, imports from developing country like India are given preferential treatment in duty.  Concessional or nil duty is offered to imports of certain item in to their countries from countries like India.  Given that major Indian exports are to these countries, it is quite certain imports from India are placed in advantageous position in local markets because of the concessional import costs.

On March 5^th, the President notified the US Congress that he intends the benefit to India on the ground that India does not provide equitable and reasonable market access for US exports to India. 

Indian exports are to the tune of USD 5.60 billion that includes raw materials and intermediate goods like organic chemicals.  The duty forgone on this account is above USD 190 million.  This appears to be negligible. But sectors like Apparel and Gem and Jewelry are likely to take a hit. But what made the US to withdraw this concession?  India denied access to US made medical devices and dairy products.  As far as India is concerned, these two are non negotiable given the sensitivity of dairy products in Indian culture and cost of medical treatment in the case of medical devices.

But Indian sea food exports like preserved shrimp and crab are unlikely to affected by the withdrawal since these products enjoy zero duty regime outside the scope of GSP!.

What are the options before India?  It can drag US in to WTO over the matter.  At the same time, provide more concessions to these sectors affected by the US decision so that Indian competitiveness is intact.

–  MR R.R. PADMANABHAN

Principal Consultant, Exim Consultants