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Generalized System of Preferences (GSP) trade privilege

Topics Covered: Effect of policies and politics of developed and developing countries on India’s interests, Indian diaspora.

Generalized System of Preferences (GSP) trade privilege:


Context:

India is likely to press Biden Administration for early restoration of the Generalized System of Preferences (GSP) trade privilege for India.

When was it withdrawn?

The privilege was withdrawn by outgoing President Donald Trump’s administration in Washington DC in June 2019 and India has been prodding the United States to restore it.

What is the Generalised System of Preferences (GSP)?

It is a U.S. trade program designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories.

  • GSP was instituted on January 1, 1976, by the Trade Act of 1974.
  • GSP has been given on non-reciprocal basis. Yet the US has linked it with market access and tariff reduction which is against the basic tenets of GSP.

What is the objective of GSP?

  • The objective of GSP was to give development support to poor countries by promoting exports from them into the developed countries.
  • GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.

Benefits of GSP:

  • Indian exporters benefit indirectly – through the benefit that accrues to the importer by way of reduced tariff or duty free entry of eligible Indian products
  • Reduction or removal of import duty on an Indian product makes it more competitive to the importer – other things (e.g. quality) being equal.
  • This tariff preference helps new exporters to penetrate a market and established exporters to increase their market share and to improve upon the profit margins, in the donor country.

InstaLinks:

Prelims Link:

  1. About GSP.
  2. Countries covered under this program.
  3. When was India removed?
  4. Benefits under the program.

Mains Link:

What are the benefits of the Generalized System of Preferences (GSP) trade privilege for India? Discuss.

Sources: Indian Express.