India's GSP Status at Risk
Updated: Jun 13, 2019
As the review of India’s eligibility for the Generalized System of Preferences (GSP) nears completion, various press reports indicate that a number of trade concerns have stalled U.S.-India trade talks that could lead to the White House narrowing or suspending India’s eligibility for duty-free exports to the U.S. GSP reduces or suspends tariffs on thousands of goods imported from developing countries. Currently, India exports 2000 different products with a value of $5.6 billion that qualify for duty-free treatment under GSP.
Trade issues that need to be resolved include India exceeding WTO-allowable subsidies on various food products, opposition to U.S. tariff increases on steel and aluminum, and tighter U.S. rules for granting visas to foreign workers. Although the two sides have been reportedly working on a bilateral agreement to resolve the various trade issues, the talks have seemed to stall due to upcoming key elections.
Source: Sandler, Travis & Rosenberg Trade Report
On March 4, 2019, the Office of the U.S. Trade Representative announced its intention to terminate the GSP designation of India and Turkey as GSP beneficiaries. These changes will not likely go into effect until May 3 and will be enacted by presidential proclamation. If the proclamation takes effect, thousands of products from both countries will no longer be eligible for duty-free treatment under GSP.
India's termination from GSP has resulted from its failure to provide the U.S. with sufficient assurance that it will provide equitable and reasonable access to its markets. However, Trump has said that he will continue to assess the situation, suggesting that there is a chance that India's eligibility can be reinstated if sufficient progress is made.
Turkey's termination from GSP is due to a finding that its "increase in Gross National Income (GNI) per capita, declining poverty rates, and export diversification, by trading partner and by sector" all suggest that the country is sufficiently economically developed. Therefore, it should not benefit from preferential market access to the U.S. market.