44 lawmakers of United States want GSP reinstated for India! Know how it will affect both the countries!

The Texas is ready to say Howdy Modi! And POTUS, joining Modi in the event is considered by many political experts as a brilliant gesture to showcase strengthening relation of India and USA.

Now, 44 lawmakers urge Trump admin to reinstate GSP for India.

The Trump administration had  terminated India’s designation as a beneficiary developing nation under the Generalized System of Preferences (GSP) in June, 2019.

These lawmakers GSP to be reinstated as part of a potential trade deal between the two countries.

The GSP is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

US President Donald Trump and Prime Minister Narendra Modi will meet on September 22 in Houston and the two sides hope to announce a potential deal on longstanding trade issues, including GSP.

Led by Congressmen Jim Himes and Ron Estes, the letter to Lighthizer- the US trade Representative-has been signed by 26 Democrats and 18 Republicans, showing the strong, bipartisan support for reinstating GSP benefits for imports from India.

They have stated that cancelation of GSP to India has cost America both in terms of dollars and jobs.

While GSP often is seen as a benefit to foreign countries, it is American businesses and workers that have suffered most from its termination to date.

Despite facing higher tariffs due to lost GSP, imports from India of previously GSP-eligible products increased over 40 per cent in June/July 2019 compared to a year earlier.

The US and China are shadow fighting and this rising in import from India likely the result of companies shifting their sourcing away from China.

The Coalition for GSP’s latest data shows that loss of GSP for India cost American companies about USD 30 million in July.

The US industries are being harmed by lack of fair access to India’s market, also the American companies and workers are facing problem due to the new tariffs

Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.

India was the largest beneficiary of the programme in 2017 with USD 5.7 billion in imports to the US given duty-free status.

The Trump administration had launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018.

The Trade Representative accepted two petitions asserting that India did not meet the criteria on, from the National Milk Producers Federation and the U.S. Dairy Export Council, and the other from the Advanced Medical Technology Association.

India wants dairy products, which could form part of religious worship, certified that they were was only derived from animals that have not been fed food containing internal organs. Other exporters such as EU nations and New Zealand certify their products, but the U.S. has so far not done so.

Second, India has recently placed a cap on the prices of medical devices, like stents, that impacts U.S. exports of such devices.

As per US norms, a beneficiary country must meet 15 discretionary and mandatory eligibility criteria established by Congress to qualify for GSP. These include providing the US with equitable and reasonable market access, combating child labour, respecting internationally recognised worker rights and providing adequate and effective intellectual property rights protection.

Why was GSP important for India?

The Indian export industry did not feel much of a pinch after cancelation of GDP. The loss for the industry was about $190 million on exports of $5.6 billion falling under the GSP category.

But it had affected specific sectors, such as gem and jewellery, leather and processed foods which had lost the benefits of the programme.

A Indian producer was able to bear 2-3% of the loss from the change, but not more than that. But the loss, in export like rice for example, had exceeded 10%.

The problem was, landed price of goods from India had to be the same as it was before the GSP was removed.

If not, consumers of those products in the U.S. would change to producers who offer lower prices.

Obviously, it is difficult to get back a customer that a competitor has taken away.

Hence even India was hoping that US would soon reinstate GSP status.

The letter by the law makers of US clearly indicates one thing. The exports from India has a huge impact on industrial growth of US.

Now the dispute with China has further complicated the procurement of raw materials or other industrial equipments for US. Hence they are looking upto India.

Modi and Trump meeting at Houston gains much more importance for these factors also.

Dr Sindhu Prashanth