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U.S. President Donald Trump terminates preferential trade status for India under GSP

The Generalized System of Preference (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.

“I have determined that India has not assured the US that it will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019,” Trump said in a proclamation on Friday. 

On March 4, Donald Trump announced that the US intends to terminate India’s designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.

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 and Turkey the fifth largest with USD 1.7 billion in covered imports, according to a Congressional Research Service report issued in January.

The GSP criteria include, among others, respecting arbitral awards in favour of the US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access.

In a statement, Coalition for GSP executive director Dan Anthony said Trump’s decision will cost American businesses over USD 300 million in additional tariffs every year. He also said the Trump administration made the decision in the face of opposition from members of the Congress and hundreds of American businesses that have called for continued GSP eligibility for India. 

The Trump administration argues that New Delhi has failed to assure America that it will provide equitable and reasonable access to its markets in numerous sectors. Meanwhile, India had said that the US government’s move to withdraw duty concessions on certain products under the GSP programme will not have a significant impact on exports to America as the benefits were only about USD 190 million annually.

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