Generalised System of Preference (GSP)

Context

• In U.S.-India relations, renewing the GSP program can significantly enhance bilateral trade, providing stable market access and fostering economic growth in both nations.
• Despite bipartisan support, the U.S. GSP program has remained in limbo since its expiration in 2020, highlighting the need for urgent renewal to leverage its benefits fully.

About Generalised System of Preference (GSP)

• The Generalised System of Preferences (GSP) is an international trade approach adopted by developed countries to offer lower tariffs and incentives for economic reform in developing countries.
• Each developed country customises its GSP programme with criteria for economic reforms, ensuring no harm to domestic production.
• GSP is the oldest and most extensive “aid for trade” approach within the World Trade Organization.

Renewing GSP in the USA

• Expiration and Renewal: The U.S. GSP programme requires periodic reauthorization by Congress, which is challenging in a polarised political environment.
  • The program expired in 2020 and remains unrenewed despite bipartisan support.
• Economic Impact: GSP helps developing countries access global trade, supports small businesses, and women-owned enterprises, and provides alternatives to Chinese imports.
  • It promotes labour, environmental, and intellectual property reforms, reducing tariff bills for American companies.
• Support: Diverse coalitions support GSP renewal, including a bipartisan group of Florida House members who emphasise its importance in reducing dependence on China and lowering tariffs for Florida’s consumers and manufacturers.

U.S.-India Trade Relationship

• Potential Benefit: GSP renewal could enhance U.S.-India trade relations, potentially increasing bilateral trade from $200 billion to a higher level.
• Past Negotiations: Before GSP expired in 2020, U.S.-India negotiations nearly concluded a deal covering $10 billion in trade, including medical devices, agricultural commodities, ethanol, and IT products.
• Current Trade Dynamics: India is negotiating free trade agreements (FTAs) with several partners (EU, UK, EFTA, Australia, and UAE) but the administration is not pursuing new FTAs.
  • Existing trade dialogues lack leverage for ambitious trade agreements.
• Sector Investments: Private sectors in both countries are increasing investments in critical technologies but face regulatory and business challenges that a strong trade agreement could mitigate.

Role of GSP in U.S.-India Trade

• Negotiation Opportunities: GSP negotiations could cover trade in goods and services, labour rights, environmental laws, regulatory practices, and ease of doing business.
• Strategic Importance: Renewing GSP would strengthen the U.S.-India strategic partnership, particularly in the Indo-Pacific region, reflecting mutual commitment to enhancing their trade relationship.

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