06/03/2019 - International Relations | Mainstorming

IAS Parliament 6 years

KEY POINTS

· Generalized System of Preferences is the USA’s largest and oldest trade preference programme, established by trade act of 1974, promotes economic development by eliminating duties on thousands of products when imported from designated beneficiary countries.

· The programme sought to expand and cement the country’s trade relations with numerous nations across the global south including majority of African nations after independence.

Impact on India’s trade

Positive

· India consistently remained the largest beneficiary nation under the scheme, enabled India to access the US market at zero duty costs for the thousands of goods.

· It acted as catalyst for boosting exports in multiple sectors such as organic and inorganic chemicals, agricultural, marine products.

Negative

· According to Ministry of Commerce and Industry, India managed to export around 2000 items through GSP, showing the inability of the nation to build up trade competitiveness.

· This outcome also impacts the cost effectiveness and price competitiveness of USA’s downstream industry and many manufacturing sector in USA.

Bilateral relationship with USA

· India has trade surplus with USA and withdrawal of India from GSP will be heavily affects the trade surplus component.

· Tariff restrictions is also expected from India’s side for the products getting imported from USA.

· Arising protectionism across nations will hurt the economic relationship between India and USA.

· India needs to push for the high level diplomatic engagement with USA to protect the economic interests of India.