Generalized System of Preferences (GSP)

Generalized System of Preferences (GSP)

Subject: Economy

Section: External Sector

1. Pharma Exports Boost:
   • The Union government has urged the US to enhance inspections by the US Food and Drug Administration in India to elevate pharmaceutical exports.
   • This appeal is part of the broader effort to strengthen trade ties, as highlighted in the joint statement of the Trade Policy Forum.
2. Longstanding Demand for GSP Restoration:
   • A reiterated demand in the statement is restoring the Generalised System of Preferences (GSP), aiming for smoother access to American markets for Indian goods.
3. Challenges Faced by Indian Business Visitors:
   • addressed challenges faced by Indian business visitors due to prolonged visa processing times, emphasizing the disruptions caused post-Covid-19.
4. US Response to Indian Trade Measures:
   • The US took note of various trade measures implemented by India, including Quality Control Orders (QCO) and the laptop import monitoring system.
   • These measures, perceived as strategies to curb imports from China, have been met with scrutiny.
5. Commitment to Address Technical Regulations:
   • Both nations reaffirmed their commitment to ensuring technical regulations, like Quality Control Orders (QCOs), don’t create undue trade barriers.
   • Stakeholder consultations and alignment of domestic standards with international ones were stressed to mitigate trade hurdles.
6. Diversity in Pharma Supply Chain:
   • Discussions encompassed the overdependence and lack of diversity in active pharmaceutical ingredients (APIs) within the global pharma supply chain.
   • India’s strategic identification of API manufacturing, under the PLI scheme, was highlighted as a significant move.
7. Mutual Recognition for Conformity Assessment:
   • The governments agreed to establish a pathway for mutual recognition of results from accredited conformity assessment bodies.
   • This move aims to address issues where Indian exports face rejection in the US due to differences in standards.
8. Emphasis on FDA Inspections:
   • There was a strong emphasis on increasing the number of inspections by the US Food and Drug Administration in India.
   • This is seen as vital for facilitating smoother trade and reducing existing backlogs.

Generalized System of Preferences (GSP):

1. Withdrawal and India’s Appeal:
   • The Generalized System of Preferences (GSP) trade privilege for India was withdrawn by the Trump administration in June 2019.
   • India has been actively urging the Biden Administration to reinstate this trade privilege.
2. Overview of GSP:
   • GSP is a U.S. trade program initiated on January 1, 1976, under the Trade Act of 1974.
   • GSP is a preferential trade program that allows certain developing countries to pay fewer or zero duties on their exports to developed countries.
   • The aim is to promote economic growth in the beneficiary countries by facilitating their exports.
   • Under GSP, eligible products from beneficiary countries receive preferential treatment in terms of reduced tariffs or duty-free access to the markets of the developed countries offering GSP privileges.
3. Non-Reciprocal Basis and Concerns:
   • GSP has historically been granted on a non-reciprocal basis, supporting development in beneficiary countries.
   • However, the U.S. has linked GSP with market access and tariff reduction, deviating from its non-reciprocal nature.
4. Objective of GSP:
   • The primary objective of GSP is to provide development support to less affluent countries by promoting their exports to developed nations.
   • It facilitates sustainable development by aiding beneficiary countries in increasing and diversifying their trade with the United States.
5. Benefits of GSP:
   • Indian exporters indirectly benefit from GSP through reduced tariffs or duty-free entry granted to eligible Indian products.
   • The lowered import duty enhances the competitiveness of Indian products in the U.S. market, benefiting both new and established exporters.
   • GSP serves as a tool for market penetration and allows exporters to improve market share and profit margins in the donor country.