Renew the Generalised System of Preferences (GSP) 

Renew the Generalised System of Preferences (GSP) 

Sub: Economy

Sec: External Sector

• Importance:
  • GSP: An approach adopted by nearly all developed countries over the last half-century to offer incentives for economic reform in developing countries through lower tariffs.
  • Customization: Each developed country customizes its GSP program to meet specific economic reform criteria while avoiding harm to domestic production.
  • Historical Significance: The oldest and most extensive approach to “aid for trade” within the modern multilateral trading system, embodied in the World Trade Organization (WTO).
• Renewing GSP in the U.S.:
• Legislative Renewal: Unique to the U.S., the authorizing legislation for GSP periodically expires and requires renewal by Congress.
  • Current Status: The U.S. GSP program expired in 2020 and remains unrenewed despite bipartisan support.
  • Challenges: Renewing legislation in a polarized environment is difficult, making bipartisan cooperation essential.
• Benefits of GSP:
  • Market Access: Provides stable market access for developing countries, crucial for small businesses and women-owned enterprises.
  • Alternatives to Chinese Imports: Offers a competitive edge to suppliers in trusted developing country markets.
  • Promotes Reforms: Encourages labor and environmental sustainability reforms, and protection of intellectual property rights.
  • Economic Impact: Reduces tariff bills for American companies, benefiting small- and medium-sized enterprises.
• Support for GSP Renewal:
• Diverse Coalitions: Bipartisan support from various U.S. sectors. For example, a group of Florida House members highlighted GSP’s importance in diversifying sourcing away from China and reducing tariff costs for Florida consumers and manufacturers.
  • Strategic Supply Chains: In an era of friendshoring and nearshoring, GSP is an effective tool for new supply chain objectives.
• U.S.-India Trade Relationship:
  • Potential for Growth: GSP renewal could facilitate wide-ranging U.S.-India trade negotiations, potentially increasing bilateral trade significantly.
  • Past Negotiations: Before the GSP expiration in 2020, there were near-final negotiations between the U.S. and India covering diverse trade areas.
  • Current Trade Dialogues: Existing dialogues lack the leverage needed for ambitious trade agreements, highlighting the need for GSP.
• Strategic Importance:
  • GSP and U.S.-India Relations: Renewing GSP could bolster the U.S.-India strategic partnership by providing a framework for negotiating trade benefits and addressing key issues like labor rights, environmental laws, and regulatory practices.
  • Trade Agreement Potential: Short of negotiating Free Trade Agreements (FTAs), GSP is the most effective trade tool for enhancing U.S.-India trade relations.
• Conclusion:
  • Renewal Advocacy: Renewing GSP is crucial for establishing stable market access for developing countries, supporting U.S. businesses, and strengthening strategic partnerships.
  • Strategic Statement: GSP renewal would signal mutual commitment to deepening trade and economic ties between the U.S. and India, supporting broader strategic objectives in the Indo-Pacific region.

In summary, renewing the GSP program is essential for enhancing economic cooperation, supporting small and medium enterprises, promoting reforms, and strengthening strategic trade relationships, particularly between the U.S. and India.