Prime Minister Narendra Modi and US President Donald Trump. (Photographer: Andrew Harrer/Bloomberg)

U.S. Lawmakers Urge Trump Not To Terminate GSP Benefits To India

The U.S. should not terminate the Generalized System of Preference scheme with India after the expiry of the sixty-day notice period on Friday, a group of 25 lawmakers has urged U.S. Trade Representative Robert Lighthizer, warning that companies seeking to expand their exports to India could be hit.

GSP is the largest and oldest U.S. trade preference program and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.

On March 4, President Donald Trump announced that the U.S. intends to terminate India's designations as a beneficiary developing country under the GSP scheme.

The 60-day notice period ends on May 3.

On the eve of the end of the notice period, the U.S. lawmakers made a last-ditch effort to convince the Trump administration from going ahead with its decision.

The 25 members of the U.S. House of Representatives, in a passionate letter, urged Lighthizer to continue negotiating a deal that protects and promotes jobs that rely on trade with India. They argued that terminating the GSP scheme for India would hurt U.S. companies seeking to expand their exports to India.

“India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors,” Trump had said in a letter to Congress, providing a notice of his intent to terminate the designation of India as a beneficiary developing country under GSP scheme.

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In his letter, Trump said that he was determined that New Delhi had “not assured
the U.S. that it would “provide equitable and reasonable access
to the markets of India.

“I will continue to assess whether the Government of India is providing equitable and reasonable access to its markets, in accordance with the GSP eligibility criteria,” he had wrote.

The USTR through a simple notification in the federal register can formally terminate GSP benefits to India.

Expressing concern over such a move, the lawmakers said that no party in the United States or India would benefit from terminating GSP benefits.

“American companies that rely on duty-free treatment for India under the GSP will pay hundreds of millions of dollars annually in new taxes. In the past, even temporary lapses in such benefits have caused companies to lay off workers, cut salaries and benefits, and delay or cancel job-creating investments in the United States,” the lawmakers said.

“Terminating the GSP for India similarly would hurt, not help, companies seeking to expand their exports to India. Any progress made toward resolving issues over the last year of GSP negotiations seems unlikely to take effect if India is removed from the program.”

“It would be a step back, not forward. Continuing negotiations is the only way to gain new market access for U.S. exports to India,” said the letter written by these lawmakers.

Reaching a comprehensive solution that benefits both the U.S. import and export interests is further complicated by the upcoming elections in India, they said.

Noting that the 60-day notice period expires in the middle of the 2019 Lok Sabha elections that run from mid-April to late-May, the Congressmen said that it will be up to India's next government to resolve outstanding issues with the U.S., but seating that government and restarting negotiations also requires time.

“A decision to terminate GSP in the midst of the elections risks politicizing the issues further, with potentially negative consequences for broader relations with an important ally,” the Congressmen wrote.

The Congressmen urged Lighthizer not to terminate any GSP benefits until there is an opportunity to negotiate with India's next government.