GSP: India Considers Moving WTO Against U.S. Over Withdrawal Of Import Sops
Containers filled with goods ready for trade are reflected in glass. (Photographer: Martin Divisek/Bloomberg)

GSP: India Considers Moving WTO Against U.S. Over Withdrawal Of Import Sops


India is exploring various options, including approaching the World Trade Organization dispute body, to deal with the U.S.’ decision to withdraw import incentives for about 2,000 domestic goods under the trade preference scheme, sources said.

Providing fiscal support to domestic exporters of those sectors hit by the U.S.’ decision and imposing retaliatory duties are also among the options considered by India, they said.

On March 5, the U.S. decided to withdraw import duty benefits, which was in the range of 1-6 percent, under its Generalized System of Preferences programme.

The GSP programme provides non-reciprocal, duty-free imports of certain products from certain developing countries. Currently, about 121 developing countries, including India, Brazil, Afghanistan and Botswana, are availing these benefits.

The decision could impact India’s exports worth $5.6 billion under this scheme. Removal of the benefits would result in imposition of duties by the U.S. on these 2,000 products, making them uncompetitive in the American market in terms of pricing.

Also read: GSP Duty Benefits: Trade Tango With America Begins For India

Another source, however, said it might be a long-drawn process in the WTO and the better option would be to resolve the issues through bilateral dialogues, as India has trade surplus with the U.S.

India approaching the Geneva-based WTO’s dispute settlement body would depend whether the U.S. is differentiating among the developing countries by excluding India based on WTO’s non-compatibility criteria.

In 2003, India had won a case in the WTO against the European Commission following its denial of GSP incentives for textiles and drugs exporters.

Also read: GSP: Altering Preferential Status A ‘Significant’ Change To India-U.S. Trade Ties, Says Raj Bhala 

Besides, India has an option to impose retaliatory tariffs on the 29 U.S. products, deadline for which has been extended until April 1. India has extended the deadline to impose these duties for six times.

Trade experts said India has the option to drag the U.S. in the WTO dispute over the GSP issue and impose retaliatory tariffs.

“India can file a complaint to the WTO’s dispute settlement body. But I think bilateral negotiations are the best options to find a solution to the issue,” Professor Biswajit Dhar of Jawaharlal Nehru University, said.

According to Federation of Indian Export Organisations President Ganesh Kumar Gupta has said that the US decision to withdraw duty benefits will have a impact on few domestic sectors such as processed food, leather, plastic, and engineering goods.

The other sectors that were enjoying the duty benefits include building material and tiles; hand tools (spanners, wrenches, drilling equipment); engineering goods such as spark ignition, turbines and pipes, parts of generators, cycles; made-ups (pillow and cushion covers); and women’s woven dresses, he said.

India has said that the U.S. government’s move to withdraw duty concessions will not have a significant impact on exports to America as the benefits amount to only about $190 million annually.

The bilateral trade between the countries increased to $74.5 billion in 2017-18 from $64.5 billion in 2016-17. The U.S. is one of the few countries with which India has a trade surplus, which stood at $21 billion in 2017-18.

Also read: U.S. Trade Snub Should Be Wake-Up Call for India

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.