GSP Withdrawal Decision Taken In Haste, Will Hurt Exporters, Says CII
The India-US GSP issue impacts India’s US exports as well as as the India-US trade deficit. (Photographer: Akio Kon/Bloomberg)

GSP Withdrawal Decision Taken In Haste, Will Hurt Exporters, Says CII

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United States’ decision to withdraw Generalized System of Preferences for India has been taken in a "haste" and would hurt India’s exports, the Confederation of Indian Industry said on Monday. CII President Vikram Kirloskar expressed hope that both the U.S. and India would discuss the GSP issue and find an amicable solution to this matter.

The U.S. has said it will withdraw incentives provided to Indian exporters under the GSP scheme with effect from June 5.

"The India-U.S. GSP issue has been done in a little bit of haste... It is certainly going to hurt us, especially small item exporters," he told reporters in Mumbai. adding that rolling back of these benefits would impact both Indian as well as U.S. companies.

"It impacts both the sides, not only us. It is boosting the competitiveness of U.S. manufacturers by lowering their cost. About two-third of U.S. imports are under GSP and they are raw materials or components to manufacture goods," Kirloskar said.

According to the CII president, the GSP scheme helps U.S. consumers by eliminating duties on varieties of expensive consumer goods. These benefits are real and tangible.

" U.S. importers enjoyed nearly $730 million in savings on import duties under GSP scheme in 2016 and 2017. It saved American companies $894 million," he said.

Commenting on the India- U.S. GSP issue, the Trade Promotion Council of India said India is firmly planning to counter the U.S. decision to withdraw GSP on Indian goods by imposing retaliatory tariffs in the coming months.

TPCI chairman Mohit Singla said the withdrawal of benefits "will not" make much difference as Indian exports are all geared up to take this challenge.

"Even the U.S. was benefitting from the GSP regime, since the intermediary inputs provided by India helped keep its industry competitive. This withdrawal of GSP is only going to inject the estimated additional burden of $190 million, which is miniscule compared to India's overall export to the U.S. ," he added.

India was the largest beneficiary of the GSP scheme in 2017 with $5.7 billion in imports to the U.S. given duty-free status, Singla said in a statement.

India's top exports to the U.S. under the GSP scheme included motor vehicle parts, ferro alloys, precious metal jewellery, building stone, insulated cables, leather products, garment and wires.

The Federation of Indian Export Organisations said that the U.S. decision would have minimal impact on Indian exporters. "However, in respect of products having GSP benefits of 3 percent or more, exporters may find it difficult to absorb the GSP loss," FIEO President Ganesh Kumar Gupta said in a statement.

The sectors which would be impacted include most imitation jewellery, leather articles, pharmaceuticals, chemical and plastics, basic and processed agri goods, he added.

"Government should provide some supports to products where GSP loss has been significant so that the market is not lost. Extension of rebate of state and central tax levies scheme on such products on exports to US will be beneficial," Gupta said.

As many as 1,900 Indian products from sectors such as chemicals and engineering get duty free access to the U.S. market under the GSP, introduced in 1976.

The U.S. has alleged that India is not providing equitable market access to its firms and has raised serious concerns over capping of price on certain medical devices. It is also seeking market for its dairy products.

The U.S.' demand for relaxation in norms for exports of medical devices and dairy products are non-negotiable for India.

Also read: Trump’s Trade Attack Pushes India to Negotiating Table

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