Tariff hike to hit exports to U.S.

  1. The US has announced its decision to terminate India’s designation as a beneficiary of its Generalized System of Preferences (GSP).
  2. This decision comes in the backdrop of US having concerns over a range of issues like (a) India’s new rules on e-commerce that affected firms such as Amazon and Walmart (b) Data localisation rules which forced foreign companies to store their data locally (c)Price controls on medical devices(Cardiac stents) (d)Tariff on ICT products such as smart watches and high end mobile phones (e)Lack of greater market access for the US dairy industry and (f) Trade imbalance between India and US.
  3. Generalized System of Preferences (GSP) is a preferential tariff system extended by developed countries to developing countries which allows zero tariff imports from developing countries.The primary objective of GSP is to give development support to poor countries by promoting exports from them into the developed countries.
  4. The GSP of US provides preferential duty-free entry for up to 4,800 products from 129 designated countries.According to World Bank data, India is currently the largest beneficiary of the GSP programme.
  5. However,Indian Government has dismissed concerns that it will have any major economic impact, noting that total benefits under GSP program was roughly $190 million on overall exports of $5.6 billion.