What is Generalised System of Preferences (GSP)?

The United States on Tuesday announced that it intends to “terminate” India’s designation as a beneficiary of its Generalised System of Preferences (GSP). The US President Donald Trump announced plans to scrap the preferential trade treatment for India, claiming that New Delhi has failed to assure the US of “equitable and reasonable” access to its markets, a move India said will not have a “significant impact” on its exports to America.

This move to end the Generalised System of Preferences (GSP) can be a big blow for India’s competitiveness in items groups such as garments, engineering, and intermediary goods in the American market.

So what is Generalised System of Preferences (GSP)?

Generalised System of Preferences (GSP) is a preferential tariff system extended by developed countries to developing countries (also known as preference receiving countries or beneficiary countries). It is a preferential arrangement in the sense that it allows concessional low/zero tariff imports from developing countries. Developed countries including the US, EU, UK, Japan etc., gives GSPs to imports from developing countries.

Criteria for GSP

The GSP criteria include, among others, respecting arbitral awards in favour of US citizens or corporations, combatting child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection and providing the US with equitable and reasonable market access. Countries can also be graduated from the GSP programme, depending on factors related to economic development.

What is the objective of GSP?

The objective of GSP is to give development support to poor countries by promoting exports from them into the developed countries. According to the US Trade Representative Office website, GSP promotes sustainable development in beneficiary countries by helping these countries to increase and diversify their trade with the United States.

Which are the product groups covered under GSP?

The products covered under GSP are mainly agricultural products including animal husbandry, meat and fisheries and handicraft products. These products are generally the specialised products of the developing countries.

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