India: Withdrawal Of India From The US' General System Of Preference (GSP) Trade Program – An Impact Analysis

Last Updated: 25 June 2019
Article by AMLEGALS  

THE GSP- AN OVERVIEW

The United States has implemented a Generalised System of Preference (GSP) trade program from the 1970s, wherein it extends a preferential tariff system to developing country. It is a preferential arrangement as it permits zero tariff or concessional low imports from such countries.

The GSP program was introduced to bring about economic development in the beneficiary developing country, where it permitted 4800 goods from 129 designated developing countries to enter the US duty free.

A country may be included in the GSP program when it meets the criteria of factors such as allowing equitable and reasonable market access to the US, following arbitral awards awarded in favour of US entities or citizens, preventing child labour, protection of intellectual property rights, following the international standard of workers' rights, etc.

In 2017, India received $5.6 billion through exports given to the US duty free, and as a result was the largest beneficiary of the GSP program. Similarly, US received goods worth $48 billion from India in 2017, remaining India's top export partner. However, approximately 10% of the goods imported from India receive benefits under this program. Withdrawal of India from GSP program will introduce additional tariff on the American businesses of approximately $ 300 million annually.

In March 2019, President Trump decided to terminate India's designation as a beneficiary developing nation from the GSP trade program, with effect from June 5, 2019. This was done as an attempt to lessen the trade deficits of the US and to provide for sufficient redressal of unfair trade relations with other countries. It was claimed by the President that India had not "assured US that it will provide equitable and reasonable access to its markets". One of the US demands was to reduce its trade surplus, as India had an annual trade surplus of USD 21 billion in 2017-18, making it the 11th largest trade surplus country for the US.

Data processors are liable for penalty in situations of non-compliance with GDPR. However, GDPR may also hold the organization liable for penalty along with the Data Processors in cases of extreme data privacy breach.

According to GDPR, both the Controller and the Processor are to delegate a DPO to supervise the data protection regime so as to observe compliance under the GDPR.

The need for DPO arises specifically when the organization handles a large amount of EU citizen's data or stores special personal data, regularly monitors data subjects or is a public authority. Law enforcement agents are exempted from the DPO requirement subject to certain conditions.

IMPACT ON INDIA

India and the US shared bilateral trade of $74.5 billion in 2017-2018, a 15.5% increment from $64.5 billion in the 2016- 2017. In the next fiscal, 2018-2019, India exported goods worth $38.8 billion whereas it imported items worth only $26.3 billion from the US. It is evident that India earns more through exporting 'intermediate goods' to the US, which are not usually manufactured in the US.

Withdrawal from GSP program is predicted to not have a significant impact on India's exports to the US. It is so stated because the benefits received on import tariffs and duty free exports runs up to a value of $190 million per annum.

India is most likely to remain unaffected by the GSP withdrawal regarding exports to the US, as there will only be a partial impact on domestic sectors like farming, marine, handicraft products, hand tools, engineering goods, leather, plastic, processed food, building material and tiles, etc.

India exports approximately 1937 goods to the US under preferential trade arrangement. The benefits of GSP program do not play a vital role in larger Indian trade but it affects trade activities carried on by the small and medium enterprises.

Small firms are likely to be affected by India's withdrawal from GSP as they produce 'intermediate goods' which are not manufactured in the US. With the removal of duty free or concessional exports, small and medium enterprises will not be able to export as freely and in the same quantities as earlier.

This will eventually create beneficial exports for countries like China who can supply similar products to the US without GSP benefits.

POTENTIAL ISSUES

1. Service Sector

A key issue for India is U.S. temporary visa policies, which affect Indian nationals working in the United States. India is challenging U.S. fees for worker visas in the WTO, and monitoring potential U.S. action to revise the H-1B (specialized worker) visa program.

2. Agricultural Sector

Sanitary and phytosanitary (SPS) barriers in India limit U.S. agricultural exports. The United States questions the scientific and risk-based justifications of such barriers. An ongoing issue is India's purported compliance with a WTO decision against its ban on U.S. poultry imports and live swine due to avian influenza concerns; the WTO held that India's measures violated WTO SPS rules.

3. Intellectual Property Regime

The two sides differ on how to balance IP protection to incentivize innovation and support other policy goals, such as access to medicines. India's IP regime remains a top U.S. concern, and India remains on the "Special 301" Priority Watch List for 2018, based on such concerns as its treatment of patents, infringement rates, and protection of trade secrets.

4. "Forced" Localization

The United States continues to press India on its "forced" localization practices. Initiatives to grow India's manufacturing base and support jobs include requirements for in-country data storage, domestic content (such as laws protecting India's solar sector), and domestic testing in some sectors. Adding to U.S. concerns are India's new data localization requirements for electronic payment service suppliers (e.g., MasterCard, Visa).

5. Investment

India aims to attract foreign investment and has made FDI reforms, such as raising foreign equity caps for insurance and defense, and other strides to improve its business environment. U.S. concerns about investment barriers remain nevertheless, heightened by new Indian restrictions on how e-commerce platforms such as Amazon and Walmart-owned Flipkart conduct business. From the U.S. view, India's weak regulatory transparency and other issues, such as India's IPR and localization policies add to concerns about FDI barriers.

6. Defense Trade

The two nations have signed defence contracts worth more than $15 billion since 2008, up from $500 million in all previous years combined.

India's pursuit of a multibillion- dollar deal to purchase the Russian-made S- 400 air defense system may trigger U.S. sanctions on India under the Countering America's Adversaries Through Sanctions Act (P.L. 115-44).

CONCLUDING REMARKS

The United States and India have had "intensive" negotiations to address the U.S. steel and aluminium tariffs, India's GSP status, and other trade issues.

While the immediate and long terms issues that shall be faced by the Indian trade due to the loss of its designation, no justification can be provided for as to how the U.S or the Trump administration plans to fill the void that shall now be created in the "intermediate goods" sector.

Given the Trump Administration's focus on greater reciprocity in U.S. trade relations, what are ways to strengthen U.S.-Indian trade and investment ties?

Is there potential for broader trade agreement negotiations?

Stay tuned for our next issue where we will discuss on the pertinent questions raised above.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
SP Chopra & Co
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
SP Chopra & Co
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions