India is a developed economy and ineligible for GSP benefits: US

The United States Trade Representative’s (USTR’s) office has classified India as a developed economy, ineligible for benefits given by Washington DC to developing countries. This is expected to stop all chances of India reclaiming its benefits under the US’ Generalized System of Preferences (GSP) scheme.

The GSP is America’s oldest preferential trade scheme, which offered Indian exporters tariff-free access to the US until June, when all benefits were suspended. The USTR considers a country’s per capita gross national income (GNI) and share of world trade to designate its level of economic development.

On the criteria of a developing country having less than 0.5 per cent share of global trade, India crossed the limit way back, according to the government’s estimate. As of 2017, India’s share in global trade was 2.1 per cent for exports and 2.6 per cent for imports. The USTR has also argued that since India, along with nations like Argentina, Brazil, Indonesia, and South Africa, is part of the G20 bloc, they can be classified as being developed despite having a per capita GNI below $12,375, according to the World Bank data.

While Commerce and Industry Minister Piyush Goyal has said India does not need development assistances like GSP hitherto provided by other nations and should be able to become competitive on its own, the issue has continued to be part of trade talks between India and the US. On the other hand, traders have pointed out Indian export remained under pressure due to increasing competition from low-cost rivals, and that surrendering GSP claims would mean handing away market share.

In 2018, the US launched an eligibility review of India’s compliance with GSP market access criteria. It concluded the country had implemented a wide array of trade barriers that create serious negative effects on commerce. Subsequently, President Donald Trump signed an executive order in November that ended duty-free status for 50 items.

India is the largest beneficiary nation under the GSP, with total benefits from tariff exemptions amounting to $260 million in 2018, according to the data from the USTR’s office.

While goods worth $6.35 billion were covered under GSP in 2018-19, it was only a small piece of India's overall exports to the US in the same period, which stood at $51.4 billion.

In respect of products having GSP benefits of 3 per cent or more, exporters had found it difficult to absorb the loss, the Federation of Indian Export Organisations (FIEO) has said. Despite having a minimal impact on India's overall outbound trade with the US, specific exports from India in a diverse set of sectors such as jewellery, leather, pharmaceuticals, chemicals and agricultural products has faced higher costs and competition, FIEO said.

India has maintained that GSP benefits were "unilateral and non-reciprocal in nature extended to developing countries", and that they couldn't be used for advancing Washington DC's trade interests and non-discriminatory benefits.

Amazon says working with government to unblock export policy issues

In its quest to increase net revenues from the global selling programme (GSP) to $ 5 billion by 2023, global e-commerce company Amazon is working closely with the Indian government to solve policy issues.

Apart from focusing on encouraging sellers from India to ship their products to USA, Europe, Japan and other countries, the e-commerce giant is hopeful that some of the recent changes in the country’s approach towards exports will boost GSP.

While the GSP, launched in 2015, had a slow start for the first two years, it has picked up good pace in the last two years.

“Initially, in the first two years it was a slow start, but it picked up in the last two years and the GSP now has a high double digit growth. We are so confident about the programme and the prospects, we believe we will do minimum net sales of $ 5 billion under the GSP by 2023”, Gopal Pillai, vice president of seller services at Amazon India, told Business Standard.

Pillai said Amazon’s association with the Indian government over the past years has boosted GSP and more sellers are now enthusiastic to join this initiative.

“More importantly, we are focusing on the building blocks and the areas of concern, for example, we work with the government to unblock a lot of policy issues and that’s working out well”, he said.

According to Pillai, the initiative from the e-commerce platform to work with the government resulted in several changes which is boosting exports.

“We were able to create more post offices where they now accept export boxes. The number of forms needed for exports went down from 14 to three and the subsidy (on exports) went up from two per cent to four per cent. So there are so many things which have happened and it is all coming together. That’s why we have the confidence,” he said.

Also, the shipment value limit for courier has been increased from Rs 25,000 to Rs 5,00,000 as the maximum eligible amount for incentive claim.

Amazon is of the view that Indian policies are becoming friendlier towards e-commerce and exports which is helping it tap the potential from India.

However, asked about what more changes does Amazon wish for to promote the GSP, Pillai replied, “It is a continuous process and as we continue to work with the sellers, we will figure out more what is working and what’s not working”.

Moreover, the company is also negotiating the rates on behalf of the sellers so that they are exempted from bargaining individually under the GSP and these sellers have now started using the company’s logistics network to boost their business.

Pillai opined that the norms and the registration process for the Amazon fulfilment centres in USA are more relaxed than it is in India which makes it easier for sellers to operate globally.

Since this programme was launched, more than 50,000 sellers from the country have joined in and encouraged by their performance, others are also queuing up.

The Amazon Export Digest 2019 states that there has been a 55 per cent growth in number of Indian products on Amazon’s international marketplaces and a 56 per cent growth in number of Indian exporters.

The major Indian states having the maximum number of international sellers are Delhi, Uttar Pradesh, Maharashtra, Gujarat and Rajasthan.

US move 'unfortunate', says India as Trump ends GSP trade privileges

US President Donald Trump has signed off on a presidential decree to cut off India’s tariff-free access to the US market under the Generalised System of Preferences (GSP) scheme. “I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets,” he said in a statement on Friday.

The move drew a mild reaction from the new government in New Delhi, which said it was “unfortunate” and hinted at further talks on the matter. “In any relationship, especially in the area of economic ties, there are ongoing issues which get resolved mutually from time to time. We view this issue as part of this regular process and will continue to build on our strong ties with the US, both economic and people to people,” the commerce department said in an official release.

Senior officials said a decision on whether India would pursue the issue further with the US would be taken later by the new commerce minister, Piyush Goyal. However, the time window remains small as the US is set to discontinue the tariff benefits starting June 5.

New Delhi also pointed out that GSP benefits were “unilateral and non-reciprocal in nature extended to developing countries”, and that they couldn't be used for advancing Washington DC's trade interests and non-discriminatory benefits.

India is the largest beneficiary nation under the GSP, US’ oldest preferential trade scheme, and exported goods worth $6.35 billion under the scheme last year.

Traders remain tense

In respect of products having GSP benefits of 3 per cent or more, exporters might find it difficult to absorb the loss, the Federation of Indian Export Organisations (FIEO) said. Despite having a minimal impact on India's overall outbound trade with the US, specific exports from India in a diverse set of sectors such as jewellery, leather, pharmaceuticals, chemicals and agricultural products are set to face higher costs and competition, the FIEO said.

India’s total benefits from GSP tariff exemptions amounted to $260 million in 2018, according to the data from the Office of the United States Trade Representative. However, this was only a small piece of India's overall exports to the US in the same period, which stood at $51.4 billion.

Considering this, some senior policymakers in the government have advised against pushing the GSP matter further with the US, sources said. However, traders have pointed out that Indian exports remained under pressure due to increasing competition from low-cost rivals, and that surrendering GSP claims would mean handing away market share.

FIEO President Ganesh Kumar Gupta said the move would also indirectly benefit China as the US data shows imports under the GSP had gone up as more tariffs had been placed on China under the US government's Section 301 list.

“In the first two months of 2019, GSP imports from India are up significantly for products on the Section 301 lists, but down for products where China does not face new tariffs. For India, 97 per cent of the increased 2019 GSP imports are on the China Section 301 lists,” Gupta said.

Back and forth

Back in March, the USTR’s office notified the US Congress and New Delhi that Indian exports did not qualify for GSP benefits under its updated, stricter eligibility criteria. India had pushed its case during the ensuing 60-day adjustment period when the US president was set to take a call on the matter.

However, US Commerce Secretary Wilbur Ross had assured the government that benefits won't be cut off until India's elections get over and a new government takes charge.

This assurance was given on the condition that India not put retaliatory tariffs on the US that have long been announced by New Delhi and postponed eight times since June, 2018, senior officials said. This includes a higher tax by up to 50 per cent on import of mostly agri goods like apples, almonds and walnuts and some industrial products.

The new taxes are proposed to rake in an estimated $240 million worth of additional taxes by targeting high-value US products. New Delhi has justified the move, claiming Indian industry had lost out after the Trump administration imposed a 25 per cent extra levy on steel and 10 per cent on aluminium products in May 2018.

US suspension of trade programme with India 'a done deal', says US official

The suspension of a U.S. trade preference program with India is a "done deal," a senior State Department official said on Thursday as Prime Minister Narendra Modi began his second term.

President Donald Trump announced in March he would end India's access to the decades-old Generalized System of Preferences (GSP) trade program over what the U.S. said was lack of access to India's market. The program allows emerging countries to export goods to the United States without paying duties.

U.S. law requires the administration to wait 60 days after it notifies Congress of the move before it formally ends India's participation in the program. Trump notified Congress of the move in early March.

"There is every reason to believe that GSP suspension will move forward," the official told reporters, speaking on condition of anonymity. "What is important is that the interest is to resolve trade irritants - to ensure fair and equitable market access," the official added.

But the official said the benefits could be restored if India gave U.S. companies fair and equitable access to its markets.

"We need to be looking forward at how we relaunch an ambitious set of discussions between our trade teams in order to address these outstanding irritants," the official said.

"We believe if India is prepared to address policies, including data localization, e-commerce measures that served to stifle international investment for top-tier companies, that we can continue to make significant progress moving forward," the official added.

India is the world's largest beneficiary of GSP, which dates from the 1970s, and ending its participation would not only be the strongest punitive action against the country since Trump took office, but would also open a new front in the global trade war.

Twenty-four U.S. members of Congress sent the administration a letter on May 3 urging it not to terminate India's access to the GSP.