On April 12, 2018 the United States Trade Representative (USTR) announced it was self-initiating a review to assess India’s eligibility to continue to be treated as a beneficiary country under the U.S. Generalized System of Preferences program (GSP).
The GSP is a trade preference program that allows duty free access to about 5,000 tariff categories from a range of developing and least developed countries, which are designated as beneficiary developing countries (BDCs) and least-developed beneficiary developing countries (LDBDCs). About 3,500 of these categories are available to all GSP countries, while about 1,500 are reserved for LDBDCs.
India is by far the largest beneficiary of the U.S. GSP program. It exported about $5.6 billion in GSP eligible articles in 2017, constituting about 26 percent of the value of total GSP imports for that year. The Indian sectors benefitting from the U.S. GSP program include organic chemicals, articles of iron and steel, plastics, vehicles and parts thereof and machinery and equipment for the electronics industry.
Under the Trade Act of 1974, a developing country is assessed against a host of factors which determine its eligibility to be a beneficiary country. These factors include respecting workers’ rights, eliminating the worst forms of child labor, respecting arbitral awards in favor of U.S. citizens or legal persons, not granting sanctuary to those involved in international terrorism, not engaging in nationalization or expropriation of assets of U.S. persons, providing reasonable and equitable market access, providing adequate and effective protection for intellectual property rights, and reducing barriers to investment and trade in services. Any person may file a request for USTR to review the GSP status of any eligible beneficiary developing country reviewed with respect to any of the designation criteria listed in the statue. In addition, USTR has implemented a new triennial process, under which it will assess each developing country’s compliance with the eligibility criteria every three years. The focus of the first year is on countries in Asia, and assessments of countries in other parts of the world will take place in the second and third years. If an assessment raises concerns about a country’s compliance with the eligibility criteria, USTR may self-initiate a full review.
In the review of India, USTR will examine whether India is in compliance with the market access criterion of the program which requires that a beneficiary country provide the United States with equitable and reasonable market access. The U.S. dairy industry has alleged that India denies market access for U.S. dairy exports on unjustified health and safety grounds. Likewise, the medical devices industry has alleged that India has failed to provide equitable and reasonable access to the Indian market because it maintains stringent price controls on coronary stents and knee replacement implants that are forcing U.S. companies to sell in India only after reducing prices by almost 85 percent
Stakeholders will want to take note of the public hearing and comment period for the India review, which USTR is expected to announce in the coming days.