US to Terminate GSP Designation for India and Turkey
Date: Wednesday, March 6, 2019
Source: Sourcing Journal
U.S. Trade Representative (USTR) Robert Lighthizer announced Tuesday that the U.S. intends to end India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory criteria for eligibility.
USTR said India’s termination from GSP follows its failure to provide the U.S. with assurances that it will provide “equitable and reasonable access to its markets in numerous sectors.” Turkey is being cut from the trade program because “it is sufficiently economically developed and should no longer benefit from preferential market access” to the U.S market.
Changes cannot take effect fort at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation.
Under the GSP program, certain products can enter the U.S. duty-free if qualified developing countries meet the criteria established by Congress. These include combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, providing the U.S. with equitable and reasonable market access and respecting arbitral awards in favor of U.S. citizens or corporations
Countries can also be graduated out of the GSP program based on factors related to economic development, as in the case of Turkey, which was designated as a GSP beneficiary developing country in 1975. Now, “An increase in gross national income per capita, declining poverty rates and export diversification, by trading partner and by sector, are evidence of Turkey’s higher level of economic development,” USTR said.
According to the CIA World Factbook, Turkey gross domestic product grew 7.4 in 2017 to an estimated $2.19 trillion.
In the case of India, the U.S. launched an eligibility review of India’s compliance with the GSP market access criterion in April.
“India has implemented a wide array of trade barriers that create serious negative effects on U.S. commerce,” USTR said. “Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion.”
The U.S. has a pending action against India at the World Trade Organization that charges the country engages in illegal export subsidies. In August, the Indian government doubled import duties to 20 percent on a range of apparel and textile products, looking to support and promote domestic manufacturing as part of its Make in India initiative.
Around 5,000 tariff items are eligible for GSP benefits–with about 3,500 available to all GSP countries and approximately 1,500 are available only to Least Developed Beneficiary Developing Countries. Most apparel is not eligible for GSP status, but many textile, leather goods and travel accessories are. The GSP program was reinstated in March after it had lapsed and runs through April 2020, when it would have to be renewed.