Why in news?

The U.S. could possibly remove India from the Generalised System of Preferences (GSP) list.

What is the Generalised System of Preferences?

• The GSP is a U.S. trade program designed to promote economic growth in the developing world.
• GSP was instituted in 1976 by the Trade Act of 1974.
• It provides preferential duty-free entry for up to 4,800 products from more than 120 designated beneficiary countries and territories.
• It was extended to India in 1976, under which India is able to export about 2,000 product lines to the U.S. under zero tariff.
• The revocation of the GSP will have a significant impact on Indian exporters.

What is the U.S.'s rationale?

• The proposal comes in a series of measures taken by the Trump administration against India to reduce U.S.'s trade deficit with India.
• President Donald Trump is concerned with the “unequal tariffs” from India, as the trade relationship is in favour of India.
• Notably, Indian exports to the U.S. in 2017-18 stood at $47.9 billion, while imports were $26.7 billion.
• The U.S. has been imposing tariffs on several Indian products since March 2018.
• The USTR (U.S. Trade Representative) also parallelly began a review of India’s GSP status.
• This was after receiving complaints of trade barriers from India, from the dairy industry and manufacturers of medical devices.
• India's decisions on data localisation for all companies operating in India and tightening norms for FDI in e-commerce have aggravated the situation.
• Recently, the U.S. withdrew GSP status on at least 50 Indian products.

What was India's response?

• In retaliation to US restrictions, India earlier proposed tariffs of about $235 million on 29 American goods.
• But it has put off implementing these, five times in the past year, in the hope that a negotiated trade settlement will come through.
• The latest deadline on implementation of the proposals expires on March 1, 2019.
• Despite several rounds of talks between officials over the past few months, there is no breakthrough.
• Besides, India has also attempted to address the trade deficit, with purchase of American oil, energy and aircraft.

What lies ahead?

• Both sides should work towards calling a halt to trade hostilities and speed up efforts for a comprehensive trade “package”.
• This would address the concerns of both sides much better than the measures to match each concern product by product.
• India must be aware of the larger, global picture about U.S.-China trade war issues as well.
• If a trade deal with the U.S. is reached, India could be the biggest beneficiary of business deals lost by China.