Port Infrastructure and Shipping Industry – Sagarmala Project, SDC, CEZ, etc.

Renew the Generalized System of Preferences


From UPSC perspective, the following things are important :

Prelims level: About Generalised System of Preferences (GSP)

Mains level: Trades and Relations; Changing Geopolitics of the World;

Why in the News? 

It is widely believed that renewing the Generalised System of Preferences (GSP) program would pave the way for comprehensive U.S.-India trade negotiations, potentially elevating the bilateral trade relationship to new heights.

What is the ‘Generalised System of Preferences (GSP)’ Program about?

    • The Generalised System of Preferences (GSP) is a trade initiative by developed countries to aid developing countries.
  • Nearly all developed countries have their versions of the GSP, tailored to their economic and policy goals.
      • It involves reducing tariffs on imports from these countries, aiming to stimulate their economic development. (It is not formally part of the World Trade Organization).
  • Origin and its Evolution:
    • During the 1960s: The idea of the GSP emerged during the 1960s as part of broader efforts within the United Nations Conference on Trade and Development (UNCTAD) to help developing countries gain better access to markets in developed countries.
    • During 1968: UNCTAD proposed the GSP as a mechanism to offer non-reciprocal, non-discriminatory tariff preferences to developing countries, aiming to promote their economic growth and industrialization.
    • During 1974: The US officially established its GSP program under the Trade Act of 1974. This act authorized the U.S. to provide duty-free treatment for selected products imported from designated beneficiary developing countries (BDCs)​.

The Significance of Renewing the GSP:

  • US Factor:  The GSP program is unique because it requires periodic reauthorization by Congress. This program of the U.S. expired in 2020 and has not yet been renewed, despite bipartisan support.
  • For Stability in the Market: Renewal is challenging in a polarized political environment but is crucial for maintaining stable market access for developing countries.
  • For Diversification: The GSP supports small businesses and women-owned enterprises, encouraging economic empowerment and diversification away from Chinese imports.
  • To bring Reform: It will promote labor and environmental reforms and reduce tariff costs for American businesses, particularly small and medium-sized enterprises.

Significance of US – India Trade Relationship:

  • Broader the Trade agreement: The U.S. and India have a significant trade relationship, with bilateral trade worth around $200 billion. Renewing the GSP could facilitate further negotiations and potentially lead to a broader trade agreement.
  • Need for GSP renewal: Before the GSP expired, the U.S. and India were close to a trade deal covering various sectors including medical devices, agriculture, ethanol, and IT products.
    • Despite ongoing trade dialogues, the U.S. is currently not negotiating new Free Trade Agreements (FTAs), making GSP renewal a key tool for enhancing trade relations.
    • A renewed GSP could cover multiple areas such as labour rights, environmental laws, and regulatory practices, fostering a more robust and ambitious trade partnership.
  • Strategic Importance:
  • In the Indo-Pacific region.
  • It can significantly boost trade and economic cooperation between the two countries.
  • It would signal a mutual commitment to deepening their trade relationship and addressing broader economic and regulatory issues.

Way forward:

  • Utilize GSP as a Negotiation Tool: Leverage GSP renewal as a platform to initiate broader trade negotiations between the U.S. and India, potentially leading to a more comprehensive trade agreement.
  • Focus on Strategic Sectors: Identify and prioritize sectors such as technology, pharmaceuticals, and agriculture where both countries have mutual interests and complementary strengths.

Mains PYQ: 

Q “What introduces friction into the ties between India and the United States is that Washington is still unable to find for India a position in its global strategy, which would satisfy India’s National self-esteem (UPSC IAS/2019)

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