Generalized System of Preferences (GSP)

 

Generalized System of Preferences (GSP):

• Generalized System of Preferences (GSP) is a preferential tariff arrangement granted by the developed countries to developing countries and Least Developing Countries (LDC) to promote economic growth in those countries.
• GSP is an umbrella that comprises the bulk of preferential schemes to promote exports from developing countries to the developed countries..
• It involves reduced Most Favored Nations (MFN) Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.

Benefits of Generalized System of Preference:

• Developing countries increase and diversify their trade with the developed nations, hence facilitating the Economic growth and development of developing countries.
• Company Competitiveness is boosted by GSP as it reduces costs of imported inputs used by companies to manufacture goods
• GSP promotes Global values by supporting beneficiary countries in affording worker rights to their people, enforcing intellectual property rights, and supporting the rule of law.

India and GSP:

• India has been the beneficiary of the GSP regime and accounted for over a quarter of the goods that got duty-free access into the US in 2017.
• USA removed India from the list of countries receiving GSP treatment in June 2019.
• Even after US withdrawal of GSP, India continues to enjoy tariff preference from many countries including Australia, Russia and Japan, as well as the European Union (EU), among others.