The United States Trade Representative (USTR) is presently reconsidering the special pact for India, a deal where the US levies no tariff on specific goods exported from India to the US under the Generalized System of Preference. Factors such as India’s Foreign Direct Investment (FDI) policy concerning e-commerce and obligatory data localization for global card payment enterprises have ushered in this review of the zero-tariff mechanism.
India’s FDI Policy on E-Commerce and Mandatory Data Localization
Previously, the Indian administration altered its FDI policy on e-commerce, effectively banning online retail titans like Amazon and Walmart-owned Flipkart from vending products belonging to companies in which they hold stakes. This significant reform has been a leading factor for the US to reassess its zero-tariff policy for India.
Furthermore, the Reserve Bank of India (RBI) released guidelines dictating that all international payment organizations such as MasterCard and Visa have to store data locally to run their activities in the country. The mandate for data localization has further necessitated the US to review its trade policy with India.
About the Generalized System of Preferences (GSP)
The concept of bestowing developing nations with preferential tariff rates in the markets of industrialized countries originated at the initial UNCTAD gathering in 1964. At the UNCTAD conference in New Delhi in 1968, the GSP was officially adopted and put into practice in 1971.
There are presently 13 national GSP schemes documented to the UNCTAD secretariat. The GSP preferences are granted by the following nations: Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, and the USA.
| Country | Grants GSP Preferences |
|---|---|
| Australia | Yes |
| Belarus | Yes |
| Canada | Yes |
| European Union | Yes |
| Iceland | Yes |
| Japan | Yes |
| Kazakhstan | Yes |
| New Zealand | Yes |
| Norway | Yes |
| Russian Federation | Yes |
| Switzerland | Yes |
| Turkey | Yes |
| United States of America | Yes |
The Role of GSP in US Trade Policies
GSP holds the spot for the most extensive and oldest U.S. trade preference program. The Trade Act of 1974 established the GSP to advance economic development by pruning duties on thousands of items when imported from one of its 120 designated beneficiary countries and territories.
