Did the US GSP Scheme Truly Benefit the Indian Economy – Political Economy of Denying Market Access?

Abstract

The Generalised System of Preferences (GSP), instituted in 1971 under the aegis of UNCTAD, has contributed over the years to creating an enabling trading environment by providing tariff reduction or complete elimination for developing countries and the LDCs. The study of GSP imports of the US economy reveals that 177 beneficiary countries import a total of US$ 562 billion from 1989 to 2019 – to investigate the role of the US to support industrialisation and encourage economic growth by creating positive exports earnings. However, in the US total imports, the share of GSP schemes total shares has consistently fallen since the formation of WTO. There are shreds of evidence that trade route can facilitate a country to improve its status from the lower-income to higher income level - the example of the US does not support this thesis. While there are shreds of evidence that trade route can facilitate a country to improve its status from the lower-income to higher income level - the example of the US does not support this thesis. It is incumbent on the nature of products sought by consumers in the benefactor country (the US market) and the relative capacity of beneficiary economies to supply in the growing market require/demand. The top ten sectors impacted by the GSP withdrawal were transport, chemical, mineral & metals, electrical machinery, non-electrical machinery, fruits, vegetable, plants, cereals & preparation, leather, footwear & rubber, manufacturing n.e.s and textiles. The fish and fish products, although it had tremendous imported values by the US in 2018 - however, these sectors have seen a major shift towards the MFN route. The top ten sectors, all of them were manufacturing and with a high presence of MSMEs. Top ten sectors accounted for 95% of the US imports under the GSP route in 2018. It can also be argued, that the US has not aided by WTO rules while withdrawing the India’s GSP privileges as it continues to give such access to other developing countries with higher income levels or similar income level – India can take this matter to the WTO Dispute Settlement Body on the grounds of discriminatory treatment.