US to Review Preference Scheme Eligibility for India, Indonesia, Kazakhstan

19 April 2018

Washington trade officials announced last week that they would be reviewing the eligibility of India, Indonesia, and Kazakhstan for participation in a long-standing trade preference programme for developing nations. 

The news was confirmed by the Office of the US Trade Representative (USTR), which will conduct this review together with other federal agencies, and has been described as part of a broader initiative to improve enforcement of US trade policy rules. The programme in question is the US’ Generalised System of Preferences (GSP). 

For example, late last year USTR Robert Lighthizer announced a new plan aimed at verifying that GSP countries are meeting the requirements for continued involvement in the programme. This plan includes reviews every three years, with the US trade chief describing the effort as one meant to “set the correct balance for a system that helps incentivise economic reform in developing countries and achieve a level playing field for American businesses.” 

Last week’s announced reviews of the GSP benefits to India, Indonesia, and Kazakhstan are meant to “help enforce the Trump Administration’s key principles of free and fair trade across the globe,” said Deputy US Trade Representative Jeffrey Gerrish. “We hope that India, Indonesia, and Kazakhstan will work with us to address the concerns that led to these new reviews,” he concluded. 

GSP, development, and US priorities

The US’ GSP was renewed last month, following approval by Congress and presidential signature, though the renewal takes effect next week. The programme will now be in place through the end of 2020. 

Initially set up by the Trade Act of 1974 and taking effect two years later, the GSP is Washington’s longest running trade preference scheme, though it does require regular renewal by Congress and by the President. The GSP is aimed at fostering deeper ties with developing economies and incentivising economic growth and covers some 3500 products, imported from a host of designated countries, with additional coverage for least developed country (LDC) products.

Goods currently eligible for GSP treatment are listed on the Harmonized Tariff Schedule of the United States (HTSUS), published by the US International Trade Commission (USITC). The programme requires the exclusion of some goods, such as textiles and apparel, along with “import‐sensitive” goods such as steel.

Along with reviewing individual country eligibility, the USTR also examines the products covered by the GSP to see whether including them remains in line with domestic priorities, consumer demand, market conditions, and other relevant factors.

Other considerations for including or excluding products, under the 1974 law, include how developing economies are affected, along with competitiveness implications for US producers and the effects of preference schemes granted by other countries.

India under review

India is the most commercially significant beneficiary of the preference scheme, having exported US$5.6 billion worth of GSP-eligible goods to the US in 2017, roughly one-quarter of the total value of products that the US imports under the programme.

The USTR has claimed that India has implemented a series of trade barriers that have hampered the import of medical and dairy products, such as a move last year to impose price controls on certain medical devices. The decision by New Delhi was lambasted by US industry groups, who argue that the move to force lower prices could hinder innovation while not providing any additional benefits to consumers. Indian health coalitions, meanwhile, have publicly defended the policy.

Lighthizer reportedly wrote to Indian commerce officials on the subject, according to the Live Mint news agency. As part of the GSP review, the US trade chief’s office has accepted petitions submitted by the US dairy industry and the US medical device industry. Washington is also conducting a “self-initiated review” to see whether New Delhi is in line with GSP rules on market access.

Further reviews of Kazakhstan, Indonesia

According to the USTR, Kazakhstan’s GSP eligibility review is based on labour rights concerns, and follows a petition submitted by the AFL-CIO, the large US labour federation.

The petition claims that Kazakhstan “has not taken steps to afford internationally recognised worker rights,” according to the Office of the USTR. The country is the twelfth biggest recipient of US GSP benefits. 

For its part, Indonesia currently ranks as the fourth biggest US GSP beneficiary, exporting goods to the US to the tune of US$2 billion last year. The Office of the USTR has cited market access among the reasons for reviewing GSP eligibility.

Additionally, GSP benefits to Indonesia were being reviewed on the basis of alleged lack of implementation and enforcement of intellectual property rights, as petitioned by the International Intellectual Property Alliance (IIPA).

According to the USTR, there will be a public hearing and comment period for the new GSP reviews of India, Indonesia, and Kazakhstan. Another eight countries have active GSP practices being currently reviewed, according to a list published by the US agency.

ICTSD reporting; “US Announces GSP Eligibility Review of India,” THE WIRE, 14 April 2018; “US to review India’s eligibility for GSP scheme,” LIVE MINT, 14 April 2018; “Dairy groups support Trump Administration examination of India, Indonesia compliance under generalized system of preferences,” OHIO’S COUNTRY JOURNAL, 16 April 2018; “US Medical Devices Companies Lobby To Punish India For Regulating Drug And Stent Prices,” OUTLOOK INDIA, 25 October 2017; “$5.6 billion Indian exports may be hit as US weighs together policy,” LIVE MINT, 18 April 2018.

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