GSP withdrawal will have only marginal impact on India’s exports to US except for a very few products: FIEO

Ludhiana, March 5, 2019: Reacting to the news where US has given 60 days withdrawal notice to India on GSP benefit, Mr Ganesh Kumar Gupta, President, FIEO said that India’s exports to US stood at USD 50.57 billion in 2017 with a GSP tariff advantage of only USD 190 million, which was less than 0.4% of our exports. Naturally, its withdrawal will have marginal impact. Mr Gupta said that GSP has been given on non-reciprocal basis yet US has linked it with market access and tariff reduction which is against the basic tenets of GSP. FIEO also said that since India is predominantly exporting intermediate and semi-manufactured goods to US under the GSP, the same has helped in cost effectiveness and price competitiveness of US downstream industry. Therefore, the GSP withdrawal will also impact the competitiveness of many manufacturing sectors and will hit the consumers at the same time. The import price of most of the chemicals products, which constituted a large chunk of India’s exports, is expected to increase by about 5%. The withdrawal of GSP benefit will also hit the import diversification strategy of US where it is keen to replace China as the main supplier to other developing countries. Mr Gupta said that India was getting tariff preference on 5111 tariff lines out of 18770 tariff lines in the US. However, on only 2165 tariff lines, the tariff advantage was 4% or more. While we hope that the exporters would be able to absorb the duty loss where it is 2-3%, we need to provide fiscal support to those products where GSP tariff advantage was significant particularly in the labour-intensive sector. FIEO study reveals that processed food; leather products (other than footwear); plastic products (vinyl floor covering, BOPP films, non-adhesive tap); building material & tiles; hand tools (spanners, wrenches, drilling equipments etc); engineering goods such as spark ignition, turbines and pipes, parts of generators, cycles; made-ups (pillow/cushion covers); Woven women’s dresses were eligible for higher GSP benefits and therefore, Government should look into providing fiscal support to such sectors so that exporters reduce their export prices factoring the fiscal support with a view that the landed price of such products remain more or less what was under the GSP regime. Government can look for providing such support on product market matrix for exports to US. Mr Gupta said that India’s exports to US will remain unaffected despite GSP withdrawal.