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THE GENERALISED SYSTEM OF PREFERENCES (GSP)



  May 21, 2024

THE GENERALISED SYSTEM OF PREFERENCES (GSP)



1. What is the Generalised System of Preferences (GSP)?

   - The Generalised System of Preferences (GSP) is an international trade program adopted by developed countries to promote economic growth in developing countries by offering reduced tariffs for their exports. It aims to encourage economic reforms and sustainable development in less developed nations by providing them preferential access to markets of developed countries.

2. How does the GSP work?

   - Under the GSP program, developed countries provide non-reciprocal preferential tariff treatment to eligible products imported from developing countries. This means lower tariffs on goods exported from developing countries compared to those from developed countries, making products from developing countries more competitive in international markets.

3. Why is the GSP important for developing countries?

   - The GSP is crucial for developing countries as it helps them integrate into the global economy, increases their export earnings, promotes industrialization, and creates jobs. It also aids small businesses and women-owned enterprises by providing them with broader market access, thus empowering them economically.

4. What are the benefits of the GSP for the importing countries?

   - For countries implementing the GSP, it diversifies their import sources, potentially reducing dependency on imports from specific countries (e.g., China). It also lowers tariff bills for importers, particularly benefiting small- and medium-sized enterprises by reducing their costs.

5. Why does the GSP need to be renewed periodically in the U.S.?

   - In the U.S., the GSP's authorizing legislation periodically expires and must be renewed by Congress. This periodic renewal process allows for the evaluation of the program's effectiveness and the updating of its terms to reflect current economic and political priorities.

6. What has caused the delay in renewing the GSP?

   - The renewal of the GSP has been delayed due to various factors, including political polarization which makes bipartisan legislation challenging. Despite broad bipartisan support and the recognized benefits of the program, aligning all political and economic interests for renewal has been difficult.

7. How can the GSP influence U.S.-India trade relations?

   - Renewing the GSP could be pivotal for enhancing U.S.-India trade relations, as it would provide a platform for broader trade negotiations, potentially leading to increased bilateral trade. The GSP could serve as a tool to further strategic interests and deepen economic ties between the two nations, especially in the absence of new free trade agreements.

8. What are some criticisms of the GSP?

   - While the GSP has many benefits, criticisms include its periodic expiration which creates uncertainty for businesses, the need for better alignment with modern economic challenges, and concerns that it might not sufficiently address issues like labor rights and environmental protection in beneficiary countries.

These FAQs provide an overview of the Generalised System of Preferences, highlighting its significance, functionality, and the ongoing discussions around its renewal, especially in the context of the U.S. legislative process and its strategic trade relationships.



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