United States to Terminate GSP Designation of India and Turkey

At the direction of President Donald J. Trump, U.S. Trade Representative Robert Lighthizer announced that the United States intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria.

According to USTR, India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors. Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States market.

“The US had initiated the review on the basis of representations by the US medical devices and dairy industries, but subsequently included numerous other issues on a self-initiated basis. These included issues related to market access for various agriculture and animal husbandry products, relaxation / easing of procedures related to issues like telecom testing / conformity assessment and tariff reduction on ICT products,” read a communiqué from India’s Ministry of Commerce and Industry.

By statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation.

Under the United States GSP program, certain products can enter the United States duty-free if beneficiary developing countries meet the eligibility criteria established by Congress. GSP criteria include, among others, respecting arbitral awards in favor of United States citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property protection, and providing the United States with equitable and reasonable market access. Countries can also be graduated from the GSP program depending on factors related to economic development.

The United States launched an eligibility review of India’s compliance with the GSP market access criterion in April 2018. “India has implemented a wide array of trade barriers that create serious negative effects on United States commerce. Despite intensive engagement, India has failed to take the necessary steps to meet the GSP criterion,” read a communiqué from the USTR.

“The Department of Commerce engaged with various Government of India departments concerned with these issues, and India was able to offer a very meaningful way forward on almost all the US requests. In a few instances, specific US requests were not found reasonable and doable at this time by the departments concerned, in light of public welfare concerns reflective of India’s developing country status and its national interest. India was ready to address US concerns regarding medical devices in principle, by putting in place a suitable trade margin approach in a reasonable time frame to balance concerns about fair pricing for the consumers and adequate remuneration for the suppliers,” read the communiqué from India’s MoC&I.

India’s Response

• On the issue of dairy market access, India has clarified that while our certification requirement, that the source animal had never been fed animal derived blood meal, is non-negotiable given the cultural and religious sentiment, the requested simplified dairy certification procedure, without diluting this requirement, could be considered. Acceptability of US market access requests related to products like alfalfa hay, cherries and pork was conveyed.
• On reduction of our IT duties, India’s duties are moderate and not import stopping. Any MFN duty reduction would almost entirely benefit third countries. Accordingly, India conveyed willingness to extend duty concessions on specific items in which there is a clear US interest. On telecom testing, India was willing to consider discussions for a Mutual Recognition Agreement.

The United States designated Turkey as a GSP beneficiary developing country in 1975. An increase in Gross National Income (GNI) per capita, declining poverty rates, and export diversification, by trading partner and by sector, are evidence of Turkey’s higher level of economic development.