According to the latest report on Tuesday, the year-long trade war with China is pushing American companies to source more from GSP (Generalised System of Preferences) countries such as India, Thailand, Cambodia, Indonesia and Turkey, warning that cancelling GSP benefits to India would only help China.
GSP is the largest and oldest US trade preference programme and is designed to promote economic development by allowing duty-free entry for thousands of products from designated beneficiary countries.
The Coalition for GSP, a group of American companies and trade associations, in a report on Tuesday said, the latest official trade figures show that the Generalised System of Preference or GSP, saved American companies USD 105 million in March 2019, an increase of USD 28 million (36 per cent) from March 2018 and the second-highest level on record.
In the first quarter of 2019, GSP saved American companies USD 285 million that is USD 63 million more than the first quarter of 2018 — itself a record-shattering year.
On March 4, President Donald Trump announced that the US intends to terminate India’s designations as a beneficiary developing country under the GSP programme. The 60-day notice period ended on May 3.
According to the Washington DC-based Coalition for GSP, products hit by Section 301 tariffs, when imported from China, account for 90 per cent of increased GSP imports in 2019.
Overall, GSP imports rose by about USD 760 million, with USD 672 million coming on products on China Section 301 lists. GSP imports of products on those Section 301 lists increased 19 per cent while GSP imports of other products increased by just five per cent.
According to the report, India benefits the most from this. It said, “For India, 97 per cent of increased 2019 GSP imports are on the China Section 301 lists. GSP imports on Section 301 lists increased by USD 193 million (18 per cent), while imports of everything else increased by just USD seven million (two per cent).”
The coalition said, “Not only would terminating GSP for India, Turkey or others under review (Thailand, Indonesia) hurt many American companies and workers that have relied on GSP for years, it would also reduce viable sourcing options for companies looking to buy less from China in response to Section 301 tariffs — thereby undermining the president’s own objectives.”
In another report, the coalition said cancelling GSP for India would benefit China.
While President Donald Trump has tweeted about raising tariffs on China to create additional negotiating leverage, terminating GSP for India would undermine it, it said.
The report said, given the head-to-head competition between India and China on many of these products, ending GSP for India would have the same effect as lowering tariffs on China. It said, “And we can see that the Administration’s tariffs on China do seem to have impacted both imports from India under GSP and from China so far in 2019.”
The coalition said in its report, “New tariffs on China presumably would amplify these trends — but new tariffs on India would mitigate them. That puts the Administration at a crossroads: is increased leverage on China or India a higher priority? Because the data show you cannot raise tariffs on one without helping the other.”
