The US may withdraw GSP for India as it is unhappy with the recent tightening of foreign direct investment rules on e-commerce. India is the largest beneficiary of the United States’ GSP scheme, which is devised to promote exports from developing countries and which allows duty-free access to about 3,500 products.

Indian exporters are apprehensive of losing their competitive edge in the US market, especially in labor-intensive products if the facility is withdrawn. Exporters want some alternative schemes from India in case the benefits are revoked. One proposal is that in case GSP benefits are withdrawn, losses to exporters could be offset by giving some additional incentives to certain labor-intensive sectors.

Continuation of GSP benefits is expected to boost competitiveness of American manufacturers too by lowering their costs. About two thirds of US imports under GSP are raw materials, components, or machinery and equipment used for manufacturing goods for domestic consumption or for exports. Out of India’s total exports worth $49 billion to the US in 2017, exports worth $5.7 billion benefited from GSP.

Last year the US started a review process for India, Indonesia and Kazakhstan on the basis of complaints made by the US dairy industry and the medical equipment industry against perceived trade barriers.