According to the Coalition for GSP (Generalised System of Preference) trading with India and other GSP countries has helped US firms save $285 million in the first quarter of this year. Last year, trading with GSP countries helped US firms save $222 millions.
In the wake of US president Donald Trump's tweets to push for higher tariffs on Chinese products and a simultaneous call for restricting trade with GSP countries such as India, the report from the Coalition for GSP is a certain eye-opener.
The Washington DC based Coalition for GSP is formed by a group of American companies and a other trade associations. The Coalition in its latest report released on Tuesday showed data that suggests that cancelling GSP-related trade benefits to countries such as India could come at a higher cost- helping China.
GSP, similar to the concept of Most Favoured Nation (another WTO tool to provide tariff reduction) is a large trade preference programme and had been designed to promote economic development. The program enables duty-free entry for thousands of products from designated beneficiary countries. The GSP countries to US include Turkey, India, Thailand, Cambodia, Indonesia etc.
"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," the coalition said.
The agency said that products hit by Section 301 tariffs when imported from China account for 90 per cent of increased GSP imports in 2019. Section 301 tariffs are considered among a principal statutory way to allow the United States administration to enforces its rights under trade agreements. This law allows the administration to address "unfair" foreign barriers to its exports.
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.
Noting that imports from China, subject to new tariffs, are down significantly, the coalition said countries from which GSP imports of products on China Section 301 lists have increased the most in the first quarter of 2019.
According to the report, India benefits the most from the trade-war and the 301 tariff. "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 $ 193 million (18 per cent), while imports of everything else increased by just $ 7 million (two per cent)," the agency said.
Speaking on India, the agency said that over 75 per cent of India's GSP imports were included on one of the Section 301 lists.
In the first two months of 2019 (most recent data available), GSP imports from India are up significantly for products on the Section 301 lists, but down slightly for products where China does not face new tariffs, according to the coalition. It is the opposite for China: imports are down significantly for products facing new tariffs, and up slightly for those that do not, it said.
In another report, the coalition said cancelling GSP for India would benefit China. Referring to the results of a recent survey, the coalition said 30 per cent of companies would look to source more from China if GSP benefits went away.
"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," the coalition said in its report.