Apparel April 2019 Apparel May 2019 issue

INDUSTRY INSIGHTS trade and the World Trade Organization (WTO) became a forum where fairer and more equitable trade relationships could be proposed. This resulted in the Trade Act of 1974 in the United States, which gave the US President the power to offer duty-free treatment to certain eligible products from specific developing countries. The powers conferred on the US President by the Trade Act give them great autonomy on determining which developing country would be a beneficiary. This was in effect known as the Generalized System of Preferences or GSP which allowed for a mechanism that gave preferential treatment to imported goods from developing nations, and functioned as an exception to the Most Favoured Nation principle in the WTO. A part of this system empowers the US President to revoke, withdraw, suspend or limit this duty-free treatment by giving a 60-day notice. For nearly as long as it has been in effect, the India–US trade relationship has benefitted from the GSP. This has led to a long period of mutual growth wherein both nations have significantly gained as trade allies. However, the recent decision by the Trump government to eliminate FOR NEARLY AS LONG AS IT HAS BEEN IN EFFECT, THE INDIA–US TRADE RELATIONSHIP HAS BENEFITTED FROM THE GSP. India’s GSP benefits is rooted in its view that India is no longer a co-operative trade partner. But this issue is in itself highly impactful to major Indian exports, mainly apparel ready-made goods. The Indian industry is on an ambitious trajectory of export goods and hopes to achieve US$300 billion in exports for the sector, and having GSP restrictions from the US will make this goal immensely difficult. BONE OF CONTENTION The reasons for the US decision are mired in lobbying from trade groups. The US government has alleged that India has not reciprocated sufficiently or offered any assurance that it will open up ‘equitable and reasonable’ access to its market, particularly in the case of medical devices APPAREL I May 2019 I 49

Apparel April 2019 Apparel May 2019 issue | Page 55