GENERALIZED SYSTEM OF PREFERENCE (GSP)
Why in news?
- US President Donald Trump has terminated India's designation as a beneficiary developing nation under the key GSP trade programme effective from 5th June 2019 after determining that it has not assured the US that it will provide "equitable and reasonable access" to its markets.
About the news
- The Trump administration had launched an eligibility review of India's compliance with the GSP market access criterion in April 2018.
- The Trump administration argues that New Delhi has failed to assure America that it will provide equitable and reasonable access to its markets in numerous sectors.
- On 4th March 2019, 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 3rd May 2019.
About GSP
- The Generalized System of Preference (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.
- Under the GSP programme, nearly 2,000 products including auto components and textile materials can enter the US duty-free if the beneficiary developing countries meet the eligibility criteria established by Congress.
- The GSP criteria includes, among others, respecting arbitral awards in favour of the US citizens or corporations, combating child labour, respecting internationally recognised worker rights, providing adequate and effective intellectual property protection, and providing the US with equitable and reasonable market access.
- Countries can also be graduated from the GSP programme depending on factors related to economic development.
- India was the largest beneficiary of the programme in 2017 with $5.7 billion in imports to the US given duty-free status.
Impact
- India has been a beneficiary of the programme, known as the Generalised System of Preferences (GSP), since November 1975.
- The move could impact India’s competitiveness in exports of 1,900 items, including organic chemical raw materials, iron, steel, furniture, aluminum and electrical machinery, as duties will now be levied on these products.
RARE EARTH
Rising tensions between the United States and China have sparked concerns that Beijing could use its dominant position as a supplier of rare earths for leverage in the trade war between the two global economic powers.
About rare earths
- Rare earth metals are a group of 17 elements – lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium – that appear in low concentrations in the ground.
- Although they are more abundant than their name implies, they are difficult and costly to mine and process cleanly.
- China hosts most of the world’s processing capacity and supplied 80% of the rare earths imported by the United States from2014 to 2017.
- In 2017, China accounted for 81% of the world’s rare earth production.
- Rare earths are also mined in India, South Africa, Canada, Australia, Estonia, Malaysia and Brazil.
Uses
- Rare earths are used in rechargeable batteries for electric and hybrid cars, advanced ceramics, computers, DVD players, wind turbines, catalysts in cars and oil refineries, monitors, televisions, lighting, lasers, fiber optics, superconductors and glass polishing.
- Several rare earth elements, such as neodymium and dysprosium, are critical to the motors used in electric vehicles.
- Some rare earth minerals are essential in military equipment such as jet engines, missile guidance systems, antimissile defense systems,satellites, as well as in lasers.
- Lanthanum, for example, is needed to manufacture night vision devices.
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