GSP, Laptop Import Monitoring System On The Table: India-US Trade Policy Meeting

India and the US will discuss several trade issues at the trade policy forum meeting that began on 12 January 2024. The issues include India’s demand for the restoration of the Generalised System of Preferences (GSP), which was revoked by former US President Donald Trump, as well as Washington’s objection to India’s laptop import monitoring system. The trade policy forum meeting is crucial because the US is India’s most significant trade partner and India exports more than it imports to the US.

As the West’s goods exports are slowing due to the Russia-Ukraine war, India primarily relies on the US demand for export earnings. Additionally, India hopes to use the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) trade pact to counter China’s influence on trade in Asia. The ongoing supply chain reset and US firms increasingly adopting a ‘China plus one’ policy provide India with an opportunity to attract more foreign direct investment (FDI) by forging closer trade ties with the US.

However, in the absence of a free trade agreement (FTA) with the US, trade policy forum meetings are among the few available platforms to resolve trade tensions and work towards tangible export growth. In 2019, former US President Donald Trump revoked India’s GSP benefits, citing a growing trade gap with India and China. This was part of his radical trade measures and it had a significant impact on India as it was the largest beneficiary of GSP status in 2017, with USD 5.

7 billion worth of imports into the US given duty-free status. Many people expected that the US under the Joe Biden administration would restore the GSP, but it has not happened yet. The topic of GSP restoration was discussed during the last India-US trade policy forum held last year.

Despite India’s assurance that they will not impose restrictions on laptop imports, the US is still raising concerns about the purpose of India’s proposed ‘monitoring system’ which has been suggested as an alternative. This issue is expected to be discussed in the upcoming trade policy meeting as such measures are seen as a non-tariff measure. India has stated that the aim of implementing such a system is to ensure that IT products are sourced from ‘trusted geographies’.

The upcoming trade policy forum meeting between India and the US is highly important for several reasons. Firstly, the US is India’s biggest trade partner and it is the only major economy where India exports more than it imports. This makes it crucial for India to maintain a strong trade relationship with the US, particularly at a time when exports to the West are slowing due to the Russia-Ukraine conflict.

Secondly, India is heavily reliant on the US demand for export earnings and is looking to the US-led Indo-Pacific Economic Framework for Prosperity (IPEF) trade pact as a means to counter China’s influence on trade in Asia. Thirdly, the ongoing supply chain reset and the increasing adoption of the ‘China plus one’ policy by US firms presents an opportunity for India to attract more foreign direct investment by establishing closer trade ties with the US. Lastly, since there is no free trade agreement (FTA) between India and the US, such trade policy forum meetings provide a crucial platform to resolve trade tensions and push for tangible export growth.

In 2019, India lost its GSP benefits due to former US President Donald Trump’s radical trade measures. These measures were aimed at addressing the widening trade gap with India and China. The loss of GSP benefits was damaging for India as it was the largest beneficiary of GSP status in 2017, with imports worth USD 5.

7 billion into the US given duty-free status. Many expected the Joe Biden administration to reverse Trump’s trade measures, including the restoration of GSP. However, GSP was not restored, which was discussed during the last India-US trade policy forum in 2020.

While India has clarified that it will not impose any restrictions on the import of laptops, the US continues to question the proposed ‘monitoring system’ that is being suggested as an alternative. The US is concerned that this system is a non-tariff measure and is likely to bring it up during the trade policy meeting. India has stated that the purpose of the monitoring system is to ensure that IT products come from ‘trusted geographies’.

Ajay Sahai, Director General and chief executive officer (CEO) of the Federation of Indian Export Organisations has declared that India is looking to boost service trade with the US. To achieve this goal, India is seeking a liberal visa regime. Although India’s services exports have been on the rise, visa delays have been a major concern, especially during the Covid-19 pandemic.

The US considers immigration as a politically sensitive issue in the election year and visa delays have surged to record levels. Apart from the liberal visa regime, India is also seeking a totalisation agreement, which will provide social security to Indian professionals in the US. This agreement will eliminate dual social security deductions in India and the US.

The agreement is expected to provide significant benefits to the Indian IT workforce currently employed in the US and paying social security, but not receiving any benefits. .