USTR defends withdrawal of gold GSP

Deputy US Trade Representative Karan Bhatia, has defended the Bush Administration's action to deny duty-free tariffs for imports of gold jewelry and brass lamps from India under the General System of Preferences program saying India for several years now had been over the threshold for eligibility for these products.

Bhatia told rediff.com however, that the termination of this duty-free tariff regime on these items did not mean that India had been completely graduated from the GSP program and no longer eligible for such benefits.

"India has not been graduated from GSP, and it remains eligible for GSP for most of its exports to the US," he said, and pointed that that "in fact, it remains the largest beneficiary of GSP."

Bhatia argued that last week's action by the Office of the US Trade Representative "only terminates the eligibility of India for GSP on gold jewelry and brass lamps," and noted that "India has for some time been far over the threshold for GSP eligibility for these products."

He said that, "for example, for jewelry, it is 17 times above the allowed threshold, but had been given a waiver," he said, and added, "Recent Congressional changes to US law constrained the President's discretion to continue the waiver."

India has lamented the Bush Administration's action with Commerce and Industry Minister Kamal Nath saying that the USTR's action would lead to considerable job loss in the Indian labor-intensive sectors, which had for decades enjoyed duty-free access to the American market.

"The decision is likely to lead to a number of jobs being lost in the jewelry sector in India, especially among vulnerable groups of society," he said in a statement, while acknowledging that the GSP was a unilateral program of the US government and was not a result of negotiations with GSP beneficiaries, and hence was the prerogative of Washington whether it wants to provide GSP benefits to certain countries or not.

India's gold jewelry exports to the US now could be hit with a tariff of anything from four to 6.5 per cent duty and is expected to impact close to $1.8 billion of jewelry exports to the US, which account for one-third of the total shipment of $5.21 billion.

In the first 10 months of 2006, India exported gold jewelry worth $1.6 billion and $20 million worth of brass lamps under the GSP program, and it is estimated that out of the total jewelry imports by the US, India holds the biggest piece of the pie accounting for 33.2 per cent.

Last week, USTR Susan Schwab in announcing the outcome of the Administration's 2006 Annual Review of the GSP - a program created in 1974 and provides duty-free treatment for nearly 5,000 products exported to the US from 131 beneficiary developing countries - said the Administration would continue GSP eligibility to 115 exports from 19 specific countries whose trade exceeded statutory limits in 2006 and terminate GSP eligibility for 21 products from specific beneficiary countries in order to advance a more targeted and effective program to promote economic development.

She explained, "Congress created the GSP program to serve as a bridge for developing countries as they increase their participation in the global trading system. It also helps to expand choices for US consumers and industry and the GSP program has proven to be very successful in expanding US trade with developing countries."

But Schwab said that with regard to the Administration's decision to revoke waivers that had previously afforded GSP preferences to certain globally competitive foreign suppliers, "The eligibility determinations made in this year's review fulfill the intent of the recent Congressional amendment that GSP continue to serve as a powerful development tool, particularly for the world's poorest countries while well-established, globally competitive industries based in developing countries should compete on a level playing field with their counterparts."

"This will preserve GSP tariff advantages for nascent sectors that are intended to be the focus of the GSP program. Indeed, the ability of these industries to compete in global markets is testament to the success of the GSP program in helping to cultivate competitive industries in a number of developing countries," she said.

The Administration action to deny GSP benefits to gold jewelry and brass lamps imported from India and brake and brake parts and ferrozirconium from Brazil, came within a week after the Doha Round talks of the World Trade Organization broke down among the key players in Potsdam, Germany, and the US pilloried India and Brazil for the unraveling of the negotiations.

But senior Administration officials denied that the breakdown of the talks and Washington's blaming India and Brazil for it had nothing to do with the denial of benefits to certain categories of exports to the from these countries under the GSP program.

In an earlier interview with India Abroad, the newspaper owned by rediff.com and published in the US, Bhatia had said, "The GSP was designed to be a program to benefit the poorest of the poor - to really help very poor countries gain access to our market and develop. India, has, to its great credit, been able to use the program to develop in a number of areas."

"Congress, last year, independent of Doha," he explained, "reformed the program to make sure that countries that have historically taken great advantage of the program give way so that less developed, less fortunate countries can (have the opportunity)."

Thus, Bhatia said, "The direction given to the Administration was quite clear. But what is not fair - certainly not in the case of the Administration - is to say this is designed to punish India. It really has to do with how you use trade preference programs to help promote development and what is the most effective way."

He said that "while India has many impoverished people, it has been able to make effective use of this program and has developed very competitive industries. Secondly - and this goes beyond GSP - whatever happens in Doha, the US-India trade relationship is strong, it is growing, and it benefits from very strong political commitment on the part of both leaders."

Bhatia argued that this trade relationship was not one which "hangs on one multilateral or other development. This is really a cause that transcends any single discussion or debate."