Exporters have asked the government to formulate an incentive scheme for labour-intensive sectors such as leather and textiles to prevent job losses amid concerns the US could withdraw the generalised system of preferences (GSP), which provides zero tariffs on $5.6-billion worth of the country’s exports.
The need for an alternative incentive mechanism figured prominently during a Board of Trade meeting, a top advisory body on external trade, last week.
The exporters expressed the need to convince the US to continue with the GSP and urged the government to look at an alternative to the US incentive scheme, sources said.
“The government should consider additional MEIS benefit to offset GSP loss to enable exporters to reduce their prices, so that the landed price is more or less at the same level as prevalent when the GSP benefit was available,” Fieo director-general Ajay Sahai said.
Under the Merchandise Exports from India Scheme, duty credit scrips are issued to exporters and these scrips are freely transferable and can be used to pay customs duty.
“We are recasting our export incentive schemes. In the new FTP, they would be in compliance with the global
trade rules. The new incentives could focus on R&D activities, production parameters and product specific clusters. Rebate can also be given on state levies,” officials said.
The zero tariff shipments have been largely benefiting the exporters of textiles, leather, engineering, gems and jewellery and chemical products.
Benefits offered by the US to the developing countries under the GSP scheme are non-reciprocal. However, the US can withhold GSP benefits to a trading partner if it finds that its own exports are facing market access hurdles.
Fieo president G. K. Gupa said, “The withdrawal of GSP will impact severely SME exporters, in particular the handloom and agriculture sectors. To compensate the SME exporters and labour-intensive goods, there is a need to provide additional benefit to all such exports to the US.”
The Trump administration had been demanding for a more open market for US agriculture products, automobiles and capping of prices for medical devices. In April, the US announced eligibility review of India for the GSP to gain more market access.
