The U.K.'s decision to withdraw the duty benefit scheme from its Generalised Scheme of Preferences (GSP) may impact Indian exporters from certain labour-intensive sectors such as leather and textiles, which have been they were the major beneficiaries, according to experts and traders.
The U.K. is replacing the GSP with a new Developing Countries Trading Scheme (DCTS) from June 19.
Labour-intensive sectors, including certain textile items, leather goods, carpets, iron & steel goods and chemicals may get impacted due to this.
Global Trade Research Initiative (GTRI) said the United States, European Union (EU), Australia, Japan and many other developed countries grant unilateral import duty concessions to developing countries under their GSP schemes.
“As the U.K. has come out of the EU, it has designed its own GSP scheme. Each country sets a product-wise threshold limit, if a country’s exports cross the limit, the GSP concessions stop. The UK withdrawing GSP concessions on labour-intensive products was expected as the two countries are negotiating a free trade agreement,” GTRI co-founder Ajay Srivastava said.
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GSP concessions are available in full to exports from Least Developed Countries (LDCs). China does not get such concessions. He added that the firms, associations and countries request for restoration of concessions but it is rarely considered.
"Since the concessions are small, India should stop participating in GSP schemes and stand tall like China does. GSPs are vestiges of colonial mind-set and should be used by only LDCs ," Mr. Srivastava said.
India’s exports worth $2.5 billion are entitled for the GSP benefit in the U.K.
Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said exports’ share of certain Indian goods in the U.K. had increased from a specified limit, and so, those sectors would not be able to enjoy the GSP benefits now.
He added that certain sectors such as metals would continue to enjoy the benefits.
"India will get the benefits under standard preferences rather than enhanced preferences. LDCs will get enhanced benefits," Mr. Sahai said.
India and the U.K. have been negotiating a free trade agreement since January 13, 2021. As many as ten rounds of talks have been completed till June this year and both sides are aiming to conclude the negotiations at the earliest.
