What US trade benefits could India forfeit?

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India Faces Potential Loss of Zero Tariff Exports to the US Under GSP Scheme

India stands to lose preferential zero-tariff access on approximately US$5.6 billion worth of exports to the United States, a concession currently provided under the Generalized System of Preferences (GSP) scheme. This potential withdrawal stems from a dispute over India's trade and investment policies, specifically its recent e-commerce regulations and data localization requirements, which have stalled broader trade negotiations between the two nations. The US Trade Representative's office is currently reviewing India's GSP status, with an announcement anticipated imminently.
Potential Loss of Generalized System of Preferences (GSP) Access

The United States is considering revoking India's eligibility for the GSP, a trade preference program that has been in place since the 1970s. India has historically been the largest beneficiary of this scheme, which allows for duty-free imports of certain goods from developing countries into the US. The potential termination of this preferential treatment represents a significant punitive measure, particularly given President Trump's stated aim to reduce trade deficits with major economies and his previous criticisms of India's high tariffs.
Trade and Investment Policy Disputes as Triggers

The recent downturn in US-India trade relations has been exacerbated by India's implementation of new e-commerce rules. These regulations, introduced in December, restrict how major online retailers like Amazon and Walmart-backed Flipkart operate within India's rapidly expanding digital market. The rules prohibit exclusive agreements with sellers, limit discount offerings, and bar sales through vendors in which these companies hold equity. This policy shift, coupled with earlier drives to compel global payment companies to store data locally and increased tariffs on electronics, has undermined a comprehensive trade package that both countries were attempting to negotiate throughout the previous year.
Impact on Indian Exporters and Small Businesses

If the US proceeds with eliminating duty-free access, it is anticipated to disproportionately affect smaller Indian businesses. For instance, jewelry exporters, who rely heavily on the GSP for market access, would likely bear the brunt of this change. The withdrawal could manifest as a reduction in the number of eligible product lines or a complete termination of the GSP program for India, significantly impacting these sectors.
Stalled Trade Negotiations and Future Uncertainty

The GSP concession was intrinsically linked to a larger trade package aimed at improving market access for agricultural and dairy products, among other areas. The imposition of new policies, such as those concerning e-commerce and data localization, has disrupted these ongoing negotiations. The US Commerce Secretary's upcoming visit to New Delhi is expected to address these concerns, but the broader trade deal remains uncertain, especially with Indian general elections scheduled for the spring. This impasse raises the possibility of further trade friction, with India potentially facing demands for a full free trade agreement, which could pose additional challenges to its domestic industries.

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What US trade benefits could India forfeit?

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