Generalised System of Preferences

Why in news?

• India is likely to press Biden Administration for early restoration of the Generalized System of Preferences (GSP) trade privilege for India.
• The privilege was withdrawn by outgoing President Donald Trump’s administration in Washington DC in June 2019 and India has been prodding the United States to restore it.

What is Generalised System of Preferences?

• GSP is an arrangement that allows concessional or zero tariff imports from developing couturiers into the US.
• The objective of GSP was to give development support to poor countries by promoting exports from them into the developed countries.
• The US government selects a group of poor countries and a set of products and offers these countries lower-than-normal tariffs than it applies to imports from all other World Trade Organization countries.
• The concept of GSP is very different from the concept of MFN.
• MFN status provides equal treatment in the case of tariff being imposed by a nation but in case of GSP differential tariff could be imposed by a nation on various country whether it is a developed country or a developing country. Both the rules comes under the purview of WTO.
• GSP provides tariff reduction for least developed countries but MFN is only for not discriminating among WTO members.

PRELIMS QUESTION

Consider the following statements regarding World Trade is organisation: 
1.It officially commenced on 1 January 1995 under the Marrakesh Agreement.
2.Most favoured nation (MFN) rule tries to ensure non discrimination in trade laws of member countries.
Which of the statements given above is/are correct?
(a)1 only
(b)2 only
(c)Both 1 and 2
(d)Neither 1 nor 2

Answer to prelims question