The US' decision to withdraw incentives for Indian exporters violates global trade rules as it discriminates among developing countries, trade experts say.
The US has decided to roll back export incentives provided under Generalised System of Preferences (GSP) from June 5. The move is expected to impact India's exports wroth USD 5.6 billion under this programme.
Dhruv Gupta, Partner (International Trade), Lakshmikumaran & Sridharan, said that irrespective of the eventual trade impact, the US' action of withdrawal of benefits against India is at loggerheads with its WTO obligations.
"It goes against the fundamental principle of non-discrimination because it discriminates between developing countries," Gupta said in a statement.
The decision also undermines the objective recognised in the preamble to the World Trade Organization (WTO) agreement that there is a need for 'positive efforts' to ensure that developing countries secure a share in their growth in international trade commensurate with the needs of their economic development, he said.
Industry body CII too has stated that this decision has been taken in "haste" and would hurt domestic exporters.
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It has expressed hope that both the US and India would discuss the matter and find an amicable solution to this issue.
Federation of Indian Export Organisations (FIEO) said that in respect of products having GSP benefits of 3 per cent or more, exporters may find it difficult to absorb the GSP loss.
The sectors which would be impacted include most imitation jewellery, leather articles, pharmaceuticals, chemical and plastics, basic and processed agri goods, it said.
"Government should provide some supports to products where GSP loss has been significant so that the market is not lost. Extension of rebate of state and central tax levies scheme on such products on exports to US will be beneficial," FIEO President Ganesh Kumar Gupta said.
As many as 1,900 Indian products from sectors such as chemicals and engineering get duty free access to the US market under the GSP, introduced in 1976.
The US has alleged that India is not providing equitable market access to its companies and has raised serious concerns over capping of prices of certain medical devices. It is also seeking market for its dairy products.