GSP extension is a breather for diamond exporters

Diamond jewellery exporters of the country are heaving a sigh of relief as the Generalised System of Preference (GSP) has been extended till June 30.

However, the industry stakeholders cannot breathe happily for long as a further review of the programme is just six months away.

According to Sanjay Kothari, chairman, the Gems & Jewellery Exports Promotion Council (GJEPC), the domestic diamond jewellery sector will have to try for another extension after six months.

But, Vasant Mehta, vice-chairman of GJEPC and a member of the two-member team that led the discussion, is keen on taking initiatives soon after the New Year holidays, as he considers it a big challenge.

Although the fear of exclusion was a political fallout, the Indian government and the American government were very supportive on all fronts for the extension, Mehta said.

According to sources, two US Congressmen "� representative of California Bill Thomas and senator of Lowa Charles Grassley "� were of the view that India's inclusion in the GSP programme was used as a bargaining chip for negotiations to the US satisfaction.

These Congressmen were indirectly objecting India's participation owing to its stance protecting the rights and interests of its farmers in a global trade environment.

Experts said if the country was not included, it would have been a repercussion of India's gain in the WTO (World Trade Organisation) talks at Doha and the jewellery sector would have been hit very badly with the exports tariff of 6.5 per cent.

"We succeeded in convincing retailers of the US with two aspects "� the removal would raise the jewellery price at least by 6.5 per cent and it would lead to imports from China, which would again attract equivalent duty resulting in no benefit for the US but only to China," Mehta said.

The domestic jewellery sector presented its concern to retailers of different pockets of the US and they in turn managed to convince their respective senators.

The comment book, which was prepared with opinions from local industry players, was set for opening in September, but the elections in the country and a strong trade relationship between India and the US deferred the decision for six months.

"We have enough time, but we would not wait for the deadline to knock at our doors. We would start convincing the US government soon after the New Year holidays are over for a further extension of GSP," Mehta said. Per piece setting charge for 20 points and below diamond was much higher in the US than in India, he added.

Other than diamond retailers, couriers firms, banks and US importers also took the lead in convincing the government that Indian exclusion would have a repercussion on the US revenue as well. Finally, the US government decided to bring the comment book for discussion in June rather than during the hectic year-end days.

The $2 billion domestic diamond jewellery exports to the US was in jeopardy with the leaders' support to co-relate the Doha round of agri talks of the WTO where India and Brazil gained much on US, with jewellery exports.

With the Democrats now controlling both the Houses of Congress, the situation was very unpredictable.

Instituted in 1976, the GSP was aimed at promoting the economic prosperity of designated underdeveloped countries with more than 4,650 selected products from 144 countries for a preferential entry into the US.

Under the programme, duty-free entry for diamond jewellery was permitted an entry into the US, which proved a boon for all those countries "� especially with diamond processing becoming a low-margin business. Since then, the programme has been extended periodically which was coming to an end on December 31, 2006.

Surprisingly, India was considered to be incorporated in the GSP programme despite the country did not fall under norms chalked out by the US authority. This was possible because of the Indian government's sincere efforts, industry sources said.

Now, the entire programme needed a renewal, and the domestic diamond jewellery industry was worried over the country's position vis-a-vis the programme.