Withdrawal Of Duty Benefit Scheme By UK May Impact Labour Intensive Goods' Exporters

The UK's decision to withdraw duty benefit scheme GSP may impact Indian exporters from certain labour-intensive sectors such as leather and textiles as they were the major beneficiaries, according to experts and traders.

The UK is replacing the Generalised Scheme of Preferences (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 US, European Union (EU), Australia, Japan and many other developed countries grant unilateral import duty concessions to developing countries under their GSP schemes.

"As the UK 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.

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 ," Srivastava said.

India's exports worth USD 2.5 billion are entitled for the GSP benefit in the UK.

Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said exports' share of certain Indian goods in the UK has increased from a specified limit due to which 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," Sahai said.

India and the UK 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.