On the Legality of the United States Action of Terminating India’s GSP Status

Abstract

Since the US Presidential Proclamation terminating India status as a GeneralizedSystem of Preferences (GSP) beneficiary with effect from 5 June 2019, questionsare raised on the WTO legitimacy of such an action. The US measure, whichappears to have a punitive element—a move precipitated by lack of reciprocityfrom India by not providing ‘equitable and reasonable access’ for US productsin Indian markets—challenges the fundamentally premise of the GSP schemes.Since the GSP schemes are established to provide economic and developmentalopportunities for developing countries, and once established must be adminis-tered as per the 1979 General Agreement on Tariffs and Trade Enabling Clause,meaning it must be on a ‘generalised’, ‘non-reciprocal’ and ‘non-discriminatory’basis, can India raise a legitimate challenge against the US action at the WTODispute Settlement Body? Or can the GSP schemes, being voluntary and uni-laterally administered, be structured by developed countries as trade policytools with stringent trade and non-trade conditionalities? The decision of theAppellate Body in European Communities—Tariff Preferences, the contested natureof the Enabling Clause and the heterogeneous nature of developing countries atthe WTO makes the interpretation knotty. In this context, this article provides abrief comment on the legal basis of the Enabling Clause in the WTO frameworkand the legitimacy of the US action of termination of India from the beneficiarystatus. Keeping aside the legal question, the author is also of the view that time isripe for India to consider ‘graduating’ itself from such preferential arrangementsand engage in binding obligations that are reciprocal and sustainable.