Even though there has been an overwhelming support for the Indo-US civilian nuclear deal among US policy makers, India is nervous about how they will deal with the Generalized System of Preference (GSP) mechanism set to expire next month. Set up in 1976 and renewed in 2002, the GSP system governs tariffs on a number of goods imported by the US and its expiry next month coupled with lack of progress on World Trade Organization (WTO) dialogue process makes bilateral trade prospects uncertain.
Key legislators have been trying to push through legislation that allows reduced benefits to India and Brazil as punishment for hard-nose bargaining at the WTO but these two nations but Congress as a whole is resistant to such harsh measures. India is trying to make diplomatic overtures to the US asking for a continuation of the preferential system till a compromise is reached at the WTO negotiations. Indian Embassy officials are reportedly working with several legislators through lobbyists and the Administration.
If the GSP system is not renewed, then India along with several nations will lose the benefits at the end of the year anyway. Powerful legislators such as Senate Finance Committee chairman Charles Grassley have threatened to let the system lapse if India and Brazil are included. US House of Representatives Ways and Means Committee Chairman Bill Thomas says that the system must be renewed with reduced benefits for these two nations. In addition, Thomas says that India could be banned in certain categories where it doesn't meet requirements. Others say that benefits to these two nations can be reduced and extended to other less advanced nations.
If the GSP is not extended as is, export of gems, jewelry, copper, table, kitchen and other household articles coated or plated with precious metals, non-electrical lamps, and lighting fixtures will be severely affected which is estimated at USD 4 billion.