India Off Preferred List as UK’s New Trading Scheme Takes Effect
Indian exporters are slowly coming to terms with the loss of tax advantages for exports to the United Kingdom, an important market for the local $44 billion apparel and textile industry. Many are coping with shock and outrage over the new scheme that went into effect June 19.
The Developing Countries Trading Scheme (DCTS) has replaced UK’s previous Generalized Scheme of Preferences (GSP) causing certain products to lose their preferential duty status.
More from Sourcing Journal
India is no longer classified as economically vulnerable and therefore does not qualify for DCTS Enhanced Preferences.
Exporters have been demanding that the situation be taken up for review, and exporter led delegations were taking the matter up with the ministry in New Delhi last week.
The Apparel Export Promotion Council also led discussions at a meeting over the weekend in Gurgaon of the Brands and Sourcing Leaders Association (BSL), where the matter was under intense discussion between brands and manufacturers. The conclusion, said Sanjay Shukla, group leader at Triburg, a large apparel sourcing solutions provider and board member of BSL, was that not all of the apparel sector was affected, with certain segments of yarn, textiles and apparel more badly hit than others.
The talk at the event also addressed the free trade agreement, and the fact that as the UK’s 12th largest trading partner, it would be a win-win situation for both sides to find an equitable solution to the June policy shift.
Dr. A Shaktivel, president of the Federation of Indian Export Organisations, told Sourcing Journal that while government-level talks aim to address this issue, he is optimistic that the free trade agreement with UK which has been under negotiation since January 2022 will bear fruit. This is expected by the end or 2024 or in early 2025, with the 10th round of negotiations just recently wrapped up.
Officials familiar with the matter said more than 50 sessions over five days detailed policy and treaty issues. The parties have agreed to at least half of the issues so far, according to unofficial sources.
Meanwhile, the Developing Countries Trading Scheme has recategorized the countries that were already on the list.
Countries under the General Framework include India and Indonesia, which will get standard preference. Vietnam, which has signed a trade agreement with the UK, will continue to receive GSP market access during the transition to their new arrangement.
Sri Lanka and Pakistan come under the enhanced preferences list of low and middle income countries meeting the GSP criteria for economic vulnerability and have ratified and are effectively implementing 27 international conventions. They will get zero import tariffs on two-thirds of their product lines.
Bangladesh, under the least developed countries category, will continue to get zero percent import tariffs on all products excluding arms and ammunition, and will receive comprehensive preference.
Ethiopia, Cambodia, Myanmar and Laos will also get comprehensive preferences.
According to the foreword from Anne-Marie Trevelyan, Secretary of State for the Department for International Trade, in June, the UK government has granted DCTS Enhanced Preferences to existing GSP Enhanced Framework countries (without another preferential trading arrangement with the UK) for three years from the launch of the DCTS to ensure business continuity.
“Countries will lose DCTS Enhanced Preferences and move to DCTS Standard Preferences when their economies have developed enough to no longer be classified as economically vulnerable,” she wrote.
“The government is retaining the power to suspend a country’s preferences for serious and systematic violations of human rights and labor rights based on international conventions. The government is expanding the list of international conventions that form the basis for suspension. The new list includes conventions on anti-corruption, climate change and the environment,” the document noted.
