Context:
Donald Trump has raised the issue of high tax by India on certain American products and has threatened to slap with reciprocal tax if voted to power in the 2024 presidential elections.
About GSP:
- Largest and oldest U.S. trade preference program.
- Purpose – To promote economic development by eliminating duties on thousands of products imported from designated beneficiary countries and territories.
- Instituted in 1971 under the aegis of United Nation Conference on Trade and Development (UNCTAD)
- A bulk of preferential schemes granted by industrialized nations to developing countries.
- Reduction of Most Favored Nations (MFN) Tariffs or duty-free importation of eligible products from beneficiary countries into the markets of donor countries.
The concept of Most Favored Nations (MFN), in accordance with the WTO’s General Agreement on Tariffs and Trade, mandates that all member countries must regard each other as “most-favored” trading partners with equal treatment. While the term ‘MFN’ might imply preferential treatment, it fundamentally signifies the principle of non-discrimination, as explained by the WTO.
UNCTAD is a permanent intergovernmental body established by the United Nations General Assembly in 1964 which has 195 member nations.
What is reciprocal tax?
- A reciprocal tax is charged on an import from another country that charges the US a similar amount to export an American product into its market which effectively functions as a tariff.
- Reciprocal tax agreements exist between states in the United States as well, allowing citizens of one state to work in another without having income taxes withheld in the state where they work.
Source: The Hindu
Previous Year Question
Consider the following statements:
Statements-I: Recently, the United States of America (USA) and the European Union (EU) have launched the ‘Trade and Technology Council’.
Statement-II: The USA and the EU claim that through this they are trying to bring technological progress and physical productivity under their control.
Which one of the following is correct in respect of the above statements?
[UPSC Civil Services Exam – 2023 Prelims]
(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I
(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I
(c) Statement-I is correct but Statement-II is incorrect
(d) Statement-I is incorrect but Statement-II is correct
Answer: (c)
