U.S. drops duty-free gold jewelry from India, Thailand

What India blames on a trade dispute regarding U.S. agricultural subsidies has led to the U.S. dropping duty-free status on gold jewelry exports from India and Thailand.

RENO, NV - 

Ambassador Susan C. Schwab of the Office of the U.S. Trade Representative recently announced that the Bush Administration has decided to drop its General System of Preferences (GSP), revoking duty-free status for gold jewelry imported from India and Thailand.

India shipped $2.21 billion in gold jewelry under the GSP program last year while Thailand shipped $700.36 million under GSP, representing 33.2% and 10.5% respectively of total U.S. gold jewelry imports, according to India's Gem & Jewellery Export Promotion Council.

The GSP Annual Review focused on several key areas, including consideration of: 1) whether to continue GSP eligibility for products from specific countries that exceeded statutory competitiveness limitations; 2) whether to terminate GSP eligibility for products that could be found competitive or meet other pertinent statutory criteria; and 3) petitions challenging the continued eligibility of certain beneficiary countries for the GSP program.

Imports that exceed the new statutory threshold established by Congress in 2006 and that have been removed from eligibility include gold jewelry from Indian and Thailand.

The USTR move followed several rounds of failed talks between Indian agricultural export expert Kamal Nath and U.S. official aimed at breaking a deadlock that has stalled progress at the Doha Round. The Doha Development Round of the World Trade Organization (WTO) negotiations aims to lower international trade barriers, permitting free trade among countries of various economic levels. The round was originally scheduled to end on December 2006.

The United States and the European Union have insisted that Indian and other poor nations substantially reduce high tariffs. Nath and his developing nations' colleagues want the West to reduce subsidies to their agricultural sectors that make western produce cheap, and whose imports (if tariffs are dropped) will decimate the agricultural sector in poor nations, such as Indian, according to the Times of India.

Schwab argued that India is "misusing its newfound clout." U.S. Secretary of State Condoleezza Rice said "it would be a tragedy and true shame if we do not complete this historic (Doha) agreement," which the Times of India said implicitly blames India for the deadlock.

In a letter to the U.S. Trade Representative GSO Subcommittee, Adv. Shashikant Pawar, President of a jewelry manufacturing association in the State of Maharashtra, said the removal of GSP benefits "would increase the cost of jewelry, lead to a decline in demand for Indian jewelry thereby having serious implications on existing and future employment in this sector."

"It would be very difficult for our artisans to find equally remunerative employment as they are semi-educated. ...To find a job at their present per capita income would be impossible and they will be faced with a livelihood crisis."

Attorney Susan G. Esserman, who represents India's Seepz Gem and Jewelry Manufacturers Association, wrote in a letter to the GSP subcommittee, "The fact that India has benefited from the program is a sign of program's success rather than an indication that the program should be terminated."

"Removal of India from GSP or terminating GSP benefits for Indian jewelry items would undercut the voices of economic reform in the Government of India as well as the broader partnership between the two countries that this Administration has championed."

Esserman said the decision will impact as many as 325,000 workers employed by the gem and jewelry industry in India. "This would be a particularly difficult blow for workers in the gem and diamond processing region of Surat," she added.

India competes most directly in the U.S. fashion jewelry market with China, according to Esserman. ‘Annual production in the jewelry industry in China is valued at approximately US$14.6 billion. The industry employs an estimated 5 million people, and is growing at an annual rate of over 10 percent."

Esserman concluded that "loss of the CNL waiver would favorably reposition a burgeoning Chinese jewelry industry at the expense of India." U.S. consumers will now pay 6% more for all jewelry that is manufactured in India.

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