Proposed US bill may hit Indian jewellery exports

New Delhi: The gems and jewellery industry is jittery over a U.S. proposal to end sops for Indian imports to that country and has even appealed to the Commerce Ministry to approach the right quarters in the US administration.

Jewellery exports from India worth $1.7 billion may be hit if Republican Senator Bill Thomas and some others are able to bring in a bill to terminate the duty-free entry of these products under the Generalised System of Preferences (GSP).

The Indian Gems and Jewellery Exports Promotion Council has approached the Commerce Ministry.

"The government has assured that the interests of the Indian industry would be safeguarded." the Council’s Chairman Sanjay Kothari said.

GSP is a scheme that was legislated by the US in the seventies to help developing countries export some of their products (not competing with US products) to the US at zero tariffs.

If GSP-products entering the US cross a certain threshold value, then they stand to lose the zero-tariff treatment being enjoyed by them.

In such circumstances, the US-President has an authority to grant a competitive needs limitations (CNL)-waiver to such products and continue granting zero-tariff treatment to them under the GSP regime.

Senator Thomas plans to bring in the bill during the forthcoming 'lame duck' session of the Senate scheduled to begin from November 13, 2006. The bill demands that the President should in future, never be in a position to grant CNL waiver to products.

By tabling such a Bill, Senator Thomas would be stripping the President of his powers to issue CNL waiver to Indian jewellery industry under the new GSP regime that would become operational from January 1, 2007.

The ministry is trying hard to lobby in the US so that the benefits continue. Nearly 50 per cent of the Indian jewellery exports are to the US and they would be affected.

Various American jewellers dealing in Indian jewellery, meanwhile have got together and are trying to inform various stakeholders about the ill-effects of the bill, on the American market.

"Indian jewellery has created a market in the US which did not exist before. This jewellery does not cater to the Tiffany's or Bulgaris. It is priced low and caters to the average middle class," Sushil Choksey of Indian Diamond and Colorstone Association said.

Kothari said the main beneficiary of the duty waiver by the jewellery is the 3.25 lakh skilled workforce in India, mostly from rural areas.

Choksey said what is not being realized is that these jobs lost in India are not going to create jobs in the US. Instead these jobs are going to migrate to China, the only country that has a capacity and size to compete with Indian jewellery.

But then the Chinese jewellery is priced in a much higher range and the quality is also better. This will directly raise the costs for the US consumer, said Choksey.

Sources in American Jewellers Assocations say, "Senator Thomas is upset that India has been exercising its right of protecting its farmers' interests during the ongoing Doha Round of Trade Negotiations at the WTO. He wants India to soften its position on agriculture issues at the WTO.”

The expiry of the existing GSP regime has provided him with an opportunity to retaliate by introducing a Bill that hits India on an item, which provides the Indian labour force the largest revenue from exporting under a single heading - jewellery.

Indian jewellery enjoys CNL waiver benefits under current GSP regime which expire on December
31, 2006.