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What
is EU’s Generalised System of Preferences?
The EU Generalised System of Preferences is the system of
preferential trading arrangements through which the European
Union extends preferential access to its markets to developing
countries.
In 1968 the United Nations Conference on Trade and Development
(UNCTAD) recommended the creation of a ‘Generalised System
of Tariff Preferences’ under which developed countries
would grant trade preferences to all developing countries.
The EU was the first to implement a GSP scheme in 1971. The
EU’s GSP grants products imported from the 178 GSP beneficiary
countries and territories either duty-free access or a tariff
reduction.
The EU GSP is the most widely used of all developed country
GSP systems. The volume of imports to the EU from developing
countries under the GSP is greater than the volume of imports
under the US , Canadian and Japanese GSP systems combined.
In 2003 EU imports under GSP totalled €52 billion. In
comparison, under the equivalent American scheme – which
is the world’s second most widely used GSP imports totalled
€16 billion.
The new GSP came into force on 1 January 2006 , although a
provisional form of the GSP plus will be fast-tracked to be
in place from July 1 2005 . The eligibility of countries placed
in the GSP Plus incentive scheme will be confirmed by an assessment
of their effective implementation of core human and labour
rights, good governance and environmental conventions before
the beginning of 2006.
The old GSP systems
The old GSP, in place since 1995, applied to imports from
developing countries that pay duty on entering the EU market,
and that are not already duty-free under Most Favoured Nation
agreements. .Of the approximately 11000 customs lines in the
EU about 2000 are already duty-free under MFN. GSP applies
to about 7000 of the remaining 9000, with the exception of
arms and ammunition.
There are currently five types of EU GSP scheme. The general
scheme covers roughly 7000 products, of which 3300 are classified
as non-sensitive and 3700 are classified as sensitive products.
Non-sensitive products enjoy duty free access, while sensitive
products benefit from a tariff reduction of 3.5 percentage
points on the MFN tariff.
There are two schemes that tie additional preferences to recognition
of labour rights and environmental standards. These schemes
reduce the tariff for sensitive products by 8.5 percentage
points on the MFN tariff.
There is a special GSP to combat drug production and trafficking.
This scheme benefits all Central American countries, countries
belonging to the Andean Community as well as Pakistan . The
number of products covered by this scheme is higher than the
general scheme (around 7200) and they have access to the EU
market duty-free.
There is a special scheme for Least Developed Countries (LDCs):
‘Everything but Arms’. For the world’s 50 poorest
countries this allows duty free access to the EU for all products
except arms and ammunition.
The new system: three schemes instead of five
The revised system is designed to be simpler, more transparent
and more stable. The new GSP will remain unchanged until the
end of 2008 hence providing stability and predictability for
importers and exporters. At the end of this period, the allocation
of preferences will be reviewed to better meet the evolving
strengths and development needs of each country.
There will be three schemes instead of five:
General scheme: product coverage increases from about 6900
to about 7200. It will incorporate 300 additional products
mostly in the agriculture and fishery sectors, of interest
for developing countries
There will be a new ‘GSP Plus’ scheme for especially
vulnerable countries with special development needs. It will
cover around 7200 products which can enter the EU duty free.
The beneficiaries must meet a number of criteria (see below)
including ratification and effective application of 27 key
international conventions on sustainable development and good
governance.
‘Everything but Arms’ will remain unchanged.
‘GSP Plus’: A new deal for vulnerable countries
To benefit from ‘GSP Plus’ countries need to demonstrate
that their economies are poorly diversified, and therefore
dependent and vulnerable. Poor diversification and dependence
is defined as meaning that the five largest sections of its
GSP-covered imports to the Community must represent more than
75% of its total GSP-covered imports.
GSP-covered imports from that country must also represent
less than 1% of total EU imports under GSP.
They also have to have ratified and effectively implemented
the 16 core conventions on human and labour rights and 7 (out
of 11) of the conventions related to good governance and the
protection of the environment. At the same time beneficiary
countries must commit themselves to ratifying and effectively
implementing the international conventions which they have
not yet ratified. In any case, the 27 conventions have to
be ratified by the beneficiary countries by 31 December 2008
.
A simpler mechanism for graduation
Certain products from GSP beneficiaries can be graduated from
the scheme if they become competitive on the EU market. This
is a sign that these products no longer need the GSP to boost
their exportation. Thus, graduation is not a penalty, but
indicates that the GSP has successfully performed its function,
at least in relation to the country and product in question.
This ensures that the GSP focuses on the countries most in
need and helps them play a greater role in international trade.
Changes will be made to the graduation mechanism to make it
simpler in the new system. The current criteria (share of
GSP imports, development index and export-specialisation index)
have been replaced with a single straightforward criterion:
share of the Community market expressed as a share of exports
from GSP countries. This share would be 15%, with 12.5% for
textiles and 12.5% for clothing.
Graduation will be assessed at the end of 2008, except in
the case of textiles and clothing which will be reviewed annually
to properly reflect the possibility of sharp increases in
textile and clothing exports.
EU imports from developing countries
Under the EU GSP between 1999-2003 developing countries share
in total EU imports grew from 33% to 40%.
The EU is the largest trading partner for the world’s
poorest countries: 40 % of EU imports originate in developing
countries, amounting to €362 billion worth of trade.
The EU is the world’s most open market for poor countries:
in 2003 around 80% of developing countries’ exports entered
the EU duty free or at reduced rates of duty.
The EU has the most open regime vis-à-vis Sub-Saharan
Africa and the other African, Caribbean and Pacific countries:
in 2003 African Caribbean and Pacific countries paid full
duty on only 3% of their imports to the EU. The remaining
97% entered at zero duty or at reduced rates of duty.
The EU is the most open market in the developed world for
the world’s 50 poorest countries. In 2003 the EU absorbed
63% of exports from Least Developed Countries to Japan , EU
, US and Canada. In the case of agriculture, this figure is
more than 70%.
The EU is the main importer of agricultural products from
developing countries, absorbing more than the US , Japan and
Canada put together.
List of Conventions to qualify for ‘GSP Plus’
Core human and labour rights UN/ILO Conventions (all must
be ratified and effectively implemented for GSP Plus to apply):
International Covenant on Civil and Political Rights; International
Covenant on Economic Social and Cultural Rights; International
Convention on the Elimination of All Forms of Racial Discrimination;
Convention on the Elimination of All Forms of Discrimination
Against Women; Convention Against Torture and other Cruel,
Inhuman or Degrading Treatment or Punishment; Convention on
the Rights of the Child; Convention on the Prevention and
Punishment of the Crime of Genocide; Minimum Age for Admission
to Employment (N° 138); Prohibition and Immediate Action
for the Elimination of the Worst Forms of Child Labour (N°
182); Abolition of Forced Labour Convention (N° 105);
Forced Compulsory Labour Convention (N° 29); Equal Remuneration
of Men and Women Workers for Work of Equal Value Convention
(N° 100); Discrimination in Respect of Employment and
Occupation Convention (N° 111); Freedom of Association
and Protection of the Right to Organise Convention (N°
87); Application of the Principles of the Right to Organise
and to Bargain Collectively Convention (N°98); International
Convention on the Suppression and Punishment of the Crime
of Apartheid.
Conventions related to environment and governance principles
(7 must be ratified and effectively implemented for GSP Plus
to apply, all must be ratified and implemented by 2009)
Montreal Protocol on Substances that deplete the Ozone Layer;
Basel Convention on the Control of Transboundary Movements
of Hazardous Wastes and their Disposal; Stockholm Convention
on persistent Organic Pollutants; Convention on International
Trade in Endangered Species; Convention on Biological Diversity;
Cartagena Protocol on Biosafety; Kyoto Protocol to the UN
Framework Convention on Climate Change; UN Single Convention
on Narcotic Drugs (1961); UN Convention on Psychotropic Substances
(1971); UN Convention against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances (1988); Mexico UN Convention
against Corruption.
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