Bridges Weekly Trade News Digest • Volume 8 • Number 36 • 27th October 2004
EU Presents GSP Overhaul
On 20 October, the European Commission adopted a proposal setting out the details for a revised EU Generalised System of Preferences (GSP) scheme for the period 2006-2008. Building on guidelines issued by the Commission in July this year (see BRIDGES Weekly, 14 July 2004), and given that the ten-year plan launched in 1995 is set to end on 31 December 2005, the new GSP will now be sent to the EU member states, the European Parliament, and its Economic and Social Committee. As a result of the WTO arbitrator’s deadline of 1 July 2005 for the EU to make the Drug Arrangements in the GSP WTO-compliant (see BRIDGES Weekly, 22 September 2004), the Commission is hoping that the new system will be adopted in time for this deadline.
Simplicity, fairness key goals
The new system will reduce the number of GSP arrangements from the current five programmes to three. Under previous arrangements, developing countries could use the general scheme — covering roughly 7000 products of which 3300 enjoy duty free access and 3700 ("sensitive products") benefit from a tariff reduction of 3.5 percentage points on the MFN tariff (MFN minus 20 percent for textiles/clothing) — or special schemes for countries promoting the protection of labour rights, environment, combating drug production and trafficking, or belonging to the group of least developed countries (LDCs) (the "Everything But Arms" initiative). Under the new scheme, the general arrangement will remain largely the same (while incorporating 300 new products), as will the "Everything But Arms" program for LDCs, but the remaining three programmes will be compiled into one called "GSP+," reserved for countries that meet new criteria for sustainable development and good governance.
Introducing GSP+
The "GSP+" programme replaces the three former incentive schemes (drugs, social and environment arrangements) by a new single scheme that covers approximately 7200 products, which can enter the EU duty free from vulnerable countries that accept the main international conventions on social issues, human rights, environmental protection and governance, including the fight against drugs. In order to qualify, countries must demonstrate that they are very small beneficiaries under the GSP, that their economies are poorly diversified and vulnerable and that they have ratified and effectively implemented the 16 core conventions on human and labour rights and seven (out of 11) of the conventions related to good governance and the protection of the environment. Among the listed conventions are the Kyoto protocol on global warming, the Cartagena protocol on genetically modified organisms, the Convention on Biological Diversity, the Convention on International Trade in Endangered Species (CITES) as well as conventions against forced labour, child labour, racial and sexual discrimination as well as an agreement defending workers’ rights to organise and bargain collectively.
New GSP focuses on smaller developing countries
For each beneficiary country, the new GSP will only provide eligibility for those groups of products ("sections" of the EU’s custom code) that represent less than 15 percent of total EU imports of the same products under GSP over the last three consecutive years. For textiles, the threshold would be 12.5 percent. This limit seeks to provide graduation, evaluated every three years, out of the GSP system for the most competitive products from beneficiaries that are highly competitive on the Community market and no longer need the GSP to boost their exports to the EU. Jo Leadbeater, head of Oxfam International’s EU advocacy office, said the fact that a country is graduated after representing 15 percent of EU imports from the developing world, rather from all EU imports, "means that a developing country may be graduating out of the GSP as it begins to get its foot on the ladder [… and] is unfair and blatantly protectionist". The limit will serve to exclude most Chinese products, and certainly textiles and clothing, from GSP provisions, while Indian textiles and clothing exports to the EU are likely to be substantial enough by mid-2005 to be excluded from GSP coverage. The new graduation rules are likely to spark discussion regarding differentiation amongst developing countries, which is a controversial issue in negotiations on special and differential treatment at the WTO.
Rules of origin revised
Recognising the role that stringent rules of origin have in preventing effective GSP utilisation (which stood at a rate of 52 percent in 2002), the new plan seeks to use regional cumulation, so that members of a regional group (such as ASEAN or SAARC) can combine to make better use of the preferences. Cumulation across regions will be introduced if interested countries request it (so countries from SAARC could cumulate origin from ASEAN, for example). However, Oxfam expressed its disappointment with the EU’s treatment of rules of origin, saying that the "Commission proposes hardly any changes to its existing rules".
In 2003 EU imports under the GSP program were worth some EUR52 billion.
"EU’s Lamy Urges Parliament to Reform GSP; Labor, Environment Standards to Be Specified," WTO REPORTER, 15 October 2004; "Developing countries: facts and figures on the new EU scheme of trade preferences for 2006-2008," EU, 20 October 2004; "Developing countries: the Commission proposes system of trade preferences for 2006-2008 -targeting countries most in need, simpler, encouraging sustainable development," EU, 20 October 2004; "New Trade Preferences Unfair to Developing World," TERRAVIVA, 25 October 2004.