Bridges Weekly Trade News Digest • Volume 5 • Number 42 • 12th December 2001
New GSP Adopted by European Union
On 10 December, European Union foreign ministers adopted a redefinition of their preferential tariff scheme, known as the Generalised System of Preferences (GSP), to facilitate entry of imports from developing countries while at the same time strengthening incentives for compliance with core labour and environment standards.
Touted as "the most generous GSP package they’ve ever put forward," EU Trade Commissioner Pascal Lamy pointed to this scheme as "further evidence that the interests of developing countries are at the top of [the EU's] agenda." However, illustrating some of the tensions in adopting the scheme, Sweden pointed out that a changed GSP would contradict "the spirit and letter of commitments to developing countries". (see below)
Restructuring the GSP
The updated GSP regulation, which was tabled in June 2001, will come into force on 1 January 2002 and continue until the end of 2004 (see BRIDGES Weekly, 19 June). According to the EC, the main thrust of the redefinition is to: 1) restore preferential margins which have been eroded by ongoing reduction of MFN duty rates; 2) enhance the effectiveness of GSP as a tool of sustainable development; and 3) simplify the management of the scheme, harmonise procedures, clarify rules and enhance predictability.
Regarding the third aim listed above, product categories have been reduced from four, leaving only ’sensitive’ and ‘non-sensitive’; with non-sensitive items receiving duty free access, and sensitive items (making up the bulk of key exports vis-à-vis developing countries) receiving a uniform flat rate tariff reduction of 3.5 percentage points.
However, there is some controversy over whether such a revised scheme actually undermines another preferential scheme, the Everything-But- Arms (EBA) initiative — aimed at providing tariff free access to the EU for least-developed countries (LDCs) on a variety of products over time (see BRIDGES Weekly Digest 27 February 2001,). Some observers speculate that providing similar duty free access to a much larger spectrum of developing countries erodes the effective duty concession provided to LDCs under the EBA scheme. Thus in line with Sweden’s comment above, one source noted, "[this] effectively contradicts the first aim of the redefining the programme." (i.e. restoring preferential margins which have been eroded by ongoing reduction of MFN duty rates)
Incentives for environment and labour standards
Another controversial element of the redefined GSP scheme is the increased significance of special incentives for the protection of the environment and labour rights - "meant to foster sustainable development". Countries would now be eligible for an additional five percentage point tariff reduction (on top of the 3.5 percent reduction stemming from the general arrangement) should they apply strict environmental norms, or meet eight core conditions developed by the International Labour Organisation (ILO). To date, most countries have been unwilling to apply for the additional tariff reductions, as they are suspicious of linking these sensitive issues.
Preferences coming under the EBA initiative and special arrangements to combat drug production and trafficking continue to apply without change.
Pakistan gains greater access for its fight against drugs
The EU also on 11 December announced the admittance of Pakistan into the afore-mentioned programme that grants tariff concessions to countries fighting the illegal drug trade - reportedly in some manner as a reward for its cooperation on the international coalition against terrorism. As such, starting January 2002, Pakistan will benefit from greater market access to the EU in a programme that was originally targeted at Central American countries. The programme’s intention is to help states move away from drug production by offering a five percent tariff cut in addition to the 3.5 percent cut under the revised GSP program.
The guide to the tariff preference programme can be found at: http://europa.eu.int/comm/trade/pdf/ guide_tariffpref.pdf.
"Lamy welcomes adoption of new scheme of tariff preferences for developing countries" EU PRESS RELEASE, 10 December 2001; "Pakistan rewarded by better access to markets" FT, 11 December 2001; ICTSD Internal Files.