Author: Eckart Naumann

European countries through the European Commission (EC) have embarked on a reform process that aims to focus the non-reciprocal trade preferences offered under the European Union (EU) Generalised System of Preferences (GSP) on fewer countries. The proposed reforms can be placed within a much broader context not only of lower EU import tariffs and dwindling preference margins, but also of the EU’s reassessment more generally of its provision of relatively generous nonreciprocal market access preferences to a large number of countries. This issue is relevant in the context of its own economic situation, which has in recent years been affected by the global financial crisis and more recently by fallout from the Eurozone debt crisis. Also telling in this respect is a recent EC proposal, discussed later in this paper, to remove nonreciprocal preferences from African Caribbean and Pacific (ACP) countries that have failed to make progress in implementing a reciprocal trade agreement with the EU.

The proposed GSP programme changes follow recent reforms of the GSP Rules of Origin (RoO) that were implemented at the start of 2011, and which in turn also included a number of measures that simplify the applicable origin requirements and reduce the number of product-specific rules. The amended RoO also contain a number of provisions that apply only to Least Developed Countries (LDCs).

The EU GSP contains three programmes: the standard GSP, the GSP Plus (with various conditions and obligations attached and applicable to countries that meet an economic vulnerability test) as well as the Everything-But-Arms (EBA) Agreement. While each of these will continue to exist, their respective eligibility criteria will change, especially those relating to the standard GSP. Countries that have achieved high and upper-middle-income status and which have received preferences up until now would lose their beneficiary status under the proposed changes. as would countries that currently benefit from similar preferences under another EU trade regime, or the Overseas Countries and Territories (OCTs) that have alternative market access arrangements in place.

The main beneficiaries of the proposed scheme will be LDCs, not so much through changes to their preferences (they already receive almost full duty- and quota-free market access) but rather through the higher concentration of preferences and perhaps reduced competition in the EU market. LDCs’ benefits under the proposed scheme are therefore primarily through gains in relative preference margins.

The new scheme would also be open-ended which means that traders both in the EU and GSP beneficiaries will enjoy greater economic certainty with respect to their trading relationship. Up until now, the GSP was subject to 10-year cycles with periodic renewals mostly in three year intervals. The current legislative period covers the 2009–2011 period with roll-over legislation already adopted which extends the current scheme to the end of 2013 at the latest (or to any such earlier date when the revised GSP is finalised and implemented). The proposed legislation for a new GSP still needs to be debated in the European Parliament and Council.

• Download:  D12WP062012 EU_GSP_Naumann_Proposals_finMay2012.pdf
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