The current Generalized System of Preferences (GSP) helps developing countries export products to the EU. When importing products from developing countries into the EU, reduced duties can be claimed. At the same time, the developing countries do not have to allow any reduced duties on EU products. The current GSP provides preferences to 176 developing countries. The GSP+ program provides for additional tariff reductions to support developing countries in the areas of sustainable development and good governance. The third program concerns the least developed countries and is known as “The Everything But Arms (EBA)” arrangement. EBA provides for a full “exemption” of duties. The EBA program applies to the products which originate from the 49 least developed countries as defined by the United Nations.
The European Commission proposed a new GSP. In the below a summary of the proposal.
- Focusing on fewer countries, i.e. countries that are really in need. Instead of products from 176 countries, the new GSP will allow preferential treatment for products from around 80 countries.
The current GSP allows countries like Russia, Saudi Arabia and Qatar certain preferences. The new GSP will exclude countries which developed well and which are, bearing in mind the World Bank classification, no longer considered as developing countries. At this stage it is not yet certain which countries will lose their preferential status. Besides the exclusion of countries that meet certain developing standards, the new GSP will not provide preferences to countries which already have similar or better preferential access to the EU, for example countries that agreed on a Free Trade Agreement with the EU or overseas countries and territories with an alternative market access arrangement.
Under the new GSP the product coverage will remain unchanged. The expansion in products or preferential duties can apply under the GSP+ or EBA program. The graduation mechanism will be revised, but will no longer apply to GSP+ countries and will remain not to apply to EBA countries.
- The principles of sustainable development and good governance will be more promoted and will become more important in the GSP program. There will be incentives for respecting human and labour rights and the environment and compliance with good governance standards.
Countries can apply for the GSP+ benefits at any time. Countries can join GSP+ when certain criteria are met and they respect core international standards. The GSP+ countries must commit to comply with international conventions and to cooperate with international organizations. The countries must prove that they meet their obligations. The GSP+ will have better monitoring options and more robust procedures for the temporary suspension from GSP+. For example, every two years a monitoring report will be published.
- Increase the importance of the EBA scheme by allowing less developing countries to GSP.
As a result of allowing the products of less countries to preferential EU duty treatment, the competitive advantage of the least developed countries will increase. As a result of concentrating the preferences on those that most need them, the GSP advantages will become more meaningful.
- The proposal is to make the system open-ended in contradiction to the current GSP that is subject to a review every three year period.
The new GSP must be predictable, transparent and stable, making it more attractive for EU importers to source in GSP countries.
The proposed new GSP is developed by the European Commission. The proposal will have to be debated with the Council and the European Parliament. When the proposed legislation is approved, the Regulation will be published 6 months in advance to the date of its application. The goal is to have the amended GSP regime in place on January 1, 2014, at the latest.
A complicating factor is that the current GSP ends in December of 2011. However, in the meantime the Commission proposed and the European Parliament and the Council approved a “roll-over” Regulation based on which the current GSP is extended until the end of 2013. This avoid that the current GSP lapses before the new regime is approved.