EU Generalised System of Preferences (GSP)

Summary: EU Generalised System of Preferences (GSP) (21 December 2005 : Brussels)

Today the European Commission granted important preferences (duty and quota-free access) to an additional 15 vulnerable developing countries that have implemented sustainable development and good governance policies under the 'GSP+' incentive.

Commissioner Mandelson said that "this was further proof of the EU's efforts to help developing countries at the same time as promoting sustainable development and Human rights".

'GSP+': A new deal for vulnerable countries

On the basis of findings from international organisations including the UN and ILO, the Commission has decided to grant GSP+ benefits to the five Andean countries (Bolivia, Columbia, Ecuador, Peru & Venezuela), six Central America countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua & Panama), Moldova, Georgia, Mongolia and Sri Lanka.

In order to benefit from 'GSP+', countries must have:

- ratified and implemented key international conventions. 23 of the most important international conventions relating to core political, human and labour rights must have been ratified, including: the elimination of discrimination against women; the prohibition of torture; the right to strike; the banning of child labour, the environment, good governance and the fight against drug production and trafficking, must have been ratified by the end of October 2005. The remaining conventions must be ratified within the lifetime of the regulations i.e. by December 2008. These conventions include the Kyoto Protocol, the Convention on International Trade in Endangered Species and the UN Convention against Corruption. The new GSP is therefore a concrete incentive for developing countries to promote best practice in key areas and support sustainable development policies.

- provided comprehensive information concerning ratification of the conventions, the legislation and measures to implement the conventions required for GSP+, and made a formal request to qualify for GSP+ before 31 October 2005.

- demonstrated that their economies are "dependent and vulnerable". Dependence is defined as meaning that the five largest sections of its GSP-covered exports to the Community must represent more than 75% of its total GSP-covered exports. In addition, GSP-covered exports from that country must also represent less than 1% of total EU imports under GSP.

Background

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 and economies in transition.

The EU GSP is the most generous 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 2004 EU imports under GSP totalled €40 billion. Spending under the equivalent American scheme, which is the world's second most widely used GSP imports, totalled comparably less at €22 billion.

Figures on EU GSP imports

Under the "Everything But Arms" initiative the world's 50 poorest countries - out of which 34 are Sub-Saharan - export to the EU duty-free and quota-free. Among the GSP beneficiaries, India (17%), the People's Republic of China (11%) and Brazil (6%) were the main exporters to the EU in 2004. Bangladesh had 6% of the total volume of EU GSP imports and ranked 7th as the first representative of the beneficiaries of the EBA initiative.

The new GSP scheme will come into force on 1 January 2006, although the GSP+ was put in place until the end of this year in a provisional form. The new GSP will remain unchanged until the end of 2008 and provide stability and predictability for importers and exporters. At the end of this period, the allocation of preferences will be reviewed in order to better meet the evolving strengths and development needs of each country.

The new GSP comprises three arrangements including:

the general arrangement which grants products imported from the 179 GSP beneficiary countries and territories either duty-free access or a tariff reduction. 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.
the special arrangement for Least Developed Countries ('Everything but Arms') remains unchanged, thereby allowing the world's 50 poorest countries duty free access to the EU for all products, except arms and ammunition.
there is a new 'GSP+' incentive for vulnerable countries faced with specific trade, financial or development needs. It will be granted, for the period from 2006 to 2008, to the 7200 products covered by the general arrangement and which can enter the EU duty free. The beneficiaries must meet a number of criteria (see above).

EU imports from developing countries

Between 1999 and 2003 developing countries share in total EU imports under EU's GSP 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 exports 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 about 2/3 of all LDC's exports. In the case of agriculture, this figure is more than 70%.

The EU is the main importer in the world of agricultural products from developing countries, absorbing more than the US, Japan and Canada put together.

Ref: EC05-441EN
EU source: European Commission
UN forum:
Date: 21/12/2005

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