The EU’s Generalised System of Preferences (GSP) is a trade arrangement through which the EU provides preferential access to the EU market to 176 developing countries and territories, in the form of reduced tariffs for their goods when entering the EU market.

GSP covers three separate preference regimes:

• the standard GSP, which provides preferences to 176 developing countries and territories on around 6400 tariff lines;
• the special incentive arrangement for sustainable development and good governance, known as GSP+, which offers additional tariff reductions to support vulnerable developing countries in their ratification and implementation of international conventions;
• the Everything But Arms (EBA) arrangement, which provides Duty-free, Quota-Free access for all products for the 50 Least-Developed Countries on 7200 tariff lines.

The 16 beneficiary countries from 1 January 2009 until the end of 2011 will be: Armenia, Azerbaijan, Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Paraguay, Peru, Sri Lanka and Venezuela.  These countries will have duty-free access to the EU market for around 6400 tariff lines in addition to the standard GSP.

GSP+ preferences are of real economic value to the beneficiary countries: in 2007 there was 4.7 billion € worth of trade under this scheme, with a nominal duty loss (compared to standard GSP rates) for the EU of over 357 million €. The duty-free access means a considerable tariff reduction over the rates applied under the regular GSP scheme. Tariff cuts include tobacco (cut by up to 52%), various fruit juices (up to 30%), fruits (up to 20%), vegetables (up to 14%), fish (up to 20%) and honey (up to 17%).

Source: Weekly Trade News of the European Commission, 11 december 2008.

A new Regulation applying the EC’s Generalised System of Preferences (GSP) has been adopted by the EU Member States.  This decision will allow the EU to maintain preferential access to its market for 176 developing countries for the period from 1 January 2009 until the end of 2011. The system is being updated and improved every three years, ensuring that GSP is targeted at those countries that need it most.

As a result of the current re-calculations, GSP preferences will be re-established for six countries and suspended for one.  Below we give you an overview of these changes per beneficiary country and product group combinations:

Re-establishment of preferences:

• Algeria, Section V (Mineral products)
• India, Section XIV (Jewelry, pearls, precious metals and stones)
• Indonesia, Section IX (Wood and articles of wood)
• Russia, Section VI (Products of the chemical or allied industries) and Section XV (Base Metals)
• South Africa, Section XVII (Transport equipment)
• Thailand, Section XVII (Transport equipment)

Suspension of preferences:

• Vietnam, Section XII (Footwear, headgear, umbrellas, sun umbrellas, artificial flowers, etc…) 

The net effect of these adjustments is worth at least €160 million to beneficiary countries in terms of import duties that would otherwise be imposed. 

Two countries (Myanmar and Belarus) remain temporarily withdrawn from GSP preferences because of human rights violations. Moldova is removed from the list of beneficiary countries as the EC granted special preferences under a separate legal instrument in March 2008.

GSP covers three separate preference regimes: 

1. The standard GSP, which is an autonomous trade arrangement through which the EU provides non-reciprocal preferential access to the EU market to 176 developing countries and territories.  In 2007, developing countries exported €57 billion worth of goods under GSP, with a nominal duty loss for the EU of €2.5 billion. 
2. The EU also offers a special incentive arrangement for Sustainable Development and Good Governance, known as GSP+.  The GSP+ offers additional preferences to support vulnerable developing countries in their ratification and implementation of relevant international conventions on human and labour rights, environmental protection, and good governance. 
3. A third arrangement is the EBA initiative (Everything But Arms). The EBA gives the 50 least-developed countries duty free access to the EU for all products, except arms and ammunition and 41 lines concerning rice and sugar, for which duty free quotas are established until full liberalisation is achieved in September 2009 (rice) and October 2009 (sugar).  For the period from 1 October 2009 to 30 September 2012 the importer of sugar shall undertake to purchase such products at minimum price not lower than 90% of the reference price.

EU Member States have this afternoon backed EU Trade Commissioner Peter Mandelson’s reform of the EU’s Generalised System of Preferences (GSP). Agreement by Member States, led by the Luxembourg Presidency, breaks a three month deadlock in Council that has delayed the adoption of the new preferential access system. The reform of the GSP will make the EU’s system of preferential market access for developing countries both simpler and fairer. While the new GSP system as a whole will apply from 1 January 2006, application of the GSP Plus incentive system, which grants additional preferences to vulnerable developing countries that pursue good governance and sustainable development policies, will be fast tracked to apply from 1 July 2005.

Background

Through its Generalised System of Preferences the European Union extends preferential access to its markets to developing countries. The EU GSP is the most generous of all developed-country GSP systems. In 2003 EU imports under GSP totalled €52 billion. Under the EU GSP between 1999-2003 developing countries share in total EU imports grew from 33% to 40%.

The current GSP, in place since 1995, applies to imports from developing countries that pay duty on entering the EU market and that are not already duty-free under Most Favoured Nation agreements.

The reform proposed by Commissioner Mandelson simplifies the EU GSP scheme by reducing the number of GSP arrangements from five to three. The coverage of the general GSP scheme will be extended to 300 additional products mostly in the agriculture and fishery sectors. A new ‘GSP Plus’ incentive scheme will be targeted at especially vulnerable countries that have ratified and effectively implemented key international conventions on sustainable development, labour rights and good governance. It will cover around 7200 products which will enter the EU duty free. The GSP Plus incentive scheme will be fast-tracked to enter into force on a provisional basis on 1 July 2005.

The eligibility of countries placed in the GSP Plus incentive scheme will be confirmed by an assessment of their effective implementation of core human and labour rights, good governance and environmental conventions before the beginning of 2006. The ‘Everything but Arms’ arrangement which grants duty and quota free access for all imports except arms from least developed countries will remain unchanged.

The new system is made fairer by focusing preferential access on countries that have a lower share of EU imports. Groups of products from beneficiary countries which in a given sector account for more than 15% of EU imports from GSP countries are “graduated” and cease to benefit from preferential access. In the case of textiles the “graduation threshold” is set at 12.5%, as it is for clothing.

Under the new regime, China will be graduated for 80% of its exports, although it remains in the GSP. As in the previous regime, Indian textiles will not benefit from the GSP preferential access although its clothing exports will continue to do so.

As part of a wider review of its Rules of Origin, the EU is in the process of reforming the Rules of Origin that govern GSP eligibility. The objective is to simplify and, where appropriate, relax these rules to provide further access for developing countries.

The new GSP will remain unchanged until the end of 2008 hence providing stability and predictability for importers and exporters. At the end of this period, the allocation of preferences will be reviewed to better meet evolving development needs of each country.