The Hindu Business Line : EC to make graduation out of GSP process transparent

THE European Commission's new Generalised System of Preferences (GSP), offering duty concession on products of export interest to developing countries for the next 10 years, is structured to target the countries that need it the most. It also aims to bring down the extant five GSP arrangements to a viable three and render the graduation out of the GSP process transparent and objective.

The basic GSP numbering 7,000 sensitive and non-sensitive products are grouped into 34 sectors. In 2002, the latest year for which figures are available in Brussels, the volume of trade from developing countries covered by the European Union-administered GSP amounted to 53 billion euros, accounting for 5.6 per cent of the community imports, against euro 16.4 billion, for the US' GSP, the second biggest, accounting for 1.4 per cent of its imports.

The EU absorbs one-fifth of developing country exports. Forty per cent of EU imports originate in developing countries. The EU is also the world's largest importer of agricultural products from developing countries, absorbing more than the US, Canada and Japan taken together. From the preferential imports under this regime in 2002, half were duty-free and half at a reduced duty.

Apart from the least developed countries mostly from Africa and Asia, and Latin America besides the Caribbean and the Pacific, other GSP beneficiaries include China (33.1 per cent of the total volume of EU GSP imports), India (11.5 per cent) and Indonesia (4.8 per cent), which were the main exporters to the EU in 2002. Bangladesh (3.6 per cent) ranked eighth as the first representative of the beneficiaries of the Everything But Arms (EBA) initiative, being extended to the world's 50 poorest countries on an absolutely zero duty basis by the EU. Agricultural products account for around 10 per cent of both the Union's GSP and EBA imports while their share in EU imports from Africa, Caribbean and the Pacific countries was around 30 per cent in 2002.

In the case of textile products, there is a significant difference between European Union GSP and EBA imports; while they only constitute 18 per cent of the total GSP imports of the EU, with a share of 80 per cent they form the dominant part of EBA imports into the EU.

Based on the experiences the EU gained from past schemes, the Commission proposes the guidelines for the GSP for the span 2006-2015 in such a manner that a new spur to encourage sustainable development and good governance would replace the former drugs, social and environment schemes by a new category - the GSP plus. This plus scheme will be providing special incentives for countries that accept the main global conventions on social rights, environmental protection and governance, including the fight against drugs production and trafficking.

Thus, there will be 3 GSP schemes - the general scheme, the special scheme for LDCs called EBA and the GSP plus.

It might be noted that the WTO Appellate Body in the recent case taken by India against the Community's existing GSP scheme (in particular the Special Drugs regime which gave Pakistan apparel exporters highly preferential duty to enter into the EU in the wake of Islamabad's coalition against terrorist attack on the US) found that the WTO members are in principle allowed to grant different tariff products originating in different GSP beneficiaries under the condition that identical treatment is all available to all similarly-situated GSP beneficiaries. Thus, a WTO member desirous to grant additional tariff preferences under its GSP scheme would have to identify, in an objective basis, the special `development' needs of developing countries, which could be effectively addressed through tariff preferences.

On transparency of graduation process, the Commission said withdrawal of GSP is only on the most competitive products from those beneficiaries that are highly competitive on the Community market and no longer need the GSP to boost their exports to the EU.

Besides, small beneficiaries would not face graduation and in addition special consideration would be given to the countries most in need in designing the graduation mechanism.

India's agricultural exporters, already under threat with the withdrawal of GSP benefits on sugar and basmati rice, might have to be content with the EU's proposition that "graduation is not a penalty but a sign that the GSP has successfully performed its function."

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