The Hindu Business Line : Countries with good governance to have better access to EU market

DEVELOPING countries pursuing good governance and sustainable development policies would be put on a fast-track for qualifying additional duty-free preferential access to the 25-member European Union (EU) market from July 1, 2005 for 7,200 products.

The EU Member States have backed the EU Trade Commissioner, Mr Peter Mandelson's reform of the Generalised System of Preferences (GSP) on June 23, according to a communiqué from Brussels. The agreement by Member States 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 simpler and fairer.

Under the new regime, China will be graduated out of the GSP for 80 per cent of its exports, though it remains in the GSP.

As in the previous regime, Indian textiles will not benefit from the preferential access though its clothing exports will continue to do so. Sources in the domestic garment industry said though duty concessions were in the range of 20 per cent, 40 per cent and 100 per cent for beneficiary countries, Indian garment exporters get only 20 per cent duty-free benefit.

While the new system will apply from January 1, 2006, the GSP Plus incentive system, which grants additional preferences to vulnerable developing countries, will be fast tracked to apply from 1 July 2005.

Through its Generalised System of Preferences the EU extends preferential access to its markets to developing countries. The EU GSP is the most generous of all developed-country systems. In 2003, EU imports under GSP totalled euro 52 billion. Under the EU GSP, between 1999 and 2003, developing countries share in total EU imports grew from 33 to 40 per cent. 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 (MFN) agreements.

The reform proposed by the Commissioner 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. 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 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 per cent 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 per cent, as it is for clothing.

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 meet evolving development needs of each country better.

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