India may not continue to get sops under EU's new trade scheme

Vidya Ram London | Updated on March 12, 2018 Published on May 10, 2011

The European Commission plans to dramatically cut the number of countries that receive trade benefits under a special scheme for growing economies from 176 to around 80.

India and the other BRIC nations are among those that will no longer receive the special tariff preferences. The total value of goods imported into the EU under the system will fall to around €38 billion a year, nearly half the figure in 2009.

Europe's Trade Commissioner, Mr Karel De Gucht, set out the proposals, which must still be ratified by member states and the European Parliament, to reform the region's system of providing zero or reduced tariff rates and quotas, known officially as the Generalised System of Preference (GSP).

“If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits,” Mr De Gucht said on Tuesday. “Almost 40 per cent of our current preferences benefit Russia, China, Brazil, India and Thailand, which no longer need preferences to maintain and build upon their success,” he added.

Under the proposals, countries that are classified as high or upper middle income per capita by the World Bank will be taken off the list. They include Kuwait, Russia, Saudi Arabia and Qatar. (India is classified as a lower middle income country according the World Bank's current rankings) Countries that have struck free trade agreements with the region will also no longer be eligible. The much-awaited India-EU FTA is set to be signed this year.

Economically vulnerable nations

However, in a move that has courted some controversy in Europe, the Commission plans to extend its GSP-Plus programme, under which a restricted number of economically vulnerable countries receive additional duty-free preferences as long as they fully cooperate with international conventions.

The EU first introduced the GSP in 1971, since when it has been an important component of the region's trade policy. In 2009, €60 billion worth of goods were imported into the EU. The reforms are part of a drive within Europe to encourage more reciprocal trade arrangements such as free trade agreements with faster growing nations. Columbia and Peru have signed Free Trade Agreements with the EU in April, which also signed with South Korea last year.

“This is not at all protectionism as is suggested,” Mr De Gucht said. “It will give poorer countries a competitive edge” while recognising that others are willing to take their place on the world stage.

Published on May 10, 2011
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