Commission wants to exclude half of current GSP beneficiaries
Mid-income countries could lose trade concessions.
The European Commission is planning to cut the number of countries benefiting from preferential access to the European Union’s internal market.
Countries such as Brazil, China and South Africa would lose their trade concessions under the EU’s generalised system of preferences (GSP) scheme at the beginning of 2014, under plans being prepared by Karel De Gucht, the European commissioner for trade.
De Gucht wants to exclude about half the current beneficiaries. China, India, Indonesia, Morocco, Nigeria, Pakistan and Ukraine would be dropped because the World Bank categorises them as middle-income countries. Countries with which the EU has concluded free-trade agreements, notably in Latin America, would also lose out. But India, a middle-income country that is currently negotiating a trade deal with the EU, is set to lose most: in 2009, more than half of its exports to the EU benefited from preferential tariffs (see box).
Development worries
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De Gucht’s proposal is scheduled for discussion by the college of commissioners next week (10 May), but officials expect the debate to be postponed to allow more time for consultations between Commission departments. Development officials worry about the impact of the plan and there is also resistance from EU member states seeking to preserve trade privileges for friendly countries or former colonies, especially in Africa and Latin America.
The current GSP provides lower or no tariffs on most products – excluding agriculture – coming from 176 developing countries and territories around the world. This includes two supplementary schemes, GSP+ for poor countries that ratify and apply international human-rights and labour standards, and Everything but Arms, which provides quota-free, duty-free access to the 49 least-developed countries.
Changing trade patterns
An official said that trade patterns had changed considerably since the GSP was created in 1971, and that the review is supposed to bring the system into line with those changes, “to make the system focus on those countries which are most in need”. The GSP already includes a graduation mechanism, under which groups of goods drop out of the scheme as a country’s export performance improves, but officials suggest that this is insufficient to reflect changing trade balances.
Fact File
The GSP
India, a lower-middle-income country, is the main beneficiary of the current GSP. In 2009, Indian exports worth €13 billion – more than half of its total exports to Europe – entered the EU under preferential GSP tariff lines. Bangladesh, one of the world’s poorest countries, came second, with €4.5bn in GSP exports in 2009. The other main beneficiaries in 2009 were Thailand (€4.2bn), Indonesia (€3.4bn), Brazil (€3.4bn) and Russia (€2.9bn).
In all, the EU imported goods worth €48bn under GSP rates in 2009, primarily textiles and clothing (€14.2bn), mineral products (€5.6bn) and chemicals (€5.1bn).
The scheme operates in cycles of three years. The current GSP cycle expires at the end of this year, but the member states agreed on 14 April to extend it by two years, to allow sufficient time for a thorough reform – which for the first time requires the backing of the European Parliament. MEPs gained full powers of co-decision on trade policy under the EU’s Lisbon treaty.
Member states’ trade ministers are meeting in Brussels next Friday (13 May) to take stock of free-trade talks with India and to discuss the prospect of starting trade talks with Japan. Both Japan and the EU are eager to announce such talks at an EU-Japan summit in Brussels at the end of this month.