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100 countries may lose clothing exports tariff breaks to EU
May '11
The European Commission has announced that it intends to reform the European Union's Generalised System of Preferences (GSP). The reform is being undertaken because, in the words of EU trade commissioner Karel De Gucht, “If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits.”

Under the proposal the EU would focus import duty concessions on poorer countries and hence those regarded by the World Bank as high or upper middle income nations would not get the benefit of tariff breaks for their knitwear exports to the EU from January 2014.

The countries that could be at a disadvantage include Brazil, Argentina, Russia, Saudi Arabia and the United Arab Emirates. However, many countries that would lose formal GSP status already have good market access through free trade and association agreements. These include Mexico, South Africa, Turkey, Chile, Algeria, and many countries neighbouring the EU.

However, the GSP status of Vietnam and Indonesia, two major knitwear exporters, may not be immediately affected as they do not fall under the category of World Bank-certified upper middle income countries with average per capita income of US$ 3,946 to US$ 12,195.

Alternatively, these countries can lose their GSP status if their clothing and textile exports surged above 12.5 per cent of all EU GSP imports of these products –- a condition under which the Indian and Chinese clothing and textile exports to the EU are not currently covered under the GSP preferences.

Simultaneously, the EU has also announced changes to its GSP+ system which offers even better market access. These underline the need for beneficiary countries to follow international sustainable development and good governance conventions (including human rights) and to have vulnerable economies. It may be recalled that Sri Lanka lost its GSP+ status in 2010 over human rights concerns.

These proposals, however, need to be approved by the EU Council of Ministers and the European Parliament before they can come into effect.

Fibre2fashion News Desk - India

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