On31 October 2012, the EU published its revised preferential import scheme for developing countries. Regulation 978/2012 provides for a revised import preference scheme - known more commonly as the Generalised Scheme of Preferences (GSP) which will be focused on fewer beneficiary countries (89instead of 176) and will take effect from 1 January 2014.


The EUs Generalised Scheme of Preferences helps developing countries by making it easier for them to export their products to the EU. This is done in the form of reduced or zero tariffs for their goods when entering the EU market. The principal objective of the reform, as proclaimed by the EU institutions, is tomake the scheme more effective.


Beneficiary countries: One of the main features of the new GSP is that the number of GSP beneficiaries will be reduced from today's 176 to only 89 countries, to ensure more impact on those most in need. Thus, a number of countries will no longer benefit from the scheme, including:


  • 20 countries which have achieved a high or upper middle income per capita, according to World Bank classification, including Argentina, Brazil, Cuba, Uruguay, Venezuela, Belarus, Russia, Malaysia, Saudi Arabia, Kuwait, Qatar, United Arab Emirates and Macao;

  • 34 countries that enjoy other preferential access to the EU which is at least as good as under the GSP, including Egypt, Algeria, Morocco, Tunisia and Mexico;

  • 33 overseas countries and territories which have an alternative market access arrangement for developed markets, such as Aruba and the Virgin Islands. The new GSPs beneficiary countries include the Chinese mainland, India, Indonesia, Pakistan, Thailand and Vietnam.


Under the current GSP scheme, only 9% of tariff lines are not covered by preferences.In 2011, imports that received GSP preferences were thus worth EURO 87 billion,which represents around 5% of total EU imports.


The GSP duty reduction for textiles is, exceptionally, different from other product categories. With a view to ensuring that GSP concessions do not harm EU producers, tariff preferences for these products will be suspended for a given country under certain exceptional circumstances. This is due to the fact that just as under the current GSP scheme textiles are expected to remain graduated out of the new GSP scheme.


Removal of tariff preferences: Graduation means that imports of particular groups of products, originating in a given GSP beneficiary country, lose GSP preferences if they have been deemed to be competitive.

 

The new GSP scheme, the graduation threshold has been increased. Preferences will be terminated on any product group for which the share of EU imports from certain GSP beneficiary exceeds 17.5% (or 14.5% in the case of textiles and clothing) of the same products from all GSP beneficiary countries (up from 15% and 12.5% respectively, under the current GSP).

 

The exact list of graduated products under the new GSP Regulation is not yet known and will be published by the Commission only in 2013.


Special incentive arrangement (GSP+): Through the GSP+ arrangement, the EU aims to promote core human and labour rights, and principles of sustainable development and good governance. Countries that benefit from this arrangement receive duty-free entry to the EU market of all the products covered by the general GSP agreement (thus including, e.g., electrical equipment, footwear, textile products and toys).


Under the new GSP, the eligibility criterion has been relaxed to allow more countries to benefit from this scheme. To qualify for this exemption, exports will have to account for less than 2% of the EUs total GSP imports (up from 1%). Consequently, according to the Commissions Information Notice, there are currently 35 countries which may request to be granted GSP+ preferences under the new scheme, including Pakistan, Ukraine, Sri Lanka, Philippines, Peru and Iran. Moreover, the GSP+ countries will no longer be graduated by sectors, and there will be less competition from advanced developing economies which lose preference.


Everything But Arms arrangement (EBA): Under the new GSP the least developed countries (LDCs) will continue to benefit from duty-free, quota-free access to the European market for all products - except for arms and ammunition. The effectiveness of the EBA scheme will be strengthened. Reducing the GSP to fewer beneficiaries will reduce competitive pressure and provide for new opportunities for LDCs to export.


Stability and predictability: The new GSP scheme will last 10 years, while the current one is subject to review every 3 years. This will make it easier for long-term contractual planning, and therefore more attractive, for EU importers to purchase from GSP beneficiary countries. In order to allow ample time for economic operators to adapt to the new scheme, the new preferences will apply only as of 1 January 2014. Until then, the current preferences under Council Regulation 732/2008 will continue to apply.


This article was originally published in the Feature section of The Stitch Times.