Select Committee on European Scrutiny Third Report


COM(01) 293

Draft Council Regulation applying a system of generalised tariff preferences for the period 1 January 2002 to 31 December 2004.

Legal base: Article 133 EC; qualified majority voting
Document originated: 12 June 2001
Forwarded to the Council: 15 June 2001
Deposited in Parliament: 9 July 2001
Department: Trade and Industry
Basis of consideration: EM of 10 October 2001
Previous Committee Report: None
To be discussed in Council: 19 November 2001
Committee's assessment: Politically important
Committee's decision: Cleared


12.1  The Generalised System of Preferences (GSP) is a mechanism intended to promote the economic development and growth of developing countries by offering preferential access to the markets of developed countries. Developed countries are not obliged to operate GSP schemes, but most — including the Community — do so, and the current ten-year cycle of the Community's GSP, which is binding on the UK and other Member States, runs from 1995 to 2004. The current proposal seeks to implement the final phase of the ten-year cycle, from 2002 to the end of 2004.

The current proposal

12.2  In addition to its underlying aim of preferential access, the current Council Regulation (No. 2820/98[20]) applying the GSP for the period 1 July 1999 to 31 December 2001 contains a number of specific features. In particular:

    —  there is a modulation mechanism, whereby the preference is calculated by placing products into four categories of sensitivity: very sensitive products attract 85% of the full duty rate, sensitive products 85%, semi-sensitive products 35%, and non-sensitive products enter duty-free;

    —  in order to target preferential treatment on those countries needing it most, assistance for individual beneficiary countries is graduated according to per capita gross national product and the country's so-called development index, with assistance for specific product sectors being determined by the proportion they represent of all the Community imports of that product;

    —  special incentives are provided to encourage countries to observe certain core labour and environmental standards; and

    —  additional preferences are given to the countries of central America and the Andean Community, in order to help them in the fight against the production and trafficking of illegal drugs.

12.3  The Commission is proposing that these arrangements should be amended so that:

    —  instead of four product categories and a sliding scale based on sensitivity, there would be only two — duty-free, and the rest, which would attract a fixed duty reduction of 3.5 percentage points, rather than the present pro rata percentage reduction;

    —  graduation would be determined by the threshold according to which the World Bank classifies countries as high-income, with countries being excluded from benefit if they meet the necessary criteria for three consecutive years (and subsequently re-admitted if they do not meet the exclusion criteria for three consecutive years);

    —  the special incentive arrangements would be both simplified and made more attractive by replacing the current relatively small margin of preferences with one equivalent to double the 3.5 percentage point reduction for the general preferences: in addition, a serious and systematic violation of labour standards would lead to the withdrawal of GSP benefits; and

    —  there would be more comprehensive monitoring and evaluation of the effects of the special drugs regime.

12.4  The proposed Regulation would also be the vehicle to deliver the Council's Everything But Arms (EBA) agreement,[21] granting duty and quota free access to all products, except arms, from the least developed countries.

The Government's view

12.5  In her Explanatory Memorandum of 10 October 2001, the Minister for Trade and Investment at the Department of Trade and Industry (Baroness Symons of Vernham Dean) says that the Government welcomes the simplification of the GSP regime that the Commission proposal would deliver, which she believes should be much easier to understand and should therefore increase the likelihood that economic operators will make use of the scheme. However, she says that the Government is concerned that some products will see a (perhaps significant) increase in duty, and that it will argue not only that the process should be more generous overall, but that there should be no countries and products which see a rise in their duties as a result of the changes.

12.6  The Minister says that the Government continues to support the principle of using positive incentives to encourage compliance with labour and environmental standards, but will seek to ensure that the proposed extension of the temporary withdrawal mechanism does not operate as a disguised sanctions regime. It also welcomes the continuation of efforts to assist in the fight against drugs, so long as those efforts are effective, and it welcomes the more comprehensive approach to monitoring and evaluation of the drugs preferences. Finally, the Government welcomes the incorporation of arrangements to implement the everything but arms agreement.


12.7  Although some of the changes being made to the Generalised System of Preferences are fairly detailed, this is nevertheless an important subject. Consequently, in clearing this document, we are drawing it to the attention of the House.

20   OJ No. L 357, 30.12.98, p.1. Back

21   (21715) 12335/00; see HC 23-xxxi (1999-2000), paragraph 9 (29 November 2000), HC 28-ii (2000-01), paragraph 3 (10 January 2001), and HC 28-vii (2000-01), paragraph 2 (28 February 2001). Back

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