13 Generalised System of Preferences:
2006-2015
| (25799)
11393/04
COM(04) 461
| Commission Communication: "Developing countries, international trade and sustainable development: the function of the Community's generalised system of preferences (GSP) for the ten-year period from 2006 to 2015
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| Legal base | — |
| Document originated | 7 July 2004
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| Deposited in Parliament | 9 July 2004
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| Department | Trade and Industry
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| Basis of consideration | EM of 1 September 2004
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
13.1 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 Communitys GSP, which is
binding on the UK and other Member States, runs until the end
of 2005.[27] The current
proposal seeks to set out the arrangements which should apply
under the next ten-year cycle, from 2006 to 2015.
The current proposal
13.2 The current Community GSP, which extends to 178 independent
countries and territories, includes both agricultural and industrial
products and covers some 7,000 out of a maximum 10,000 tariff
lines, with most of the exclusions being in the agricultural area.
In 2002, the volume of trade from the countries in question amounted
to €53
billion, accounting for 5.6% of the Community's imports, though
the impact of the GSP has been reduced by wider tariff reductions
agreed within the World Trade Organisation (WTO) and as a result
of bilateral and regional free trade agreements. Also, only just
over half of the volume of imports eligible under the GSP actually
enjoy tariff preferences.
13.3 In addition to the underlying aim of preferential
access, the arrangements contain a number of specific features.
In particular:
- there is a modulation
mechanism, whereby roughly half of the products concerned enter
duty-free, whilst the remaining more sensitive products attract
a fixed-rate duty reduction of 3.5 percentage points;
- in order to target preferential treatment where
it is needed most, assistance for individual beneficiary countries
is graduated (i.e. reduced for certain products) according
to their share of preferential imports into the Community and
their stage of development;
- 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, though the WTO's Appellate Body has recently
criticised the arrangement (on the grounds that the criteria for
selecting the beneficiaries lack transparency and objectivity).
The scheme also provides the means to deliver the
Community's Everything But Arms (EBA) agreement, which grants
duty and quota free access to all products, except arms, from
the 49 least developed countries.
13.4 The Commission is now proposing that the current
preferential margins should at least be maintained, but that there
should be a number of changes in the detailed arrangements, having
regard —
among other things —
to the WTO's Doha Development Agenda. This would include:
- extending the scheme to include
some of the dutiable products not currently part of the GSP;
- re-classifying as non-sensitive some of the products
currently regarded as sensitive, thereby permitting them to enter
free of duty in future;
- targeting the graduation arrangements, so that
these are triggered only by a country's share of preferential
imports and apply to products which are competitive on the Community
market (but do not, as they do now, apply to other products within
the same sector, which may not be competitive);
- ensuring that, where a country ceases to have
least developed status, the EBA preferences should be withdrawn,
not suddenly as at present, but gradually;
- replacing the three special incentive schemes
for labour standards, environmental protection and drugs by a
single scheme focussed on promoting sustainable development, under
which countries ratifying a certain number of international agreements
and treaties in areas such as human and labour rights and environmental
protection would have an additional preferential margin on top
of the standard GSP tariff reduction; and
- removing from the GSP, with any levelling up
necessary, countries with other preferential access to the Community
market through free trade agreements, so that there is a single
trade agreement between the Community and each such country.
The Government's view
13.5 In his Explanatory Memorandum of 1 September
2004, the then Minister for Trade, Investment and Foreign Affairs
(Mr Mike O'Brien) says that the Government welcomes the Commission's
aim to increase the uptake of the GSP scheme by simplifying its
provisions. He also welcomes the possible reclassification of
currently sensitive products, and the proposed extension of the
scheme's coverage, particularly to agricultural products, where
he notes that the recent reforms of the Common Agricultural Policy
may also give some scope for additional preferential margins on
the key exports of developing countries.
13.6 As regards individual aspects of the scheme,
the Minister says:
- that, whilst maintenance of
current preferential margins is important to the overall liberalising
process, the Government would encourage the Commission to improve
existing preferential margins (currently 3.5 percentage points
for most items), and will also continue to press for an increase
from 1% to 3% in the threshold for so-called "nuisance"
tariffs (where the duty collected is not worth the cost of collection,
and is therefore waived);
- that the changes proposed for graduation are
also welcome, as these will shield those smaller developing countries
which, despite a generally low state of economic development,
have made a success of developing an industry and export market
in a relatively narrowly-defined sector: however, the UK also
believes that, in view of the underlying intention to assist development,
any such step should be linked, not just to market share, but
to levels of social and economic development in the beneficiary
countries;
- that the Government welcomes the proposal that
the withdrawal of preferences for countries moving up from least
developed status should be gradual; and
- that the Government recognises the political
and economic importance of maintaining a similar level of preferential
access as now for the beneficiaries of the current Drugs Regime,
but in a way which is compatible with the findings of the WTO's
Dispute Panel: it is also concerned that the proposals for a
single incentive scheme should be an effective and appropriate
incentive for developing countries to ratify international agreements.
Conclusion
13.7 Since the Generalised System of Preferences
is an important aspect of the Community's efforts to promote economic
growth in the developing countries, we think it right to draw
to the attention of the House this proposal to extend the arrangements
—
subject to certain modifications —
for a further ten years. We note the Government's support for
such a step, and that it has in general welcomed the detailed
changes proposed by the Commission, which are intended to liberalise
and simplify the current Scheme. We are therefore clearing the
document.
27 The cycle originally ran until the end of 2004,
but was extended for a year to allow the Accession States to participate
in its renegotiation. Back
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