Scheme of preferences from 2006 to 2015 - Guidelines
The purpose of the generalised system of preferences (GSP) is to help developing countries to reduce poverty by using tariff preferences to help them obtain international trade revenue. In the Communication the Commission sets out the principles that should underpin regulations between 2006 and 2015 in order to achieve this objective. It proposes improving the current system (GSP for the period 2002-2005) in several areas by simplifying the GSP (reducing the five arrangements currently in place to three), targeting the system on the developing countries that need it most, encouraging regional cooperation and increasing the additional preferences granted for sustainable development, good governance etc.
Communication of 7 July 2004 from the Commission to the Council, the European Parliament and the European Economic and Social Committee on "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" [COM(2004) 461 final - Official Journal C 242 of 29.9.2004]
In this Communication the European Commission proposes guidelines for the generalised system of preferences for the period 2006-2015, based on experience of earlier systems. It advocates:
Maintaining generous tariff rates
There are a number of ways of maintaining and even improving the tariff preferences. Among other things the Commission proposes extending the GSP to some products not covered by the current system, under which almost one tenth of taxable products in the Customs Tariff are not covered.
Some products classed as sensitive could also be transferred to the category of non-sensitive products.
Preferential margins (currently 3.5 % for sensitive products and 100 % for non-sensitive products) will be maintained and, where possible, increased.
The enlargement of the European Union (EU) by ten new Member States on 1 May 2004 has helped to improve what the Community can offer since it has expanded the EU market to include a further 75 million potential consumers.
Targeting the GSP on the countries that most need it
The Commission proposes that the GSP should target the countries that need it most, such as the least developed countries (LDCs) and the most vulnerable among the other developing countries (small economies, land-locked countries and low-revenue countries) to help them to play a greater part in international trade.
The GSP should also have a mechanism for gradual withdrawal of a country from the special GSP, the everything-but-arms scheme, which gives duty-free and quota-free access to all products (except arms and munitions) from the fifty poorest countries.
A simpler GSP with easier access
The process of simplification, already started under the present GSP, should be enhanced. The Commission has proposed replacing the five GSP arrangements to three: the general arrangement, the special arrangement for the least developed countries and a new special arrangement (GSP+) to encourage sustainable development and good governance.
Making graduation more transparent and targeting it on the prime beneficiaries
The Commission proposes making graduation (withdrawal from the GSP) more transparent by withdrawing the most competitive product groups of certain beneficiary countries from the GSP.
This means that the beneficiaries no longer need the GSP to increase their exports of those products to the EU. The smaller beneficiaries will not be graduated and so can enjoy a greater share of the benefits of the GSP.
The current criteria for graduation (share of preferential imports, development index and export-specialisation index) will be replaced with a single straightforward criterion: share of the Community market, expressed as a share of preferential imports.
Devising a new incentive to encourage sustainable development and governance
As already mentioned, the Commission proposes introducing a new incentive for sustainable development and good management of public affairs by replacing the separate "drugs", "social" and "environment" special arrangements with a single new category: GSP+.
GSP+ will provide special incentives for countries which have signed up to the main international agreements on social rights, environmental protection, governance and combating the production of and trafficking in illegal drugs.
The Commission will take account of the evaluations by the international organisations responsible for each international agreement concerned before deciding which of the applicant countries will be selected to benefit from the GSP+. This scheme will include a credible suspension clause that can be rapidly activated where a country fails to meet its commitments under the agreements.
Improving the rules of origin
The Commission proposes improving the rules of origin by changing their form (simplifying them), their substance (adjusting the origin criteria and cumulation rules) and their procedures (formalities and controls).
The new rules of origin should also be flexible in order to encourage development. One of the objectives must be to facilitate acquisition of origin to optimise the benefits of preferences.
The system could, for example, be improved by regional cumulation, promoting regional cooperation among beneficiary countries. The Commission attaches particular importance to regional integration for southern countries as a route to greater involvement of the southern countries in international trade.
Restoring the temporary withdrawal instruments, safeguard measures and anti-fraud measures
The Commission proposes redefining the GSP temporary withdrawal arrangements and the safeguard clause to take account of the new graduation focused on the most competitive beneficiary countries.
Even though they will still be for use in exceptional circumstances only, those arrangements must be made more credible, which will involve simplifying them and making the way they are used more flexible, particularly in cases of unfair trade practices. It is also essential that the Commission and Member States responsible for applying the GSP should apply these rules unwaveringly where fraud is detected.
As the beneficiary countries also have GSP management responsibilities, the Commission calls on them to establish effective and appropriate management structures to guarantee the validity of certificates or origin.
The generalised system of preferences allows manufactured products and some agricultural products exported by developing countries access to the Community market with total or partial exemption from customs duties.
It is thus an instrument of both the European Community's trade policy and its development policy. As it is a cooperation instrument it is a provisional mechanism, the benefits of which are to be withdrawn from countries that no longer need it.
The EU absorbs one fifth of developing countries' exports. 40 % of EU imports come from the developing countries. The EU is also the world's biggest importer of agricultural products from developing countries, importing more than the United States, Canada and Japan put together.
Half the preferential imports under this system in 2002 were exempt from customs duties and reduced duties were applied to the other half.