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EU Generalised Scheme of Preferences

 

EU Generalised Scheme of Preferences

Answer: The EU's GSP is a well-established trade and development policy instrument, which has been in place since 1971. The current GSP framework, which expires by the end of 2023, is based on Regulation (EU) No 978/2012 of 25 October 2012. By eliminating or reducing import tariffs the scheme offers easier access to the EU market for goods exported from developing countries. Lower duties enable these countries to increase their exports to the EU and thus contribute to their economic growth and jobs creation, including diversifying their economies. The EU's GSP supports sustainable development, as tariff preferences are conditional on the respect for human rights, labour rights, environmental protection and good governance.

The EU offers three GSP arrangements covering a total of 67 countries:

1. EBA (Everything But Arms) for least developed countries (LDCs) which benefit from duty-free (0% duties), quota-free access to the EU market for all products except arms and ammunition.
2. Standard GSP for low and lower-middle income countries which are granted a partial or full removal of customs duties on two thirds of tariff lines.
3. GSP+, the special incentive arrangement for sustainable development and good governance which slashes tariffs to 0% for the same tariff lines as in the case of Standard GSP for Standard GSP beneficiaries which accept additional sustainability requirements (it is based on application)
Answer: The EU's overarching objective in the revised GSP Regulation is to maintain the essential features and goals of the current framework, which has proved successful for the past half-century namely poverty eradication, support for sustainable development and good governance, while not jeopardising EU interests. However, the GSP is now being updated to improve its overall efficiency and effectiveness to respond to future challenges for beneficiary countries. The aim is also to bring the scheme closer in line with our trade sustainability principles.
Answer: The 2018 Mid-Term Evaluation (MTE) of GSP, the External Study supporting the Impact Assessment, and the 2020 Open Public Consultation confirmed the achievements of the EU GSP, while indicating several areas of improvement.

In particular, the GSP review aims to:

• Reflect the evolving priorities, such as those underpinning the European Green Deal, by extending negative conditionality (that is, no serious and systematic violations) for all beneficiaries to environmental and good governance conventions in addition to core human and labour rights conventions;
• Facilitate access to the GSP+ arrangement to the growing number of least developed countries (LDCs) graduating from EBA arrangement of GSP;
• Provide transitional arrangements for current GSP+ beneficiaries, which would have to reapply to fulfil new requirements for GSP+ such as ratifying the additional conventions, and add a requirement for countries applying for GSP+ status to submit a plan of action to demonstrate their effective implementation of the relevant conventions;
• Amend the GSP reporting period, from two to three years, to align it with monitoring reports of United Nations international bodies and organisations;
• Add new international conventions to the list;
• Make the preferences withdrawal process faster and more responsive in exceptionally grave cases of violations;
• When proposing a temporary withdrawal of GSP preferences, the Commission will consider the socio-economic impact of the withdrawal in the GSP beneficiary country;
• Introduce a withdrawal criterion related to readmission of own nationals by beneficiary countries;
• Change calculation method of safeguard thresholds to use import values (rather than volumes) to align it with the calculation of graduation threshold;
• Introduce a specific process to make sure that the cumulation of rules of origin responds to the requesting country's development, financing and trade needs;
• Adjust product graduation (that is, the temporary suspension of tariff preferences for highly competitive products) thresholds for the Standard GSP arrangement to better focus preferences on less competitive products and create more opportunities for other GSP beneficiaries, in particular the LDCs;
• Improve the monitoring and implementation of GSP+ commitments; for instance, through increased transparency and participation of relevant stakeholders, including through the recently created Single Entry Point (SEP) mechanism for non-compliance complaints.
Answer: The proposal for a revised GSP Regulation is based on a Mid-term Evaluation (MTE) of the current GSP Regulation completed in 2018. The MTE concluded that, overall, the GSP was delivering on its objectives and there was no need to amend the Regulation before its expiry on 31 December 2023. However, the MTE made several recommendations to improve the effectiveness and efficiency of the scheme.

In addition, the review takes note of an extensive External Study informing the draft Impact Assessment Report for this proposal, undertaken and published in 2021, as well as the open public consultation on the GSP and its proposed reform that was open from 11 March 2020 to 15 July 2020.
Answer: The new Regulation proposal is available at the following link: https://trade.ec.europa.eu/doclib/docs/2021/september/tradoc_159803.pdf
Answer: The new post-2023 GSP Regulation:

• adds the possibility for updating the list of eligible countries based on changes in their trade and development needs;
• adds a requirement for countries applying for GSP+ status to submit a plan of action for the effective implementation of the relevant conventions;
• extends negative conditionality (that is, no serious and systematic violations) for all beneficiaries to environment and climate and good governance conventions/agreements, in addition to the core human and labour rights conventions;
• removes the export competitiveness vulnerability criterion in terms of eligibility for the GSP+ arrangement;
• provides transitional arrangements for current GSP+ beneficiaries, which would have to reapply to fulfil new requirements for GSP+ (ratify six additional conventions to be added to the list of relevant conventions);
• amends the GSP reporting period, from two to three years, to streamline and better synchronise with monitoring reports of international bodies and organisations;
• introduces a provision so the Commission, when proposing a temporary withdrawal of GSP preferences, considers the socio-economic impact of the withdrawal in the beneficiary country;
• introduces the possibility to extend the scope of withdrawal measures where additional reasons or violations occur;
• introduces a withdrawal criterion related to readmission of own nationals;
• increases flexibility for reviewing the scope of withdrawal, postponing or suspending its application in case of exceptional circumstances such as a global health or sanitary emergency;
• provides for an urgent withdrawal procedure in cases of grave violations of the GSP relevant conventions where a rapid response is needed, in view of the specific circumstances in the beneficiary country;
• removes the provision for determining safeguard thresholds based on import volumes and replaces it with a calculation based on import value;
• introduces a specific process to make sure that the cumulation of rules of origin responds to the requesting country’s development, financing and trade needs;
• provides the list of eligible countries and the arrangement they benefit from in a single Annex;
• removes Russia, China, Hong Kong, and Macao from the list of eligible countries, which will not be considered as developing countries in the context of the reviewed GSP to ensure that its benefits are limited to developing countries having similar trade, financing and development needs;
• provides a single list of countries from which GSP preferences have been withdrawn; and
• adjusts the product graduation and safeguard thresholds downwards by ten percentage points to better target competitive products
Answer: The new GSP Regulation establishes a list of eligible developing countries in column A of Annex I. Those are low-and-lower-middle-income countries, as classified by the World Bank, and least-developed countries (LDCs), as classified by the United Nations (UN), which share similar development needs.
The new GSP removes Russia, China, Hong Kong, and Macao from the list of eligible countries, which will not be considered as developing countries in the context of the reviewed GSP, to ensure that the program’s benefits are limited to developing countries having similar trade, financing and development needs.
The lists of eligible and beneficiary countries have been merged into a single table in Annex I. In addition, a separate list of countries for which the preferences have been withdrawn has been set out in Annex II to reduce the number of Annexes and simplify the reading.
Answer: The three-tier structure of the GSP framework (EBA, GSP and GSP+) allows addressing the diverse trade and development needs of different groups of developing countries.
Answer: The preferences enjoyed by the GSP beneficiary countries complying with the requirements of the three arrangements remain the same.
Countries benefitting from special incentive arrangement for sustainable development and good governance (GSP+) will face some additional requirements: they will need to ratify the additional international conventions and reapply for the GSP+ status with a plan of action to implement those conventions effectively. To ensure a smooth transition, a two-year grace period for this reapplication is proposed.
Answer: Countries with GSP+ status in accordance with current Regulation (EU) No. 978/2012 should submit a new application within two years after the entry into force of the new Regulation. However, in order to ensure business continuity and legal certainty for economic operators, the tariff preferences under the GSP+ are to be maintained during the assessment period of their new application.
Companies will be able to use GSP+ preferences also during the period necessary to assess the application. Nothing will be required of them.
Answer: There are no changes to the list of products; only to their presentation. The new product Annexes outline clearly the products applicable to both standard GSP and GSP+ and, separately, the additional products covered in the GSP+ arrangement.
Answer: The new GSP adjusts the product graduation thresholds downwards by ten percentage points to better target competitive products and create more opportunities for other GSP beneficiaries.
Answer: Yes. The new proposal posits that cross-regional and extended cumulation of product origin should be granted provided that the applicant beneficiary country brings sufficient evidence that:

(a) cumulation responds to its development, financing and trade needs, thus leading, amongst others, to economic growth, elimination of poverty, diversification of exports and industrialisation;
(b) it cannot comply with the applicable rules of origin without such cumulation, and;
(c) it does not impact negatively the situation of other countries; especially, on EBA beneficiary countries.

When assessing whether granting cumulation responds to the requesting country’s development, financing and trade needs, the Commission should consider the beneficiary country’s dependency on the supplying country and future perspectives with regard to the products in question.
Answer: The new GSP contributes to the European Green Deal objectives by extending negative conditionality to environmental and good governance international conventions. Moreover, the list of relevant international conventions will also include the Paris Agreement on climate change.

The preparatory work looked at a list of ‘green products’ containing 34 goods that are presently considered as sensitive under the GSP and therefore still subject to reduced preferential tariffs (as opposed to tariff-free imports to the EU) in the case of Standard GSP countries. Given the minor market share that standard GSP and GSP+ have in the selected environmental goods imported to the EU, the export expansion from removing tariffs on these products is predicted to be relatively modest. The implications for EU-27 domestic production are also very minor.
Answer: The following international conventions/agreements are proposed for inclusion in the list:

• Optional Protocol to the Convention on the Rights of the Child on the Involvement of Children in Armed Conflict (2000)
• Convention on the Rights of Persons with Disabilities (2007)
• Convention on Labour Inspection No 81 (1947)
• Convention on Tripartite Consultations No 144 (1976)
• The Paris Agreement on climate change (2015) [Note: it replaces the Kyoto Protocol]
• United Nations Convention against Transnational Organised Crime (2000)

These conventions/agreements have been positively assessed against a set of relevant criteria:

1) The level of contribution to and coherence with the objectives of the GSP and policy coherence for development;
2) The extent to which new conventions overlap with the conventions already listed in Annex VIII of the current GSP Regulation;
3) Legal recognition as a convention;
4) The ratification status of conventions globally and among GSP countries (only conventions that are open to ratification by all members of the international community are considered);
5) Coherence with the EU’s Member State commitments – that is, ratification by all EU Member States;
6) The conventions’ decision-making, governance systems and institutional structures;
7) The system of regular implementation and/or compliance mechanisms and associated reporting by monitoring bodies under the convention; and
8) Reporting obligations on ratifying countries.
Answer: The relevant international conventions on the environment and good governance have been put on par with human and labour rights conventions in the list. ‘Negative conditionality’ applies to all conventions listed in the new GSP Regulation.
Answer: GSP+ beneficiaries have to ratify all international conventions listed in the new Regulation. Current GSP+ beneficiaries have a two-year transition period to fulfil the new requirements and submit their application.
Answer: Countries applying for GSP+ status have to submit a plan of action to implement effectively the GSP-relevant international conventions as part of their application.
Answer: GSP preferences can be withdrawn on the basis of different grounds ranging from fraud, money-laundering, increased competitiveness, unfair trading practices, infringement of objectives linked to management of fishery resources, economic development (upper-middle income status) or the conclusion of a trade arrangement.

In addition to these elements, the withdrawal for all three GSP arrangements can also take place if the Commission concludes there are serious and systematic violations of key principles enshrined in fundamental United Nations human rights and labour rights, environmental and good governance conventions. There are also specific conditions leading to the withdrawal of GSP+ preferences, such as in cases of failure to effectively implement the conventions.

The use of the withdrawal process so far on international conventions (against Sri Lanka, Belarus, Myanmar, and Cambodia) has shown that the existing conditionality criteria create the necessary platform of dialogue with beneficiaries on issues covered by the GSP Regulation. It also increased the EU’s leverage in pushing for respect of fundamental rights.
Answer: The GSP proposal covers a wider range of human rights and aims at their better implementation in beneficiary countries.

The proposal includes two new international instruments on human rights (the Convention on the Rights of People with Disabilities and the Optional Protocol to the Convention on the Rights of the Child on the Involvement of Children in Armed Conflict), in addition to the previously listed ones. It also proposes two new labour rights conventions (ILO Conventions No. 81 on Labour Inspection and No. 144 on Tripartite Consultation), in addition to the current 15 core human and labour rights UN/ILO conventions.

The proposal also includes an urgent procedure for temporary withdrawal of preferences for exceptionally grave violations, where a rapid response is needed. This will allow to shorten the withdrawal process from 18 to 7 months. It is important to highlight that such a rapid procedure would supress the monitoring and evaluation period of six months embedded in the normal procedure; hence, it will be used with caution in cases of blatant violations
Answer: The GSP Regulation includes the ILO Convention No. 29 concerning Forced or Compulsory Labour, and ILO Convention no 105 concerning the Abolition of Forced Labour.

The EU's ‘zero tolerance approach' regarding child labour is also firmly anchored in the GSP. The GSP Regulation includes obligations regarding the ILO Convention No. 182 on the Worst Forms of Child Labour and the UN Convention on the Rights of the Child.

The EU can withdraw preferences from any GSP country in cases of serious and systematic violations of the principles of those conventions. And GSP+ countries have to ratify and effectively implement those conventions to benefit from the more generous preferences.

We are also adding export of goods made by internationally prohibited child labour and by forced labour, including slavery and prison labour, as a ground to withdraw the preferences.

The 2018-2019 Biennial Report of the European Commission indicates that the GSP+ contributes to effective implementation of the human rights conventions, noting in particular progress in eradicating child labour.
Answer: The GSP relevant conventions already include eight environmental and climate international instruments, including the Kyoto Protocol, the Convention on Biological Diversity, and the UN Framework Convention on Climate Change.

The new GSP further contributes to the European Green Deal objectives by extending negative conditionality to environmental and good governance international conventions. Moreover, the list of relevant international conventions will also include the Paris Agreement on climate change.

The preparatory work also looked at a list of 34 environmentally friendly products that are presently treated as sensitive under the GSP (versus duty-free status under EBA). The study concluded that the benefits stemming from changing the tariffs in those products is modest and it would flow mostly to the largest and most diversified economies, with minimum impact on the vulnerable, less diversified countries – minimal impact in terms of advancing the diversification objective for the less-diversified, such as Central Asian and African economies.
Answer: In July 2020, the Commission appointed the Chief Trade Enforcement Officer (CTEO) to strengthen the implementation and enforcement of trade rules and commitments. As part of these increased efforts, in November 2020, the Commission launched a new complaints mechanism: the Single Entry Point (SEP).

Through the SEP, the Commission receives complaints on various matters related to trade policy, including non-compliance with GSP commitments. This new system of complaints is integrated within the framework of the new GSP Regulation.
Answer: The open public consultation on the GSP and defined reform options was open from 11 March 2020 to 15 July 2020. After data cleaning, 309 different contributions remained. In the open public consultations, the vast majority of respondents supported maintaining GSP preferences with its three arrangements, on the grounds that it helped to eradicate poverty, create jobs – notably, for women) – and support economic growth – including economic recovery of beneficiary countries severely impacted by the COVID-19 pandemic. This, while contributing to sustainable development and potentially serving as a stepping stone to reciprocal trade agreements as countries graduate from the GSP.

Information about the open public consultation held in 2020 can be found at:

Trade – preferential tariff scheme between the EU and developing countries (update) (europa.eu)

Information on the Civil Society Dialogue meeting is available at:

Presentation of the interim report of the study in support of an impact assessment to prepare the review of the GSP Regulation - Trade - European Commission (europa.eu).
Answer: EU GSP monitoring of countries compliance with the international conventions is principally based on the reports and recommendations of the United Nations and the International Labour Organization monitoring bodies.. The comprehensive GSP+ monitoring includes information and exchanges with European and local civil society, beneficiary countries’ authorities, and international organisations. The EU engages regularly with the civil society either in Europe or in the GSP countries territories.
Answer: The GSP Regulation provides for several mechanisms to ensure that the interests of European industries are adequately protected, while also responding to the development needs of GSP beneficiaries:

• GSP beneficiaries that become ‘upper-middle income’ countries, in accordance with the World Bank’s assessment, are removed from the GSP framework, as they reached a level of economic development that does not require support through EU GSP tariff preferences;
• GSP beneficiaries can lose preferences for specific product categories which are deemed to have become sufficiently competitive;
• Safeguards measures can be requested by the EU industry, based on evidence that increased imports from a GSP beneficiary country have caused or threaten to cause serious economic difficulties for that industry.

The contribution of the newly established CTEO and SEP will also be important, as a single complaint mechanism that will allow stakeholders to submit their concerns in a structured way. This will also enhance pressure on the countries concerned to further sustainability-related reforms.
Answer: Safeguards respond to the imperative grounds of urgency relating to the deterioration of the economic and/or financial situation of Union producers There are two safeguard mechanisms available under the GSP framework: general safeguards, for all products (triggered by a well-evidenced complaint); and the automatic safeguards, applied to the textile, agriculture, and fisheries sectors (triggered when a specific threshold is met or exceeded).
Answer: The proposal will be final when adopted by the European Parliament and the Council. Adoption could take place in the last quarter of 2022. Adoption could take place in the last quarter of 2022. The new GSP Regulation is expected to enter into force on 1 January 2024.

The new Regulation provides transitional arrangements for current GSP+ beneficiaries, which would have to reapply to fulfil new requirements for GSP, that is, ratify six additional conventions that are proposed to be added to the list of GSP+ relevant conventions.

 


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