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TWN Info Service on WTO and Trade Issues (Oct08/17)
28 October 2008
Third World Network

Trade: Imminent deadline for GSP-Plus alternative to EPAs with the EU
Published in SUNS #6574 dated 23 October 2008

Kuala Lumpur, 22 Oct (Sanya Smith) -- Developing countries that are negotiating with the European Union for an economic partnership agreement or a free trade agreement could consider applying instead for "GSP-Plus" status with the EU.

This is because the GSP+ status provides non-reciprocal preferences by the EU to a large part of the exports of the developing country, as contrasted to the non-reciprocal nature of the EPAs or FTAs with the EU.

Moreover, the GSP+ status does not require the developing country to sign on to commitments in other areas such as services, intellectual property, investment, competition policy and government procurement. The EU requires that their EPAs contain these issues.

There is a deadline of 31 October for countries to apply in this round for GSP+ status from the EU. If this deadline is missed, the next opportunity is to meet the next deadline of April 2010.

With the present deadline fast approaching, it seems surprisingly that few developing countries are aware of this attractive, non-reciprocal, alternative to free trade agreements for market access into the European Union.

In an effort to obtain market access into the European Union (EU), approximately 120 developing countries are negotiating regional trade agreements or economic partnership agreements (EPAs) with the EU.

These "FTAs" require reciprocal market liberalisation. It appears that the EU is requiring African countries in EPA negotiations to eliminate tariffs on about 80% of EU products by import value, according to a recent report co-published by the Overseas Development Institute of the UK.

Politicians and officials of many African countries have expressed serious concerns about the adverse effects that such drastic liberalization will have on their economies. These concerns include the loss of tax revenue, and a surge of imports that would potentially cause dislocation to domestic farms and industries.

The officials of ACP countries are however also worried that by not signing on to an EPA with the EU, they could lose the preferences they enjoyed under the Cotonou Agreement. This is because the WTO waiver for the EU preferences to ACP countries expired at the end of last year.

Pressure is now put on African and Pacific countries to sign on to an EPA, with some having initialled an interim goods-only EPA. The Caribbean countries in CARIFORUM have recently signed on to a version of the full EPA with the EU.

Several development groups and independent experts have noted that an interesting and viable alternative to these FTAs for many developing countries is to instead enjoy non-reciprocal market access into the EU via its Generalised System of Preferences (GSP).

The GSP is a unilateral World Trade Organization-compatible trade arrangement where the EU provides non-reciprocal preferential access to its market to 176 developing countries and territories in the form of reduced tariffs for their goods when entering the EU. It is implemented by a Council Regulation applicable for a period of three years at a time.

The EU's GSP covers three separate preference regimes: (1) the standard GSP, which provides preferences to 176 Developing Countries and Territories on over 6300 tariff lines; (2) the special incentive arrangement for Sustainable Development and Good Governance, known as GSP+, which offers additional tariff reductions to support vulnerable developing countries in their ratification and implementation of relevant international conventions in these fields; and (3) the Everything But Arms (EBA) arrangement, which provides Duty-Free, Quota-Free access for the 50 Least-Developed Countries (LDCs).

A report by Oxfam International and Third World Network Africa in the context of the African, Caribbean and Pacific (ACP)-EU EPA negotiations notes that the standard-GSP would not be very satisfactory for African countries (compared to their current preferential access under the Cotonou Agreement).

This report, "A Matter of Political Will", also points out that GSP+ would provide access to EU markets "at levels very similar to access under the Cotonou Agreement, in ways that are compatible with World Trade Organisation rules." According to the EU, 15 countries currently benefit from GSP+.

A copy of the Oxfam-TWN report can be found at http://www.oxfam.org/files/a-matter-of-political-will-apr07.pdf.

GSP+ would primarily be of interest to non-LDCs because according to the EU, the EBA preferential access to the EU market available to LDCs is more far-reaching than that available under the GSP+.

The Oxfam-TWN report finds that "In 88 per cent of the cases where the standard-GSP applies higher tariffs than Cotonou, duty-free access is provided under the GSP+. Indeed, every single ACP export that would face a tariff jump of 20 per cent or more in its ad valorem duty under the standard-GSP would receive duty-free treatment under GSP+. In the majority of cases where GSP+ is not duty free, it offers the same level of access as Cotonou."

For example, excluding bananas and sugar, for the countries studied, the Report finds that GSP+ would provide exactly the same level of duty-free access as the Cotonou Agreement for Papua New Guinea, Zimbabwe, Mauritius and Cote d'Ivoire.

In particular, according to the report, GSP+ "would provide ACP countries with tariff-free access into the EU for all major export sectors, including horticulture, wood, and fish." It also looks in more detail at the sectors which would face non-zero tariffs under GSP+ for a number of African countries and Papua New Guinea.

On comparative rules of origin, the report notes that the EU's standard GSP, GSP+ and EBA do all have stricter rules of origin than the Cotonou Agreement. After looking in more detail at rules of origin issues such as cumulation, minimum tolerance and fish exports, it suggests some solutions.

The report outlines the procedure for applying for GSP+ and highlights its finding that a number of the countries studied have already met almost all the criteria for GSP+.

According to the EU, the main qualifying criteria are that any GSP+ beneficiary country must be considered "vulnerable" and must also have ratified and effectively implemented 27 specified international conventions in the fields of human rights, core labour standards, sustainable development and good governance.

The list of international conventions to implement can be found in Annex III of http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:211:0001:0039:EN:PDF.

The EU's Regulation defines a vulnerable country as one: (a) which is not classified by the World Bank as a high-income country during three consecutive years, and (b) of which the five largest sections of its GSP-covered imports into the Community represent more than 75 % in value of its total GSP-covered imports, and ( c) of which the GSP-covered imports into the Community represent less than 1 % in value of the total GSP-covered imports into the Community.

The first two of these conditions are also applicable to any developing country wanting to benefit from the normal GSP arrangement. It is the third condition that is additional for qualifying for GSP+ (in addition to treaty ratification).

There are about 92 non-LDC countries and territories which meet the vulnerability criteria, according to the EU's list at

http://trade.ec.europa.eu/doclib/docs/2008/july/tradoc_139963.pdf.

If applications received by 31 October 2008 are approved, these countries will receive GSP-plus treatment from 1 January 2009 to 31 December 2011.

Although the 31 October 2008 deadline will expire soon, University of Cambridge legal expert Dr Lorand Bartels notes that it may not be necessary to have ratified all the listed treaties by 31 October 2008. This is because "Regardless of the state of ratification, it is strongly arguable that the GSP+ arrangement can be provisionally applied to countries in advance of ratification and implementation.

"This is for two reasons. First, one country (El Salvador) was granted 14 months to ratify and implement the required conventions on the basis of "specific constitutional constraints" (which were not specified). There is therefore a precedent for a 14 month grace period for ratification and implementation during which preferences can be provisionally applied.

"Second, this follows from the rationale of the GSP+ arrangement itself (that the additional preferences are granted in order to compensate countries for the burden of ratifying and implementing the required conventions). It is not only illogical to require that these conditions be met before the preferences are granted; it is also discriminatory, in that only applicants with the ability to fund ratification and implementation out of their own resources will be able to meet these conditions. Those who have no such resources are therefore ineligible for such preferences. Such discrimination also violates the EU's WTO obligations." His legal opinion can be found at http://www.acp-eu-trade.org/library/files/Bartels_EN_121107_GSP+-as-an-alternative.pdf.

Furthermore, if countries are unable to meet the 31 October 2008 deadline, the Regulation allows another chance to apply by 30 April 2010 for GSP+ treatment to start from 1 July 2010.

[NOTE: Information on applying for GSP+ status can be found on the website of the European Commission. The new GSP regulation is available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:211:0001:0039:EN:PDF; a

summary of the regulation's provisions is at:

http://trade.ec.europa.eu/doclib/docs/2008/july/tradoc_139872.pdf; and procedural

information on the GSP+ application process can be found at:

http://trade.ec.europa.eu/doclib/docs/2008/august/tradoc_140032.pdf (which points out that hard copies of the application must be received by 31 October 2008 etc).] +

 


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