At the end of October 2012, the European Commission issued a regulation that applied from 20 November 2012 and which will alter substantially the European Generalised System of Preferences (GSP) from 1 January 2014. (1, 2) The new regulation is broadly in line with the Commission’s 2011 GSP proposals (see Agritrade article ‘ Commission unveils proposal for new GSP’, 10 June 2011).

The regulation reduces the number of beneficiary countries of the EU’s GSP scheme and alters the details of ‘product graduation’ (whereby countries have GSP benefits removed for exports of products that exceed a certain level),  but now also modestly extends the breadth of the scheme (i.e. the number of goods on which preferences are given), by including two agricultural products (fresh cut carnations and sun-cured oriental tobacco), and the depth (i.e. the extent of the preferential tariff cut) of the GSP preferences offered.

The EU’s GSP scheme is currently applied to 176 states, among the broadest coverage of any such scheme.  The initial EC proposal set out the criteria that would reduce the number by about one half. The new regulation creates just 89 beneficiaries, but with scope to increase this number if the circumstances of the newly excluded states change. Countries have been excluded on three grounds which will be applied on a continuing basis by the Commission using delegated powers (under Article 3.2 of the Regulation). Hence the number of ACP states that benefit from the GSP from 2014 onwards may change over time.

• The first criterion is an uncontroversial tidying-up exercise that excludes EU overseas countries or territories that have preferential access to the EU market under other policies.
• The second is a potentially controversial tidying-up exercise that excludes countries that have equivalent or superior access to the European market under a trade agreement (e.g. all CARIFORUM countries and any other ACP states that have agreed EPAs by the time the GSP comes into force).
• The controversial removal from the GSP of countries that have been classified as upper middle income (UMIC) by the World Bank for 3 years, which could affect ACP members such as Namibia, Gabon and Botswana).

This means that from 2014, the EU’s GSP scheme will cover only lower middle income, low income and least developed states (LDCs – which benefit from the EBA initiative, which is formally part of the EU’s GSP overall regime).

Another important feature of the Regulation is the EC proposal on safeguards, under which the EC may withdraw benefits temporarily for a range of reasons, including ‘serious and systematic unfair trading practices including those affecting the supply of raw materials..,’ (Article 19, 1(d)) and ‘serious and systematic infringement of the objectives adopted by Regional Fisheries Organisations or any international arrangements to which the Union is a party’ on fisheries conservation and management (Article 19(e)). These provisions apply to all GSP beneficiaries, including LDCs, which benefit from the EBA initiative.