Commission unveils proposal for new GSP

10 June 2011

The first major step in a process that will result in a new EU GSP scheme coming into force (probably in 2014) has taken place with the publication by the Commission of its proposal for the new regime. There will now be formal negotiations with the European Parliament and the member states (as well as much lobbying from other interested parties) before an agreed new regime emerges.

The EU’s current GSP regime expires at the end of 2011, but is likely to be extended temporarily to avoid any hiatus (like that which has led to the suspension of the USA’s GSP – a casualty of the budget negotiations). It covers three elements: a basic scheme (the ‘Standard GSP’) that, until now, has been open to almost all developing countries; a more liberal special scheme (GSP+) for ‘vulnerable states’ that is tied to the observance of environmental, social and political rights; and the most liberal scheme (Everything But Arms – EBA) limited to LDCs.

Previous renewals of the GSP have tended to widen its scope; this one narrows it. This is most evident in a reduction in the number of countries benefiting, from 176 to 85. This cut is partly a tidying up which will remove confusion: countries (apart from LDCs, which are unaffected) with equal or better access to the EU through another scheme will no longer be covered by the GSP (removing confusion over why they do not use it). This excludes all non-LDC ACP states that have signed a full or interim EPA and also non-LDC states such as Kenya that have initialled an interim EPA but not yet concluded negotiations (because they are covered by the temporary access granted by the EU from 2008).

More controversially, countries are excluded if they are classified by the World Bank as ‘upper- middle income’ (as well as ‘high-income’). This threshold excludes Gabon (which is not in an IEPA) and Namibia (which is still negotiating).

The graduation mechanism (whereby preferences are withdrawn from states with a relatively large market share) has been made stronger. A detailed comparison will take time to emerge as the product categories have changed, but more countries are expected to be graduated on more products. The Commission argues that this measure, in addition to the other areas of narrowing, will allow the benefits of the GSP to be focused more effectively on poorer states, but this remains to be seen.

The criteria for GSP+ eligibility have also changed. Applicants must still apply the same set of international conventions but the formality of implementation has been increased (with, for example, states being required to make binding commitments with a more rapid EU mechanism for withdrawing benefits if the state cannot demonstrate that these are being met). The criteria for establishing vulnerability have also changed. Until the calculations have been made, it is not certain that the current beneficiaries will remain eligible: the proposal does not list potential beneficiaries of GSP+, whereas it does list them for the Standard GSP and EBA.

The proposal retains the safeguard provisions on CAP products (that affect LDCs under EBA as well as other GSP beneficiaries) virtually unchanged. Article 30 permits the EU to suspend preferences of CAP products if imports ‘cause, or threaten to cause, serious disturbance’ to European markets. This could allow EBA preferences for sugar and rice (as well as other CAP products) to be suspended (although sugar trade is covered by the general ACP/LDC safeguard ceiling of 3.5m tonnes).

Press analysis indicates the changes will mainly affect fast-growing nations such as India and Brazil. The proposal is seen as ‘[bolstering] the EU’s push to strike free-trade agreements with individual countries or groups of nations’. Indeed, press reports quote Trade Commissioner Karel De Gucht as stating that the new GSP scheme ‘could and should boost our FTA effort’.

Editorial comment

The agreement on the new GSP is the first major test affecting developing countries of the new distribution of EU decision-making following the entry into force of the Lisbon Treaty, which increased the powers of the European Parliament. The Commission proposal attempts a compromise between competing European interests. It is reported that the Commission expects it to cause considerable controversy, but to emerge from the process with its main features intact.

ACP agricultural trade will be affected both directly and indirectly, hence the need to engage in the discussion surrounding the proposal’s passage. Many ACP states will be removed from the GSP. This may not be controversial for those that are content in their interim or full EPA. But those that are still negotiating (and so are not listed as a GSP beneficiary) will need to make sure that their interests are protected should the negotiations fail (or drag on to 2014). Any state that has seen GSP+ as an alternative to EPAs needs to check if it is still eligible on the vulnerability criteria and consider the implications of its stronger political conditionality.

Gabon is currently the only ACP state without an (I)EPA or FTA with the EU that will be graduated out as ‘upper-middle income’, but others might be graduated out if they attain this classification (within a year of being listed by the World Bank). And if Namibia does not sign the IEPA it will be left, as an upper-middle income country, without any preferences in the EU market. While the special status of LDCs is generally confirmed by the proposal, the provision for safeguard action on CAP products illustrates that there exist several routes through which the EU can trim the benefits of EBA without formally altering its main provisions.

The likelihood of the changes actually focusing benefits on poorer states, as the Commission hopes, may become clearer as the proposals are analysed in more detail. But few non-LDC ACP states will benefit directly: 29 of them will no longer be eligible for the GSP scheme current proposals.

Copyright 2018, CTA. Technical Centre for Agricultural and Rural Cooperation (ACP-EU)