TRADE-EU: Step Claimed Towards Reforms

By IPS Correspondents Reprint | | Print |

Stefania Bianchi

BRUSSELS, Jul 7 2004 (IPS) - The European Union is to reform its tariff system for imports by offering more benefits to the poorest countries while trimming trade discounts to wealthier nations.

The European Commission, the executive arm of the European Union (EU), outlined proposals Wednesday that will guide the EU system of trade preferences for developing countries for the next ten years.

Under the system known as the Generalised System of Preferences (GSP), the EU grants imports from 178 developing countries duty-free access or a tariff reduction depending on the arrangement in place with that country.

Presenting new proposals for 2006-2015, the European Commission says it wants to simplify the current system and focus benefits on developing countries most in need.

The World Trade Organisation (WTO) ruled in April that the bloc’s current system of preferences was not based on "impartial and transparent criteria."

The EU’s GSP is implemented in ten-year cycles. The current cycle will end Dec. 31, 2005.

The EU annually imports goods worth more than 62 billion dollars under the GSP, but the European Commission says it wants to do better.

"We want to do even better, by focusing on the poorest and most vulnerable developing countries who most need trade preferences to access the EU market," EU trade commissioner Pascal Lamy told media representatives Wednesday. "We’re trying to make it more objective, more transparent. Instead of having a scattered benefit to all developing countries, we want to focus efforts on the most needy countries."

Farm and industrial products from poor nations currently have duty-free access to the EU through a series of schemes – a general scheme, a scheme for the protection of labour rights, for the protection of the environment, a special scheme to combat drug production and trafficking, and the Everything but Arms (EBA) initiative which gives duty-free and quota free access to the EU market to the 50 least developed countries (LDCs).

Under the proposed changes these would be reduced to a general arrangement, the EBA initiative and a new GSP plus system giving tariff preferences to countries with special development needs.

The GSP plus system aims to encourage sustainable development and good governance by providing special incentives for countries that accept the main international conventions on social rights, environmental protection, and governance including the fight against drugs production and trafficking.

Lamy said the proposed changes would base preferences on a nation’s market share in a specific industry such as textiles when determining which countries should be eligible for the tariff reductions.

"When they have a pretty good market share, we deem they no longer need these preferences and therefore we can reallocate them to poorer countries," he said.

Large countries like China and India, the biggest beneficiaries under the current system, could therefore see some of those benefits disappear under the reform, though Lamy stressed that figures have yet to be calculated.

Lamy said that the "practical effects of the reform will depend on figures in the final draft of the proposals. We’re not thinking in terms of countries, we’re thinking in terms of market share. It could very much depend on the country and the product concerned."

Development groups say the proposals do not go far enough.

"The EU’s moves towards improving market access for developing countries are only half-hearted," Jo Leadbeater, head of Oxfam International’s EU advocacy office told IPS. "While the Everything but Arms initiative promises duty-free access for goods from least developed countries, in reality strict rules prevent the poorest countries in the world from taking advantage, particularly in textiles." The proposals will now be discussed with the member states, the European Parliament and the Economic and Social Committee.

The Commission plans to produce a legal text before Nov. 1 when a new commission takes office, and the overhaul should be in place by 2006. +EU (www.europa.eu.int) +Oxfam (www.oxfam.org)