Development & Aid, Economy & Trade, Europe, Headlines

DEVELOPMENT: ‘New Trade Preferences Unfair to Developing World’

Stefania Bianchi

BRUSSELS, Oct 21 2004 (IPS) - A leading development group has slammed EU plans to amend trade discounts to developing countries.

The European Commission, the European Union (EU) executive, announced proposals Wednesday (Oct. 20) to replace the current Generalised System of Preferences (GSP).

The GSP is a key instrument to help developing countries reduce poverty by stimulating exports to the EU. Under the current scheme developing countries receive preferential tariff rates in the markets of industrialised countries.

The commission says the new proposals will be simpler, will target the most needy countries and would offer a “clearer, more transparent and more predictable” system for the bloc’s trading partners.

Presenting the new GSP system Wednesday, outgoing EU trade commissioner Pascal Lamy said the proposals would help the most vulnerable countries.

“The EU is already the world’s largest provider of trade preferences in favour of developing countries – enabling us to import more than all other major developed countries put together,” he told media representatives.

“But 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,” he added.

Lamy, who will be replaced by Peter Mandelson from Britain as EU trade chief at the beginning of November, added that the new plans would also bring the bloc’s trade rules in line with the World Trade Organisation (WTO), which has called on the 25-nation EU to reform its trade system.

“We’ve got to pull our socks up, come into line, and that’s what we are doing. For the system to be more efficient, we need to adjust, we need to simplify,” he said.

The new proposals involve slimming down the current system of five arrangements to three – a “general arrangement” available for all beneficiary countries, the “everything but arms” initiative which gives duty-free and quota free access for all products from the world’s 50 poorest countries, and a new “GSP+” system which would give tariff preferences to vulnerable countries who meet new criteria for sustainable development and good governance.

The plan also offers greater market access for up to 72,000 products from developing countries that abide by international human rights, environment and labour standards. They will also have to combat the drug trade.

But under the proposals countries that hold more than 15 percent of EU market share of any goods will lose their discounted tariffs. Tighter restrictions will apply in textiles, where a ceiling of 12.5 percent market share will be set.

Lamy said the system would exempt countries which have breached the limit, but have not diversified their exports enough and remain dependent on the export of only a few products.

Critics say the reforms will do more damage than good. Jo Leadbeater, head of Oxfam International’s EU advocacy office says the proposals are “unfair” and could mean that developing countries are not able to progress.

“The criterion for graduating a developing country out of the system of preferences is unfair and blatantly protectionist,” she said. “The proposal looks at whether a developing country accounts for 15 percent of EU imports from the developing world, instead of from all EU imports. The rule means that a developing country may be graduating out of the GSP just as it begins to get its foot on the ladder.”

Oxfam is also concerned about the proposals for the rules of origin. “It’s disappointing that the commission proposes hardly any changes to its existing rules of origin for the GSP. When Canada relaxed its rules of origin for Least Developed Countries, Bangladesh’s exports to Canada went from 90 million dollars to nearly 200 million dollars within a year,” said Leadbeater.

“In refusing to allow Bangladeshi garment producers to source from anywhere in the world, the EU is letting its fear of China’s textile industry block a reform that could significantly benefit one of the poorest countries in the world,” she added.

Large exporters like China and India, who are the biggest beneficiaries under the current system, are also likely to be disappointed with the new proposals as they will lose some of their preferential benefits.

The new proposals have to be approved by EU member states and the European Parliament. If approved, the new system will come into force 2006-2008.