EU Gives Duty-Free Access To Developing Countries

by Ulrika Lomas, Tax-News.com, Brussels

15 December 2008

The European Commission has decided to give sixteen developing countries duty-free access to the European Union market for around 6,400 tariff lines, under a special incentive arrangement for sustainable development and good governance.

The preferences, called GSP+, are in addition to the standard Generalised System of Preferences (GSP) extended to developing countries. GSP+ is offered to vulnerable developing countries that have ratified and effectively implemented 27 core United Nations (UN) and International Labour Organization (ILO) conventions on human and labour rights, and other international conventions related to the environment and governance principles.

As a result of the Commission's decision on December 9, the GSP+ beneficiaries from January 1 2009 until the end of 2011 will be: Armenia, Azerbaijan, Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Paraguay, Peru, Sri Lanka and Venezuela.

Although the two countries El Salvador and Sri Lanka were included in the decision, questions remain over the degree of effective implementation of certain UN and ILO conventions in these countries. The European Commission launched investigations in May (El Salvador) and October (Sri Lanka) in order to ascertain whether or not the two countries fulfil the conditions to continue to receive GSP+ preferences. While the investigations are ongoing the countries continue to receive preferential access, but depending on the findings they could be withdrawn from the scheme.

EU Trade Commissioner Catherine Ashton said:

"GSP+ is at the heart of our pro-development trade policy. The decision today ensures that sustainable development and good governance will continue to be rewarded."

Experience shows that the incentive effect of the GSP+ is strong, as countries have made every effort to fulfil the requirements. GSP+ preferences are of real economic value to the beneficiary countries: in 2007 there was EUR4.7bn worth of trade under this scheme, with a nominal duty loss (compared to standard GSP rates) for the EU of over EUR357m. The duty-free access means a considerable tariff reduction over the rates applied under the regular GSP scheme. Tariff cuts include tobacco (cut by up to 52%), various fruit juices (up to 30%), fruits (up to 20%), vegetables (up to 14%), fish (up to 20%) and honey (up to 17%).

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