EU Approves New Scheme for GSP Tariffs

by Ulrika Lomas, Tax-News.com, Brussels

08 October 2012

Following an agreement with the European Parliament (EP), the European Council has adopted a regulation amending the European Union (EU) scheme of generalized tariff preferences (GSP) for developing countries.

The EU GSP grants trade preferences, such as zero or reduced tariffs, for developing countries' exports to the EU, and has been in force since 1971. Its reform is said to be aimed at adapting the system to the changed global landscape; making it more transparent and predictable, and more generous to the countries in greatest need.

Preferences will now be concentrated on least developed, low income and lower middle-income countries. The selection of beneficiaries will henceforth be largely income-based. Preferences will be removed for EU imports from countries on the World Bank's higher or upper middle per capita income list (including Russia, Brazil, Kuwait, Saudi Arabia and Qatar).

The decision reduces the number of countries enjoying preferential access, in terms of lower trade tariffs, to EU markets to around 80 nations, from 176 previously. Imports qualifying for preferences are further reduced from EUR60bn (USD78bn) in 2009 (4% of total EU imports) to about EUR37.7bn.

However, the operation of the special ‘Everything But Arms’ (EBA) incentive scheme, providing for full duty-free and quota-free imports of all goods from the least developed countries, with the exception of arms, will be unchanged. The position of nine African, Caribbean and Pacific (ACP) countries - Burundi, Comoros, Haiti, Lesotho, Mozambique, Rwanda, Tanzania, Uganda and Zambia – will thereby be unaffected.

Implementation of the new scheme will, in particular, involve updating the lists of eligible and beneficiary countries. It is said that sufficient time will be provided for economic operators to adapt to the new preferences, which are due to apply as of January 1, 2014.

It is expected, however, to put further pressure on those ACP countries that have not yet concluded Economic Partnership Agreements (EPAs) with the EU, as they have already been given only until 2014 by the European Commission to ratify their EPAs before withdrawing their current completely free access to the EU market.

The Council has also decided to extend the range of products covered by the GSP to include some raw metals (for example, aluminium oxide, lead and cadmium), that are of particular value to countries (most in Africa) that would remain in the GSP scheme, while there are safeguards to protect the EU textile and clothing industries against very low-cost imports from third countries.

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