General information

GSP policy for the 1990s

The Generalised System of Preferences, designed 20 years ago to promote industrialisation and development in the Third World, is due to be reviewed this year.

A number of findings emerge from an analysis of the way it works:

1. Erosion of the preferential margin, in particular by the successive reductions in customs duties negotiated under GATT, has made GSP less attractive than it was.

2. The system changed from being an alternative to a supplementary system to GATT when the developing countries stepped up their involvement in the multilateral negotiations and their integration in the world trade system became one of the aims of these negotiations.

3. GSP’s usefulness as a supplementary instrument is attenuated by the fact that the Community scheme is complicated to manage and short on stability and transparency.

An instrument of this kind is still a necessary part of the Community’s development policy, but it will have to be revised in the light of developments since its inception if it is to work properly.

The idea of the proposed guidelines is to make GSP attractive again so it can go on doing a useful job. Experience suggests that this means simplifying it, first of all, in particular by doing away with the quantitative restrictions hampering utilisation, and ensuring that there is a proper system for taking the sensitivity of products and the competitive position of countries into account.

And this means making a special effort to improve the way the LDCs use the system, particularly the rules of origin.

Lastly, a look should be taken at the consequences of expanding international trade to non-traditional sectors- a trend clearly reflected in the extension of the sectors covered by the multilateral negotiations going on under GATT and one which should also be taken into account in the general framework of cooperation with the developing nations.

The Community should revise GSP in line with the developing countries’ more active involvement in the outcome of the Uruguay Round and their greater acceptance of multilateral discipline. The most advanced of the developing countries also think that the countries of Eastern Europe should open their markets to the LDCs.

A comparable degree of harmonisation of donor country policies should also be sought to ensure a fairer spread of the costs of liberalisation.

The Commission feels, therefore, that the new scheme for the other developing countries cannot really be finalised until the results of the Uruguay Round are known - which means carrying over the 1990 system, on a provisional basis, into 1991. And the improved rules of origin arrangements for the LDCs will be put into effect in 1991 as a contribution to the Conference of Paris scheduled for September 1990.