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EU Generalised Scheme of Preferences to be toughened up

The European Commission is soon expected to release a proposal for a revision of its Generalised Scheme of Preferences. The key aim is to strengthen monitoring and enforcement to ensure recipient countries strictly follow their obligations under the arrangements.

A subset of GSP beneficiaries will most likely be expected to see their compliance with the Paris Agreement on combating climate change become a prerequisite to continue to benefit from enhanced EU trade preferences.

The Commission’s proposal to review the GSP scheme, the current version of which is due to expire at the end of 2023, is expected to be published in the week of 20 September.

The GSP is a trading arrangement between the EU and a number of low and lower-middle income countries which reduces customs duties on various tariff lines to help them in their efforts develop their economies. All GSP beneficiary countries are expected to comply with a list of fifteen core United Nations and International Labour Organisation conventions.

An additional element to the scheme, GSP Plus, offers more generous trade preferences to countries that agree to implement in total 27 international conventions concerning human rights, labour rights, environmental protection and good governance – and have that implementation regularly monitored by the EU.

A third arrangement, known as Everything But Arms – EBA – provides least developed countries with duty-free, quota-free access for all products except arms and ammunition.

The review also comes amidst criticisms by NGOs and stakeholders of Brussels’ haphazard approach to dealing with GSP partner countries where issues can arise periodically around human rights in particular.

The EU suspended trade preferences over human rights violations in the past, targeting Sri Lanka a decade ago and Cambodia in 2020, and Bangladesh and Myanmar have recently been placed under enhanced monitoring after perceived backsliding of human and labour rights issues.

Although Uzbekistan was recently added to the list of GSP+ countries earlier this year, the Commission was urged by the NGO Human Rights Watch to “set up a dedicated monitoring process, with the involvement of local and international civil society groups, to ensure greater transparency on benchmarks and recommendations, as well as to follow-up on the commitments of the Uzbek government to remedy failures identified.”

More transparency

“The greatest opportunity for changes is in implementation,” San Bilal, Head of Trade, Investment and Finance at the European Centre for Development Policy Management, told Borderlex.

“Implementation is not just enforcement – it starts with monitoring. There should be a more transparent monitoring process involving civil society, similar to the consultation mechanisms which exist for civil society within the EU’s FTAs. Such a mechanism could be introduced for GSP countries.”

A second question regards dialogue with partner countries when they are perceived to be in breach of implementing the conventions.

“If there are problems, we need to think about how to support these countries,” continued San Bilal. “The GSP would be more effective if it were well-integrated into the European investment tools, particularly development cooperation.”

“In terms of enforcement, yellow cards, as is currently used in fisheries, and scorecards could be effective tools to communicate warnings.”

Paris Agreement steps in

The review of  Generalised System of Preferences will help the EU “work with our developing country partners to meet the targets of the Paris agreement and other environmental conventions”, said European Commission vice-president Valdis Dombrovskis, who also is in charge of the EU’s trade portfolio at a conference in early September.

The European Parliament in its resolution from 2019, called on that the Paris Climate Accords to be added to the list of conventions for GSP Plus, with other political groups saying it should apply to the broader GSP and EBA as well,  given that the vast majority of countries have already ratified it.

The GSP Platform representing a group of human rights and development organisations, is calling for all 12 conventions under GSP Plus to apply to the GSP and EBA partner countries.

This would create major headaches for current GSP beneficiaries which include India, Indonesia and Nigeria, as well as geopolitical problems for the EU – which is why it is likely to be step too far for the Commission at this stage.

This is, however, a line which is likely to be followed up in the European Parliament by Green MEPs when the proposal enters the EU decision-making process later this year.

The is clearly scope to increase the product coverage under the GSP, although whether the Commission proposes this is unclear. San Bilal is not very hopeful. “There are some technical twists the Commission could bring to GSP in terms of increasing product coverage, introducing more preferences for green goods, and referencing fair trade,” he said, “but in practice this can be difficult.”

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