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The EU's Generalised System of Preferences (GSP): Impact on Textile and Clothing Trade
published in Issue 137, September-October 2008
The Generalised System of Preferences (GSP) enables exporters in developing countries to benefit from preferential tariffs in the markets of industrialised countries. Its aim is to help those countries to generate additional export revenue and reduce poverty.
The first GSP schemes were launched in Europe, Japan and the USA in the 1970s, followed by schemes in various other countries. However, the EU’s schemes are the most widely used, and 176 countries benefit from them. Imports under the schemes increased by 10% in 2006 and 12% in 2007 to reach Euro57 bn (US$78 bn). There are three types of scheme. The standard GSP is a non-negotiated arrangement under which the EU provides non-reciprocal preferential access. In the case of textiles and clothing, GSP duties amount to 80% of the full common customs tariff. GSP+ aims to encourage sustainable development and good governance in vulnerable developing countries. Beneficiaries must ratify and apply 27 core United Nations (UN) and International Labour Organization (ILO) conventions relating to such matters as human and labour rights, the environment, the fight against drug production and trafficking, and corruption. The Everything But Arms (EBA) GSP scheme offers duty-free and quota-free access to least developed countries (LDCs) for all products except arms and armaments. Leading LDC producers and exporters of textile goods include Bangladesh, Cambodia, Lesotho and Madagascar.
The GSP is governed by strict rules of origin—to ensure that the benefits go only to the countries intended. Products “originate” in a country if they were wholly obtained in the country or sufficiently worked upon or processed within it. However, “cumulation” rules enable production processes to take place in certain locations elsewhere without affecting the country’s entitlement to GSP benefits.
In December 2008 the EU announced that 16 countries would benefit from GSP+ between January 1, 2009, and the end of 2011. However, the eligibility of one of the biggest beneficiaries, Sri Lanka, is subject to a European Commission review following allegations of human rights violations. This is casting a shadow over the Sri Lankan garment export sector, which employs nearly 300,000 people, and there are fears that the entire textile and clothing industry could be put at risk if the benefits under GSP+ come to an end.
- The EU's Generalised System of Preferences (GSP): Impact on Textile and Clothing Trade
- Development of the Generalised System of Preferences (GSP)
- The EU's Generalised System of Preferences (GSP) Scheme
- Differences Between Standard GSP, GSP+ and Everything But Arms (EBA) Schemes
- EU Rules of Origin and Cumulation
- The EU's New Generalised System of Preferences (GSP) Regulation for 2009-11
- Impact of the EU's Generalised System of Preferences (GSP) on the Development of Poor Countries