Parltrack

The Committee on International Trade adopted the report by Christofer FJELLNER (EPP, SE) on the proposal for a regulation of the European Parliament and of the Council applying a scheme of generalised tariff preferences.

The committee recommends that the position of the European Parliament in first reading following the ordinary legislative procedure should be to amend the Commission proposal, as follows:

Duration of the regulation: the Commission proposes that this should be an open ended regulation, with no end date for when the latter will have to be renewed. In view of the major changes proposed, Members state that the scheme of generalised tariff preferences should continue to apply for a period of 10 years, except for the special arrangement for the least-developed countries, which should continue to be applied without any expiry date. The scheme must be reviewed five years after its entry into force. The committee feels that this would still be a period long enough in order to ensure predictability and stability, and would also coincide with the timeframe presently set out for the guidelines for the application of the scheme of generalised tariff preferences. The Everything But Arms scheme should however, as has been the case up to now, be open-ended.

General arrangement: Members clarified that Least Developed Countries (LDCs) will always benefit from the tariff preferences provided under the general arrangement, as long as they are classified as LDCs by the UN.

Eligible countries: the Commission’s proposal had stated that the scheme would not apply to a country if it has been classified by the World Bank as a high-income or an upper-middle income country during three consecutive years immediately preceding the update of the list of beneficiary countries. However, the committee specified that this not apply until two years after the entry into force of the Regulation, for countries which by the date of its entry into force have concluded the negotiations of a bilateral preferential market access agreement with the Union, which is not yet applied as the ratification process is still ongoing. Members feel that countries in this position should not be excluded from the GSP from the outset. This is in order to avoid re-establishing MFN duties under a transitional period which could lead to possible trade disruptions for a country which has undertaken a commitment to strengthen the trade relations with the European Union.

Members add that in order to facilitate information and increase transparency, the Commission shall also ensure that the relevant statistical data for the GSP sections are regularly available in a public database.

Special incentive arrangement for sustainable development and good governance: Members state that a GSP beneficiary country may benefit from the tariff preferences provided under the special incentive arrangement if it has ratified all the conventions listed in Annex VIII without any reservations found to be inconsistent with their objectives and purposes by a body set up under the same conventions and the most recent available conclusions of the relevant monitoring bodies do not identify a serious failure to effectively implement any of these conventions.

The committee amends the text to ensure that the decision on whether a country is admitted to the arrangement is taken though delegated acts to establish or to amend Annex III in order to grant a requesting country the special incentive arrangement and to add that country to the list of GSP+ beneficiary countries. Equally, the Commission shall be empowered to adopt a delegated act to amend Annex III in order to remove that country from the list of GSP+ beneficiary countries.

Delegated acts will also be used to amend Annex IV in order to remove a country from the list of EBA beneficiary countries following a transitional period of three years as from the date on which the delegated act entered into force.

The Commission shall keep under review the status of ratification of the conventions listed in Annex VIII and shall monitor their effective implementation, as well as cooperation with the monitoring bodies, by examining the conclusions and recommendations of the relevant monitoring bodies. The Committee recalls that for the purposes of monitoring and withdrawal of preferences, reports from monitoring bodies are essential. However, such reports may be supplemented by other sources of information, as long as they are accurate and reliable. Without prejudice to other sources, this could include information from civil society and the European Parliament.

The special incentive arrangement for sustainable development and good governance shall be withdrawn temporarily, in respect of all or of certain products originating in a GSP+ beneficiary country, where in practice a beneficiary country does not respect its binding undertakings or does not fulfil its obligation to cooperate with the Commission and provide all information necessary as referred to the Regulation. The Commission’s decision not to temporarily withdraw shall be fully motivated, based on evidence received, and be published immediately.

Safeguard and surveillance provisions: Members specify that any investigation, including the procedural steps, shall be concluded within six months from its initiation (the Commission had proposed 12 months and the committee considers this too long). In exceptional circumstances, such as an unusually high number of interested parties or complex market situations, this time limit may be extended by a further period of three months. The Commission shall notify all interested parties of any such extension and explain the reasons leading to it.

Members add that the Commission shall present, with due regard to the protection of confidential information within the meaning of the Regulation, a report setting out its findings and reasoned conclusions reached on all pertinent issues of fact and law to the European Parliament. No later than six months after presenting the report to the European Parliament, the Commission shall make the report public.

The text is amended to state that if the conditions for reintroducing normal Common Customs Tariff duties were not met, they should be refunded to the beneficiary.

Safeguards in the textile, agriculture and fisheries sectors: tariff preferences will be removed for certain products originating in a beneficiary country if their total increase by at least 12.5 % (rather than 15%) in quantity (by volume), as compared with the previous calendar year. This does not apply to EBA beneficiary countries, nor shall it apply to countries with a share for certain products not exceeding 6 % (rather than 8%) of total European Union imports of the same products.

The advisory procedure is used for the adoption of surveillance measures given the effects of these measures and their sequential logic in relation to the adoption of definitive safeguard measures.

Information: new provisions state that information received pursuant to the Regulation shall be used only for the purpose for which it was requested. No information of a confidential nature or any information provided on a confidential basis shall be disclosed without specific permission from the supplier of such information. Each request for confidentiality shall state the reasons why the information is confidential. However, if the supplier of the information wishes neither to make it public nor to authorise its disclosure in general terms or in the form of a summary and if it appears that the request for confidentiality is unjustified, the information concerned may be disregarded. Information shall in any case be considered to be confidential if its disclosure is likely to have a significantly adverse effect upon the supplier or the source of such information.

These provisions shall not preclude reference by the Union authorities to general information and in particular to reasons on which decisions taken pursuant to this Regulation are based. Those authorities shall, however, take into account the legitimate interest of natural and legal persons concerned so that their business secrets shall not be divulged.

Report: the Commission shall present an annual report on the application and implementation of this Regulation to the European Parliament. The report shall cover all of the preferential arrangements), including obligations concerning barriers to trade, and present a summary of the statistics and the evolution of trade with the beneficiary countries and territories.

The Generalised Preferences Committee and the European Parliament shall examine the effects of the scheme, on the basis of the report. The European Parliament may invite the Commission to a meeting of its responsible committee to present and explain any issues related to the implementation of this Regulation. No later than six months after presenting the report to the Generalised Preferences Committee and the European Parliament, the Commission shall make the report public.

Annexes: amendments are made to Annexes V and IX. The committee wants to extend the range of products covered by the GSP to include some raw metals that are of particular value to countries that would remain in the GSP scheme.

The European Parliament adopted by 503 votes to 107 with 37 abstentions, a legislative resolution on the proposal for a regulation of the European Parliament and of the Council applying a scheme of generalised tariff preferences (GSP).

Parliament adopted its position in first reading following the ordinary legislative procedure. The amendments adopted in plenary are the result of a compromise between Parliament and Council. They amend the Commission proposal as follows:

Duration of the Regulation and review clause: the Regulation will apply for a period of 10 years from the date of application of the preferences provided in the text, except for the special arrangement for the least-developed countries (“Everything but Arms” or EBA), which should continue to be applied without any expiry date. The scheme shall be reviewed five years after its entry into force.

Eligible countries: the text clarifies provisions on the granting or withdrawing of certain preferences:

-         application of general arrangement to LDCs: it is clarified that Least Developed Countries (LDCs) will always benefit from the tariff preferences provided under the general arrangement, as long as they are classified as LDCs in accordance with the criteria established in the Regulation;

-         maintain GSP for certain countries which have concluded agreements on preferential market access with the EU for a transitional period: the Commission’s proposal had stated that the scheme would not apply to a country if it has been classified by the World Bank as a high-income or an upper-middle income country during three consecutive years immediately preceding the update of the list of beneficiary countries. However, the text specified that this not apply until two years after the entry into force of the Regulation, for countries which by the date of the entry into force of the regulation have initialled a bilateral preferential market access agreement with the European Union, providing the same tariff preferences as the scheme, or better, for substantially all trade, which is not yet applied;

Change of status of an EBA country and application of GSP to EBAs: where an EBA beneficiary country changes its status, the Commission shall be empowered to adopt delegated acts to amend Annex IV in order to remove the country from the list of EBA beneficiary countries following a transitional period of three years as from the date on which the delegated act entered into force.

If a newly independent country is not identified by the United Nations as a least-developed country during the first available review of the category of LDCs, the Commission shall be empowered to adopt delegated acts forthwith, to amend Annex IV in order to remove such a country from the list, without granting the transitional period. 

Application of special incentive arrangement for sustainable development and good governance (GSP+): the proposal states that a GSP beneficiary country may benefit from the tariff preferences provided under the special incentive arrangement for sustainable development and good governance (GSP+) if it has ratified all the conventions listed in Annex VIII. The text adopted in plenary states that the country in question must not have formulated a reservation in relation to any of the conventions listed in Annex VIII, which is prohibited by the convention or which is considered to be incompatible with its object and purpose.

GSP+: reviewing the state of ratification of international conventions: as of the date of the granting of the tariff preferences provided under the special incentive arrangement for sustainable development and good governance, the Commission shall keep under review the status of ratification of the conventions listed in Annex VIII and shall monitor their effective implementation, as well as cooperation with the monitoring bodies, by examining the conclusions and recommendations of the relevant monitoring bodies. In drawing its conclusions concerning effective implementation of the conventions, the Commission shall assess the conclusions and recommendations of the relevant monitoring bodies, as well as, without prejudice to other sources, information submitted by third parties, including civil society, social partners, the European Parliament and the Council.

Withdrawal of GSP+: the special incentive arrangement for sustainable development and good governance shall be withdrawn temporarily, in respect of all or of certain products originating in a GSP+ beneficiary country, where in practice a beneficiary country does not respect its binding undertakings or the beneficiary country has formulated a reservation which is prohibited by the convention or which is incompatible with its object and purpose. Where the Commission considers that the findings do not justify temporary withdrawal, it shall adopt a decision to terminate the temporary withdrawal procedure, which shall be based inter alia on evidence received. Where the Commission considers that the findings justify temporary withdrawal for the reasons, it shall be empowered to adopt delegated acts to amend the list of eligible countries in order to temporarily withdraw the tariff preferences. 

Safeguard measures: the proposal contains a series of safeguard and surveillance measures to protect European producers. The latter may call for an investigation where a product originating in a beneficiary country is imported in volumes and/or at prices which cause, or threaten to cause, serious difficulties to European Union producers.  Serious difficulties shall exist where European Union producers suffer deterioration in their economic and/or financial situation.

The Commission shall investigate whether the normal Common Customs Tariff duties should be reintroduced if there is sufficient prima facie evidence that serious difficulties exist. If the investigation concludes that there are no such difficulties, the decision to reintroduce the CCT shall end and any customs duty collected as a result of those provisional measures shall be refunded.

Safeguards in the textile, agriculture and fisheries sectors: special safeguard measures exist for certain sectors such as textile, agriculture and fisheries. The text adopted in plenary states that the scope of special safeguard measures for textiles will cover all textiles and not only clothing.

The text also amended the thresholds at which safeguards are applicable: there must be an increase by at least 13.5 % in quantity (by volume), as compared with the previous calendar year for safeguard measures to take effect. This shall not apply to EBA beneficiary countries, nor shall it apply to countries with a share for the relevant products not exceeding 6 % of total European Union imports.

Members also voted to extend the range of products covered by the GSP to include some raw metals (aluminium oxide, lead, cadmium and others), that are of particular value to countries (most in Africa) that would remain in the GSP scheme.

Delegated acts: amendments are made to the text in order to conform to the requirements of the Lisbon Treaty with respect to delegated acts and implementing acts. In order to achieve a balance between the need for better targeting, greater coherence and transparency on one hand, and better promoting sustainable development and good governance through a unilateral trade preference scheme on the other hand, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union is delegated to the Commission in respect of amendments to:

·        Annexes to the Regulation;

·        temporary withdrawals of tariff preferences due to failure to adhere to the principles of sustainable development and good governance,

·        procedural rules regarding the submission of applications for the tariff preferences granted under the special incentive arrangement for sustainable development and good governance;

·        the conduct of a temporary withdrawal and safeguard investigations in order to establish uniform and detailed technical arrangements;

·        repealing a decision on temporary withdrawal under the urgency procedure before that decision to temporarily withdraw tariff preferences takes effect, where the reasons justifying temporary withdrawal no longer apply.

The Commission, when preparing and drawing up delegated acts, should ensure the simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and Council.

It should be noted that the through amendments, this will be the first time that Parliament has exercised its power, introduced by the Lisbon Treaty, to legislate on the GSP. Members negotiated a rule to ensure that Parliament will have power of veto over any changes in country coverage, product coverage, import thresholds or temporary withdrawals of GSP preferences (which currently apply to Belarus and Myanmar).

Transparency of statistical sources: the text states that Member States shall transmit statistical data no later than 40 days after the end of each monthly reference period. In order to facilitate information and increase transparency, the Commission shall also ensure that the relevant statistical data for the GSP sections are regularly available in a public database.

Confidentiality of information: information received pursuant to the Regulation shall be used only for the purpose for which it was requested. Neither information of a confidential nature nor any information provided on a confidential basis received pursuant to the Regulation shall be disclosed without specific permission from the supplier of such information. Each request for confidentiality shall state the reasons why the information is confidential. However, if the supplier of the information wishes neither to make it public nor to authorise its disclosure in general terms or in the form of a summary and if it appears that the request for confidentiality is unjustified, the information concerned may be disregarded. Information shall in any case be considered to be confidential if its disclosure is likely to have a significantly adverse effect upon the supplier or the source of such information.

Report: the text states that the Commission report submitted to the Council and the European Parliament must include a detailed analysis of the impact of the Regulation on trade and on the EU's tariff income, with particular attention to the effects on beneficiary countries. 

Entry into force: the main tariff preferences shall apply from 1 January 2014. The scheme shall apply until 31 December 2023. However, the expiry date shall not apply to the special arrangement for the least-developed countries, nor, to the extent that they are applied in conjunction with that arrangement, to any other provisions of the Regulation.

Amendment of the Annex: annexes are amended in order to ensure that certain products are covered by the scheme or to clarify the position of certain countries in the scheme.

The Committee on International Trade adopted the report by Christofer FJELLNER (EPP, SE) on the proposal for a regulation of the European Parliament and of the Council applying a scheme of generalised tariff preferences.

The committee recommends that the position of the European Parliament in first reading following the ordinary legislative procedure should be to amend the Commission proposal, as follows:

Duration of the regulation: the Commission proposes that this should be an open ended regulation, with no end date for when the latter will have to be renewed. In view of the major changes proposed, Members state that the scheme of generalised tariff preferences should continue to apply for a period of 10 years, except for the special arrangement for the least-developed countries, which should continue to be applied without any expiry date. The scheme must be reviewed five years after its entry into force. The committee feels that this would still be a period long enough in order to ensure predictability and stability, and would also coincide with the timeframe presently set out for the guidelines for the application of the scheme of generalised tariff preferences. The Everything But Arms scheme should however, as has been the case up to now, be open-ended.

General arrangement: Members clarified that Least Developed Countries (LDCs) will always enjoy the Everything But Arms status, as long as they are classified as LDCs by the UN.

Eligible countries: the Commission’s proposal had stated that the scheme would not apply to a country if it has been classified by the World Bank as a high-income or an upper-middle income country during three consecutive years immediately preceding the update of the list of beneficiary countries. However, the committee specified that this not apply until two years after the entry into force of the Regulation, for countries which by the date of its entry into force have concluded the negotiations of a bilateral preferential market access agreement with the Union, which is not yet applied as the ratification process is still ongoing. Members feel that countries in this position should not be excluded from the GSP from the outset. This is in order to avoid re-establishing MFN duties under a transitional period which could lead to possible trade disruptions for a country which has undertaken a commitment to strengthen the trade relations with the European Union.

Members add that in order to facilitate information and increase transparency, the Commission shall also ensure that the relevant statistical data for the GSP sections are regularly available in a public database.

Special incentive arrangement for sustainable development and good governance: Members state that a GSP beneficiary country may benefit from the tariff preferences provided under the special incentive arrangement if it has ratified all the conventions listed in Annex VIII without any reservations found to be inconsistent with their objectives and purposes by a body set up under the same conventions and the most recent available conclusions of the relevant monitoring bodies do not identify a serious failure to effectively implement any of these conventions.

The committee amends the text to ensure that the decision on whether a country is admitted to the arrangement is taken though delegated acts to establish or to amend Annex III in order to grant a requesting country the special incentive arrangement and to add that country to the list of GSP+ beneficiary countries. Equally, the Commission shall be empowered to adopt a delegated act to amend Annex III in order to remove that country from the list of GSP+ beneficiary countries.

Delegated acts will also be used to amend Annex IV in order to remove a country from the list of EBA beneficiary countries following a transitional period of three years as from the date on which the delegated act entered into force.

The Commission shall keep under review the status of ratification of the conventions listed in Annex VIII and shall monitor their effective implementation, as well as cooperation with the monitoring bodies, by examining the conclusions and recommendations of the relevant monitoring bodies. The Committee recalls that for the purposes of monitoring and withdrawal of preferences, reports from monitoring bodies are essential. However, such reports may be supplemented by other sources of information, as long as they are accurate and reliable. Without prejudice to other sources, this could include information from civil society and the European Parliament.

The special incentive arrangement for sustainable development and good governance shall be withdrawn temporarily, in respect of all or of certain products originating in a GSP+ beneficiary country, where in practice a beneficiary country does not respect its binding undertakings or does not fulfil its obligation to cooperate with the Commission and provide all information necessary as referred to the Regulation. The Commission’s decision not to temporarily withdraw shall be fully motivated, based on evidence received, and be published immediately.

Safeguard and surveillance provisions: Members specify that any investigation, including the procedural steps, shall be concluded within six months from its initiation (the Commission had proposed 12 months and the committee considers this too long). In exceptional circumstances, such as an unusually high number of interested parties or complex market situations, this time limit may be extended by a further period of three months. The Commission shall notify all interested parties of any such extension and explain the reasons leading to it.

Members add that the Commission shall present, with due regard to the protection of confidential information within the meaning of the Regulation, a report setting out its findings and reasoned conclusions reached on all pertinent issues of fact and law to the European Parliament. No later than six months after presenting the report to the European Parliament, the Commission shall make the report public.

The text is amended to state that if the conditions for reintroducing normal Common Customs Tariff duties were not met, they should be refunded to the beneficiary.

Safeguards in the textile, agriculture and fisheries sectors: tariff preferences will be removed for certain products originating in a beneficiary country if their total increase by at least 12.5 % (rather than 15%) in quantity (by volume), as compared with the previous calendar year. This does not apply to EBA beneficiary countries, nor shall it apply to countries with a share for certain products not exceeding 6 % (rather than 8%) of total European Union imports of the same products.

The advisory procedure is used for the adoption of surveillance measures given the effects of these measures and their sequential logic in relation to the adoption of definitive safeguard measures.

Information: new provisions state that information received pursuant to the Regulation shall be used only for the purpose for which it was requested. No information of a confidential nature or any information provided on a confidential basis shall be disclosed without specific permission from the supplier of such information. Each request for confidentiality shall state the reasons why the information is confidential. However, if the supplier of the information wishes neither to make it public nor to authorise its disclosure in general terms or in the form of a summary and if it appears that the request for confidentiality is unjustified, the information concerned may be disregarded. Information shall in any case be considered to be confidential if its disclosure is likely to have a significantly adverse effect upon the supplier or the source of such information.

These provisions shall not preclude reference by the Union authorities to general information and in particular to reasons on which decisions taken pursuant to this Regulation are based. Those authorities shall, however, take into account the legitimate interest of natural and legal persons concerned so that their business secrets shall not be divulged.

Report: the Commission shall present an annual report on the application and implementation of this Regulation to the European Parliament. The report shall cover all of the preferential arrangements), including obligations concerning barriers to trade, and present a summary of the statistics and the evolution of trade with the beneficiary countries and territories.

The Generalised Preferences Committee and the European Parliament shall examine the effects of the scheme, on the basis of the report. The European Parliament may invite the Commission to a meeting of its responsible committee to present and explain any issues related to the implementation of this Regulation. No later than six months after presenting the report to the Generalised Preferences Committee and the European Parliament, the Commission shall make the report public.

Annexes: amendments are made to Annexes V and IX. The committee wants to extend the range of products covered by the GSP to include some raw metals that are of particular value to countries that would remain in the GSP scheme.

The Council endorsed the approach outlined by the presidency for a comprehensive review of the EU's generalised scheme of tariff preferences (GSP) for developing countries.

It agreed on a compromise focusing on five key areas in the Commission's proposal. On this basis, the presidency will prepare a mandate, to be approved by the Permanent Representatives Committee, for negotiations with the European Parliament on the draft regulation establishing the new GSP.

The review of the GSP is aimed at adapting the system to the changed global landscape and making it more efficient so that it responds better to the specific needs of the beneficiary countries. Preferences would be concentrated on the countries in greatest need (least developed, low income and lower middle-income countries), taking account of changing economic and trade patterns and acknowledging that the economic crisis and preference erosion have hit the poorest countries hard.

The selection of beneficiaries would be largely income-based, with countries already enjoying preferences under free trade agreements or autonomous arrangements being excluded from the scheme.

The five main areas covered by the proposal are:

·        country coverage;

·        preference margins and product coverage;

·        product graduation;

·        "GSP+" (special incentive for sustainable development and good governance); and

·        special safeguards.

PURPOSE: to revise, adapt and update the Regulation on applying a scheme of generalised tariff preferences (GSP).

PROPOSED ACT: Regulation of the European Parliament and of the Council. 

BACKGROUND: the European Union (EU) has granted trade preferences to developing countries through the Generalised Scheme of Tariff Preferences (GSP scheme) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action. It is one of the key EU trade instruments assisting developing countries in their efforts to ensure core human and labour rights, reduce poverty and promote sustainable development and good governance in developing countries.

The Generalised System of Preferences helps developing countries, and particularly Least Developed Countries (LDCs), to reduce poverty by offering them import preferences in order to generate or boost revenue from international trade. In addition, the scheme provides incentives in the form of additional tariff preferences, to countries that commit themselves to sustainable development and good government.

The scheme grants preferential access to EU markets on a generalised and non-discriminatory basis to 176 eligible countries and territories. It has three arrangements:

1. the general arrangement (often described simply as "GSP");
2. the special incentive arrangement for sustainable development and good governance (described as "GSP+") which offers additional preferences as incentives to support vulnerable developing countries in ratifying and implementing 27 international conventions on human and labour rights, environment and good governance;
3. the Everything But Arms arrangement (EBA), which provides duty-free, quota-free access to LDCs.

The present GSP scheme is implemented through successive regulations, each applying for three years. The current GSP regulation will expire on 31 December 2011. A recently completed midterm review provides the background for the planned Commission proposal for a revised regulation to replace the existing scheme upon expiry in 2013. Both the EBA arrangement and the rules of origin provisions fall outside the scope of this revision: the former, because it is not subject to periodic reviews; and the latter, because new legislation on rules of origin has entered into force in 2011.

The proposed GSP Regulation herewith revises, adapts and updates the GSP scheme in replacement of the current regulation, so as to better reflect the contemporary global economic and trade landscape which has changed significantly since the original scheme was put into place.

IMPACT ASSESSMENT: the proposal has been drawn up on the basis of a public consultation and of a detailed impact assessment which studied the effects of a number of different policy options:

• Option A: discontinuation: preferences are abandoned for GSP and GSP+ beneficiaries. EBA arrangement would remain. The economic and social effects for countries most in need are expected to be negative. LDCs would benefit, but the many other developing countries and economic sectors which are also most in need would suffer as preferential access disappears. This option would however have positive economic and social impacts for certain sectors in certain Member States at a time when so much emphasis is on boosting competitiveness, growth and job creation. And last, at a time of extreme pressure on public finances, it boosts tariff revenues.
• Option B: no policy change: there is a natural reduction in the level of import duties (and, therefore, preferences) due to preference erosion under the impact of further bilateral and multilateral trade deals. In the long run, when all multilateral and bilateral agreements are fully implemented, duties are likely to be so low that the idea of preferences becomes largely irrelevant - and so would a generalised system of preferences. Other totally different tools may have to be designed. Until then, the question is what can be done for the countries most in need of preferences.
• Option C: partial redesign: this comprises two sub-options (C1 and C2). Preferences are deferred for certain eligible countries: overseas countries and territories; high and upper middle income countries; countries with a preferential trade agreement covering substantially all preferences. The main difference between C2 and C1 concern the graduation of competitive sectors and the vulnerability criteria under GSP+.
• Option D: full redesign:  in order to simplify the analysis, D sub-options are calculated as increments to C2 only. Three sub-options are assessed. D1 is a far reaching option. It provides full product coverage expansion and elimination of all sensitive products (eg, extending the duty-free, quota-free treatment of EBA countries) to all countries most in need (whether GSP or GSP+). This implies that the remaining beneficiaries are no longer subject to graduation. D2 and D3 are less far-reaching. They take all the parameters of C2 (graduation included) and add partial de-sensitisation (D2) and partial expansion in product coverage (D3).

Drawing on the outcome of the impact assessment, the preferred policy option that determined the substance of the proposed new regulation is Option C1.

LEGAL BASIS: Article 207 of the Treaty on the Functioning of the European Union (TFEU). 

CONTENT: the draft proposal would focus the GSP preferences on the countries most in need. This is achieved by enhancing GSP modalities related to the GSP eligibility criteria and the GSP graduation mechanism, which identifies competitive imports and suspends unwarranted preferences.

The main amendments to the scheme may be summarised as follows:

Modification of the GSP+ mechanism: the scheme also expands its support under the special incentive arrangement for sustainable development and good governance (GSP+) for those countries that commit to embracing core universal values on human, labour rights, environment and governance. While offering further opportunities for potential beneficiaries, the scheme will place more responsibility for countries and require stricter scrutiny of eligibility by the EU.

Vulnerability threshold of GSP+: as regards the criteria of vulnerable of the GSP+, the threshold of imports is increased from 1% to 2%.

Monitoring mechanism: there will be a more effective and transparent mechanism for monitoring and evaluating the implementation of relevant international conventions, whereby the EU seeks noticeable stability and improvement over time in countries' implementation record. This effectively raises the requirements for beneficiary countries, as they have to provide positive and regular proof that they are indeed implementing conventions. The current list of GSP+ conventions to be ratified remains the same as those currently applicable.

EBA beneficiary countries: the special arrangement for least developing countries known as 'Everything But Arms', which was added to the GSP scheme in 2004, is unchanged and further supported by new elements in the scheme reflecting the aim of focusing GSP benefits on countries most in need.

Improved withdrawal mechanism system: the reasons which justify the temporary withdrawal of preferences have also been clarified. In particular, it has been made explicit that unfair trading practices include those affecting the supply of raw materials. Furthermore, it has been underlined that preferences may be temporarily withdrawn if beneficiaries fail to comply with international conventions on antiterrorism.

Safeguard measures: to ensure a better safeguarding of the EU's financial and economic interests and to enhance legal certainty, stability and predictability, the administrative procedures for safeguard mechanisms are improved by developing clear definitions of key legal concepts.

Unlimited duration: the proposed Regulation will no longer be limited in duration, thus promoting a stable framework both for economic operators and beneficiary countries.

Delegated acts: decision-making procedures reflect the new institutional balance among the European Commission, the Council and the European Parliament in particular with respect to the application of implementing or delegated acts. The new Regulation indicates the instances where the adoption of delegated acts by the Commission is foreseen following a delegation conferred by the European Parliament and the Council, and also the instances where the Commission will be granted implementing powers.

BUDGETARY IMPLICATIONS: the proposed Regulation does not incur costs charged to the EU budget. Its application does, however, entail loss of customs revenue. Based on the 2009 figures, the annual loss of customs revenue resulting from the application of the current GSP Regulation was estimated to be EUR 2.97 billion corresponding to a net amount of EUR 2.23 billion after deduction of Member States' collection costs. As a result of the application of the proposed Regulation and on the basis of Annex I in its indicative form, the annual loss of customs revenue is estimated to be EUR 1.87 billion (net amount EUR 1.4 billion).

PURPOSE: to revise, adapt and update the Regulation on applying a scheme of generalised tariff preferences (GSP).

PROPOSED ACT: Regulation of the European Parliament and of the Council. 

BACKGROUND: the European Union (EU) has granted trade preferences to developing countries through the Generalised Scheme of Tariff Preferences (GSP scheme) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action. It is one of the key EU trade instruments assisting developing countries in their efforts to ensure core human and labour rights, reduce poverty and promote sustainable development and good governance in developing countries.

The Generalised System of Preferences helps developing countries, and particularly Least Developed Countries (LDCs), to reduce poverty by offering them import preferences in order to generate or boost revenue from international trade. In addition, the scheme provides incentives in the form of additional tariff preferences, to countries that commit themselves to sustainable development and good government.

The scheme grants preferential access to EU markets on a generalised and non-discriminatory basis to 176 eligible countries and territories. It has three arrangements:

1. the general arrangement (often described simply as "GSP");
2. the special incentive arrangement for sustainable development and good governance (described as "GSP+") which offers additional preferences as incentives to support vulnerable developing countries in ratifying and implementing 27 international conventions on human and labour rights, environment and good governance;
3. the Everything But Arms arrangement (EBA), which provides duty-free, quota-free access to LDCs.

The present GSP scheme is implemented through successive regulations, each applying for three years. The current GSP regulation will expire on 31 December 2011. A recently completed midterm review provides the background for the planned Commission proposal for a revised regulation to replace the existing scheme upon expiry in 2013. Both the EBA arrangement and the rules of origin provisions fall outside the scope of this revision: the former, because it is not subject to periodic reviews; and the latter, because new legislation on rules of origin has entered into force in 2011.

The proposed GSP Regulation herewith revises, adapts and updates the GSP scheme in replacement of the current regulation, so as to better reflect the contemporary global economic and trade landscape which has changed significantly since the original scheme was put into place.

IMPACT ASSESSMENT: the proposal has been drawn up on the basis of a public consultation and of a detailed impact assessment which studied the effects of a number of different policy options:

• Option A: discontinuation: preferences are abandoned for GSP and GSP+ beneficiaries. EBA arrangement would remain. The economic and social effects for countries most in need are expected to be negative. LDCs would benefit, but the many other developing countries and economic sectors which are also most in need would suffer as preferential access disappears. This option would however have positive economic and social impacts for certain sectors in certain Member States at a time when so much emphasis is on boosting competitiveness, growth and job creation. And last, at a time of extreme pressure on public finances, it boosts tariff revenues.
• Option B: no policy change: there is a natural reduction in the level of import duties (and, therefore, preferences) due to preference erosion under the impact of further bilateral and multilateral trade deals. In the long run, when all multilateral and bilateral agreements are fully implemented, duties are likely to be so low that the idea of preferences becomes largely irrelevant - and so would a generalised system of preferences. Other totally different tools may have to be designed. Until then, the question is what can be done for the countries most in need of preferences.
• Option C: partial redesign: this comprises two sub-options (C1 and C2). Preferences are deferred for certain eligible countries: overseas countries and territories; high and upper middle income countries; countries with a preferential trade agreement covering substantially all preferences. The main difference between C2 and C1 concern the graduation of competitive sectors and the vulnerability criteria under GSP+.
• Option D: full redesign:  in order to simplify the analysis, D sub-options are calculated as increments to C2 only. Three sub-options are assessed. D1 is a far reaching option. It provides full product coverage expansion and elimination of all sensitive products (eg, extending the duty-free, quota-free treatment of EBA countries) to all countries most in need (whether GSP or GSP+). This implies that the remaining beneficiaries are no longer subject to graduation. D2 and D3 are less far-reaching. They take all the parameters of C2 (graduation included) and add partial de-sensitisation (D2) and partial expansion in product coverage (D3).

Drawing on the outcome of the impact assessment, the preferred policy option that determined the substance of the proposed new regulation is Option C1.

LEGAL BASIS: Article 207 of the Treaty on the Functioning of the European Union (TFEU). 

CONTENT: the draft proposal would focus the GSP preferences on the countries most in need. This is achieved by enhancing GSP modalities related to the GSP eligibility criteria and the GSP graduation mechanism, which identifies competitive imports and suspends unwarranted preferences.

The main amendments to the scheme may be summarised as follows:

Modification of the GSP+ mechanism: the scheme also expands its support under the special incentive arrangement for sustainable development and good governance (GSP+) for those countries that commit to embracing core universal values on human, labour rights, environment and governance. While offering further opportunities for potential beneficiaries, the scheme will place more responsibility for countries and require stricter scrutiny of eligibility by the EU.

Vulnerability threshold of GSP+: as regards the criteria of vulnerable of the GSP+, the threshold of imports is increased from 1% to 2%.

Monitoring mechanism: there will be a more effective and transparent mechanism for monitoring and evaluating the implementation of relevant international conventions, whereby the EU seeks noticeable stability and improvement over time in countries' implementation record. This effectively raises the requirements for beneficiary countries, as they have to provide positive and regular proof that they are indeed implementing conventions. The current list of GSP+ conventions to be ratified remains the same as those currently applicable.

EBA beneficiary countries: the special arrangement for least developing countries known as 'Everything But Arms', which was added to the GSP scheme in 2004, is unchanged and further supported by new elements in the scheme reflecting the aim of focusing GSP benefits on countries most in need.

Improved withdrawal mechanism system: the reasons which justify the temporary withdrawal of preferences have also been clarified. In particular, it has been made explicit that unfair trading practices include those affecting the supply of raw materials. Furthermore, it has been underlined that preferences may be temporarily withdrawn if beneficiaries fail to comply with international conventions on antiterrorism.

Safeguard measures: to ensure a better safeguarding of the EU's financial and economic interests and to enhance legal certainty, stability and predictability, the administrative procedures for safeguard mechanisms are improved by developing clear definitions of key legal concepts.

Unlimited duration: the proposed Regulation will no longer be limited in duration, thus promoting a stable framework both for economic operators and beneficiary countries.

Delegated acts: decision-making procedures reflect the new institutional balance among the European Commission, the Council and the European Parliament in particular with respect to the application of implementing or delegated acts. The new Regulation indicates the instances where the adoption of delegated acts by the Commission is foreseen following a delegation conferred by the European Parliament and the Council, and also the instances where the Commission will be granted implementing powers.

BUDGETARY IMPLICATIONS: the proposed Regulation does not incur costs charged to the EU budget. Its application does, however, entail loss of customs revenue. Based on the 2009 figures, the annual loss of customs revenue resulting from the application of the current GSP Regulation was estimated to be EUR 2.97 billion corresponding to a net amount of EUR 2.23 billion after deduction of Member States' collection costs. As a result of the application of the proposed Regulation and on the basis of Annex I in its indicative form, the annual loss of customs revenue is estimated to be EUR 1.87 billion (net amount EUR 1.4 billion).

PURPOSE: to revise, adapt and update the Regulation on applying a scheme of generalised tariff preferences (GSP).

PROPOSED ACT: Regulation of the European Parliament and of the Council. 

BACKGROUND: the European Union (EU) has granted trade preferences to developing countries through the Generalised Scheme of Tariff Preferences (GSP scheme) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action. It is one of the key EU trade instruments assisting developing countries in their efforts to ensure core human and labour rights, reduce poverty and promote sustainable development and good governance in developing countries.

The Generalised System of Preferences helps developing countries, and particularly Least Developed Countries (LDCs), to reduce poverty by offering them import preferences in order to generate or boost revenue from international trade. In addition, the scheme provides incentives in the form of additional tariff preferences, to countries that commit themselves to sustainable development and good government.

The scheme grants preferential access to EU markets on a generalised and non-discriminatory basis to 176 eligible countries and territories. It has three arrangements:

1. the general arrangement (often described simply as "GSP");
2. the special incentive arrangement for sustainable development and good governance (described as "GSP+") which offers additional preferences as incentives to support vulnerable developing countries in ratifying and implementing 27 international conventions on human and labour rights, environment and good governance;
3. the Everything But Arms arrangement (EBA), which provides duty-free, quota-free access to LDCs.

The present GSP scheme is implemented through successive regulations, each applying for three years. The current GSP regulation will expire on 31 December 2011. A recently completed midterm review provides the background for the planned Commission proposal for a revised regulation to replace the existing scheme upon expiry in 2013. Both the EBA arrangement and the rules of origin provisions fall outside the scope of this revision: the former, because it is not subject to periodic reviews; and the latter, because new legislation on rules of origin has entered into force in 2011.

The proposed GSP Regulation herewith revises, adapts and updates the GSP scheme in replacement of the current regulation, so as to better reflect the contemporary global economic and trade landscape which has changed significantly since the original scheme was put into place.

IMPACT ASSESSMENT: the proposal has been drawn up on the basis of a public consultation and of a detailed impact assessment which studied the effects of a number of different policy options:

• Option A: discontinuation: preferences are abandoned for GSP and GSP+ beneficiaries. EBA arrangement would remain. The economic and social effects for countries most in need are expected to be negative. LDCs would benefit, but the many other developing countries and economic sectors which are also most in need would suffer as preferential access disappears. This option would however have positive economic and social impacts for certain sectors in certain Member States at a time when so much emphasis is on boosting competitiveness, growth and job creation. And last, at a time of extreme pressure on public finances, it boosts tariff revenues.
• Option B: no policy change: there is a natural reduction in the level of import duties (and, therefore, preferences) due to preference erosion under the impact of further bilateral and multilateral trade deals. In the long run, when all multilateral and bilateral agreements are fully implemented, duties are likely to be so low that the idea of preferences becomes largely irrelevant - and so would a generalised system of preferences. Other totally different tools may have to be designed. Until then, the question is what can be done for the countries most in need of preferences.
• Option C: partial redesign: this comprises two sub-options (C1 and C2). Preferences are deferred for certain eligible countries: overseas countries and territories; high and upper middle income countries; countries with a preferential trade agreement covering substantially all preferences. The main difference between C2 and C1 concern the graduation of competitive sectors and the vulnerability criteria under GSP+.
• Option D: full redesign:  in order to simplify the analysis, D sub-options are calculated as increments to C2 only. Three sub-options are assessed. D1 is a far reaching option. It provides full product coverage expansion and elimination of all sensitive products (eg, extending the duty-free, quota-free treatment of EBA countries) to all countries most in need (whether GSP or GSP+). This implies that the remaining beneficiaries are no longer subject to graduation. D2 and D3 are less far-reaching. They take all the parameters of C2 (graduation included) and add partial de-sensitisation (D2) and partial expansion in product coverage (D3).

Drawing on the outcome of the impact assessment, the preferred policy option that determined the substance of the proposed new regulation is Option C1.

LEGAL BASIS: Article 207 of the Treaty on the Functioning of the European Union (TFEU). 

CONTENT: the draft proposal would focus the GSP preferences on the countries most in need. This is achieved by enhancing GSP modalities related to the GSP eligibility criteria and the GSP graduation mechanism, which identifies competitive imports and suspends unwarranted preferences.

The main amendments to the scheme may be summarised as follows:

Modification of the GSP+ mechanism: the scheme also expands its support under the special incentive arrangement for sustainable development and good governance (GSP+) for those countries that commit to embracing core universal values on human, labour rights, environment and governance. While offering further opportunities for potential beneficiaries, the scheme will place more responsibility for countries and require stricter scrutiny of eligibility by the EU.

Vulnerability threshold of GSP+: as regards the criteria of vulnerable of the GSP+, the threshold of imports is increased from 1% to 2%.

Monitoring mechanism: there will be a more effective and transparent mechanism for monitoring and evaluating the implementation of relevant international conventions, whereby the EU seeks noticeable stability and improvement over time in countries' implementation record. This effectively raises the requirements for beneficiary countries, as they have to provide positive and regular proof that they are indeed implementing conventions. The current list of GSP+ conventions to be ratified remains the same as those currently applicable.

EBA beneficiary countries: the special arrangement for least developing countries known as 'Everything But Arms', which was added to the GSP scheme in 2004, is unchanged and further supported by new elements in the scheme reflecting the aim of focusing GSP benefits on countries most in need.

Improved withdrawal mechanism system: the reasons which justify the temporary withdrawal of preferences have also been clarified. In particular, it has been made explicit that unfair trading practices include those affecting the supply of raw materials. Furthermore, it has been underlined that preferences may be temporarily withdrawn if beneficiaries fail to comply with international conventions on antiterrorism.

Safeguard measures: to ensure a better safeguarding of the EU's financial and economic interests and to enhance legal certainty, stability and predictability, the administrative procedures for safeguard mechanisms are improved by developing clear definitions of key legal concepts.

Unlimited duration: the proposed Regulation will no longer be limited in duration, thus promoting a stable framework both for economic operators and beneficiary countries.

Delegated acts: decision-making procedures reflect the new institutional balance among the European Commission, the Council and the European Parliament in particular with respect to the application of implementing or delegated acts. The new Regulation indicates the instances where the adoption of delegated acts by the Commission is foreseen following a delegation conferred by the European Parliament and the Council, and also the instances where the Commission will be granted implementing powers.

BUDGETARY IMPLICATIONS: the proposed Regulation does not incur costs charged to the EU budget. Its application does, however, entail loss of customs revenue. Based on the 2009 figures, the annual loss of customs revenue resulting from the application of the current GSP Regulation was estimated to be EUR 2.97 billion corresponding to a net amount of EUR 2.23 billion after deduction of Member States' collection costs. As a result of the application of the proposed Regulation and on the basis of Annex I in its indicative form, the annual loss of customs revenue is estimated to be EUR 1.87 billion (net amount EUR 1.4 billion).

PURPOSE: to revise, adapt and update the Regulation on applying a scheme of generalised tariff preferences (GSP).

PROPOSED ACT: Regulation of the European Parliament and of the Council. 

BACKGROUND: the European Union (EU) has granted trade preferences to developing countries through the Generalised Scheme of Tariff Preferences (GSP scheme) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action. It is one of the key EU trade instruments assisting developing countries in their efforts to ensure core human and labour rights, reduce poverty and promote sustainable development and good governance in developing countries.

The Generalised System of Preferences helps developing countries, and particularly Least Developed Countries (LDCs), to reduce poverty by offering them import preferences in order to generate or boost revenue from international trade. In addition, the scheme provides incentives in the form of additional tariff preferences, to countries that commit themselves to sustainable development and good government.

The scheme grants preferential access to EU markets on a generalised and non-discriminatory basis to 176 eligible countries and territories. It has three arrangements:

1. the general arrangement (often described simply as "GSP");
2. the special incentive arrangement for sustainable development and good governance (described as "GSP+") which offers additional preferences as incentives to support vulnerable developing countries in ratifying and implementing 27 international conventions on human and labour rights, environment and good governance;
3. the Everything But Arms arrangement (EBA), which provides duty-free, quota-free access to LDCs.

The present GSP scheme is implemented through successive regulations, each applying for three years. The current GSP regulation will expire on 31 December 2011. A recently completed midterm review provides the background for the planned Commission proposal for a revised regulation to replace the existing scheme upon expiry in 2013. Both the EBA arrangement and the rules of origin provisions fall outside the scope of this revision: the former, because it is not subject to periodic reviews; and the latter, because new legislation on rules of origin has entered into force in 2011.

The proposed GSP Regulation herewith revises, adapts and updates the GSP scheme in replacement of the current regulation, so as to better reflect the contemporary global economic and trade landscape which has changed significantly since the original scheme was put into place.

IMPACT ASSESSMENT: the proposal has been drawn up on the basis of a public consultation and of a detailed impact assessment which studied the effects of a number of different policy options:

• Option A: discontinuation: preferences are abandoned for GSP and GSP+ beneficiaries. EBA arrangement would remain. The economic and social effects for countries most in need are expected to be negative. LDCs would benefit, but the many other developing countries and economic sectors which are also most in need would suffer as preferential access disappears. This option would however have positive economic and social impacts for certain sectors in certain Member States at a time when so much emphasis is on boosting competitiveness, growth and job creation. And last, at a time of extreme pressure on public finances, it boosts tariff revenues.
• Option B: no policy change: there is a natural reduction in the level of import duties (and, therefore, preferences) due to preference erosion under the impact of further bilateral and multilateral trade deals. In the long run, when all multilateral and bilateral agreements are fully implemented, duties are likely to be so low that the idea of preferences becomes largely irrelevant - and so would a generalised system of preferences. Other totally different tools may have to be designed. Until then, the question is what can be done for the countries most in need of preferences.
• Option C: partial redesign: this comprises two sub-options (C1 and C2). Preferences are deferred for certain eligible countries: overseas countries and territories; high and upper middle income countries; countries with a preferential trade agreement covering substantially all preferences. The main difference between C2 and C1 concern the graduation of competitive sectors and the vulnerability criteria under GSP+.
• Option D: full redesign:  in order to simplify the analysis, D sub-options are calculated as increments to C2 only. Three sub-options are assessed. D1 is a far reaching option. It provides full product coverage expansion and elimination of all sensitive products (eg, extending the duty-free, quota-free treatment of EBA countries) to all countries most in need (whether GSP or GSP+). This implies that the remaining beneficiaries are no longer subject to graduation. D2 and D3 are less far-reaching. They take all the parameters of C2 (graduation included) and add partial de-sensitisation (D2) and partial expansion in product coverage (D3).

Drawing on the outcome of the impact assessment, the preferred policy option that determined the substance of the proposed new regulation is Option C1.

LEGAL BASIS: Article 207 of the Treaty on the Functioning of the European Union (TFEU). 

CONTENT: the draft proposal would focus the GSP preferences on the countries most in need. This is achieved by enhancing GSP modalities related to the GSP eligibility criteria and the GSP graduation mechanism, which identifies competitive imports and suspends unwarranted preferences.

The main amendments to the scheme may be summarised as follows:

Modification of the GSP+ mechanism: the scheme also expands its support under the special incentive arrangement for sustainable development and good governance (GSP+) for those countries that commit to embracing core universal values on human, labour rights, environment and governance. While offering further opportunities for potential beneficiaries, the scheme will place more responsibility for countries and require stricter scrutiny of eligibility by the EU.

Vulnerability threshold of GSP+: as regards the criteria of vulnerable of the GSP+, the threshold of imports is increased from 1% to 2%.

Monitoring mechanism: there will be a more effective and transparent mechanism for monitoring and evaluating the implementation of relevant international conventions, whereby the EU seeks noticeable stability and improvement over time in countries' implementation record. This effectively raises the requirements for beneficiary countries, as they have to provide positive and regular proof that they are indeed implementing conventions. The current list of GSP+ conventions to be ratified remains the same as those currently applicable.

EBA beneficiary countries: the special arrangement for least developing countries known as 'Everything But Arms', which was added to the GSP scheme in 2004, is unchanged and further supported by new elements in the scheme reflecting the aim of focusing GSP benefits on countries most in need.

Improved withdrawal mechanism system: the reasons which justify the temporary withdrawal of preferences have also been clarified. In particular, it has been made explicit that unfair trading practices include those affecting the supply of raw materials. Furthermore, it has been underlined that preferences may be temporarily withdrawn if beneficiaries fail to comply with international conventions on antiterrorism.

Safeguard measures: to ensure a better safeguarding of the EU's financial and economic interests and to enhance legal certainty, stability and predictability, the administrative procedures for safeguard mechanisms are improved by developing clear definitions of key legal concepts.

Unlimited duration: the proposed Regulation will no longer be limited in duration, thus promoting a stable framework both for economic operators and beneficiary countries.

Delegated acts: decision-making procedures reflect the new institutional balance among the European Commission, the Council and the European Parliament in particular with respect to the application of implementing or delegated acts. The new Regulation indicates the instances where the adoption of delegated acts by the Commission is foreseen following a delegation conferred by the European Parliament and the Council, and also the instances where the Commission will be granted implementing powers.

BUDGETARY IMPLICATIONS: the proposed Regulation does not incur costs charged to the EU budget. Its application does, however, entail loss of customs revenue. Based on the 2009 figures, the annual loss of customs revenue resulting from the application of the current GSP Regulation was estimated to be EUR 2.97 billion corresponding to a net amount of EUR 2.23 billion after deduction of Member States' collection costs. As a result of the application of the proposed Regulation and on the basis of Annex I in its indicative form, the annual loss of customs revenue is estimated to be EUR 1.87 billion (net amount EUR 1.4 billion).

PURPOSE: to revise, adapt and update the Regulation on applying a scheme of generalised tariff preferences (GSP).

PROPOSED ACT: Regulation of the European Parliament and of the Council. 

BACKGROUND: the European Union (EU) has granted trade preferences to developing countries through the Generalised Scheme of Tariff Preferences (GSP scheme) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action. It is one of the key EU trade instruments assisting developing countries in their efforts to ensure core human and labour rights, reduce poverty and promote sustainable development and good governance in developing countries.

The Generalised System of Preferences helps developing countries, and particularly Least Developed Countries (LDCs), to reduce poverty by offering them import preferences in order to generate or boost revenue from international trade. In addition, the scheme provides incentives in the form of additional tariff preferences, to countries that commit themselves to sustainable development and good government.

The scheme grants preferential access to EU markets on a generalised and non-discriminatory basis to 176 eligible countries and territories. It has three arrangements:

1. the general arrangement (often described simply as "GSP");
2. the special incentive arrangement for sustainable development and good governance (described as "GSP+") which offers additional preferences as incentives to support vulnerable developing countries in ratifying and implementing 27 international conventions on human and labour rights, environment and good governance;
3. the Everything But Arms arrangement (EBA), which provides duty-free, quota-free access to LDCs.

The present GSP scheme is implemented through successive regulations, each applying for three years. The current GSP regulation will expire on 31 December 2011. A recently completed midterm review provides the background for the planned Commission proposal for a revised regulation to replace the existing scheme upon expiry in 2013. Both the EBA arrangement and the rules of origin provisions fall outside the scope of this revision: the former, because it is not subject to periodic reviews; and the latter, because new legislation on rules of origin has entered into force in 2011.

The proposed GSP Regulation herewith revises, adapts and updates the GSP scheme in replacement of the current regulation, so as to better reflect the contemporary global economic and trade landscape which has changed significantly since the original scheme was put into place.

IMPACT ASSESSMENT: the proposal has been drawn up on the basis of a public consultation and of a detailed impact assessment which studied the effects of a number of different policy options:

• Option A: discontinuation: preferences are abandoned for GSP and GSP+ beneficiaries. EBA arrangement would remain. The economic and social effects for countries most in need are expected to be negative. LDCs would benefit, but the many other developing countries and economic sectors which are also most in need would suffer as preferential access disappears. This option would however have positive economic and social impacts for certain sectors in certain Member States at a time when so much emphasis is on boosting competitiveness, growth and job creation. And last, at a time of extreme pressure on public finances, it boosts tariff revenues.
• Option B: no policy change: there is a natural reduction in the level of import duties (and, therefore, preferences) due to preference erosion under the impact of further bilateral and multilateral trade deals. In the long run, when all multilateral and bilateral agreements are fully implemented, duties are likely to be so low that the idea of preferences becomes largely irrelevant - and so would a generalised system of preferences. Other totally different tools may have to be designed. Until then, the question is what can be done for the countries most in need of preferences.
• Option C: partial redesign: this comprises two sub-options (C1 and C2). Preferences are deferred for certain eligible countries: overseas countries and territories; high and upper middle income countries; countries with a preferential trade agreement covering substantially all preferences. The main difference between C2 and C1 concern the graduation of competitive sectors and the vulnerability criteria under GSP+.
• Option D: full redesign:  in order to simplify the analysis, D sub-options are calculated as increments to C2 only. Three sub-options are assessed. D1 is a far reaching option. It provides full product coverage expansion and elimination of all sensitive products (eg, extending the duty-free, quota-free treatment of EBA countries) to all countries most in need (whether GSP or GSP+). This implies that the remaining beneficiaries are no longer subject to graduation. D2 and D3 are less far-reaching. They take all the parameters of C2 (graduation included) and add partial de-sensitisation (D2) and partial expansion in product coverage (D3).

Drawing on the outcome of the impact assessment, the preferred policy option that determined the substance of the proposed new regulation is Option C1.

LEGAL BASIS: Article 207 of the Treaty on the Functioning of the European Union (TFEU). 

CONTENT: the draft proposal would focus the GSP preferences on the countries most in need. This is achieved by enhancing GSP modalities related to the GSP eligibility criteria and the GSP graduation mechanism, which identifies competitive imports and suspends unwarranted preferences.

The main amendments to the scheme may be summarised as follows:

Modification of the GSP+ mechanism: the scheme also expands its support under the special incentive arrangement for sustainable development and good governance (GSP+) for those countries that commit to embracing core universal values on human, labour rights, environment and governance. While offering further opportunities for potential beneficiaries, the scheme will place more responsibility for countries and require stricter scrutiny of eligibility by the EU.

Vulnerability threshold of GSP+: as regards the criteria of vulnerable of the GSP+, the threshold of imports is increased from 1% to 2%.

Monitoring mechanism: there will be a more effective and transparent mechanism for monitoring and evaluating the implementation of relevant international conventions, whereby the EU seeks noticeable stability and improvement over time in countries' implementation record. This effectively raises the requirements for beneficiary countries, as they have to provide positive and regular proof that they are indeed implementing conventions. The current list of GSP+ conventions to be ratified remains the same as those currently applicable.

EBA beneficiary countries: the special arrangement for least developing countries known as 'Everything But Arms', which was added to the GSP scheme in 2004, is unchanged and further supported by new elements in the scheme reflecting the aim of focusing GSP benefits on countries most in need.

Improved withdrawal mechanism system: the reasons which justify the temporary withdrawal of preferences have also been clarified. In particular, it has been made explicit that unfair trading practices include those affecting the supply of raw materials. Furthermore, it has been underlined that preferences may be temporarily withdrawn if beneficiaries fail to comply with international conventions on antiterrorism.

Safeguard measures: to ensure a better safeguarding of the EU's financial and economic interests and to enhance legal certainty, stability and predictability, the administrative procedures for safeguard mechanisms are improved by developing clear definitions of key legal concepts.

Unlimited duration: the proposed Regulation will no longer be limited in duration, thus promoting a stable framework both for economic operators and beneficiary countries.

Delegated acts: decision-making procedures reflect the new institutional balance among the European Commission, the Council and the European Parliament in particular with respect to the application of implementing or delegated acts. The new Regulation indicates the instances where the adoption of delegated acts by the Commission is foreseen following a delegation conferred by the European Parliament and the Council, and also the instances where the Commission will be granted implementing powers.

BUDGETARY IMPLICATIONS: the proposed Regulation does not incur costs charged to the EU budget. Its application does, however, entail loss of customs revenue. Based on the 2009 figures, the annual loss of customs revenue resulting from the application of the current GSP Regulation was estimated to be EUR 2.97 billion corresponding to a net amount of EUR 2.23 billion after deduction of Member States' collection costs. As a result of the application of the proposed Regulation and on the basis of Annex I in its indicative form, the annual loss of customs revenue is estimated to be EUR 1.87 billion (net amount EUR 1.4 billion).