Explanatory Memorandum to COM(2021)579 - Regulation Towards the future Generalised Scheme of Preferences legal framework granting trade advantages to developing countries - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2021)579 - Regulation Towards the future Generalised Scheme of Preferences legal framework granting trade advantages to developing ... |
|---|---|
| source | COM(2021)579  |
| date | 22-09-2021 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The European Union (EU) has granted trade preferences to developing countries 1 through the Generalised Scheme of Preferences (GSP) since 1971. It is part of its common commercial policy, in accordance with the general provisions governing the EU's external action 2 .
The GSP is one of the key EU trade instruments to assist developing countries to integrate in the world economy, reduce poverty, and support sustainable development through the promotion of core human and labour rights, environmental protection, and good governance. The GSP consists of three arrangements:
·Standard GSP: for low and lower-middle income countries, providing for a reduction or full removal of customs duties on two thirds of EU tariff lines.
·GSP+: the special incentive arrangement for sustainable development and good governance, which reduces tariffs to 0% for broadly the same tariff lines as Standard GSP. It is granted to vulnerable low and lower-middle income countries that implement 27 international conventions related to human rights, labour rights, protection of the environment and good governance.
·EBA (Everything But Arms): the special arrangement for least developed countries (LDCs), providing them with duty-free, quota-free access to the EU market for all products except arms and ammunition.
The current scheme shall apply until on 31 December 2023. Unless a new Regulation is adopted, the Standard GSP and the GSP+ arrangements will cease to apply on 1 January 2024. Imports from developing countries under Standard GSP and GSP+ would thus be charged with higher duties. However, imports from LDCs would still be covered by the EBA arrangement, which does not have an expiry date. The proposal for a new GSP Regulation aims to renew the scheme for a further period of ten years. The GSP is a mature part of the EU’s trade policy toolbox. Its review is about fine-tuning the way the GSP works and improving its efficiency and effectiveness. Hence, the chosen set of policy options, also defined and further explored in the External Study and Impact Assessment, have a high level of granularity. They aim at specific and limited improvements, to ensure the continued relevance of the GSP overall, and to achieve its development and sustainability objectives.
The EU’s overarching objectives with the revised GSP Regulation are to maintain the essential features of the present Regulation, namely poverty eradication and support for sustainable development and good governance, while also not jeopardising EU interests. At the same time, the aim is to improve the GSP’s overall efficiency and effectiveness to respond to future challenges:
(a)Facilitate access to the GSP+ arrangement to the growing number of LDCs graduating from the EBA status;
(b)Adjust product graduation thresholds to better focus preferences on less competitive products and countries;
(c)Reflect the evolving priorities such as those underpinning the European Green Deal by extending negative conditionality also to environmental and good governance conventions;
(d)Update the list of international conventions in a targeted and manageable way, while not jeopardizing the monitoring process;
(e)Make the preferences withdrawal process more responsive in urgent cases;
(f)Enhance the monitoring and implementation of GSP+ commitments, for instance through increased transparency and participation of relevant stakeholders, including through the recently created Single Entry Point (SEP) mechanism for non-compliance related complaints.
This is an initiative within the Regulatory Fitness Programme (REFIT).
• Consistency with existing policy provisions in the policy area
The general objectives of the GSP are consistent with the analysis and perspective of the Commission Communication Trade Policy Review: An Open, Sustainable and Assertive Trade Policy 3 of 18 February 2021. The Trade Policy Review (TPR) confirms the objective of the GSP review to increase trading opportunities for developing countries to reduce poverty and to create jobs, based on international values and principles. It further notes the EU’s interest in supporting vulnerable developing countries to integrate into the world economy and to support multilateralism, and ensure adherence to universal values, adding a focus on climate and environmental challenges, while also remaining ready to act assertively in defending its interests.
The initiative is consistent with the establishment of the Chief Trade Enforcement Officer (CTEO) and the Single Entry Point (SEP); the on-going development of supply chain due-diligence legislation, the newly established EU Global Human Rights Sanctions Regime, as well as on-going programming of development cooperation.
• Consistency with other Union policies
The continuation of GSP is part of the EU’s political commitment to support sustainable development globally, as reflected in the implementation of the United Nations (UN) Agenda 2030 for Sustainable Development and Sustainable Development Goals (SDGs) – to which all World Trade Organisation (WTO) Members have committed. The GSP’s objectives are also in line with EU’s Policy Coherence for Development (PCD), which constitutes a key pillar of EU efforts to enhance the positive impact and increase effectiveness of development cooperation 4 . Furthermore, it is consistent with Treaty provisions on promotion of sustainable development and human rights through external action, trade provisions regulating imports, EU Green Deal initiatives, and the EU Action Plan on Human Rights and Democracy.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
The legal basis for a new GSP Regulation lies in Article 207 of the Treaty on the Functioning of the European Union (TFEU), which sets out the EU’s common commercial policy.
• Subsidiarity (for non-exclusive competence)
The common commercial policy is listed in Article 3 of the TFEU among the areas of exclusive competence of the Union.
Pursuant to Article 5(3) of the Treaty on European Union (TEU), the subsidiarity principle does not apply in areas of exclusive EU competence.
• Proportionality
The principle of proportionality is satisfied since the proposal includes limited effectiveness and efficiency adjustments only. The proposal is accompanied by an Impact Assessment Report, which discusses proportionality in Chapters 3 (Why should the EU act?), 6 (What are the impacts of the policy options?) and 7 (How do the options compare?). The practical implications of the initiative are discussed in Annex 3 of the Impact Assessment Report accompanying the legislative proposal (Who is affected and how?). The policy choices in the proposal are described in Chapter 8 of the accompanying Impact Assessment Report (Chapter 8 – Preferred Options) and can be summarised as follows:
–To maintain the current architecture consisting of three arrangements.
–To amend the vulnerability (economic eligibility) criteria for GSP+ to allow LDC countries that graduate from LDC status to join GSP+.
–To review the product graduation thresholds.
–To extend negative conditionality to environmental and good governance conventions and review the list of international conventions.
–To expand and improve the withdrawal procedure (carry out a socio-economic impact assessment, provide for a rapid response mechanism that can be activated in cases of exceptionally grave violations, expand the scope of the instrument to cover also the principles of the environment and good governance conventions and additional areas such as relating to migration).
–To improve transparency and inclusion of civil society and streamline the monitoring cycle (reporting every 3 years).
• Choice of the instrument
The GSP Regulation is the only appropriate action that the Union can take to establish unilateral, non-reciprocal, preferential access to the Union market for developing countries.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Ex-post evaluations/fitness checks of existing legislation
A Mid-term Evaluation (MTE) of the current GSP Regulation was completed in 2018 5 . The MTE concluded that, overall, the GSP was delivering on its objectives 6 and there was no need to amend the Regulation before its expiry on 31 December 2023. However, the MTE made several recommendations to improve the effectiveness and efficiency of the scheme. These recommendations underpinned the identification of the problems defined in detail in Section 2 of the Impact Assessment Report accompanying this proposal.
The MTE Project Team presented the following recommendations: (1) Improve transparency and awareness of EU’s GSP and GSP+ monitoring; (2) Safeguard provisions to be more effectively used; (3) Temporary withdrawal of tariff preferences to be more effectively used; i Update the list of conventions on core human and labour rights as well as on environment and good governance principles; (5) Evaluate the continued relevance of the Standard GSP arrangement as distinct and separate from the GSP+ and consider expanding conditionality related to conventions; (6) Take stock of the WTO’s services waiver for LDCs; and (7) Consider the issue of coherence between GSP and the Free Trade Agreements (FTAs)/Preferential Trade Agreements (PTAs) regimes. Several of these aspects were addressed during the implementation of the GSP Regulation, in particular through the GSP Hub Project on transparency and awareness. The safeguard and withdrawal mechanisms were also applied since the MTE; lessons learned from their application are presented in the Impact Assessment accompanying this proposal.
• Stakeholder consultations
An open public consultation on the GSP and the proposed reform options was open from 11 March 2020 to 15 July 2020. A detailed summary of the stakeholder consultation is provided in Annex 2 of the accompanying Impact Assessment Report.
512 responses were submitted to the public consultation. Among the respondents, 54% are EU stakeholders, 41% from GSP countries, and the remaining 5% from other countries (including the UK). In terms of the type of respondent, “companies/business organisations” account for the largest share of responses (28%), followed by business associations (24%) and EU citizens (17%), public sector (12%), civil society (NGOs, environmental and consumer organisations, and academia; 8%), and others (including trade unions; 7%).
A large majority i.e., about 70% of respondents considers that international trade can make an important contribution to poverty eradication in developing countries and another 10% think that it can make a minor contribution; 17% think that it cannot contribute to poverty alleviation. Views in GSP countries are clearly more positive regarding the poverty alleviating role of trade: here, 92% of respondents state that trade can make an important contribution, compared to 52% of EU respondents; conversely, 19% of EU respondents do not believe that trade can help eradicate poverty, compared to 2% in GSP countries. Asked about how trade contributed to poverty alleviation, most respondents pointed to the generation of employment and, in the long term, skills development through exporting.
On average, the GSP is viewed to have positive impacts across all areas of sustainable development.
86% of respondents consider it important for the EU to continue monitoring the level of implementation of the 27 international conventions by GSP+ beneficiary countries, compared to 8% who consider it unimportant. Respondents consider that a wide range of information sources provide useful information for the Commission’s monitoring of the implementation of international conventions. The most relevant source, with some distance, are reports by the conventions’ monitoring bodies, i.e., the UN, International Labour Organization (ILO) and other international organisations, followed by information provided by business and social partners in the beneficiary countries, and by Non-Governmental Organizations (NGOs).
The input received was considered in the accompanying Impact Assessment Report in particular in the construction of the problem definitions (Chapter 2), the general and specific objectives of the initiative (Chapter 4), and the available policy options (Chapter 5).
• Collection and use of expertise
An External Study (hereafter the Study) informing the draft Impact Assessment Report was undertaken by BKP Economic Advisors GmbH. The final report of the Study was published in May 2021 and is available on the DG Trade website 7 . The Study followed onto the conclusions of the MTE and focused on several policy options that could improve achieving the overall objectives of the GSP instrument. It took into account existing literature and the results of the open public consultation described above. An executive summary of the recommendations of the Study is available on the DG Trade website 8 .
The results of the supporting Study were presented to the GSP Expert Group on the following dates: 20 October 2020, 7 December 2020, and 23 February 2021; and to INTA at an in-camera technical presentation on 12 April 2021.
The key elements of this proposal were further discussed with the GSP Experts on 19 April 2021 and 14 June 2021.
• Impact assessment
The summary sheet of the accompanying Impact Assessment Report is available as part of the proposal package. The Regulatory Scrutiny Board issued a positive opinion on the Impact Assessment Report on 9 April 2021.
The Impact Assessment examined policy alternatives in five thematic clusters: (1) GSP arrangements and beneficiary countries, (2) product coverage and product graduation mechanism, (3) conditionality of gaining/maintaining tariff preferences, i transparency in GSP implementation and (5) safeguards. For each cluster, several policy options were assessed against the baseline of keeping the GSP scheme as it is.
GSP arrangements and beneficiary countries (country graduation)
This cluster looks at the continuous reduction of the number of the GSP beneficiaries. Countries may lose access to GSP if they conclude a Free Trade Agreement with the EU or if they move up to the Upper-Middle-Income country category. The Impact Assessment looks at options to amend the three-tier structure of the GSP and the country coverage of the scheme. The analysis shows that there is no compelling reason to change the existing structure or country coverage of the GSP, as the scheme is already focused on countries most in need and the three-tier structure addresses the different developmental needs of beneficiaries.
The option which contributes most to the general objective of contributing to poverty eradication and the specific objective of expanding exports from developing countries is to amend the economic vulnerability criteria for GSP+. This option attempts to mitigate the significant negative consequences of losing EBA preferences following graduation from LDC status.
Continued access to GSP (in particular to GSP+) matters to the relatively high number of LDCs beneficiaries expected to lose EBA status in the coming years. The supporting Study finds that of the 12 countries likely to graduate from EBA over the lifespan of the next Regulation, six are likely to face significant economic impact and notably this is the case for Bangladesh.
The supporting Study and Impact Assessment Report, therefore, suggest the following options to ensure that all EBA countries expected to graduate from LDC status could transition to GSP+ arrangement: (1) To maintain the current architecture consisting of three arrangements; and (2) To amend the vulnerability (eligibility) criteria to facilitate access by a larger number of countries that graduate from LDC status to the GSP+ arrangement.
Product coverage and product graduation mechanism
The supporting Study and Impact Assessment Report analysed whether the product graduation mechanism targets well enough the most competitive products 9 and the most competitive countries (option to extend the product graduation mechanism from Standard GSP to GSP+ or EBA beneficiaries). Furthermore, they assessed whether the product coverage reflects the export potential of GSP beneficiaries.
The socio-economic analysis found that the current definition of the graduation mechanism could be maintained and continue to apply only for Standard GSP. No significant economic and social impacts are observed if product graduation is extended to GSP+ or EBA beneficiaries or if product coverage is extended to new sectors and products.
We, therefore, propose to maintain product graduation only for Standard GSP but review the thresholds for product graduation. We propose to maintain the current graduation method by section and decrease the product graduation thresholds by 10 percentage points.
Conditionality of gaining/maintaining tariff preferences
GSP conditionality remains one of the key EU instruments to promote respect for human rights and international humanitarian law, and labour rights, environmental protection, and good governance in GSP beneficiary countries: a country should not benefit from preferential trade arrangements if it is acting in a way that is contrary to international standards and principles and thereby also to its own developmental needs. The Impact Assessment looks at options on extending positive and negative conditionality, amending the list of GSP relevant conventions, and introducing changes to the preferences withdrawal process.
Building upon the MTE and the supporting Study, the main conclusion is to extend negative conditionality (i.e. the withdrawal provisions under Article 19(1), point (a) of the current GSP Regulation (EU) No 978/2012) also to environmental and good governance conventions (currently it only concerns the core human and labour rights UN/ILO conventions). Another aim is to further reinforce GSP’s contribution to sustainable development by updating the list of international conventions, and by improving the withdrawal procedure.
The experience of the GSP monitoring and withdrawal mechanisms as currently applied to human and labour rights conventions suggests that an extension of negative conditionality to environmental and good governance conventions would create similar opportunities to engage on such issues in support of the UN Sustainable Development Goals (SDGs) and the contribution of the EU’s green agenda to GSP beneficiary countries.
Regarding the GSP withdrawal procedure, the experience so far has shown such procedure can be slow in reaching a final decision; all past withdrawals took up to two years to conclude, including the preparatory stages before launching a withdrawal investigation. Exceptionally grave violations require, however, that the Commission have the tools to respond promptly. We, therefore, propose a rapid response mechanism in view of the specific circumstances in the beneficiary country.
The experience with the temporary and partial withdrawal 10 of EBA preferences from Cambodia in 2020 has shown that it is necessary to carefully assess the socio-economic impact of withdrawal of preferences on the sectors of production affected to avoid hurting the most vulnerable part of the population.
Transparency in the monitoring and implementation of GSP commitments
In July 2020, the Commission appointed the Chief Trade Enforcement Officer (CTEO) with the role of better enforcing trade policy. In this connection, in November 2020, the Commission launched a new complaints mechanism, the Single Entry Point (SEP) as part of its increased efforts to strengthen the enforcement and implementation of trade commitments. Through the SEP, the Commission receives complaints on various matters related to trade policy, including breaches of the GSP commitments. It is necessary, therefore, to integrate this new system of complaints within the framework of the GSP Regulation, in particular with respect to the withdrawal procedure.
Stakeholders consulted during the 2018 MTE and the 2021 IA supporting Study preparation raised the need to improve the transparency and communication across the various stages of GSP monitoring and implementation work. This could help make the monitoring system more robust and contribute towards a more effective dialogue with beneficiary countries, as well as strengthen stakeholder involvement in the GSP.
The Impact Assessment reviews options on improving the monitoring process and civil society’s involvement and on adjusting the GSP+ monitoring cycle. We, therefore, propose to publish guidance on the monitoring process as developed through administrative practice, on the actors involved and the opportunities for civil society’s involvement. In the legislative proposal, we further clarify the wide inclusion of information sources for GSP+ monitoring and suggest to change the GSP monitoring cycle’s duration from two to three years.
Application of safeguards
The supporting Study and Impact Assessment Report consider two types of expansion regarding automatic safeguards - in terms of the product coverage and the GSP beneficiaries covered. The conclusion is that neither would lead to a more frequent application of this mechanism. Hence, there does not appear a need for major changes to the safeguard mechanism. It is, therefore, proposed to proceed only with a number of technical adjustments and improvements aiming at aligning better the automatic safeguards with product graduation, namely: (1) Base the calculation of import surges at GSP Section level on import values rather than import volumes due to the heterogeneity of products within Sections; this will better reflect instances of increased imports which could harm EU industry; (2) Align the thresholds for automatic safeguards and product graduation so as to complement each other.
Contents
The overall economic and non-economic impact (social, environmental, human rights) of the proposed policy options is limited as the current GSP three-tier structure is proposed to be maintained. This choice has been made to precisely limit the expected decline in real GDP, in welfare, in total exports to the EU, and in governmental revenues compared to the current baseline that could be felt by Standard GSP or GSP+ countries, should the current structure be modified. In case of discontinuation of the Standard GSP and/or GSP+, a significant reduction in exports would be expected in specific sectors such as textiles and apparel, leather and footwear, agri-food products, chemical, rubber and plastics. The economic analysis in the supporting Study has been made using Computable General Equilibrium (CGE) model-based simulations. It has showed (in all other scenarios than maintaining the current architecture of GSP), the negative impact on GDP and trade for both the EU and the GSP beneficiaries, (some of them may be more affected) 11 and supports this fundamental choice in favour of continuity of the scheme and its current structure.
The choice to build a bridge towards GSP+ for LDCs which exit EBA (by amending GSP+ economic eligibility criteria) strengthens the continuity choice and reduces the negative impact which could have been felt on LDCs.
More active use of conditionality linked to potential (partial or sectoral) withdrawals is expected to positively impact the effectiveness of the GSP scheme: it would further advance the GSP sustainable development objective. It would also be coherent with other EU policies, in particular development cooperation, promotion of human rights and social issues, and the EU contribution to Agenda 2030.
Continuing GSP with the targeted changes proposed will be a key encouraging signal from the EU to developing partners, maintaining an important platform to engage with beneficiary countries to bring about change that is consistent with the EU’s values agenda and policy coherence for development.
The political impact of the preferred options is a key consideration. For this area, the analysis is qualitative and based on formal and informal consultations. We expect the choice of continuity of the current GSP architecture to be welcomed by beneficiary countries and by developed WTO partners. This is in line with the long-standing principle of the General Agreement on Tariffs and Trade (GATT) Enabling Clause, which grants a permanent exemption from the Most Favoured Nation (MFN) principle (non-discrimination) for developed countries to unilaterally grant elimination or reductions of the tariffs paid on imports from developing countries which share the same trade, financing and development needs. The continuation of GSP is in line with EU’s Policy Coherence for Development (embedded in Article 208 of the Treaty on the Functioning of the EU) which constitutes a key pillar of EU efforts to enhance the positive impact and increase effectiveness of development cooperation. Moreover, it is part of the EU’s political commitment to support sustainable development globally, as reflected in the implementation of the UN Agenda 2030 for Sustainable Development and Sustainable Development Goals to which all WTO Members have committed.
• Regulatory fitness and simplification
The full tables with benefits and costs can be found in Annex 3 of the Impact Assessment Report accompanying the proposal. The potential benefits of the proposed set of objectives are difficult to quantify, as they often involve technical improvements to the existing structure and provisions of the GSP framework – in order to maximise its efficiency and effectiveness and increase the potential for sustainable economic development of the beneficiary countries. The proposal maintains the status quo whenever there is no compelling reason for change, in order to ensure the predictability and stability of the system. For the changes proposed, the initiative has the following practical implications, benefits, and associated costs, relative to the baseline, per cluster:
(g)Arrangements and country coverage: All graduating EBA countries would be a priori eligible for GSP+, in case their authorities wish to apply for the arrangement. This is a mitigation measure: no gains are expected, but it aims to avoid losses and serious negative economic impact for graduating LDCs which would lose EBA preferences. It further supports the development goal of GSP, by ensuring continued access to the scheme for the countries most in need. This would also entail some simplification of the system and a reduction of administrative burden for calculating and monitoring the relevant criteria.
(h)Product coverage and product graduation: Amending the product graduation thresholds aims at increasing the effectiveness of the product graduation mechanism in targeting specific competitive products. This is expected to contribute to better focusing the scheme on the products and countries most in need.
(i)Conditionality: Extending negative conditionality contributes to the fight against climate change by encouraging GSP beneficiary countries to improve the implementation of climate and environment conventions and to improvements in good governance in all beneficiary countries. The role played by GSP can be significant as environmental degradation tends to hit developing countries hardest due to extensive manufacturing of products dependent on natural resources (such as textiles), as well as the often observed lack of environmental protection laws and programs in those countries. Updating the list of international conventions increases leverage and attention on key human rights (e.g. the rights of people with disabilities, rights of children) and standards (e.g. on labour inspection) and supports action combating climate change through the inclusion of the Paris Agreement (and the removal of the out-of-date Kyoto Protocol).
The introduction of an impact assessment before a withdrawal of preferences will make it possible to balance GSP’s general objectives of contributing to poverty reduction and supporting sustainable development. In particular, it ensures that a possible withdrawal is adapted to the circumstances in the targeted beneficiary country, its economic development needs, and the socio-economic impact of any withdrawal measures.
Introducing a faster withdrawal procedure provides for a specific instrument to address specific circumstances characterised by exceptionally grave violations and a need to react urgently. This also increases the effectiveness of the withdrawal by increasing pressure on beneficiaries to respond to identified concerns.
(j)Transparency: Extending the GSP+ monitoring cycle improves effectiveness and efficiency by approximating the length of the GSP+ monitoring cycle to the monitoring cycle of the international conventions by the respective treaty monitoring bodies and allowing beneficiary countries more time to address issues on implementation of the conventions.
(k)Safeguards: The technical changes proposed ensure consistency between measures aimed at protecting EU industry and provide for simplification of automatic safeguards procedure and reduction in administrative burden.
The evolution of the GSP Regulation is not expected to be significantly influenced by digital technologies. In the implementation of the proposal, the EU can use existing business processes and solutions that securely handle information in an electronic manner (i.e., exchanging information with beneficiary countries authorities, international convention monitoring bodies, and civil society; open public consultations; REX (Registered Exporter System) declarations on imports from third countries, etc.).
• Fundamental rights
Supporting respect for fundamental rights in GSP beneficiary countries is part of the general objectives of the GSP Regulation, namely, (1) to assist developing countries in their efforts to reduce poverty, (2) to promote good governance and sustainable development. Therefore, relevant aspects and impact on fundamental rights have been considered throughout the accompanying Impact Assessment. Particular consideration has been given to international human rights and labour rights instruments, which are also part of the list of conventions in Annex VI of this proposal. Relevant Commission services (SJ, DG JUST, HOME, EMPL, INTPA) and EEAS have been consulted on this proposal which is foreseen to have an overall positive impact on fundamental rights.
4. 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 last available data (2019) 12 , these preferences represent under the proposed GSP Regulation a loss of revenue for the EU of EUR 2,977.6 million. The new Regulation would largely perpetuate existing preferences, but would tighten the conditions for the graduation of individual product sections. Consequently, the trajectory of revenue losses under the new Regulation would be somewhat lower than under the current Regulation. 13 Additionally, the possibility of countries losing coverage of the scheme due to reaching upper-middle-income statues or signing an FTA with the EU would contribute to lowering the revenue losses.
A detailed financial statement is available in the proposal below.
The proposal emphasises continuity, resulting in an overall assessment of a moderate impact, in terms of administrative burden, for the EU and beneficiary countries. Within the preferred options, the issues that are most likely to have such an impact are the proposals on conditionality and the resulting increased monitoring efforts which will be necessary. In particular, under the conditionality cluster (detailed in section 6.3.1 of the Impact Assessment Report) the following policy options can generate additional administrative costs: adding new conventions as a conditionality to continue to receive or enjoy GSP; extending negative conditionality to environmental and good governance conventions; reducing the duration of the withdrawal procedure in exceptional circumstances; preparing the socio-economic impact assessment as additional step after launching the GSP withdrawal procedure or adding elements linked to the obligation to readmit the beneficiary country’s own nationals would add administrative costs (mostly staff involvement). Administrative burden (assessed in Table 6 of the Impact Assessment Report) is prevented by opting against the choice to extend positive conditionality i.e., ratification of conventions and robust monitoring obligations to the Standard GSP and EBA beneficiaries.
The policy options in relation to monitoring, (detailed in section 6.4 of the Impact Assessment Report) also have a direct bearing on the administrative costs. In particular, they can add to the administrative tasks on the EU side. However, this is difficult to quantify as it represents a codification of practices that are already in place. Furthermore, the change would address demands of from stakeholders such as trade unions and NGOs to play a more active role in the monitoring process.
Another cost would be the EU’s technical assistance and support to GSP countries to enhance their institutional capacity to ratify and implement international conventions. These elements of costs are, however, very difficult to estimate due to the lack of relevant information at this stage.
The lengthening of the monitoring cycle from two to three years is expected to reduce the administrative burden both for the EU and for beneficiary countries.
5. OTHER ELEMENTS
• Implementation plans and monitoring, evaluation and reporting arrangements
As this proposal introduces minimal changes, aimed at improving effectiveness and efficiency, the implementation of the GSP Regulation will be able to continue without major adjustments based on current practices upon its entry into force.
The Commission will report to the European Parliament and the Council on the implementation of the Regulation every three years, starting 1 January 2027. The Commission will regularly report on the implementation of the Regulation to the Commission’s GSP Expert Group and the Council Working Party. A mid-term evaluation of the Regulation is suggested for 1 January 2030 i.e., after five years of actual application of the scheme.
• Explanatory documents (for directives)
Not applicable.
• Detailed explanation of the specific provisions of the proposal
A detailed correspondence table is provided in Annex VIII of this proposal.
A chapter by chapter commentary on the specific provisions is provided below:
Chapter I General Provisions:
Article 2 definitions of complaint (13) and regional (14) and extended (15) cumulation added.
Article 3.2 added possibility for updating the list of eligible countries based on changes in their trade and development needs. No other substantive changes proposed.
Chapter II Standard arrangement (Standard GSP):
Article 4.3 removed as it was a transitional clause for the 2012 Regulation. No other substantive changes proposed.
Chapter III Special incentive arrangement: (GSP+)
Article 9.1 point (d) added a requirement for GSP+ candidate countries to submit a plan of action for the effective implementation of the GSP relevant conventions as part of the GSP+ application.
Article 9.2 removed as it links to the export competitiveness vulnerability criterion for GSP+, which is proposed to be removed, based on the supporting Study and Impact Assessment.
Article 10.8 added to provide transitional arrangements for current GSP+ beneficiaries, which would have to reapply to fulfil new requirements for GSP+ (ratify six additional conventions that are proposed to be added to the list of GSP+ relevant conventions).
Article 14 amended the reporting period to three years to streamline and better synchronise with monitoring bodies reports.
Article 15.9 introduced a provision so that the Commission considers the socio-economic effect of the temporary withdrawal of tariff preferences in the beneficiary country when proposing the withdrawal.
Article 16 introduces the possibility to extend the scope of withdrawal measures where additional reasons or violations occur.
Chapter IV Special arrangement (EBA):
Article 18.2 and .3 removed as they are no longer necessary.
Chapter V Temporary withdrawal:
Article 19.1 point (c) introduced a withdrawal procedure related to readmission of own nationals.
Article 19.10 introduced a provision so that the Commission considers the socio-economic effect of the temporary withdrawal of tariff preferences in the beneficiary country when proposing the withdrawal.
Article 19.14 added to increase flexibility for reviewing the scope of withdrawal, postpone or suspend its application in case of exceptional circumstances such as a global health or sanitary emergency.
Article 19.16 and 19.17 added to provide for an urgent withdrawal procedure in cases of grave violations of the GSP relevant conventions where a rapid response is needed in view of the specific circumstances in the beneficiary country.
Article 20 introduces the possibility to extend the scope of withdrawal measures where additional reasons or violations occur.
Chapter VI Safeguard and surveillance:
Article 29.1 removed the provision for determining safeguard thresholds based on import volumes and replaced it with calculation based on import value.
Chapter VII Common provisions:
Article 33 points 33.3 and 33.4 introduces a specific process to make sure that cumulation responds to the requesting country’s development, financing and trade needs.
Article 40 extends from two to three years the period for the submission of the report to the Parliament and the Council.
Chapter VIII Final provisions:
List of Annexes:
Annex I: Provides the list of eligible countries and the arrangement they benefit from in a single Annex, replacing Annex I and the positive parts of Annex II, III, and IV of the former GSP Regulation. Removes from the list of eligible countries those not to be considered developing countries in the context of the GSP (Russia, China, Hong Kong, Macao) to ensure that GSP benefits are limited to developing countries having similar trade, financing and development needs.
Annex II: Provides a single list of countries from which GSP preferences have been withdrawn, replacing the corresponding specific lists in former Annex II, III, and IV.
Annex III: Provides a list of products covered by the GSP and GSP+ arrangements.
Annex IV: (Former Annex VI) Adjusts the product graduation and safeguard thresholds downwards by 10% to better target competitive products.
Annex V: (Former Annex V) Removes the export competitiveness vulnerability criterion as above.
Annex VI: (Former Annex VIII) Adds six additional international conventions as per the supporting study and Impact Assessment.
Annex VII: Provides a list of products covered by the GSP+ arrangement only.
Annex VIII: (Former Annex X) Provides a correlation table.