In news: India and Indonesia were the top two beneficiaries of the European Union’s Generalized System of Preferences (GSP) schemes for exports in 2022, with clothing, machinery and footwear accounting for nearly half of all standard GSP imports, per a joint report of the EU to the European Parliament and the Council.

Under the GSP scheme, the EU allows identified products originating in certain developing countries preferential access to its markets in the form of reduced or zero rates of customs duties.

  • As the items become more competitive and reach a particular threshold, the GSP is withdrawn. The EU has already withdrawn the GSP benefit for about 1,800 items from India in 2023, and the present policy will now continue for another four years until 2027, according to the latest decision endorsed by the EU.
  • In 2023, however, the situation is expected to change significantly as some of the largest recipients of GSP benefits, including several sectors from India, graduated from the scheme. The EU is hopeful that preferential tariffs could be extended through a transition to free trade agreements.
  • The Generalized System of Preferences (GSP), instituted in 1971 under the aegis of UNCTAD, has contributed over the years to creating an enabling trading environment for developing countries. The following 15 countries grant GSP preferences: Armenia, Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, United Kingdom and the United States of America.
  • Challenges arise for beneficiaries in fully exploiting the market access opportunities available under these schemes, including in effectively meeting the rules of origin requirements.
  • Following the WTO Hong Kong Ministerial Decision in 2005 in which members agreed that developed countries and developing countries in a position to do so would grant duty-free and quota-free market access for exports of LDCs, improvements were made to various GSP schemes and/or new schemes for LDCs were launched.
  • Subsequent ministerial decisions, including that taken at MC10 in Nairobi, 19 December 2015, reaffirmed the continued importance of this issue for LDCs’ trade and development prospects. The provision and utilization of trade preferences is a key goal of the Istanbul Program of Actions adopted at the UN LDC IV in 2013, as further reaffirmed in SDGs Goal 17.

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