GENERALISED SYSTEM Chapter - 5

OF PREFERENCE (GSP)
 WHAT IS GENERALIZED
SYSTEM OF PREFERENCES
(GSP)
•Generalized System of Preferences (GSP) is a preferential tariff system
extended by developed countries to developing countries (also known as
preference receiving countries or beneficiary countries). It is a preferential
arrangement in the sense that it allows concessional low/zero tariff imports
from developing countries.
•Developed countries including the US, EU, UK, Japan etc., gives GSPs to
imports from developing countries. GSP involves reduced/zero tariffs of
eligible products exported by beneficiary countries to the markets of GSP
providing countries.
•The US has a strong GSP regime for developing countries since its launch in
1976, by the Trade Act of 1974. In the past, thousands of products were
imported from nearly 120 designated beneficiary countries and territories .
 WHAT IS THE OBJECTIVE
OF GSP?
The objective of GSP was to give development support to poor countries
by promoting exports from them into the developed countries. According
to the US Trade Representative Office website, GSP promotes sustainable
development in beneficiary countries by helping these countries to
increase and diversify their trade with the United States. “GSP provide
opportunities for many of the world’s poorest countries to use trade to
grow their economies and climb out of poverty” – USTR.
According to the USTR, “GSP also boosts American competitiveness by
reducing costs of imported inputs used by U.S. companies to manufacture
goods in the United States.”
WHO ARE THE BENEFICIARIES
UNDER GSP?
The beneficiaries of GSP are around 120 developing
countries. As of 2017, India and Brazil were the major
beneficiaries in terms of export volume realized under GSP.
Imports from China and some developing countries are
ineligible for GSP benefits. The beneficiaries and products
covered under the scheme are revised annually.
WHICH ARE THE PRODUCT
GROUPS COVERED UNDER GSP?
The products covered under GSP are mainly
agricultural products including animal husbandry,
meat and fisheries and handicraft products. These
products are generally the specialized products of the
developing countries.
WHAT IS THE DIFFERENCE
BETWEEN GSP AND THE
USUAL TRADE
ARRANGEMENT UNDER WTO?
Under the normal trade laws, the WTO members must give
equal preferences to trade partners. There should not be any
discrimination between countries. This trade rule under the
WTO is called the Most Favored Nation (MFN) clause. The
MFN instructs non-discrimination that any favorable
treatment to a particular country. At the same time, the WTO
allows members to give special and differential treatment to
from developing countries (like zero tariff imports). This is
an exemption for MFN. The MSP given by developed
countries including the US is an exception to MFN .
WHAT IS THE PROCEDURE FOR
GSP IN THE CASE OF THE US?
Under GSP, there were zero/low concessional tariff on
imports from developing countries.  The US government
selects a group of poor countries and a set of products and
offers these countries lower-than-normal tariffs than it
applies to imports from all other World Trade Organization
countries.
The USTR makes annual reviews about the types of
commodities to be selected under GSP and the countries to
be benefited.
WHAT IS THE NEW TRUMP
ADMINISTRATION’S APPROACH
ON GSP?
The Trump administration has decided to withdraw GSP for
94 products from all GSP beneficiary developing countries
as the US is trying to completely phase out it. GSP
withdrawal covers mainly Agricultural and handicraft
products and is effective from November 1, 2018 onwards.
According to the Washington Post, in 2016, the GSP covered
only $19 billion, or less than 3 percent, of U.S. imports.
 WHAT IS THE IMPACT OF GSP
WITHDRAWAL ON INDIA?
India exports nearly 50 products of the 94 products on which GSP benefits are
stopped. The GSP removal will leave a reasonable impact on India as the country
enjoyed preferential tariff on exports worth of nearly $ 5. 6 billion under the GSP
route out of the total exports of $48 bn in 2017-18.   In total India exports nearly
1,937 products to the US under GSP. According to the Washington Post, 90 percent
of Indian/Brazilian exports to America face normal US tariffs and hence will remain
unaffected from the exit of the GSP program.
Removal of GSP indicate a tough trade position by the US; especially for countries
like India who benefited much from the scheme. The US was insisting India to
reduce its trade surplus. India is the 11th largest trade surplus country for the US and
India enjoyed an annual trade surplus of $ 21 bn in 2017-18.
GLOBAL SYSTEM OF TRADE Chapter - 5
PREFERENCES (GSTP)
The Global system of trade preferences among
developing countries (G.S.T.P) is a 
preferential trade agreement signed on 13 April 1988
with the aim of increasing trade between 
developing countries in the framework of the 
United nations conference on trade and development
 United regions U.R. Its entry into force was on 19 April
1989 and its notification to the WTO on 25 September
1989
There are 42 country members of GSTP, including 7 LDCs (Bangladesh, Benin, Guinea, Mozambique,
Myanmar, Sudan, and Tanzania). The Third Round of Trade Negotiations (São Paulo Round) concluded in
December 2010, but has not yet become effective. The currently small number of concessions limits the
utilization of the GSTP by LDCs. Current members states, participating since 19 April 1989, are: Bangladesh,
Cuba, Ghana, India, Nigeria, Singapore, Sri Lanka, Tanzania, Zimbabwe

Additionally current members states are: Algeria, Argentina, Benin, Bolivia, Brazil, Cameroon, Chile,
Colombia, Ecuador, Egypt (16 July 1989), Macedonia, Guinea, Guyana (4 May 1989), Indonesia, Iran, Iraq,
North Korea, South Korea (11 June 1989), Libya, Malaysia (31 August 1989), Mexico (13 May 1989), Morocco
(13 July 1989), Mozambique, Myanmar, Nicaragua (3 May 1989), Pakistan (8 July 1989), Peru (15 April
1989), Philippines, Sudan, Thailand, Trinidad and Tobago, Tunisia (25 August 1989), Venezuela, Vietnam and
the trade bloc of MERCOSUR (2 November 2006).

Applicants are: Burkina Faso, Burundi, Haiti, Madagascar, Mauritania, Rwanda, Suriname, Uganda and
Uruguay.

Former members: Yugoslavia (from 1989-04-19), Romania (from 1989-04-19 until its EU membership)
The Agreement establishing the Global System of Trade Preferences (GSTP) among Developing
countries was signed on 13th April, 1988 at Belgrade following conclusion of the First Round of
Negotiations. The GSTP came into being after a long process of negotiations during the Ministerial
Meeting of the Group of 77, notably at Mexico City in 1976, Arusha in 1979 and Caracas in 1981. The
Ministers of Foreign Affairs of the Group of 77 in New York set up the GSTP Negotiating Committee in
1982. The New Delhi Ministerial meetings, held in July 1985, gave further impetus to the GSTP
negotiation process. The Brasilia Ministerial Meeting held in May 1986 launched the First Round of GSTP
Negotiations. At the conclusion of the First Round in April 1988 in Belgrade, the GSTP Agreement was
signed on 13 April 1988. The Agreement entered into force on 19th April 1989. Forty-four countries
have ratified the Agreement and have become participants. The GSTP establishes a framework for the
exchange of trade concessions among the members of the Group of 77. It lays down rules, principles
and procedures for conduct of negotiations and for implementation of the results of the negotiations.
The coverage of the GSTP extends to arrangements in the area of tariffs, para-tariff, non-tariff measures,
direct trade measures including medium and long-term contracts and sectoral agreements. One of the
basic principles of the Agreement is that it is to be negotiated step by step improved upon and
extended in successive stages
The current round of GSTP negotiations, also known as “São Paulo Round” was launched in 2004 with 22
participating countries, on the occasion of the UNCTAD XI Quadrennial Conference in Sao Paulo in Brazil. At the
end of the negotiations, Ministerial Modalities were adopted on 2 December, 2009 wherein Ministers agreed to
modalities based on a tariff reduction of at least 20% on at least 70% of all dutiable tariff-lines. Members who
were in the process of their WTO accession namely, Algeria and Iran were to be given specific flexibilities. The
modalities on market access adopted by the Ministers are as under:
•Across-the-board, line-by-line, linear cut of at least 20% on dutiable tariff lines;

•Product coverage to be at least 70% of dutiable tariff lines;

•Product coverage shall be 60% for participants having more than 50% of their national tariff lines at zero duty
level;

•Tariff cuts shall be made on the MFN tariffs applicable on the date of importation. Alternatively, participants may
choose to apply the cuts on the MFN tariffs applicable on the date of conclusion of the Third Round;

•The Negotiating Committee shall also consider proposal for revision of the GSTP rules of origin.
Based on these modalities, intensive negotiations were
held in 2010 for finalisation of the schedules of
Members. During this period, Cuba, Egypt, India,
Indonesia, Korea, Malaysia, Mercosur and Morocco
submitted their schedules and bilateral negotiations were
held to finalise the schedule. It is significant to note that
India unilaterally offered a tariff reduction of 25% on
77% of its tariff lines for Least Developed Countries
(LDC
A Ministerial Meeting of the GSTP Negotiating Committee
was held on 15 December, 2010 in Foz do Iguacu, Brazil for
signing of the "Final Act Embodying the Results of the Sao
Paulo Round" and the "Sao Paulo Round Protocol on the
Agreement on GSTP". The Ministers or Head of the
Delegations of Members who have submitted their final
schedules namely Cuba, Egypt, India, Indonesia, Korea,
Malaysia, Mercosur and Morocco would be signing the two
documents. India was represented by H.E. Mr. B.S. Prakash,
Ambassador of India to Brazil.
 DIFFERENCE BETWEEN GSP AND GSTP
Generalized System of Preferences (GSP)

The Generalised System of Preferences (GSP) is a scheme designed by the UNCTAD to encourage exports of developing countries to
developed countries. Under this scheme, developed countries grant duty concession on imports of specified manufactures and semi-
manufactures from developing countries.

It was a resolution adopted at the UNCTAD-II, held in 1968 in New Delhi, that led to the introduction of the GM', which is the result of
the realisation that temporary advantages in the form of generalised arrangements for special tariff treatment for developing countries
in the market of developed countries may assist developing countries to increase their export earnings and so contribute to an
acceleration in the areas of their economic growth.

The EEC countries and a number of other countries, such as the USA, Japan, Norway, New Zealand, Finland, Sweden, Hungary,
Switzerland, Australia, Canada, Bulgaria and Poland have introduced the GSP.

The GSP facility is available only to developing countries; it is subject to certain stringent limitations.

The preferential rates of duty allowed on the import of manufactures and semi-manufactures and processed agricultural products differ
in schemes of different developed countries because each country has developed its own GSP, keeping in view its local production base
and certain other factors. Each scheme has a safeguard clause or an escape clause to protect the sensitive sectors in its economy.
CONTINUATION ……
A particular item is qualified for GSP benefits only if the following conditions are satisfied: (1)
The product must be included in the GSP list.

(2) The country exporting the item should be declared under the GSP as a beneficiary country.

(3) The value added requirements/process criteria must be complied with.

(4) The product must be imported into the GSP donor country from a GSP beneficiary country.

(5) The exporter must send to his buyer/importer a certificate of origin in the prescribed fowl
duly filled in and duly signed by him, and then certified by a designated Government authority.
Global System of Trado Proforoncea (GSTP)
It was a resolution adopted at the UNCTAD-II, held in 1968 in New Delhi, that led introduction of the
GSP, which is the result of the realisation that temporary the form from of generalised arrangements for
special tariff treatment for developing countries in the of developed countries may assist developing
countries to increase their export earnings and so convibute to an acceleration in the areas of their
economic growth.
The EEC countries and a number of other countries, such as the USA, Japan, Norway, New Zealand,
Finland, Sweden, Hungary, Switzerland, Australia, Canada, Bulgaria and Poland have introduced the GSP.
The GSP facility is available only to developing countries; it is subject to certain stringent limitations.
The preferential rates of duty allowed on the import of manufactures and semi-manufaaurts and processed
agricultural products differ in schemes of different developed countries because each country has
developed its own GSP, keeping in view its local production base and certain other factors. Each scheme
has a safeguard clause or an escape clause to protect the sensitive sectors in its economy.
A particular item is qualified for GSP benefits only if the following conditions are satisfied:
(1) The product must be included in the GSP list.
(2) The country exporting the item should be declared under the GSP as a beneficiary country.
(3) The value added requirements/process criteria must be complied with.
(4) The product must be imported into the GSP donor country from a GSP beneficiary country.
(5) The exporter must send to his buyer/importer a certificate of origin in the prescribed form duly filled
in and duly signed by him, and then certified by a designated Government authority.
Thank You