WORLD TRADE  
ORGANIZATION  WT/COMTD/N/4/Add.3 
29 March 2006 
 (06-1417) 
Committee on Trade and Development Original:   English 
  
 
GENERALIZED SYSTEM OF PREFERENCES 
 
Notification by the European Communities
 
 
Addendum  
 
  The following communication, dated 1 March 2006, is being circulated at the request of the 
European Communities.  It contains a notification by the European Communities of their revised GSP 
Scheme, which entered into force on 1 January 2006 and is founded on the following two legal 
instruments:  
 
• Council Regulation (EC) N° 980/2005 of 27 Ju ne 2005 applying a scheme of generalized 
tariff preferences (published in Official Journa l of the European Communities (OJ) L 169, 
30.6.2005, p. 1);  and  
 
• Commission Decision (2005/924/EC) of 21 December 2005 on the list of the beneficiary 
countries which qualify for the special incentive arrangement for sustainable development and 
good governance, provided by Article 26 (e) of  Council Regulation (EC) N° 980/2005 (OJ L 
337, 22.12.2005, p. 50).
1 
 
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THE EUROPEAN UNION'S GENERALIZED SCHEME OF TARIFF PREFERENCES 
 
 
1. The previous scheme of the EU's Generalized System of Preferences 
 The European Union's (EU) Generalized System of Preferences (GSP) is the system of 
preferential trading arrangements through which the Eu ropean Union extends pr eferential access to its 
markets to developing countries.   In 1968, the United Nations Conferen ce on Trade and Development (UNCTAD) 
recommended the creation of a 'Generalized System  of Tariff Preferences' under which developed 
countries would grant trade preferences to all developing countries.  The EU was the first to 
implement a GSP scheme in 1971.  The EU's GSP grants either duty-free access or a tariff reduction 
to products imported from the 178 GSP beneficiary countries and territories.   The EU's GSP is the most widely used of a ll developed-country GSP systems.  The volume of 
imports to the EU from developing countries under the GSP is greater than the combined volumes of 
                                                     
 
1 The texts of the Council Regulation (EC) N° 980/2005 of 27 June 2005 and the Commission Decision 
(2005/924/EC) of 21 December 2005 are bein g circulated as docu ment WT/COMTD/57. WT/COMTD/N/4/Add.3 
Page 2  
 
  imports under the US, Canadian and Japanese GSP systems.  In 2005, EU imports under the GSP 
totalled €43 billion.   The EU's new GSP scheme came into force on 1 January 2006, although a provisional form of 
one of the arrangements in it (the GSP-plus) was fast -tracked to be in place from 1 July 2005.  The 
eligibility of countries placed in the GSP-plus in centive scheme was confirmed by an assessment of 
their effective implementation of core human a nd labour rights, good governance and environmental 
conventions at the end of 2005.   The previous GSP scheme, in place since 1995,  applied to imports of goods on which duty 
was liable on entering the EU market, and that were not already duty-free under the 
most-favoured-nation (MFN) tariff clause.  Of th e approximately 11000 tariff lines in the EU, about 
2000 were already duty-free under MFN.  GSP applies to about 7000 of the re maining 9000, with the 
exception of arms and ammunition.  
 There were five sets of arrangements in the EU's GSP scheme.  The general arrangements 
covered roughly 7,000 pr oducts, of which 3,300 were classified as non-sensitive and 3,700 were 
classified as sensitive products.  Non-sensitive pr oducts enjoyed duty-free access, while sensitive 
products benefited from a tariff reduction of 3.5 percentage points on the MFN tariff.  
  There were two sets of arrangements that tie d in additional preferences with the recognition 
of labour rights and environmental standards.  These schemes reduced  the tariff for sensitive products 
by 8.5 percentage points on the MFN tariff.   There were special GSP arrangements to combat drug production and trafficking.  This scheme benefited all Central American countries, countries belonging to the Andean Community, and 
Pakistan.  The number of products  covered by this scheme was higher than the general scheme 
(around 7,200), and they had duty-free access to the EU market.   There were special arrangements for the Least Developed Countries (LDCs):  'Everything but 
Arms'.  For the world's 50 poorest countries, this allowed duty-free access to the EU for all products 
except arms and ammunition.  2. The new system:  three sets of arrangement instead of five 
 The revised system is designed to be simpler,  more transparent and more stable.  The new 
GSP remains unchanged until the end of 2008, thus pr oviding stability and predictability for importers 
and exporters.  At the end of this period, the allo cation of preferences will be reviewed, for matching 
better with the evolving strengths a nd development needs of each country. 
  Since 1 January 2006, there are three arrangements, instead of five:    - the general arrangement:  product cove rage increases from about 6,900 to about 
7,200.  It incorporates 300 additional produc ts, mostly in the agriculture and fishery 
sectors, of interest for developing countries.  
  - the new 'GSP-plus' arrangement, for esp ecially vulnerable countries with specific 
trade, financial or development needs.  It covers around 7,200 products which can 
enter the EU duty-free.  The beneficiaries must meet a number of criteria (see below), 
including the ratification and effective app lication of 27 key international conventions 
on sustainable development and good governance. 
  - the 'Everything but Arms' arrangement remains unchanged.  WT/COMTD/N/4/Add.3 
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3. 'GSP plus':  A new deal for vulnerable countries 
 On the basis of findings from international organisations including the UN and ILO, the 
Commission decided, on 21 December 2005, to grant G SP-plus benefits to the five Andean countries 
(Bolivia, Columbia, Ecuador, Peru and Venezuela), to six Central American countries (Costa Rica, 
El Salvador, Guatemala, Honduras, Nicaragua and Panama), and to Moldova, Georgia, Mongolia and 
Sri Lanka. 
  In order to benefit from 'GSP-plus', countries had to have:  
¾ ratified and effectively implemented the 16 core conventions on core human and 
labour rights and seven (out of 11) of th e conventions related to good governance and 
the protection of the environment, by the end of October 2005.  At the same time, beneficiary countries were required to make  the commitment to ratify and implement 
effectively those international conventions which they had not yet ratified, and this 
within the lifetime of the new GSP Regulation, i.e. by 31 December 2008 (see 
below),  
 
¾ provided comprehensive information concer ning ratification of the conventions, the 
legislation and measures to implement th e conventions required for GSP-plus, and 
made a formal request to qualify for GSP-plus by 31 October 2005, 
 
¾ demonstrated that their economies are "dep endent and vulnerable". Dependence is 
defined as meaning that the five largest se ctions of its GSP-c overed exports to the 
Community must represent more than 75 pe r cent of its total GSP-covered exports.  
In addition, GSP-covered e xports from that country must also represent less than 
1 per cent of total EU imports under GSP. 
  List of Conventions to qualify for 'GSP plus':   Core human and labour rights UN/ILO Conventi ons (all must be ratified and effectively 
implemented for GSP plus to apply):  
 
International Covenant on Civil and Political Rights;   International Covenant on Economic Social and 
Cultural Rights;  International Convention on the Elim ination of All Forms of Racial Discrimination;  
Convention on the Elimination of All Forms of Di scrimination Against Women;  Convention Against 
Torture and other Cruel, Inhuman or Degrading Tr eatment or Punishment;  Convention on the Rights 
of the Child;  Convention on the Prevention and Puni shment of the Crime of Genocide;  Convention 
concerning Minimum Age for Admission to Employment (No 138);  Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No 182);  
Convention concerning the Abolition of Forced La bour (No 105);  Convention concerning Forced or 
Compulsory Labour (No 29);  Convention con cerning Equal Remuneration of Men and Women 
Workers for Work of Equal Value (No 100);  Conv ention concerning Discrimination in Respect of 
Employment and Occupation (No 111);  Conven tion concerning Freedom of Association and 
Protection of the Right to Organise (No 87);  Convention concerning the Application of the Principles 
of the Right to Organise and to Bargain Collect ively (No 98);  International Convention on the 
Suppression and Punishment of the Crime of Apartheid. 
 WT/COMTD/N/4/Add.3 
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  Conventions related to the environment and to governance principles (seven must be ratified 
and effectively implemented for GSP-plus to appl y; all must be ratified and implemented by 
31.12.2008): 
 Montreal Protocol on Substances that deplete the Ozone Layer;  Basel Convention on the Control of 
Transboundary Movements of Hazardous Wastes and Their Disposal;  Stockholm Convention on 
Persistent Organic Pollutants;  Convention on In ternational Trade in Endangered Species of Wild 
Fauna and Flora;  Convention on Biological Divers ity;  Cartagena Protocol on Biosafety;  Kyoto 
Protocol to the UN Framework Convention on Climate Change;  UN Single Convention on Narcotic 
Drugs (1961);  UN Convention on Psychotropic Su bstances (1971);  UN Convention against Illicit 
Traffic in Narcotic Drugs and Psychotropic S ubstances (1988);  UN Convention Against Corruption 
(Mexico).  
 
4. A simpler mechanism for graduation 
 Certain products from GSP beneficiaries can be  graduated from the scheme, if they become 
competitive on the EU market.  This is a sign th at these products no longer need the GSP to boost 
their exportation.  Thus, graduation is not a penalty, but indicates that the GSP has successfully performed its function, at least in relation to the co untry and product in questio n.  This ensures that 
the GSP focuses on the countries most in need and he lps them play a greater role in international 
trade.  
 Changes have been made to the graduation mech anism to make it simpler in the new system.  
The previous criteria (share of GSP imports, devel opment index and export-specialisation index) have 
been replaced with a single straightforward criteri on:  share of the Community market expressed as a 
share of exports from GSP countries.  This share is 15 per cent, with 12.5 per cent for textiles and 
12.5 per cent for clothing. 
 
 Graduation will be assessed at the end of 2008,  except in the case of textiles and clothing 
which will be reviewed annually to reflect properly the possibility of sharp increases in textile and 
clothing exports.  
 
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