Proposal for a Council Regulation amending Regulation (EC) No 2501/2001 applying a scheme of generalised tariff preferences for the period from 1 January 2002 to 31 December 2004 and extending it to 31 December 2005
Date: 2003-10-29
Institutions: European Commission
Subjects: common commercial policy, generalised preferences

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 29.10.2003
COM(2003) 634 final

2003/0259 (ACC)

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 2501/2001 applying a scheme of generalised tariff
preferences for the period from 1 January 2002 to 31 December 2004 and extending it to
31 December 2005

(presented by the Commission)

EXPLANATORY MEMORANDUM

1.

2.

In accordance with the guidelines adopted in June 1994 for the period 1995 to 2004,
the  Community  adopted  at  the  end  of  2001  Regulation  No  2501/2001  applying  a
scheme  of  generalised  tariff  preferences  for  the  period  from  1  January  2002  to
31 December 2004. This latter date will see the expiry of both the ten-year guidelines
for  the  period  1995  to  2004  and  of  the  last  implementing  Regulation  for  the  years
2002 to 2004.

The new ten-year guidelines and their first implementing Regulation should normally
enter  into  force  on  1  January  2005.  Keeping  to  this  timetable  would  require  the
Commission  to  submit  its  proposal  for  a  Regulation  this  year  so  that  it  can  be
adopted  in  2004  at  the  latest.  But  the  wider  framework  of  the  GSP  is  that  of  the
WTO.  Given  that  the  round  of  multilateral  negotiations  launched  in  Doha  in
November 2001 will not be completed in time for this timetable to be kept  to, it is
proposed  to  defer  adoption  of  the  ten-year  guidelines  to  a  later  date  and  simply  to
renew the current Regulation No 2501/2001 for one year, namely 2005.

3.

This extension must be accompanied by a number of changes to the GSP. However,
these changes have to be compatible with the 1994 ten-year guidelines, namely:

– 

– 

– 

– 

– 

– 

maintenance of the level of the offer,

differentiation between sensitive and non-sensitive products and the associated
tariff modulation,

stability  and  predictability  by  establishing  multiannual 
Regulations,

implementing

annual  adjustment  of 
countries/sectors  with  a 
preferences and reinstatement of those in the opposite situation),

the  offer 
level  of  competitiveness  no 

through  graduation 

(exclusion  of
longer  requiring

exclusion  from  the  GSP  of  countries  at  a  high  level  of  development,  the
scheme's suspension in cases of fraud or unfair social or trade practices,

retention,  within  the  framework  laid  down  by  the  WTO,  of  social  and
environmental incentives, of specific incentive arrangements for efforts to fight
drug production and trafficking, and  a special scheme  for the  least-developed
countries.

4.

5.

The  main  proposed  change  is  to  the  annual  adjustment  of  the  offer  by  graduation.
Country/sector graduation has existed since 1996; this year, however, is the first time
that  it  has  been  applied  on  an  annual  basis.  Based  on  the  experience,  it  appears
necessary  not  to  apply  the  graduation  to  the  smallest  countries,  in  order  to
concentrate it most on the biggest beneficiaries.

Accordingly, the graduation mechanism can be modified in order to exclude, in a non
discriminatory  way,  all  beneficiary  countries  accounting  for  less  than  1%  of  GSP
imports.  In  practice,  this  will  focus  the  effects  of  graduation  on  the  principal  GSP

2

6.

7.

beneficiaries,  a  dozen  countries  accounting  for  the  bulk  of  GSP  trade1.  This  new
mechanism  does  not  prejudge  the  question  of  whether  further  amendments  will  be
necessary  within  the  new  GSP  regime  aiming  at  limiting  preferences  to  those
countries  which  are  more  vulnerable.  This  concentration  of  graduation  on  the
principal GSP beneficiaries constitutes a return to the very principles of graduation,
as set out in the 1994 guidelines. These guidelines noted that the leading beneficiary
countries dominated the Community's GSP, somewhat to the detriment of countries
which had greater needed of its benefits.

The second change of note concerns the conditions for granting the special incentive
arrangements  for  the  protection  of  the  labour  rights.  The  experience  of  requests
submitted  by  some  beneficiary  countries  has  shown 
their
characteristics,  the  developing  countries  face  specific  obstacles  in  integrating  and
applying  internationally  agreed  social  standards  (ILO  standards).  Accordingly,  the
incentivising  aspects  of  these  arrangements  should  be  bolstered,  something  which
could  be  done  temporarily,  subject  to  evaluation  of  the  beneficiary  countries'
progress in incorporating these standards into their legislation and practice.

that,  whatever 

Other proposed changes include abandoning the annual publication of an opinion on
the  upcoming  annual  graduation  in  the  Official  Journal.  Rather  than  being
informative,  this  opinion  sows  uncertainty  and  confusion  since  it  concerns
countries/sectors  which  are  not  necessarily 
that  will  "graduate"  (or
"degraduate")  when  the  actual  Commission  decision  is  adopted  on  the  basis  of
statistical data for the three most recent years available.

those 

The evaluation of the arrangements for drugs, initially planned for the last year of the
scheme's application (i.e. 2004) has to be deferred to the new last year of application
of the procedure, which , as a result of this Regulation, will be 2005.

1 

On  the  basis  of  most  recent  statistics  available,  the  list  of  countries  subject  to  graduation  next  time
(1 January 2006, or 1 January 2005 if it is decided to bring forward application of this new clause) is:
China, Russia, India, Thailand, Indonesia, Malaysia, Brazil, Pakistan, Saudi Arabia, the Philippines and
Vietnam. The main beneficiaries of this amendment (countries not subject to graduation) would be all
the  "drug"  countries  (except  Pakistan),  Argentina  (which  from  2005  will  no  longer  benefit  from  the
"crisis" clause introduced in 2003), Sri Lanka, Iran and Kuwait.

3

                                                
2003/0259 (ACC)

Proposal for a

COUNCIL REGULATION

amending Regulation (EC) No 2501/2001 applying a scheme of generalised tariff
preferences for the period from 1 January 2002 to 31 December 2004 and extending it to
31 December 2005

THE COUNCIL OF EUROPEAN UNION,

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular
Article 133 thereof,

Having regard to the Commission proposal,2

Having regard to the opinion of the European Parliament,3

Having regard to the opinion of the European Economic and Social Committee,4

Whereas:

(1)

(2)

(3)

Since  1971  the  Community  has  granted  trade  preferences  to  developing  countries
under its generalised tariff preference scheme.

The Community's common commercial policy must be consistent with and consolidate
the objectives of development policy, in particular the eradication of poverty and the
promotion of sustainable development in the developing countries.

The  multilateral  trade  negotiations  launched  at  fourth  ministerial  conference  of  the
World Trade Organisation in Doha in November 2001 are not yet over. It is therefore
premature to draw up guidelines for applying the scheme from 2005 to 2014, which is
a  valid  reason  for  renewing  the  current  scheme  for  one  year  in  accordance  with  the
guidelines in the communication from the Commission to the Council of 1 June 1994.5

(4)

Implementation of Council Regulation No 2501/2001 showed the need to amend some
of its provisions.6

2

3

4

5

6

OJ C [... ], [... ], p. [... ].
OJ C [... ], [... ], p. [... ].
OJ C [... ], [... ], p. [... ].
COM(1994) 212 final.
OJ L 346, 31.12.2001, p. 1. Last amended by Commission Regulation (EC) No 1686/2003 (OJ L 240,
26.9.2003, p. 8).

4

                                                
(5)

(6)

In  April  2003  the  Council  and  the  Commission  committed  themselves  to  examining
any  appropriate  amendment  to  the  annual  mechanism  for  excluding  beneficiary
countries/sectors  on  the  grounds  of  their  development  (graduation),  which  justifies
amendment of the relevant provisions of Regulation No 2501/2001. Article 12 should
therefore be amended to avoid any adverse impact on beneficiary countries whose low
volume  of  GSP-covered  trade  makes  them  vulnerable  to  any  change  in  tariff
preferences.

In order to take into account the individual characteristics of the developing countries
benefiting  from  the  GSP,  the  special  incentive  arrangements  for  the  protection  of
labour  rights  need  to  be  strengthened  in  order  to  give  more  encouragement  to  the
gradual  adoption  of  the  standards  set  out  in  the  International  Labour  Organisation
declaration.

(7)

Regulation (EC) No 2501/2001 should therefore be amended accordingly,

HAS ADOPTED THIS REGULATION:

Regulation (EC) No 2501/2001 is amended as follows:

Article 1

1)

2)

In Article 1(1) the words "and 2004" are replaced by ", 2004 and 2005".

At the end of Article 6(a) the words "tariff quotas" are replaced by the words "tariff
quotas adopted under Article 26 of the Treaty or  Annex 7 to Regulation (EEC)  No
2658/87".

3)

Article 12 is amended as follows:

a) Paragraph (3) is replaced by the following:

"3. On the basis of the most recent data available on 1 September of each  year, the
Commission  shall  establish  which  sectors  meet  the  conditions  laid  down  in
paragraphs  1  and  2.  However,  paragraphs  1  and  2  do  not  apply  to  beneficiary
countries  whose  exports  to  the  Community  account  for  less  than  1%  of  total
Community imports of products covered by the Community preference scheme in at
least  one  of  the  three  years  referred  to  in  paragraphs  1  and  2.  Similarly,  tariff
preferences removed pursuant to column D of Annex 1 shall be restored."

b) Paragraph (4) is deleted.

4)

Article 14(2) is replaced by the following:

"2.  The  special  incentive  arrangements  for  the  protection  of  labour  rights  may  be
granted to a country:

(a) the national legislation of which incorporates the substance of the standards laid
down  in  ILO  Conventions  Nos  29  and  105  on  forced  labour,  87  and  98  on  the
freedom  of  association  and  the  right  to  collective  bargaining,  100  and  111  on
non-discrimination  in  respect  of  employment  and  occupation,  and  138  and  182  on
child labour, and which effectively applies that legislation, or

5

(b)  which  is  engaged  in  significant  ongoing  efforts  to  incorporate  and  apply  the
substance of these standards.

In  the  case  provided  for  in  (b),  the  arrangements  may  be  accorded  for  a  limited
period, their renewal of subject to the beneficiary country giving proof of progress in
this area. The appraisal of such progress is carried out according to the memorandum
of understanding to be agreed by the authorities of the beneficiary country."

5)

6)

In Article 25(4) the year "2004" is replaced by "2005".

In Article 41(2) the year "2004" is replaced by "2005".

Article 2

This Regulation shall enters into force on the third day following that of its publication in the
Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, [... ]

For the Council
The President
[... ]

6

FINANCIAL STATEMENT

[... ]

DATE:
9 October 2003

1.

TITLE OF MEASURE:

Council  Regulation  amending Regulation (EC) No 2501/2001  applying  a  scheme  of
generalised  tariff  preferences  for  the  period  from  1  January  2002  to  31  December
2004 and extending it to 31 December 2005.

2.

LEGAL BASIS:

Article 133 of the Treaty.

3.

OBJECTIVES OF MEASURE:

The  aim  of  this  proposal  is  to  renew  for  one  year  the  current  GSP  Regulation
applicable  for  the  period  2002–2004,  pending  the  finalisation  of  the  Doha
Development Agenda.

COMMENTS:

This  Regulation  does  not  involve  new  expenditure  for  the  Community  budget.  It  does,
however, involve a loss of customs revenue.

In  2002,  the  last  year  for  which  information  is  available,  Community  imports  enjoying
preferences amounted to €52.503 billion. The average preferential margin (weighted by the
volume of trade) rose to 4.31%. The loss of income therefore amounted to €2.262 billion in
a full year.

The project in question is the renewal, for the year 2005, of the current Regulation (Council
Regulation No 2501/2001) applicable for the years 2002 to 2004. On this basis, the loss of
revenue would be maintained at this maximum annual level, meaning €2.262 billion for the
year 2005. Application of the new Article 12(3) would increase this loss of revenue by only
€146 million.

The only foreseeable variation in this revenue loss would be downwards since tariff erosion
is  an  ongoing  process,  excluding  de  facto  from  the  GSP  products  which  are  no  longer
taxable  (for  example,  ending  of  customs  duties  on  electronic  products  at  the  end  of  the
1990s as a result of a decision taken at the Singapore WTO ministerial conference in 1996).
However, the level will not be known until we know the customs duties applicable in 2005
following  application  of  the  tariffs  currently  under  negotiation  (Doha  Development
Agenda).

7