Opinion of the European Economic and Social Committee on the ‘generalised system of preferences (GSP)’
Date: 2004-02-25
Institutions: European Economic and Social Committee
Subjects: developing countries, generalised preferences, sustainable development

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the ‘generalised system of prefer-
ences (GSP)’

(2004/C 110/10)

On 20 January 2003 the Commissioner for Trade, Mr Pascal Lamy, asked the European Economic and
Social Committee, under Article 262 of the Treaty establishing the European Community, to draw up an
opinion on the Generalised System of Preferences.

The Section for External Relations, which was responsible for preparing the Committee's work on the
subject, adopted its opinion on 6 February 2004. The rapporteur was Mr Pezzini.

At its 406th plenary session (meeting of 25 February 2004) the European Economic and Social Committee
adopted the following opinion by 117 votes to one with no abstentions.

1. Introduction

few decades,

Over the last

1.1
the EU has consistently
adjusted and updated its policy on trade preferences for devel-
oping countries in the light of developments in the situation.
The latest major revision of the Generalised System of Prefer-
ences (GSP) came into force on 1 January 1995 to cover the
ten-year period starting on that date. It is, therefore, due to
expire on 31 December 2004 and this necessitates a further
revision.

industrial and agricultural products in a new Regulation to
come into effect on 1 January 1999 and remain in force until
31 December 2001. The EESC gave its approval
to these
proposals. (1) They were subsequently embodied in Council
Regulation (EC) 2820/98.

In 2001,

the Commission introduced

1.4
proposals
(COM(2001) 293 final) for a modified regime to cover the
period from 1 January 2002 to 31 December 2004. The EESC
to these proposals, (2) which were
also gave its approval
enacted as Council Regulation (EC) 2501/2001.

1.2
The existing guidelines introduced a number of impor-
tant changes. They replaced the traditional approach of
granting duty-free market access for limited quantities with the
concept of modulation, which provides limited preferences for
unlimited quantities. At the same time, new rules were intro-
duced on graduation, allowing for the exclusion of certain
sectors of exports from specific beneficiary countries.

1.2.1
the form of
special
intended to promote the objectives of:

Subsequently, additional preferences were offered in
incentive arrangements. These were

— achieving sustainable development;

— assisting the Least Developed Countries;

— suppression of drug production and trafficking;

— protection of labour rights;

— environmental protection.

1.2.2
Provisions exist for the temporary withdrawal of bene-
fits from countries which are in breach of human rights, have
committed serious and systematic violations of core labour
standards, have exhibited shortcomings in customs controls,
have connived at drug trafficking, have been involved in frau-
dulent behaviour or unfair trading practices, have infringed
international conventions concerning the conservation and
management of fishery resources or have contravened one or
more of a number of other requirements. However, this sanc-
tion has been invoked so infrequently as to be largely ineffec-
tive; the only country presently being disciplined in this way is
Myanmar.

In 1998,

1.3
in order to facilitate the application of the
GSP, the Commission introduced proposals (COM(1998) 521
final) bringing together the widely differing provisions for

2. The Commission proposals

2.1
The Commission originally envisaged publishing a docu-
ment in September 2003 to set out its proposals for the new
regime to come into effect on 1 January 2005. Subsequently, it
decided to delay the introduction of the new system for a
period of one year and to put forward a proposal for an
interim arrangement in the intervening period, which would
continue the existing guidelines with some relatively minor
modifications, primarily of a technical nature.

2.1.1
The decision to delay the introduction of fundamental
changes to the system has been attributed inter alia to a wish
to await the results of the Doha round of WTO negotiations
and a desire not to prejudice the outcome of these talks. An
additional factor was the complaint brought against the EU at
the WTO by India. It was also considered that it would be
advantageous to postpone the introduction of the new guide-
lines until some time after the enlargement of the Union had
taken place, in order to give the new Member States more time
to adjust; one of these (Cyprus) is currently a GSP beneficiary.

The ten-year period for

the new regime is now
2.1.2
expected to commence on 1 January 2006; even in the event
that implementation of the Doha round of negotiations has not
been achieved by that date, the Commission has now decided
that it will not seek a further prolongation of the status quo.
The relative failure of the Cancun talks does not bode well for
a successful conclusion of the Doha round within this time-
scale.

(1) Opinion on the Proposal for a Council Regulation (EC) applying a
multiannual scheme of generalized tariff preferences for the period
1 January 1999 to 31 December 2001 - (COM(1998) 521 final -
98/0280 (ACC)),

(OJ C 40 of 15.02.1999)

(2) Opinion on the Proposal for a Council Regulation (EC) applying a
scheme of generalised tariff preferences for the period 1 January
2002 to 31 December 2004 - COM(2001) 293 final - 2001/0131
(ACC), (OJ C 311 of 07.11.2001

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2.2
The Commission proposals for the interim period were
published in September 2003 (COM(2003) 634 final) and the
EESC duly gave its approval to these arrangements. (3)

2.3
In accordance with the request received from Mr Lamy,
the EESC now sets out its observations and recommendations
on the form which the guidelines for the new definitive GSP
regime, to be introduced at the end of this interim period,
should take.

3. EESC comments

3.1
The EESC believes that the objectives of the present
system (as set out above) are worthwhile and should form the
basis of any new system which is designed to replace the
current arrangements.

3.2
The challenge must now be to design a system that will
ensure effective implementation of the EU's policies in these
areas.

3.3
In this context, the EESC notes that the special incentive
arrangements have largely failed to have the desired impact. At
the latest count, only one country (the Republic of Moldova)
had been included in the special incentive arrangements for the
protection of labour rights (a second country, Sri Lanka, is due
to be included in February 2004) and none at all in the special
incentive arrangements for the protection of the environment;
this is a clear indication that the special incentive arrangements
transpired to be incentives. The EESC therefore
have not
these mechanisms
considers that a fundamental review of
should form part of the revision process.

In a previous opinion on this subject, (4) the EESC
3.3.1
commented that the Commission's proposals to improve these
arrangements might not have gone far enough to make the
incentives attractive to the beneficiary countries. This raises the
issue of whether it is possible, within the restrictions of the
modulated system, with its limited preferences, to offer incen-
tives to the countries concerned to adopt the desired modes of
behaviour.

The additional flat-rate reduction of 3.5 percentage
3.3.2
points, giving a total reduction of 7.0 percentage points, might
well constitute an inadequate incentive compared to the enor-
mous sums of money involved in drug trafficking or the
daunting cost to the national coffers of the beneficiary coun-
tries of implementing environmental projects.

preferable to offer the incentive on an ex-ante basis in order to
encourage the countries concerned to adopt the required poli-
cies. However, neither of
these approaches will have the
desired effect unless the preferences are of sufficient magnitude
to constitute a worthwhile inducement.

The EESC considers

that, whatever measures

3.4
are
adopted, they should be transparent, coherent, objective and
non-discriminatory. They should be based on internationally
agreed standards and internationally-recognised criteria, where
these exist, including the eight core ILO labour standards. They
should also be compatible with WTO regulations and other
treaty commitments.

In its previous opinion, (5) the EESC observed that the
3.5
revision introduced at that time stopped short of fully harmo-
nising and unifying all the rules and procedures of the GSP and
expressed the hope that advantage would be taken of the major
revision in 2004 to simplify, harmonise, streamline, codify,
reduce and unify the entire system. It now reiterates this state-
ment and stresses the importance which it attaches to this
issue; simplification is fundamental to the improved operation
of the GSP and to any prospect of realising its objectives. The
existing arrangements are characterised by a lack of clarity,
concision and structure.

the factors which is contributing to the
One of
3.6
complexity of
the present arrangements is the system of
graduation, whereby specific sectors of exports from individual
beneficiary countries can be excluded on the grounds that
support for those particular industries in those territories is no
longer required and its prolongation cannot be justified in the
context of aid to developing nations, even though the continu-
ance of support for other industries in the same nation is envi-
saged. While the EESC gave its approval (6) for retaining the
system of graduation in the context of the interim arrange-
ments for the period from 1 January 2002 to 31 December
2004, it feels that this process should be reviewed as part of
the more thorough-going revision which is now to take place.

In a number of recent opinions, (7) the EESC has laid
3.7
emphasis on the essential need for legislative proposals to be
accompanied by a detailed impact assessment. It hopes that the
Commission will prepare such an impact assessment of its
proposals to revise the GSP system.

4. The views of civil society

3.3.3
There is also the question of how the incentive can
best be structured; whether it is better to grant the reduction
on an ex-post basis in recognition of the fact that a beneficiary
country has complied with the requirements or whether it is

(3) Opinion on the Proposal for a Council Regulation amending Regu-
lation (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 - COM(2003) 634
final – 2003/0259ACC, (CES 1623/2003 of 10.12.2003).

(4) Opinion on the Proposal for a Council Regulation (EC) applying a
scheme of generalised tariff preferences for the period 1 January
2002 to 31 December 2004 - COM(2001) 293 final - 2001/0131
(ACC),

(OJ C 311 of 07.11.2001, § 3.6).

4.1
On 10 June 2003 the EESC conducted a hearing of civil
society representatives at its Brussels headquarters. The views
set out in this section reflect the written submissions received
and the interventions made at the hearing.

(5) Opinion on the Proposal for a Council Regulation (EC) applying a
scheme of generalised tariff preferences for the period 1 January
2002 to 31 December 2004 - COM(2001) 293 final - 2001/0131
(ACC),

(OJ C 311 of 07.11.2001

(6) Ibid.
(7) Opinion on Simplification,

(OJ C 48 of 21.02.2002), Opinion on
the Communication from the Commission – simplifying and
improving the regulatory environment - COM(2001) 726 final (OJ
C 125 of 27.05.2002) and the Opinion on Simplification,
(OJ C
133 of 06.06.2003).

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4.2
In general there was a feeling that the present system
was not working as well as it might. Several respondents said
that they had serious doubts about the efficacy of the preferen-
tial tariffs but they lacked any means to substantiate them.
Evaluations of the success of the system were difficult to make
because of the paucity of available data. Others pointed to an
imbalance in the distribution of benefits; 75 % of the total
volume of tariff reduction goes to Eastern countries, of which
one third is to China. Concerns were expressed that
the
preponderance of benefits went to the most advanced of the
developing countries and not to the Least Developed Countries.
international traders rather than nation states are
Frequently,
the major beneficiaries. It was felt that the impact of the GSP
was often outweighed by other factors, such as non-tariff
barriers.

4.3

Several problems were identified:

— Tariff erosion is undermining the impact of the GSP. As
tariffs in general are reduced, the scope for giving preferen-
tial treatment on a significant scale to selected countries is
diminished. The conclusion of the Doha negotiations is
expected to produce further across-the-board reductions.

— The system is susceptible to fraud. It is relatively easy for
unscrupulous traders established in countries that are not
eligible for preferential tariff rates to export their goods to
an eligible country and thence re-export them to the EU
under the guise of products of that country.

— Even where fraud is not involved, the process of verifying
country of origin is complex, particularly for manufactured
articles containing a number of materials or sub-compo-
nents; in many cases, this imposes unacceptable compliance
burdens on the EU importer.

— The rules, especially in relation to graduation, are too

complex and lead to confusion and controversy.

— There is a lack of cohesion between the GSP system and
In some instances, countries can

other EU instruments.
benefit from quotas under:

Some respondents felt that the current list of beneficiary

4.5
countries was inconsistent because:

a) the range of development stages comprised in the list is too

wide;

b) developing economies and transitional economies are inter-

mingled;

c) several beneficiary countries also have preferential status via

bilateral or regional trade agreements.

Others felt that GDP per capita should not be the defining
criterion because some countries with a low per-capita GDP
had a strong, or even dominant, position in the world trade in
particular industrial sectors. Trade union representatives argued
that adherence to core labour standards, environmental protec-
tion and combating drug trafficking should be the sole criteria.
Many respondents held the view that the list of beneficiaries
should be restricted to the 49 nations on the UN list of Least
Developed Countries.

There was general agreement

4.6
that basic preferences
should be granted on an ex ante basis, but that special prefer-
ences – if granted at all – should be awarded on an ex post
basis.

4.7

Suggestions for simplification included:

— reducing the list of beneficiary countries

— reducing the number of industrial sectors and product cate-

gories

— excluding countries which have a bilateral agreement with

the EU

— excluding countries which benefit from a regional trade

agreement

— abolishing special preferences or reducing their number

— simplifying the rules regarding the country of origin

a) a bilateral agreement with the EU;

— simplifying or deleting the graduation clause

b) autonomous product-specific quotas granted every year
irrespective of origin;

in favour of all third countries,
and

c) preferential tariffs granted under the GSP system.

4.4
Views were sharply divided on the question of which
objectives the GSP system should be designed to pursue for the
next ten-year period. The trade union organisations were firmly
of
the opinion that core labour standards, environmental
protection and the suppression of drug production and traf-
ficking should remain an essential part of the system; even to
the extent of excluding countries which did not comply with
these requirements, regardless of their economic status. Conver-
sely, the trade associations, while recognising the great impor-
tance of these issues, felt that the GSP was not a suitable instru-
ment for dealing with such problems and that including them
made the application of the preferential scheme more difficult,
as well as resulting in some legal uncertainty.

— eliminating all ad valorem duties of 3 % or less and all

specific duties of EUR 5 or less.

Proponents of limiting the beneficiaries to the 49 Least Devel-
oped Countries pointed out that this would ipso facto result in
a major simplification of the system.

4.8
There was a general feeling that the operation of the
graduation clause was not working satisfactorily and had led to
a great deal of controversy. One respondent went so far as to
say that ‘the current system of graduation is totally blind and
untransparent’. It was noted that loss of GSP status often led to
the curtailment of FDI in the country concerned because the
investment had been predicated on the existence of the prefer-
ential tariffs; the countries excluded therefore suffered a double
penalty. Another problem is that the period of reference used
for updating the graduation is too far removed from the
updating point; for example, the reference period for 2003 is
1997-1999.

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4.9
It is generally considered that there is not only a lack of
coherence in the general trade and development policies of the
EU but that these are sometimes contradictory. Rectifying this
situation and achieving a proper balance between the various
factors to be taken into consideration will require a coordinated
approach from all of the EU institutions and the active involve-
ment of a number of Directorate Generals within the Commis-
sion.

5. The views of third countries

The same questionnaire was sent to the governments
5.1
and representative organisations in a number of the beneficiary
countries. Regrettably, very few replies were received and the
results have been excluded from this survey as it is considered
that the response is too low to represent a statistically signifi-
the EESC continues to be actively
cant sample. However,
engaged in assisting the developing countries to build their
capacities to respond to requests of this nature.

6. Specific comments

It seems likely, given its inauspicious start,

6.1
the
Doha round of GATT negotiations will be as protracted as its
predecessors. The EESC therefore endorses the Commission's
decision to proceed with the introduction of the new system
with effect from 1 January 2006 and not to await the outcome
of the Doha round at some uncertain time in the future.

that

6.2
The initiative which the EU has launched under its
Everything But Arms deal for the 49 Least Developed Countries
means that they are effectively removed from the GSP regime.
As they are entitled to export all other products (with some
transitional exceptions in the agricultural field) to the EU in
unlimited quantities on a duty-free basis, the GSP no longer
applies to them, since you cannot reduce by preferences that
which has already been set at zero.

6.3
The GSP is one element in the EU's development policy.
As such, it must not be out of kilter with the other elements of
this policy. Changes to the GSP system have to be considered
the overall development strategy. This will
in the light of
require a close degree of coordination between the relevant
Directorates-General of the Commission.

The EESC hopes that when the new system is introduced
6.4
the opportunity will be taken to harmonise all the rules and
procedures of the scheme.

6.5
The GSP is primarily aimed at assisting developing
countries to develop their economies. It cannot be a panacea
for all the problems faced by those countries.

Various criticisms have been levelled at the existing GSP

6.6
system, viz:

— there are too many countries covered by the scheme;

— the special incentive arrangements have failed;

— there is an imbalance in the distribution of benefits;

— the graduation system is too complex;

— the scheme is susceptible to fraud;

— the impact of the scheme has been diminished by tariff

erosion.

6.6.1
The EESC agrees that there are too many countries
covered by the GSP scheme. The current list of eligible nations
extends to 174 and within that figure there are wide discrepan-

cies in state of development, volume of trade, per-capita GDP,
level of poverty and adherence to
level of industrialisation,
internationally accepted standards of social responsibility.

6.6.1.1
On the one hand, it includes major trading nations
such as China, India, the Russian Federation and South Africa,
who are formidable competitors of the EU in many market
sectors; at the other end of the scale, it embraces remote island
territories with miniscule economies such as Christmas Island,
Heard Island, the McDonald Islands, South Georgia and the
South Sandwich Islands; in between these two extremes fall tax
havens such as the Cayman Islands, oil-rich nations like
Kuwait, countries with well-developed economies such as Egypt
and those with totalitarian regimes such as Zimbabwe.

The EESC agrees with the proposition that per-
6.6.1.2
capita GDP cannot be the sole criterion used to determine elig-
ibility for inclusion in the GSP arrangements. It also shares the
concerns which have been expressed in many quarters that an
undue proportion of the benefit
is going to those nations
which have least need of it. In order to ensure that assistance
under the GSP system is concentrated on those countries with
the greatest need, the EESC recommends that the new guide-
lines should exclude the following categories from participa-
tion:

— those nations which are not designated by the United

Nations Organisation as ‘developing countries’;

— those nations which have bilateral or regional trade agree-

ments with the EU;

— those nations which are members of OPEC;

— those nations which have a nuclear weapons programme;

— those nations which act as tax havens.

6.6.1.3
In order not to disadvantage nations with existing
bilateral or regional trade agreements with the EU, it should be
possible to modify the existing agreements in such a way as to
consolidate in those agreements any benefits to which they
may currently be entitled under the GSP arrangements.

The EESC attaches prime importance to promoting
6.6.2
the observance of core labour standards, protecting the envir-
onment and combating drug trafficking but it has to be said
that the present GSP regime has been totally ineffective in
achieving any of
these aims. Only one country has been
included in the special incentive arrangements for the protec-
tion of labour rights and none at all in those for the protection
of the environment while there is no evidence that the special
incentive arrangements for combating the production and traf-
ficking of drugs, from which twelve countries have benefited,
has had any impact whatsoever on the drug trade.

6.6.2.1
The EESC regards it as pointless to prolong a system
which, while admirable in its objectives, has so patently failed
in practice. It believes that consideration should be given to
devising more effective ways of meeting these worthwhile
objectives; if it is felt that the GSP system should be employed
to this end, then this can best be achieved by making greater
use of the temporary withdrawal mechanism. To date, this has
been invoked against only one of the countries in the list of
174, despite the fact that breaches of the required standards
can readily be found passim. In many cases, this is because it is
deemed impolitic to offend or antagonise the regimes of the
countries concerned; the EESC cannot condone the subordina-
tion of matters of principle to political expediency.

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6.6.2.2
The EESC recommends that, as part of the new
guidelines, the Commission should lay down clear standards for
the protection of labour rights, the protection of the environ-
ment, the suppression of drug trafficking, the observance of
fundamental human rights, sustainable development and other
areas of concern such as consumer protection and animal
welfare. Countries which are seen to be in serious and
systematic breach of
in the first
instance, have their attention drawn to their defalcations and
be required to correct them; where this is ignored, a public
warning should be issued that failure to meet the required stan-
dards by a specified date will result in the temporary with-
drawal of all GSP benefits; countries which do not respond to
these warnings should then have all preferences withdrawn
until such time as they have complied with the requirements.
In order to produce the desired effect, this must be regarded as
a measure to be applied routinely, where necessary, and not as
a weapon of last resort, to be used only in extremis.

these standards should,

6.6.2.3 Where internationally-accepted standards exist, as in
the case of the core ILO labour standards, (8) these should form
the basis of the applicable EU standards. However, the absence
of such international standards should not be an impediment
to the formulation and application of relevant EU standards.
The EU is entitled to impose conditions on the conduct of
trade on preferential terms at its absolute discretion. The temp-
tations to connive at drug-trafficking, turn a blind eye to viola-
tions of human rights and plunder the environment are strong
and it is necessary to provide a countervailing force of suffi-
cient weight. At the same time,
it is essential to stress the
moral imperative in these issues in order to counter the accusa-
tion that these requirements are merely another form of non-
tariff barrier in disguise.

6.6.3
The EESC accepts that there is an imbalance in the
current distribution of benefits, with the major beneficiaries
being the more advanced of the developing countries and not
those which stand most in need of assistance. It feels that the
elimination of the categories set out in 6.6.1.2 above would go
some way towards redressing the balance. In order to promote
economic development in the poorer countries, preferences for
products must be fixed primarily according to the export
interest of
It would simplify the
process considerably if there were to be some rationalisation of
the industrial sectors and product categories covered by the
scheme.

the beneficiary country.

6.6.4
The EESC accepts that there is too great a degree of
complexity in the present system of graduation and that it has
led to considerable controversy and discontent, particularly
from those countries which have been subjected to it; some
improvement is obviously desirable but the EESC does not
agree with those who postulate that graduation should be
discontinued. Graduation should not be seen as a sanction; it
is, rather, a recognition of the fact that the preferences have
worked and that a particular industrial sector has advanced to
the point where it no longer requires preferential assistance.
That this is indeed the case, is demonstrated by the fact that
eight of the nine industries which have been graduated to date
have continued to increase the volume of their exports to the

(8) ILO standards, 29, 87, 98, 100, 111, 138 and 182

EU after graduation. The assumption that sectors, and nations,
will eventually reach this stage is inherent in the GSP system.

6.6.4.1
The EESC recommends that the graduation system
should be simplified, rendered more transparent and should
combine a statistical economic assessment based on a formula
of market indicators with a serious market evaluation of the
sector concerned. It would be advantageous for DG Enterprise
to be involved in this exercise and the views of European
industry should also be canvassed.
In addition, the interval
between the graduation point and the reference period should
be reduced.

6.6.4.2
The EESC recommends that the provision introduced
in the interim arrangements whereby the graduation process
should not be applied to any beneficiary country whose
exports to the EC account for less than 1 % of total Community
imports of products covered by the Community preference
scheme in at least one of the reference years, should be retained
in the guidelines for the new definitive system. Indeed, it feels
that consideration could well be given to increasing this
threshold limit.

6.6.5
The EESC is concerned by the incidence of fraud and
considers that every possible measure should be introduced to
reduce it. The rules of origin are too complex and are difficult
to apply; they are easily misunderstood and require in-depth
knowledge of a huge quantity of legal texts; consequently they
act both as a constraint on trade and an incitement to fraud.
Too often, beneficiary countries are merely serving as conduits
for the products of non-beneficiary nations. The incidence of
GSP Form A Certificates incorrectly issued or falsified in certain
countries of origin in the 1990s is a case in point. There must
be an effective system of inspection, verification and enforce-
ment. This will require the strengthening of customs services
within the EU and better coordination between them.

Beneficiary countries must also be required to
6.6.5.1
improve their controls;
those beneficiaries who connive at
fraud by operating ineffectual control mechanisms should
suffer temporary withdrawal of their benefits. The EU is incur-
ring an annual cost in excess of EUR 2.2 billion by way of lost
customs revenue in order to fund the GSP scheme. Conversely,
the participating countries are receiving a collective annual
benefit of that amount; if the EU is to give advantages of that
magnitude, it is entitled to impose terms and conditions on the
receipt of those advantages.

6.6.5.2
There is also a need for closer contact and coopera-
tion between the customs services of the EU and those of the
originating countries. This may require financial commitments
at Community level to provide liaison between EU customs
officials and their counterparts in developing countries; in addi-
tion,
it may require training facilities to be provided to the
customs services of those nations. There is also a security
it has to be
aspect to this situation;
recognised that, in reality, the external frontiers of the EU lie
not only at the boundaries of its Member States but increas-
ingly in the territories of the countries from which its imports
emanate. The EESC is currently preparing an opinion on this
topic. (9)

in the current climate,

(9) Opinion on the Proposal for a Regulation of the European Parlia-
the Council amending Council Regulation (EEC)
-

ment and of
No. 2913/92 establishing the Community Customs Code
COM(2003) 452 final – 2003/0167 (COD).

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6.6.6
The EESC recognises that the effectiveness of the GSP
preferences is constantly being eroded by progressive across-
the-board tariff reductions as a result of successive rounds of
the GATT negotiations. It regards this situation as being inevi-
table and not necessarily undesirable.
It has been clearly
demonstrated that global tariff reductions have been very effec-
tive in stimulating world trade and increases in global commer-
cial activity can only be to the benefit of all trading nations.
Indeed the evolution of this process is such that the new guide-
lines, which are envisaged to remain in force for a ten-year
period, may well be the last application by the EU of a conven-
tional reduced-tariff system.

The EESC considers that

6.7
the present rules of origin
applied to preferential trading are too complex. As a result,
they create unnecessary compliance burdens for EU importers
and produce a system which is characterized by opacity and
confusion. Such a system can only be conducive to fraud. The
EESC would like to see these rules replaced by new rules drawn
up on the lines of those currently in force for non-preferential
goods.

6.8
A further measure of simplification would be to elimi-
nate duties where preferential treatment results in: ad valorem
duties of 3.0 % or less; specific duties of EUR 5 or less.

In order to give the governments of the developing
6.9
countries and EU importers time to adjust their planning, any
changes in the preferential treatment of a country should be
made public one year before entry into force.

The EESC considers that the new guidelines should be:
6.10
simple; predictable; easy to administer; consistent; transparent;
relevant; equitable; stable over time.

7. Conclusions

The EESC endorses the Commission's decision to intro-

7.1
duce the new system of GSP with effect from 1 January 2006.

7.2
The EESC urges that advantage should be taken of the
opportunity to harmonise, unify and streamline all the rules
and procedures of the GSP system in the new guidelines.

Brussels, 25 February 2004.

7.3
The EESC considers that the Commission should issue a
detailed impact assessment with its proposals for the new
guidelines.

the existing special

The EESC accepts that

7.4
incentive
arrangements have been ineffectual and advocates that they
the Commission should lay
should be withdrawn;
down internationally acceptable standards based on the funda-
mental principles of European society; countries that violate
any of those standards should have their access to all preferen-
tial tariffs temporarily suspended.

instead,

The EESC agrees with the view that there are too many
7.5
participating nations in the GSP system and argues that these
should be reduced as outlined in the text.

7.6
The EESC recommends that the graduation mechanism
should be retained but that it should be simplified and rendered
more transparent.

The EESC is concerned by the incidence of fraud in the

7.7
present system and calls for tighter controls to be introduced.

The EESC regards the existing preferential rules of origin
7.8
as being too complex and suggests that they could be simplified
on the lines of the current non-preferential rules of origin.

The EESC believes that simplification of

7.9
the system
should be a primary objective for the new guidelines. It hopes
that the proposals which it has made to, inter alia, reduce the
number of beneficiary countries, replace the special incentive
arrangements by application of
the temporary withdrawal
mechanism based on clearly-defined standards, replace the
current rules of origin by rules based on the non-preferential
rules of origin, reduce the interval between the graduation
point and the reference period and rationalise the industrial
sectors and product categories covered by the scheme will go
some way towards achieving this goal.

7.10
This opinion, prepared at the request of Mr Lamy, is
an important first step in the consultation of civil society on
this issue. The EESC feels that the introduction of the new
guidelines should be preceded by further wide-ranging and
timely consultation on the proposals with the stakeholders,
both in the EU and in the developing countries.

The President
of the European Economic and Social
Committee
Roger BRIESCH