Opinion of the European Economic and Social Committee on the Proposal for a Council Regulation applying a scheme of generalised tariff preferences (COM(2004) 699 final — 2004/0242 (CNS))
Date: 2005-02-09
Institutions: European Economic and Social Committee
Subjects: administrative transparency, developing countries, fraud, generalised preferences, sustainable development

8.9.2005

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the Proposal for a Council Regu-
lation applying a scheme of generalised tariff preferences

(COM(2004) 699 final — 2004/0242 (CNS))

(2005/C 221/15)

On 10 November 2004 the Council decided to consult the Economic and Social Committee, under Article
262 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for External Relations, which was responsible for preparing the Committee's work on the
subject, adopted its opinion on 12 January 2005. The rapporteur was Mr Pezzini.

At its 414th plenary session of 9 and 10 February 2005 (meeting of 9 February), the European Economic
and Social Committee adopted the following opinion by 132 votes to 1 with 3 abstentions.

1. Introduction

1.1
Council Regulation (EC) No. 2501/2001 of 10
December 2001 (1) applying a multiannual scheme of general-
ised tariff preferences (GSP) will expire on 31 December 2005.
In July 2004, the Commission adopted guidelines (2) on the
role of the GSP for the next ten-year period, from 1 January
2006 to 31 December 2015. It has now published its propo-
sals (3) for the implementing regulation.

In 1994, the previous guidelines (4) for the ten-year
1.1.1
period 1994-2005 and their implementing regulations intro-
duced a number of important changes, such as tariff modula-
tion according to product sensitivity, graduation and special
incentive schemes. In 2001, a special arrangement for the Least
Developed Countries (LDC), ‘Everything but Arms’ (EBA), was
introduced for an unlimited period of time. Experience has
shown that some of these measures work well in practice and
should be continued while others would seem to require adjust-
ment in the light of experience gained.

1.1.2
The Community has granted trade preferences to
developing countries in the framework of its GSP since 1971.
Trade policy plays a key role in the EU's relations with the rest
of the world. The GSP scheme is part of that policy and must
be consistent with and consolidate the objectives of develop-
ment policy. To this end,
it must comply with the WTO
requirements and, in particular, with the GATT enabling clause
of 1979. It must also be compatible with the Doha Develop-
ment Agenda. A key priority is to help developing countries to
benefit from globalisation, in particular by linking trade and
sustainable development. In this context, it is understood that
sustainable development comprises a variety of aspects, such as
respect for fundamental human and labour rights, good govern-
ance and environmental protection.
the fight
against drugs is a shared responsibility of all countries.

In addition,

(1) OJ L 346 of 31.12.2001
(2) COM(2004) 461 final
(3) COM(2004) 699 final
(4) COM(1994) 212 final

The Commission has consulted widely on its guidelines
1.2
for the next ten-year period since they were first published.
However, because of the specialised statistics required, impact
assessments have been conducted internally. The Commission
will conduct an assessment of the impact on the outermost
regions of the EU once the Regulation has come into force.

It is not envisaged that the changes put forward in the
1.3
draft proposal would involve a significant change in the annual
loss of customs revenue as compared to the present situation.

2. The Commission's proposals

2.1
The proposals constitute a simplification of the present
system by reducing the number of arrangements from five to
three; this has been achieved by the introduction of a single
incentive arrangement to replace the three special
incentives
currently in place for the protection of labour rights, protection
of the environment and combating the production and traf-
ficking of drugs. Thus, the proposed scheme consists of:

— a general arrangement;

— a special incentive arrangement (SIA) for sustainable devel-

opment; and

— a special arrangement (EBA) for the Least Developed Coun-

tries.

2.2
A further measure of simplification would be achieved
by removing from the list of beneficiaries those countries that
presently enjoy preferential access to the Community market
under the terms of bilateral, regional or other free-trade agree-
ments (FTA). The Community would ensure that no country
would lose as a result of this measure by consolidating into the
relevant FTA the benefits for any particular product that had
previously received GSP treatment.

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to

continue

Preferences would

2.3
differentiated
according to the sensitivity of products. Common Customs
Tariff
(CCF) duties on products designated as non-sensitive
would continue to be entirely suspended, except for agricultural
components. The current flat-rate reduction of 3.5 percentage
points for sensitive products would be maintained.

be

2.4
The general arrangement would be open to all countries
except those which had been classified by the World Bank
during a period of three consecutive years as high-income
countries and where the five largest sections of GSP-covered
exports to the Community represented less than 75 % of the
total GSP-covered exports from that country into the Com-
munity. Any such countries that are currently beneficiaries
under the GSP system would be removed from the scheme on
the entry into force of the proposed Regulation. Beneficiary
countries, which also benefit from a commercial agreement
with the Community, covering at least all of the preferences
provided by the present scheme for that country, would also be
removed from the list of eligible countries.

The SIA for sustainable development is targeted at those
2.5
developing countries most in need. The additional preferences
would be granted immediately (subject to the submission of an
application) to developing countries that have ratified and effec-
the sixteen core conventions on
tively implemented all of
human and labour rights set out in Appendix 1 and at least
seven of the conventions relating to good governance and the
protection of the environment set out in Appendix 2. At the
same time,
the beneficiary countries would be required to
commit to ratifying and effectively implementing those interna-
tional conventions, which they had not yet ratified. A deadline
of 31 December 2008 would be set for the completion of this
process.

2.5.1
The conventions chosen are those with mechanisms,
which can be used by the relevant international organisations
to evaluate on a regular basis how effectively they have been
implemented. The Commission will take these evaluations into
account before deciding which of the applicant countries will
be selected to benefit from the SIA. Based on the applications
from the developing countries, the Commission would later
produce a list of the beneficiaries under the arrangement.

2.5.2
The applications from countries wishing to benefit
from the SIA would be required to be submitted within three
months of the date of publication of the Regulation.

2.6
The proposals include measures to reduce the impact on
a beneficiary nation when the United Nations removes it from
the list of LDCs. This would take the form of a transition
period for the gradual withdrawal of that country from the
EBA arrangement. At present, the country in question automa-
tically suffers immediate loss of all the GSP advantages that it
enjoyed as a LDC. The new mechanism allows for this process
to take place over a transitional period.

The graduation mechanism has been retained but has
2.7
been modified to make it simpler in operation. As at present, it
would be applied to groups of products from countries that are
competitive on the Community market and no longer need the
GSP to boost their exports but the current criteria (share of
preferential imports, development index and export-specialisa-
tion index) would be replaced by a single straightforward
criterion: share of the Community market, expressed as a share
of preferential
imports. Groups of products are defined by
reference to the ‘sections’ in the Combined Nomenclature. As
only those countries that are competitive for all the products in
a section would be graduated, small beneficiary countries
would not be graduated solely on the basis of a few competi-
tive products in a section.

Graduation would be applied to any beneficiary
2.7.1
country in respect of products of a section when the average of
Community imports from that country of products included in
the section concerned exceeds 15 % of Community imports of
the same products from all countries over a period of three
consecutive years. For certain textile products, the threshold is
reduced to 12.5 %.

2.8 Where the rate of an ad valorem duty reduced in accord-
ance with the provisions of the Regulation was 1 % or less, that
duty would be entirely suspended. Similarly, where a specific
duty amounted to EUR 2 or less per individual amount, the
duty would be entirely suspended.

2.9
The proposals include provisions for the temporary
withdrawal of preferential arrangements in respect of all or of
certain products of a country in certain specified circumstances.
These do not represent a significant departure from the status
quo. The Commission has indicated that these provisions are
still intended for use only in exceptional circumstances.

2.5.3
A further requirement is that the applicant countries
should be vulnerable countries. The definition of a vulnerable
country for this purpose is that the World Bank should not
have classified it as a high-income country or that its GSP-
covered exports to the Community should amount to less than
1 % of total GSP-covered imports to the Community.

2.9.1 When a product originating in a beneficiary country is
imported on terms which cause, or threaten to cause, serious
like or directly
difficulties
competing products, normal CCF duties might be reintroduced
at any time at
the request of a Member State or on the
Commission's initiative.

to a Community producer of

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a Generalised

the Regulation

The Commission would be assisted in its task of imple-
2.10
menting
Preferences
by
Committee, composed of representatives of the Member States
and chaired by the Commission. The Committee would receive
reports from the Commission on the operation of the system
and could examine any matter relating thereto but, in particu-
lar, it would be involved in determining such matters as the
eligibility of an applicant country for access to the SIA for
sustainable development, the temporary withdrawal of benefits,
the re-imposition of CCF duties in cases of hardship to a Com-
munity producer and the establishment of transitional periods
for the loss of EBA benefits for countries removed from the
United Nations' list of LDCs.

ciary nations and not to those which stood most in need. It
warmly welcomes the fact that the Commission has addressed
this issue but wonders whether the proposals go far enough in
this direction.

the

The

that

EESC recommended (7)

3.5
graduation
mechanism should be retained but that it should be simplified
and rendered more transparent. It endorses the Commission's
proposals in this area and considers that they will achieve a
significant measure of improvement in both respects. In par-
the substitution of a single, clear criterion for the
ticular,
existing multiple criteria should both simplify the process and
enhance its transparency.

3. General comments

The GSP is an important element of the EU's foreign
3.1
trade policy, which has far-reaching repercussions; it exerts a
considerable influence on events in the developing world,
it
impacts the EU budget, it affects relationships with the EU's
trading partners in such organisations as the WTO and it has
significant consequences for European industry, particularly
manufacturing industry. It is one of the few matters that is
managed at the European level in a federal rather than a non-
federal manner; the Commission has exclusive competence in
this area. Globalisation has enhanced the importance of GSP;
the EU has utilised this regime to help developing countries
benefit from the globalisation process. At the same time, it has
enabled the EU to promote the practice of sustainable develop-
ment by granting preferential terms of access to the European
market to those countries which show respect for the funda-
mental principles of human rights.

3.2 When the Commission published the guidelines (5) that
form the basis of the present proposals, the EESC issued an
Opinion (6) commenting in detail on the issues raised. In that
Opinion, it stated that simplification of the system should be a
primary objective.
those measures
contained in the Commission's proposals that are aimed at
simplifying the structure. In particular,
it considers that the
reduction in the number of arrangements from five to three
will considerably facilitate the attaining of that objective.

therefore welcomes

It

3.3
The EESC also called for the number of participating
nations to be reduced (7) and proposed, inter alia, the exclusion
of countries that currently benefit from preferential access to
the Community under the terms of an FTA, with the safeguard
that any preferences from which they benefited under the
current GSP system should be subsumed into the relevant bi-
lateral agreement. It is pleased to note that this recommenda-
tion has been adopted.

The EESC expressed concern (7) that the bulk of Com-
3.4
munity assistance was going to the most affluent of the benefi-

(5) Op. cit.
(6) EESC opinion of 25 February 2004– OJ C 110 of 30 April 2004
(7) Ibid

The EESC urged (7) that the opportunity be taken to
3.6
harmonise, unify and streamline all the rules and procedures of
the GSP system. It is of the opinion that the present proposals
go a long way towards realising this ideal.

The EESC called (7)

3.7
for the publication of a detailed
impact assessment with the Commission proposals. It is disap-
pointed that this has not been done and would point out that
conducting an assessment of the impact on the outermost
regions of the EU after the event is a pointless exercise unless it
is intended to modify the system in the light of this assessment,
which would not satisfy the requirement that the regulations
should be stable over time. A climate of uncertainty is inimical
to the satisfactory operation of a GSP system.

The EESC approves the concept of incorporating the
3.8
rights,
observance of human rights, protection of
protection of
the environment, good governance and the
curbing of drug production and trafficking within the definition
of ‘sustainable development’.

labour

The EESC pointed out (7) that the existing special incen-
3.9
tive arrangements have been totally ineffectual
in achieving
their worthwhile objectives. Only two countries have qualified
for the special
for the protection of
labour rights and none at all for the special incentive for the
protection of the environment; meanwhile, twelve nations have
benefited from the special arrangement to combat the produc-
tion and trafficking of drugs but without having any percep-
tible effect on the incidence of these activities.

incentive arrangement

3.9.1
The EESC considers that the new proposals, while
introducing a welcome measure of simplification into the
process, are unlikely to be any more efficacious. The size of the
incentive has not been increased and there is no reason to
suppose that the new arrangements will provide any greater
inducement for beneficiary countries to embrace the principles
sustainable development. Faced with the
and practice of
requirement to adopt twenty-seven international conventions
they may well prefer to follow their own dictates and forego
the benefits on offer.

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3.9.2
Given the difficulty of providing a worthwhile incen-
tive within the confines of a continually reducing tariff barrier,
consideration might be given to also linking the observance of
these conventions to the provision of development aid.

lines should exclude, inter alia, countries with nuclear weapons
programmes and those which operate as tax havens. It regrets
that many of these nations would appear to continue to be
eligible for inclusion in the list of beneficiaries.

3.10
The EESC observes that all the conventions with which
the applicant countries are required to comply are those with
mechanisms that the ‘relevant international organisations’ can
use to regularly evaluate how effective the implementation has
been. The EESC would advocate that the social partners should
have a role in this evaluation.

The EESC notes that

3.11
the conditions for temporary
withdrawal of benefits are little changed from those prevailing
under the existing regime. Given that they have only been
invoked in the case of one country (Myanmar), which repre-
sents an extreme example of
international
conventions, their usefulness in promoting sustainable develop-
ment is questionable. A sanction which is applied only in such
rare circumstances can have little deterrent effect. The EESC
would have preferred to see a wider application of
this
mechanism in order to reinforce the SIA for promoting sustain-
able development, which it fears is likely to fall into desuetude.

the flouting of

3.12
The EESC questions whether the new system would
provide a more effective deterrent to fraud than that which it
It would have preferred to see a more proactive
replaces.
approach to this issue. In particular, it would have liked to see
the creation of mechanisms for closer cooperation between
agencies in the EU and their counterparts in the beneficiary
countries. It is difficult to avoid the conclusion that in this area
the Commission has adopted a policy of festina lente.

The EESC welcomes the fact that the Commission has
3.13
consulted widely, both in the EU and in the beneficiary coun-
tries, before formulating these proposals.

3.14
The EESC notes that the Commission would continue
to be assisted in the administration of the GSP system by a
General Preferences Committee, acting within the framework of
the ‘Regulatory Committee’ procedure.

One of the criteria for inclusion in the SIA promoting
4.2
sustainable development is that a country should be a ‘vulner-
able country’. Article 9(2) defines this as being a country which
has not been excluded from the general arrangement under the
terms set out in point 4.1 above or whose GSP-covered exports
to the Community represent less than 1 % of total GSP-covered
imports to the Community. The ESC considers that this article
should be redrafted to replace the word ‘or’ with ‘and’; other-
wise,
the article will have an effect which was surely not
intended.

The EESC has pointed out (8) that, under the existing
4.3
is too far removed from the
system, the graduation point
updating point. It therefore welcomes the fact that, in future,
graduation would take place in the year following the third
consecutive year which constitutes the reference period for any
given country and sector.

4.4
The EESC supports the Commission's proposal to main-
tain regional cumulation within the meaning of Regulation
(EEC) No. 2454/93 when a product used in further manufac-
ture in a country belonging to a regional group originates in
another country of the group which does not benefit from the
arrangements applying to the final product, provided that both
countries benefit from regional cumulation for that group. It
would point out that, in the past, these provisions have been
the source of a considerable level of fraudulent manipulation.

The EESC reiterates its opinion (8) that the preferential
4.5
rules of origin should be simplified, and the compliance burden
on EU importers correspondingly reduced, by bringing them
into line with the current rules of origin on non-preferential
imports.

The EESC reiterates its call (9) for dialogue between the
4.6
EU and the LDCs to improve the implementing rules for the
special arrangements for LDCs in certain specific cases, espe-
cially by adapting the transition period.

4. Specific comments

The EESC notes that the countries to be excluded from
4.1
the general arrangement will be limited to those which have
been classified by the World Bank as high-income countries
and if they are not sufficiently diversified in their exports. It is
of the opinion that the number of countries meeting these
criteria will be limited. It has proposed (8) that the new guide-

(8) Ibid

4.7
The EESC welcomes the proposal to eliminate duties
where preferential treatment results in an ad valorem duty of
1.0 % or less or a specific duty of EUR 2 or less. It considers
that this will constitute an appreciable measure of simplifica-
tion.

(9) CESE 1646/2004 - Communication from the Commission to the
Council and the European Parliament - Accomplishing a sustainable
agricultural model for Europe through the reformed CAP - sugar
sector reform - COM(2004) 499 final

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4.8
The EESC notes that the temporary withdrawal of bene-
fits is limited to a period of three months, renewable once. The
Commission may extend this period in accordance with Arti-
cles 3 and 7 of Decision 1999/468/EC, as has already been
done in the case of Myanmar. The EESC would have preferred
a provision whereby the temporary withdrawal of benefits,
once applied, would be maintained until such time as the
offending nation had removed the cause for withdrawal by
remedying the breach of international conventions which had
given rise to the withdrawal in the first place.

4.9
The EESC feels that the requirement for countries or
territories wishing to benefit from the SIA for sustainable devel-
opment to submit a request to that effect within three months
of the date of entry into force of the Regulation is somewhat
onerous and likely to be self-defeating by limiting the degree of
uptake. There might well be a number of countries at that
point in time that did not meet the criteria and therefore saw
no point in submitting an application. After the expiration of
the three-month deadline, such countries would then have no
incentive to ratify and effectively implement the international
conventions set out in appendices 1 and 2. The EESC would
have considered it preferable to have left the door open for the
admission of these countries at a later date provided that they
had then met the criteria for inclusion.

The EESC pointed out (10) that the GSP system is one
4.10
element of the EU's trade policy and that, as such, it must be
compatible with the other elements of that policy. In order to
achieve a coherent trade policy it is essential that other Directo-
rates-General
in the Commission should be involved in the
process. In particular, there should be close, continuous and
for
effective cooperation between the Directorates-General
Trade and for Enterprise.

The EESC considers it advisable that,

4.11
in the case of
serious market disturbances for goods covered by Annex 1 of
the Treaty, the safeguard clause could also be invoked at the
request of a Member State to the Commission, which would
then consult the relevant management committee.

4.12
According to the Commission proposal, the special
arrangement for the Least Developed Countries (LDCs) is to be
incorporated into the GSP and the other arrangements
(including that for sugar) are to be taken over in accordance
with Regulation 416/2001. The fears of the LDCs are well-
founded namely that there will be considerably more disadvan-
tages than advantages following the reform of the EU sugar
regime, with a sharp drop in prices arising from the proposed

Brussels, 9 February 2005.

moves to open up the EU market fully to these countries as of
1 July 2009. The Committee refers in this regard to its Opinion
of 15 December 2004 (11) on the proposed CMO/sugar reform.
This called on the Commission, in line with the express wishes
of the LDCs, to negotiate preferential import quotas for sugar
for the period after 2009, with periodic reviews that take into
account the link between the reform of the European sugar
market and the development objectives of
least developed
countries (LDCs). The EESC is in favour of prohibiting ‘swap’
practices (three-way trade).

Generally speaking,

4.13
for the
products under consideration, the application of Article 12(1)
should be clearly defined within the framework of the relevant
common market organisations.

the EESC believes that,

5. Conclusions

The EESC has advocated that the existing system should
5.1
be simplified and rendered more transparent and that
the
opportunity should be taken to harmonise, unify and stream-
line all the GSP rules and procedures. It considers that the
improvement in this
proposed scheme would be a material
respect and to this extent it endorses the Commission's propo-
sals.

5.2
The EESC approves the fact that the number of benefi-
ciary countries would be reduced but fears that the reduction
might not be of sufficient proportions.

5.2.1
The EESC considers that the Generalised System of
Preferences should be reserved for least developed countries
and countries most in need, in order to ensure that they are the
primary beneficiaries of the new GSP regime. The graduation
threshold for textile and clothing products should therefore be
lowered to 10 percent (12).

The EESC considers that the new SIA for promoting
5.3
sustainable development will have little more impact on the
behaviour of beneficiary nations than those which it replaces.

The EESC is concerned that the issue of fraud in the
5.4
to have been effectively
existing system does not appear
addressed and considers that more could have been done in
this respect.

5.5
The EESC is disappointed that detailed impact assess-
ments on these proposals have not been published or appar-
ently, in some cases, conducted.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(10) Ibid

(11) CESE 1646/2004 - Communication from the Commission to the
Council and the European Parliament - Accomplishing a sustainable
agricultural model for Europe through the reformed CAP - sugar
sector reform - COM(2004) 499 final

(12) Proposal for a Council Regulation COM(2004) 699 final, Article 13

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APPENDIX 1

Core human and labour rights UN/ILO Conventions

1. International Covenant on Civil and Political Rights

2. International Covenant on Economic Social and Cultural Rights

3. International Convention on the Elimination of All Forms of Racial Discrimination

4. Convention on the Elimination of All Forms of Discrimination Against Women

5. Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment

6. Convention on the Rights of the Child

7. Convention on the Prevention and Punishment of the Crime of Genocide

8. Minimum Age for Admission to Employment (No. 138)

9. Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No. 182)

10. Abolition of Forced Labour Convention (No. 105)

11. Forced Compulsory Labour Convention (No. 29)

12. Equal Remuneration of Men and Women Workers for Work of Equal Value Convention (No. 100)

13. Discrimination in Respect of Employment and Occupation Convention (No. 111)

14. Freedom of Association and Protection of the Right to Organise Convention (No. 87)

15. Application of the Principles of the Right to Organise and to Bargain Collectively Convention (No. 98)

16. International Convention on the Suppression and Punishment of the Crime of Apartheid.

APPENDIX 2

Conventions related to environment and governance principles

17. Montreal Protocol on Substances that deplete the Ozone Layer

18. Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal

19. Stockholm Convention on persistent Organic Pollutants

20. Convention on International Trade in Endangered Species

21. Convention on Biological Diversity

22. Cartagena Protocol on Biosafety

23. Kyoto Protocol to the UN Framework Convention on Climate Change

24. UN Single Convention on Narcotic Drugs (1961)

25. UN Convention on Psychotropic Substances (1971)

26. UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)

27. Mexico UN Convention against Corruption.