REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 978/2012 applying a Scheme of Generalised Tariff Preferences and repealing Council Regulation (EC) No 732/2008
Date: 2018-10-04
Institutions: Directorate-General for Trade and Economic Security, European Commission
Subjects: EU market, developing countries, development aid, export, generalised preferences, import (EU), market access, poverty, sustainable development, tariff preference

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 4.10.2018 COM(2018) 665 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Regulation (EU) No 978/2012 applying a Scheme of Generalised Tariff Preferences and repealing Council Regulation (EC) No 732/2008 {SWD(2018) 430 final}  
 
 
1. 

INTRODUCTION 

In 1971, the European Community first introduced a Generalised Scheme of Preferences 
(GSP)  following  a  resolution  of  the  United  Nations  Conference  on  Trade  and 
Development  (UNCTAD)  to  create  a  system  of  preferences  to  support  developing 
countries.  The  GSP  is  also  based  on  the  WTO's  enabling  clause,  which  permits 
developed countries to grant unilateral and non-reciprocal tariff preference to developing 
countries. 

By providing preferential access to the EU market, GSP has the prime objective to assist 
developing countries in their efforts to reduce poverty and promote good governance and 
sustainable  development,  by  helping  them  to  generate  in  particular  employment, 
industrialisation and additional revenue through international trade.  

1.1.  The reform of 2012 

The  EU’s  GSP  has  undergone  several  transformations  over  the  decades  in  terms  of 
country and product coverage, also with the objective to increasingly promote sustainable 
development.  The  general  objectives  of  the  GSP  reform  of  2012  were  threefold1:  (i)  to 
contribute to poverty eradication by expanding exports from countries most in need; (ii) 
to  promote  sustainable  development  and  good  governance;  and  (iii)  to  ensure  better 
safeguards for  the EU’s financial  and economic interest.  These general objectives were 
translated into six specific operational objectives for the GSP Regulation: 

1.  to better focus the preferences on the countries most in need; 
2.  to remove disincentives towards diversification for the countries most in need; 
3.  to  enhance  consistency  with  overall  trade  objectives,  whether  bilateral  or 

multilateral; 

4.  to strengthen the support for sustainable development and good governance; 
5.  to  improve  the  efficiency  of  safeguard  mechanisms  ensuring  that  the  EU’s 

financial and economic interests are protected; and 

6.  to enhance legal certainty, stability and predictability of the scheme. 

1.2.  The current regulation 

The  current  GSP  Regulation2  entered  into  force  on  1  January  2014  for  a  period  of  ten 
years. The GSP consists of three different arrangements: 

1.  a  general  arrangement  (Standard  GSP)  for  developing  countries  that  have  not 

achieved high or upper middle income status; 

2.  a  Special  Incentive  Arrangement  for  Sustainable  Development  and  Good 
Governance  (GSP+)  for  Standard  GSP  beneficiaries  that  are  also  considered 
vulnerable; and 

3.  an  Everything  But  Arms  (EBA)  arrangement  for  Least  Developed  Countries 

(LDCs). 

1  See  page  21  of  Commission  Staff  Working  Document  -  Impact  Assessment  Vol.  I  Accompanying  the 
document  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  applying  a 
scheme  of  generalised  tariff  preferences  {COM(2011) 241 final}{SEC(2011)  537 final,  available  at: 
http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2011/sec_2011_0536_en.pdf 
2  Regulation  (EU)  No 978/2012  of  the  European  Parliament  and  of  the  Council  applying  a  scheme  of 

generalised tariff preferences. 

1 

 
 
 
 
 
 
 
                                                 
Table 1 provides an overview of provisions and beneficiaries under these arrangements. 

Table 1: Overview of the three GSP arrangements 

Standard GSP 

GSP+ 

EBA 

Beneficiaries 

Low or lower-middle 
income countries 

Standard GSP 
beneficiaries that are 
vulnerable (in terms 
of export 
diversification, export 
volumes) and have 
ratified 27 
international core 
conventions 

LDCs 

Number of 
beneficiaries 

Tariff preferences 

18 

8 

49 

duty suspension 
(non-sensitive 
goods) or duty 
reduction (sensitive 
goods) for around 
66% of all EU tariff 
lines 

duty suspension for 
around 66% of all EU 
tariff lines 

duty suspension for 
all goods with the 
exception of arms 
and ammunition 

From Table 2 below, we can see that compared to total EU imports from the world the 
share of GSP is relatively modest and even declining. The vast majority of imports into 
the EU takes place under Most Favoured Nation (MFN) tariffs (i.e. tariffs that apply to 
all countries). EU imports under non-GSP preferential schemes, which include all kinds 
of  trade  agreements  (free  trade  agreements,  deep  and  comprehensive  free  trade 
agreements  and  Economic  Partnership  Agreements),  have  steadily  increased  between 
2011 and 2016, signalling their growing importance. This is in line with the objective to 
encourage countries that were previously GSP beneficiaries to continue their trade with 
the  EU  under  more  comprehensive  preferential  trading  schemes,  which  are  often 
reciprocal.3

3  Standard  GSP  and  GSP+  beneficiaries  lose  their  GSP  status  in  case  of  a  preferential  market  access 
arrangement which provides the same tariff preferences as the scheme, or better, for substantially all 
trade. Current or past GSP beneficiaries have therefore the incentive to conclude trade agreements to 
upgrade and make long-term their market access to the EU. 

2 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Table 2: Share of EU imports by tariff regime (2011-2016)4 

MFN=0   MFN>0 

GSP 

FTAs 

Other  

Total  

Trade under 
zero tariffs 

Import 
value 

(EUR 
millions) 

2011 

1578724 

62.5% 

21.5% 

5.8% 

9.5% 

0.7% 

100.0% 

75.2% 

2012 

1631256 

63.6% 

20.0% 

5.8% 

9.8% 

0.9% 

100.0% 

76.6% 

2013 

1530711 

61.9% 

20.2% 

6.1% 

10.7% 

1.1% 

100.0% 

76.0% 

2014 

1534073 

60.4% 

23.1% 

3.9% 

11.6% 

1.1% 

100.0% 

74.1% 

2015 

1557035 

56.6% 

26.1% 

3.9% 

12.4% 

1.1% 

100.0% 

71.2% 

2016 

1546772 

56.1% 

26.1% 

4.1% 

12.8% 

0.9% 

100.0% 

71.4% 

(MFN=0 means EU imports under zero Most Favoured Nation (MFN) tariffs, MFN>0 means EU 
imports under positive MFN tariffs, FTA means Free Trade Agreement) 

1.3.  The midterm evaluation 

Pursuant to Article 40 of the GSP Regulation, the Commission shall submit a report on 
the  application  of  the  GSP  Regulation  to  the  European  Parliament  and  to  the  Council, 
five years after the adoption of the regulation.  

An  independent  external  consultant  was  contracted  to  carry  out  a  study  to  support  this 
midterm evaluation. The final report produced by the consultant (Study) is made public 
alongside this report5. The staff working document (SWD) accompanying this report on 
the application of Regulation 978/2012 summarises the findings of and recommendations 
by the consultant. The SWD presents the process and methodology used in the context of 
this evaluation as well as the analysis of the evidence that have allowed the Commission 
to conclude on the application and the performance of the GSP Regulation. 

The external evaluation used three complementary approaches in the midterm evaluation 
to analyse the functioning and impact of the GSP in the beneficiary countries and the EU, 
namely:  (i)  quantitative  and  qualitative  desk  research  and  data  analyses;  and  (ii)  an 
inclusive  and  extensive  stakeholder  consultation  process;  and  (iii)  country  and  sector 
case  studies.  For  the  economic  analyses  of  the  reformed  GSP,  the  most  up-to-date 
economic, trade and tariff data provided by Eurostat for the period 2011-2016 was used. 
Additionally, indicators were compiled to analyse the social, environmental and human 
rights  impact  in  the  beneficiary  countries.  This  research  was  complemented  by 
qualitative research based on literature sources as well as econometric estimation of the 
determinants  of  trade  flows  using  gravity  modelling.  Since  the  reformed  GSP  has  only 
been in force for three years as of the start of the midterm evaluation process, the number 
of  readily  available  and  up-to-date  social,  human  rights  and  environmental  impact 
indicators  is  limited.  To  overcome  this  shortcoming,  case  studies  were  undertaken  in  a 

4 Table 3 on page 45 of the Study 

5 http://trade.ec.europa.eu/doclib/html/157270.htm 

3 

 
 
 
 
 
 
                                                 
number of beneficiary countries. These can, however, only give indications and are not 
necessarily  representative.  Therefore,  the  conclusions  drawn  at  this  point  in  time  are 
indicative. 

2.  EVALUATION OF THE GSP REGULATION 

The application of the GSP Regulation is evaluated in light of the general objectives of 
the 2012 reform. 

2.1.  Contribute  to  poverty  eradication  by  expanding  exports  from  countries 

most in need 

The effectiveness of the GSP has been enhanced by focusing better on countries most in 
need, which was a main goal of the GSP reform. As figure 1 shows, following the entry 
into  force  of  the  GSP  Regulation  in  2014  a  significant  decline  in  the  value  of  imports 
under the Standard GSP can be observed, because a large number of countries, including 
China, an upper middle-income  country  since 2010, are no longer eligible for GSP.6  A 
slight decline in GSP+ imports is also evident. Imports under the EBA arrangement have 
however steadily increased. 

Figure 1: Analysis of the usage of GSP preferences by eligible countries (2011-
2016)7 

100000

90000

80000

70000

60000

50000

40000

30000

20000

10000

S
O
R
U
E

F
O
S
N
O
I
L
L
I
M
N
I

0
2011

2012

2013

2014

2015

2016

GSP+ EBA

Standard GSP

Overall, the positive economic impact of the GSP reform can already be witnessed and 
the  relevance  for  beneficiaries  of  the  GSP  remains  strong.  In  particular,  while  its 
aggregate trade impact has diminished as a result of the reduced number of beneficiaries 
it remains essential for those countries most in need of support, notably LDCs and other 
vulnerable  countries.  Their  total  exports  to  the  EU  have  risen  substantially,  while  their 
actual use of the preferences offered by GSP showed overall positive results (see figure 
2).  However,  challenges  to  taking  full  advantage  of  the  trade  opportunities  remain  in 

6 In total, 82 countries are no longer eligible for GSP after the 2012 GSP reform 

7 Figure 2 on page 47 of the Study 

4 

 
 
 
 
 
 
 
 
                                                 
 
 
 
 
 
some countries, such as strong competition from other countries, non-tariff barriers, rules 
of  origin  requirements,  compounded  by  other  supply-side  constraints,  for  example 
limited production and transport capacity, a lack of diversification, and in general a low 
industrial development. 

Figure 2: Utilisation rate per GSP arrangement8 

GSP+ Countries

Standard GSP Countries

EBA Countries

After

Before

0%

20%

40%

60%

80%

100%

While  export  diversification  levels  showed  little  change  and  remained  lowest  for  EBA 
countries, this is largely due to supply side constraints and the enabling environment in 
beneficiary countries and not to GSP. 

In conclusion the reformed GSP has reduced the number of Standard GSP beneficiaries, 
increased  preference  utilisation  and  contributed  to  poverty  eradication  by  expanding 
exports from countries most in need. 

2.2.  Promote sustainable development and good governance 

A  country’s  sustainable  development,  in  its  economic,  social  and  environmental 
dimensions,  depends  on  a  multitude  of  factors,  including  the  overall  development 
strategies of the country. GSP as a trade policy instrument thus acts together with other 
EU  external  policies,  such  as  its  development  policies.  GSP  has  been  found  to  be 
coherent with those EU policies, but also its foreign and security policies, especially as it 
relates to respect for human rights and fundamental freedoms. 

The GSP has had an overall positive impact on social development and human rights in 
the beneficiary countries. For example: 

  GSP  has  had  a  noteworthy  impact  on  the  role  of  women  in  society  through  the 
creation  of  employment  opportunities  for  women  and  improved  participation  of 
women  in  the  labour  force  in  export  industries  trading  with  the  EU.  This  is  the 
case in particular in the textile and clothing sectors, amongst others, for example 
in Bangladesh and Pakistan. 

8 Figure 6 on page 61 of the Study.  

5 

 
 
 
 
 
 
 
 
 
 
                                                 
  GSP  has  propelled  developing  countries  to  ratify  international  conventions,  for 
example Tajikistan, in seeking to avail themselves of enhanced access to the EU 
market through GSP+. While ratification in itself does not necessarily mean that 
the  rights  enshrined  in  the  conventions  are  respected,  it  provides  an  important 
impetus and framework for improvement. 

  The close monitoring of countries that benefit from GSP+ has increased the EU’s 
leverage in these countries in pushing for the effective implementation of the 27 
international  conventions  related  to  human  and  labour  rights,  protection  of  the 
environment  and  good  governance.  It  has  allowed  for  constructive  dialogue, 
enabling  the  EU  to  engage  with  beneficiary  countries  on  all  areas  where 
implementation  is  unsatisfactory.  Overall  GSP+  has  made  a  contribution  to 
sustainable development and good governance. The biennial GSP reports by the 
Commission  and  the  European  External  Action  Service9  show  that  all  GSP+ 
beneficiary  countries  are  making  progress  in  implementing  the  relevant 
international conventions, even though challenges and problematic issues remain 
in all countries. 

 

In  line  with  its  commitment  in  the  Trade  for  All  Communication,  the 
Commission,  together  with  the  High  Representative,  has  also  stepped  up  its 
engagement with certain EBA beneficiary countries to contribute to EU efforts to 
ensure respect of fundamental human and labour rights.  

The  impact  of  GSP  on  the  environment  is  more  difficult  to  assess  for  a  number  of 
reasons, e.g. lack of relevant and up-to-date data and indicators, and isolating the effect 
of  GSP  from  other  factors  affecting  the  environment.  It  can  be  expected  to  be  positive 
only if the beneficiary countries have policies in place to effectively direct their resources 
to environmental policies and mitigation measures that limit any potentially detrimental 
effects of increased economic activity on the environment. 

Standard GSP and EBA are based on the respect of fundamental human rights and labour 
rights  principles.  GSP+  beneficiaries  must  moreover  effectively  implement  all  GSP+ 
relevant  international  conventions.  The  EU  will  continue  to  engage  with  beneficiary 
countries  and  use  its  leverage.  The  EU  remains  ready  to  launch  the  procedure  to 
temporarily  withdraw  preferences  in  respect  of  all  or  certain  products,  in  case  its 
engagement with GSP beneficiaries fails to deliver, and if the legal conditions of the GSP 
Regulation are fulfilled. 

To  conclude,  the  reformed  GSP  has  contributed  to  the  promotion  of  sustainable 
development and good governance, in particular through the EU’s enhanced monitoring 
of the implementation of the international conventions relevant to GSP+. 

9   Report from the Commission to the European Parliament and the Council on the Generalised Scheme 
at: 

of 
the 
http://trade.ec.europa.eu/doclib/docs/2018/january/tradoc_156536.pdf  

2016-2017,  COM(2018) 

Preferences 

available 

covering 

period 

36, 

Report from the Commission to the European Parliament and the Council on the Generalised Scheme 
of 
at: 
the 
http://trade.ec.europa.eu/doclib/docs/2016/january/tradoc_154180.pdf  

2014-2015,  COM(2016) 

Preferences 

available 

covering 

period 

29, 

6 

 
 
 
 
 
 
 
 
 
                                                 
 
2.3.  Ensure a better safeguard for the EU’s financial and economic interest 

The granting of unilateral trade preferences to other countries can provide benefits to EU 
industry, e.g. those that rely on imported inputs for their competitiveness, and consumers 
through cheaper and more variety of goods. However, it can also increase the competitive 
pressure  on  EU  industry  that  competes  with  goods  imported  under  GSP.  While  the 
reduction in the number of beneficiaries should generally have reduced the competitive 
pressure  on  EU  industry,  this  might  not  be  the  case  in  specific  industry  sectors  (e.g. 
textiles,  clothing  and  tyres).  That  is  why  ensuring  better  safeguards  for  the  EU’s 
fincancial and economic interests has been among the Commission’s objectives. 

The  GSP  Regulation  has  mechanisms  to  protect  EU  industry  in  warranted  cases.  The 
general safeguard provisions were reformed in 2012 to better protect the EU's economic 
interests.  The  recently  launched  safeguard  investigation  on  imports  of  rice  from 
Cambodia and Myanmar/Burma10 will be the first test of the new safeguard provisions. 
Furthermore, the Commission monitors closely the conditions for the possible initiation 
of the automatic safeguards provided by Article 29 of the GSP Regulation. Moreover, the 
Commission ensures that countries that no longer need unilateral preferences (because of 
their improved income status or the conclusion of a trade arrangement with the EU) are 
removed  from  the  scheme.  Finally,  tariff  preferences  under  GSP  are  also  removed  for 
specific product sections of a country when they become sufficiently competitive. 

To  conclude,  the  reformed  GSP  has  improved  provisions  to  protect  EU’s  financial  and 
economic  interests.  Too  competitive  products  are  regularly  removed  from  the  scheme 
and there is an ongoing safeguard investigation concerning rice imports. 

3.  CONCLUSIONS 

The  midterm  evaluation  largely  focused  on  an  assessment  of  the  results  of  the  major 
reform  that  took  place  in  2012  as  embodied  in  the  current  GSP  Regulation.  The 
evaluation showed that the EU’s current GSP is on track in delivering on its objectives. 
Within the limits set by the WTO's Enabling Clause, it brings clear economic benefits to 
developing  countries,  making  it  relevant  to  the  development  needs  of  beneficiary 
countries.  Moreover,  the  2012  reform  succeeded  in  focusing  preferences  on  countries 
most in need and has contributed to their sustainable development. Finally, the efficiency 
of  the  scheme  has  remained  stable  during  the  period  of  implementation  of  the  current 
regulation.  

Therefore, at this stage, there is no need to amend the GSP Regulation before its expiry 
on 31 December 2023. 

In  line  with  the  Study's  recommendations,  the  implementation  of  the  GSP  Regulation 
could however be improved in two important aspects: 

10  Notice  of  initiation  of  a  safeguard  investigation  concerning  imports  of  Indica  rice  originating  in 
Cambodia  and  Myanmar/Burma,  O.J.  2018/C  100/13,  available  at:  http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:52018XC0316(02)&from=EN 

7 

 
 
 
 
 
 
 
 
                                                 
1. Improving transparency in GSP+ monitoring and better involving civil society 
both in the EU and in the beneficiary countries: In line with its commitments in 
the Trade for All Communication, the Commission is committed to transparency. 
In this respect, a number of measures are already in place to ensure transparency 
and inclusiveness in the GSP+ monitoring process. Regular and broad stakeholder 
consultations are held in order to allow civil society actors, including local civil 
society,  to  engage  in  the  process.  Additionally,  the  biennial  reports  on  the 
implementation  of  the  GSP  are  a  major  source  of  information  and  are  made 
public  immediately  upon  their  transmission  to  the  European  Parliament  and  the 
Council.  It  should  also  be  noted  that  the  public  UN  and  ILO  reports  are  the 
primary  source  of  information  for  GSP+  monitoring.  The  Commission  will 
explore  practical  ways  of  improving  transparency  of  GSP+  monitoring  and  to 
further civil society involvement. 

2.  Promoting  greater  awareness  of  GSP  in  beneficiary  countries:  GSP  success 
largely depends on the uptake of the scheme by exporters in beneficiary countries 
and  the  degree  of  their  awareness  of  the  GSP  rules.  In  this  respect,  there  are 
already actions and programmes financed or undertaken by the EU that have this 
objective11. Even though promoting the scheme is primarily the responsibility of 
beneficiary  countries,  the  EU  could  do  more  to  raise  awareness  not  just  for 
businesses, but also for civil society organisations, who have an important role to 
play in the implementation of the international conventions.  

Beyond the abovementioned steps linked to the GSP implementation, the study provides 
some  insight  of  the  workings  of  the  scheme,  and  makes  observations  on  aspects  to  be 
considered in a successor scheme.  

The  present  midterm  evaluation  constitutes  an  important  input  for  the  reflection  on  the 
next  GSP  Regulation.  The  Commision  looks  forward  to  discussions  with  the  European 
Parliament, the Council and  civil society in this respect.   

11  For  example  in  the  trade  related  technical  assistance  programmes  the  EU  has  had  in  Pakistan  and  is 
currently  undertaking  in  Sri  Lanka,  as  well  as  support  to  local  civil  society  organisations  under  a 
programme funded under the European Instrument for Democracy and Human Rights. 

8