the generalized system of preferences (gsp) the special regime for the less developed countries...

The Generalized System of Preferences (GSP)

The special regime for the Less Developed Countries (LDC)

Towards a responsible sugar regime Brussels, June 9, 2005


What is the GSP ?It is a system of preferential trade, thanks to which the EU allows an easier access to its market for developing countries.

It benefits 178 countries Countries of which the GNP 1995 is above 8210 USD and the development index (*) is > -1 are

excluded.(*) combination of income per inhabitant and the level of exportation of manufactured goods compared to the data of the EU.

In 2003 , the GSP has benefited to 52 billion importations in the EU.

The present GSP is in pLDCe since 1995It has been extended to 2004 in periods of 3 years and has been prolonged until 2005.


It covers the chapters 1 through 97 of the Common Customs Tariff (CCT)Of 11.000 tariff lines, 2000 have already are already null duty through the MFNThe GSP covers 7000 of the 9000 remaining lines.

The system is characterized by a graduation mechanism and 5 regimes

The graduation mechanism- Is the key of the system;- Gives handicaps according to the country and the product concerned;- Gives the lowest handicaps to the weakest countries, and thus favours their

imports;- Periodically re-evaluates this handicap according to the evolution of the

commercial exchanges between a favoured country and the EC;- Theoretically, it works in two ways. Experience shows that a degradation in the

situation of a country easily leads to better access, but that there are always good reasons not to apply a reduction of facilities automatically (it´s an inversed bonus-malus!!!).


The 4 regimes1. The general regimeAt the beginning, agricultural and industrial products were classified

in 4 groups: 1)very sensitive: - 15 % 2) sensitive : - 30% 3) hardly sensitive : - 65% 4) not sensitive at all : -

100%to reduction of the Common Customs Tariff (CCT)

Since the GSP reform in 2001, only 2 groups remain:1) Not sensitive: no entry right = 3300 tariff lines2) Sensitive : - 3,5% reduction on the MFN = 3600 tariff lines

of which many agricultural products.


2-3. The special encouragement regimesGive supplementary preferences for respect of labour rights

and environmental standardsPreference : - 8,5 % points on the MFN taxes

(- 40 % on textiles and clothing)

4. The special drug regimeBenefits the Andes countries, Central America and Pakistan (panel lost adjustment)Preference : Access to 0 duty for 7200 tariff lines


5. The special regime for the LDCs.For the 50 LDCs, unlimited access to null duty for all

products except weapons.

Hence entitled: EBA “Everything but arms” or,

TSA “Tout sauf les armes”Transition measures for rice, bananas and sugar until 2009.

See 2nd part.


New GSP July 1, 2005 2015

3 regimes instead of 5

1. The general regime+ 300 products (mostly agricultural products)Preferences : idem (PS – 3,5% : S – 100%)

2. Encouragement regime = GSP + (Regroups work, environment, drugs)

2 conditions : - feebly diversified and vulnerable economy - ratification and application of 16 conventions on human

rights and labour rights, and of 7 (of 11) conventions on good

governance and protection of the environment

Preferences : null duty on the 7.200 lines of the GSP.


3. The special regime for the LDCs.No changes, transition regime for the development countries that lose LDC

status.

Graduation systemGoal: to offer more advantages to the least competitive countries.

applied to product groups per country, with regard to sections of the combined nomenclature.

Criterion: starts from a country in the EU market, partly expressed in the preferential community imports (threshold fixed at 15%).

Protection in case of exceptional situations (unfair commercial practices)Temporary retreat clause AND protection clause.


Problems to be solved (that concern us)

EBA : adoption of a declaration of the Presidency, requesting the analysis of the

EBA on the reformed sugar OCM, particularly on the triangular trade.

Saveguard clause : detail the procedures (calendar) and the trigger thresholds ( +25% import)

We are very much on our own …

The “Everything but arms” initiative - EBA

• Special GSP regime for the 50 LDCs.

• Unlimited access to 0 duty.

BUT :- no guaranteed volume- No guaranteed price

• Transitional protective measures until 2009 :

- Fixed quotas but,

- Guaranteed volumes and prices Price guaranteed at 85% price

intervention In reality = price below > PI

The favoured LDCsEquivalent T of white sugar

Soudan 17.036

Ethiopia 14.689

Malawi 10.661 (ACP)Tanzania 9.317 (ACP)Zambia 9.016 (ACP)Nepal 8.970

Mozambique 8.384

Burkina Faso 7.240Total 85.313

Evolution of the system0 duty

beyond quotas

T of WS

2001/02 74.185 unchanged

2002/03 85.313 unchanged

2003/04 98.110 unchanged

2004/05 112.826 unchanged

2005/06 129.750 unchanged

2006/07 149.213 -20%

2007/08 171.594 -50%

2008/09 197.334 - 80%

2009/10 unlimited - 100%


What is the capacity of these LDCs ?

Production 2,4 Mio T

Consumption 3,7 Mio T

Import 2,1 Mio T

Export 0,6 Mio T

They import more than they export, so …


The triangular trade – the transfer of the market

1 LDC exports its entire production to the EU and provisions itself on the international markets to cover its internal needs.

Is this legal ? Yes, the starting condition has been respected.

So, export potential of 2,4 Mio T (4 Mio T)

Where is the problem ?


WM

LDC

EUWorld price

200 €/t

600 €/t

524 €/t (raw sugar)

Loss: 524-(450+80)= - 6,0 €/t

Net profit: 280 – 6 = 274 €/t

Transport, loading, customs duties:

+120 €/t Fobbing, transport : +80 €/t

Profit : 600-(200+120)=280 €/t

Raw sugar (for export.): 450 €/tWHAT INTEREST ?


•Encourage the export cultures at the expense of the food crops (the coffee and cocoa experiences have already been forgotten!!)

•Expose producers and consumers to the exchange risks : the producer is being paid in national currency – often weak – and the consumer has to pay the equivalent in strong currency.

•Increases the insecurity for the farmers, who depend 100% on the exports: whether there will be more export, local market already occupied by imports at prices they can’t compete with, ...

•Encourage an exacerbated competition between LDCs and with the non-LDC ACPs.

•Encourage fraud as it is impossible to determine the origin by analyzing the product.

THE DISAVANTAGES OF SWAPS FOR THE LDCs (I)


•Favour multiplication of transport of products, and multiplication of intermediaries at the expense of the environment, of producers and consumers.

•Moreover, much legal insecurity for potential investors, because:- if too much sugar on the EU market ---> prices go down ---> question again the profitability of their investment - if the variation is too important, risk of: suspension of

the protection by the regimeHowever, the new GSP intends to limit itself to exceptional circumstances such as disloyal practices.

THE DISAVANTAGES OF SWAPS FOR THE LDCs (II)


THE DISADVANTAGES OF SWAPS FOR THE EU

Impossible to foresee the offer

Pressure of falling prices

Weak visibility in the LT


THE ADVANTAGES OF SWAPS

Creation of commercial flows

Encouraging the efficiency of the sugar sector

Prevents the situation annuities (quotas)

Integration in the world market

Better prices for the consumers

More exits for the producers


What do the LDCs demand ? Proposition of March 3, 2004

1. To delay the progressive elimination of tariffs from 01/07/2OO6 to 01/07/20162. To conserve the quota of 197.335 T (reached in 2008/09) until 2016 (called

« first stream » )3. An additional quota from 2004/05 on (valid for all sugars), initially based upon

their foreseeable net export capacity and increased by 15% cumulated per year, until 2016. (called « second stream »), limited to 1.425.606 T after 2012

4. To maintain the prices close to their present level.

1. An unlimited access, at zero duties, for sugar coming from the LDCs that are the surplus of the internal production with regard to domestic consumption of these products.

2. A clear protection mechanism with a calendar, a procedure and pre-defined trigger thresholds.

What do we demand ?


What does the Commission seem to propose?A regulation by a decrease of prices that suppresses all interest, and thus all the dangers of SWAPBUT-ALSO suppresses all interest from EBA for the LDCs (low prices – preference cancelled).

- the majority of LDCs that produce at a price too high are excluded.


WM

LDC

EUWorld price

200 €/t

550 €/t

310 €/t (raw sugar)

Loss: 310-(450+80)= - 220 €/t

Net profit: 230 – 220 = 10 €/t … if there is no fraud !!!

Transport, loading, customs duties:

+120 €/t Fobbing, transport : +80 €/t

Profit : 550-(200+120)=230 €/t

Raw sugar (for export): 450 €/t

HYPOTHESIS

Reference price : 310 €/T

The Balkan experience

In 2000, the EU offers unlimited access at 0 duties for sugar coming from Albania, Bosnia-Herzegovina, Croatia, Fyrom and Serbia-Montenegro

Explosion of imports: Through - boost production (1MioT in ex-Yougoslavia)

- triangular trade and fraud

Exports Imports Difference1998 1.960 143.644 - 141.6841999 2.330 268.839 - 266.5092000 232 257.073 - 256.8412001 51.535 395.731 - 344.1962002 306.630 514.682 - 208.0522003 313.305 (of which 201.324 Serbia and 95.173 Croatia)

The Balkan experienceConsequences :

- equivalent decrease of community quotas (B ---> C)- sugar carrousel between the EU and the Balkans- internal market unbalanced ---> suspension of facilities to Serb-Mont in

June 2003- in the long term: increase of imports from third countries to the Balkans ----> increase of WTO references according to art XXIV.6

In 2005 fixation of delivery quotas Serbia-Montenegro-Kosovo 180.000 TBosnia-Herzegovina 12.000 TAlbania 10.000 TCroatia (future EM) being negotiatedFYROM being negotiated

CONCLUSION

So, EBA …. is

EVERYTHING BUT an “AFFAIRE” (good business)

Or,

EVERYTHING BUT ARMS

Thank you for your attention.

the generalized system of preferences (gsp) the special regime for the less developed countries...

Documents

countries countries

tariff lines2 sensitive

gsp reform

present gsp

mfnthe gsp

system of preferential

andes countries

weakest countries