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European Parliament Committee on International Trade hearing on GSP reform

10-06-2011

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The European Parliament held its first hearing on the European Commission’s proposal for the European Union’s new GSP scheme at the end of May. The new proposal is far-reaching and ambitious (see Isabelle Ramdoo’s overview of the main changes). The hearing comprised of several interventions by experts, business representatives and officials, followed by a Q&A session. The two hours long hearing touched upon many of the proposal’s features, but comments and discussions focused on the big lines. The GSP debate is well under way, and the EC’s proposal is raising key questions about EU trade policy that ECDPM’s San Bilal, Isabelle Ramdoo and Quentin de Roquefeuil highlighted in this briefing note.

The income criteria: scalpel or blunt axe?
The EC’s idea of restricting GSP access to lower and lower middle income countries, perhaps the most controversial feature of the proposal, was widely criticized during the hearing. The Commission argues that such a differentiation is desirable in order to re-focus the GSP on those most in need; to ensure that emerging economies do not benefit from a system designed for economically marginalized countries.

Civil society, represented by Marc Maes, raised the case of countries that, while classified as upper middle income, are still suffering from high levels of poverty. These countries would no longer be able to benefit from unilateral preferences and would de facto be relegated to MFN market access to the European Market. Parliamentarians from the Green group also echoed these concerns, while ODI’s Chris Stevens reminded the Committee that, in fact, emerging economies never were the biggest beneficiaries of the EU’s GSP (see the CARIS report).

The EC defended its proposal by pointing out that countries exhibiting a high GNI/capita ratio, but high levels of poverty, were in fact experiencing income redistribution issues, which trade preferences cannot cure.

His Excellency Fernando Yépez Lasso, Ambassador of Ecuador, highlighted that his country risked being kicked out of the EU’s GSP in the near future if Commission’s income criteria was left untouched. He argued that the criteria does not take into account many aspects of a country’s vulnerability, and further argued that inequality was in itself a factor of vulnerability.

The Income criteria: pushing for FTAs?
Various interventions also mentioned that restricting access to the GSP might in fact push several countries in the direction of negotiating free trade agreements with the EU, and that this would further render the GSP meaningless as developing countries access the European market through reciprocal FTAs instead of unilateral preferences.

Article “19 d”: Raw Materials and the GSP
The Commission’s proposal also specifically mentions restrictions on access to raw materials as an unfair trade practice that could lead to withdrawal of preferences. Civil society and parliamentarians form the green group expressed concerns that the EU’s very controversial Raw Materials Initiative had found its way into the EC’s GSP reform proposal. The Chairman of the Committee, however, reminded that it was perhaps not too much to ask of a country benefiting from unilateral preferences not to take measures that could harm European industries. DG trade further argued that the mention of raw materials was nothing more than an example meant to illustrate was “unfair” practices were, and that this was apparent in the wording of the article.

GSP+ modifications
The importers representative expressed broad satisfaction with the fact that the GSP+ was rid of the graduation mechanism, a measure likely to render the scheme more predictable and hence more attractive to importers.

The Chair of the meeting further commented that the relaxation of the threshold for total exports to the EU, meant to measure low overall levels exports, from 1% to 2%, was in fact a political decision by the Council tailor made for Pakistan to be able to fit in the scheme. He questioned whether EU producers would welcome such a politically minded move.

The details of the “reversal of the burden of proof” mechanism, meant to improve the implementation of the 27 conventions to be ratified in order to benefit form the GSP+, have yet to be released by the EC.

Many other topics were touched on during the hearing, a recording of which is available here.

Quentin de Roquefeuil is Research Assistant Economic and Trade Cooperation at ECDPM.

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