Preferential trade measures to benefit tsunami-hit

European Commission accelerates preferential trade measures to benefit tsunami-hit countries

In response to the Tsunami disaster, the European Commission has today proposed to accelerate the entry into force of the new EU preferential trade regime for developing countries. The new Generalized System of Preferences (GSP) will now come into effect on April 1. The focus of the new regime is on developing countries most in need such as the Maldives, Sri Lanka, Thailand and Indonesia. The EU GSP, already by far the most generous in the world, provides for further tariff concessions, in particular in the clothing and the fishery sectors. Its benefits will extend to all the countries affected by the recent Tsunami.

In parallel, the European Commission is working on simplifying and, where appropriate, relaxing the rules of origin to allow countries to take fuller advantage of the benefits of GSP.

European Commissioner for Trade Peter Mandelson said: “By accelerating this boost to developing countries’ market access, the European Union has acted quickly to provide relief for countries affected by the recent tsunami. By lowering tariffs for poorer countries, we are extending benefits to all developing countries.”

Background

The EU GSP is the preferential trade regime the EU has been granting to developing countries for the last 30 years. It is worth more than €52 billion in trade flows, and is by far the most important preferential trading regime in the world, providing more market access for developing countries than the preferential access schemes of the US, Japan and Canada combined. Following the Tsunami of December 2004, the European Commission identified the rapid entry into force of the new EU GSP as a way to aid countries affected by the disaster. The Commission is proposing to bring forward its entry into force by three months, to 1 April 2005. The acceleration has already been welcomed by EU Member States and the European Parliament.

Through tariff concessions the new regime will open about € 3 billion worth of new trade flows for countries affected by the tsunami. In the new GSP, all fishery products will benefit from tariff cuts. In the case of Sri Lanka, which will benefit from the special incentive scheme aimed at encouraging sustainable development and good governance (GSP Plus), this implies that about 90 per cent of exports, including clothing items, will enter the EU at zero duty. In the case of Thailand, the new concessions will apply to extremely sensitive products such as shrimps. Indonesia and India will benefit from new tariff cuts for their textile and shoes sectors respectively.

Tariffs for Thai shrimp will fall from 12% (Most Favoured Nation rate) to 4.2%. Tariffs for Indian textiles and clothing will be set at 9.5% instead of 12% under MFN. Tariffs for shoes from Indonesia and Thailand will drop from 17% to 13.5%.

For more background information on the new GSP system see MEMO/05/43

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