Highlights of the EU's new Generalised Scheme of Preferences (GSP)

1. Highlights of the EU's new Generalised Scheme of Preferences (GSP)

2. This presentation is part of the Commission's Info Pack on the EU's new GSP and is best read together with the description in full text of the Info Pack. This is not a legal document and has been prepared exclusively for information purposes. This should not be used by any party as a basis for any decisions with legal implications. The exclusive legal basis for the new GSP is Regulation (EU) No 978/2012 of the European Parliament and of the Council.

3. TIMELINE • Current scheme: Preferences applicable until 31 December 2013 (Council Regulation (EC) No 732/2008 rolled over by Council Regulation (EC) No 512/2011). • New scheme: Basic rules published on 31 October 2012. New preferences to apply from 1 January 2014.

4. MAIN OBJECTIVES of NEW GSP • Focus the preferences on those most in need—Least Developed Countries and other poor economies with no other preferential channels to access the EU market. Reflection of different trade, financial and development needs of countries. • Enhance GSP+ as a tool to support partners which are serious about implementing international conventions. • Make the system more transparent and predictablefor economic operators. 4. Adapt to Lisbon procedures—enhanced role for the European Parliament.

5. Focus on partners most in need Current • 177 countries and overseas territories, divided in 3 groups: - 'Standard' GSP (generous preferences) - GSP+ (enhanced preferences because countries ratify and implement international conventions relating to human and labour rights, environment and good governance) - Everything But Arms (EBA, duty-free quota-free access for all goods except arms to least developed countries) Fact: more advancedeconomies place a lot of competitive pressure on LDC and otherpoorer country competitors—whichlagbehind. Preferences must bere-focused to help thosemost in need.

6. Focus on partners most in need New • 90 countries which need GSP trade preferences the most: - 49 least developed countries under EBA - 41 Low income' and 'lower middle income' countries, as classified by the World Bank. These countries may benefit from standard GSP and/or GSP+ (see below) • Partners which are no longer eligible: 33 Overseas countries and territories (already have access—do not need GSP) • Partners which no longer benefit: - 34 Partners which have been granted preferences through other tracks (e.g. bilateral agreements, autonomous arrangements—do not need GSP). - 20 'High income' or 'upper middle income' partners, as listed by the World Bank (these more advanced developing countries no longer need preferences to export; in fact, continuing to provide preferences to them increases the competitive pressure on exports from LDCs and other poor countries, which lag behind. This is particularly damaging for these countries, in a context of increased competition due to the general drop in EU tariffs.)

7. Focus on partners most in need (continued) Everything-but-Arms (EBA) beneficiaries Africa (34): Angola, Burkina Faso, Burundi, Benin, Chad, Democratic Republic of Congo, Central African (Republic), Djibouti, Eritrea, Ethiopia, Gambia, Guinea, EquatorialGuinea, Guinea-Bissau, Comoros Islands, Liberia, Lesotho, Madagascar, Mali, Mauritania, Malawi, Mozambique, Niger, Rwanda, Sudan, Sierra Leone, Senegal, Somalia, South Sudan, Sao Tome and Principe, Togo, Tanzania, Uganda, Zambia. Asia (9): Afghanistan, Bangladesh, Bhutan, Cambodia, Lao (People's Democratic Republic), Myanmar/Burma, Nepal, Timor-Leste, Yemen. Austrialiaand Pacific (5): Kiribati, Samoa, Solomon Islands, Tuvalu, Vanuatu. Caribbean (1): Haiti

8. Focus on partners most in need (continued) Standard GSP beneficiaries Armenia, Azerbaijan*, Bolivia, China, Cape Verde, Colombia, Republic of Congo, Cook Islands, Costa Rica, Ecuador, Georgia, Guatemala, Honduras, India, Indonesia, Iran*, Iraq, Kyrgyzstan, Maldives**, Marshall (islands), Micronesia (federate States of), Mongolia, Nauru, Nicaragua, Nigeria, Niue, Pakistan, Panama, Paraguay, Peru, the Philippines, El Salvador, Sri Lanka, Syria, Tajikistan, Thailand, Tonga, Turkmenistan, Ukraine, Uzbekistan, Vietnam. * In July 2012 both Azerbaijan and Iran were classified as upper-middle income countries for the third time. Therefore, preferences will be deferred for these countries. This was announced in a Commission delegated regulation published on 21 February 2012. Preferences will no longer apply as of one year later, providing an ample transition period for operators to adjust. ** Maldives were graduated out of the LDC status at the end of 2010 and as such will have exited the EBA arrangement after a 3-year transition period on 31 December 2013.

9. Focus on partners most in need (continued) GSP+ beneficiaries The list of GSP+ countries in the new law is originally empty. This is because countries which meet the criteria will be entered into GSP+ as they apply. The new GSP+ law expands the number of eligible countries (see the slides on GSP+ below). All eligible countries interested in GSP+ under the new law (including those which enjoyed GSP+ under the preceding law) must apply under the new rules to obtain GSP+. Eligible countries have more than one year to apply and obtain GSP+ before the new preferences enter into force on 1 January 2014, but early application is advisable.

10. Focus on partners most in need (continued) Which partners are no longer eligible? • 33 Overseas Countries and Territories (OCTs) which have already a special market access arrangement to the EU or belong to developed countries: Anguilla, Netherlands Antilles, Antarctica, American Samoa, Aruba, Bermuda, Bouvet Island, Cocos Islands, Christmas Islands, Falkland Islands, Gibraltar, Greenland, South Georgia and South Sandwich Islands, Guam, Heard Island and McDonald Islands, British Indian Ocean Territory, Cayman Islands, Northern Mariana Islands, Montserrat, New Caledonia, Norfolk Island, French Polynesia, St Pierre and Miquelon, Pitcairn, Saint Helena, Turks and Caicos Islands, French Southern Territories, Tokelau, United States Minor Outlying Islands, Virgin Islands – British, Virgin Islands- US, Wallis and Futuna, Mayotte. As these partners have alternative market access arrangements, no negative impact expected.

11. Focus on partners most in need (continued) Which partners no longer benefit? • 34 Partners with another market access arrangement: • Euromed(6): Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia. • Cariforum(14): Belize, St. Kitts and Nevis, Bahamas, Dominican Republic, Antigua and Barbuda, Dominica, Jamaica, Saint Lucia, Saint-Vincent and the Grenadines, Barbados, Trinidad and Tobago, Grenada, Guyana, Surinam. • Economic Partnership Agreement Market Access Regulation (8): Côte d'Ivoire, Ghana, Cameroon, Kenya, Namibia, Botswana, Swaziland, Fiji. • Eastern and Southern Africa (3): Seychelles, Mauritius, Zimbabwe • Pacific (1): Papua New Guinea • Other (2): Mexico, South Africa. As these partners have alternative market access arrangements, no negative impact expected.

12. Focus on partners most in need (continued) Which partners no longer benefit? • 8 High income countries and territories (according to World Bank):Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Brunei Darussalam, Macao. • 12 Upper middle income countries (UMIs)*:Latin America (5): Argentina, Brazil, Cuba, Uruguay, Venezuela; ex-USSR (3): Belarus, Russia , Kazakhstan; other (4): Gabon, Libya, Malaysia, Palau Limited drops in exports (1% range) for some of these partners. Even marginal drops in exports by the more advanced, bigger economies, can potentially provide significant opportunities for the poorest, whose exports are very small in comparison. To give an idea of the order or magnitude, a drop of 1% in, say, Brazilian exports, is equivalent to more than 16 times Burkina Faso's total exports to the EU. *In July 2012 both Azerbaijan and Iran were classified as upper-middle income countries for the third time. Therefore, preferences will be deferred for these countries. This was announced in a Commission delegated regulation published on 21 February 2013. Preferences will no longer apply as of one year later, providing an ample transition period for operators to adjust.

13. Focus on partners most in need (continued) New "dynamic" approach Once the new GSP enters into force, status of countries is revised continuously. When a country no longer fulfils criteria to be a beneficiary, the partner exits the beneficiary list with ample transition periods to ensure economic operators can adapt. Two cases: • World Bank lists the country as "high-income" or "upper middle income“ three years in a row. At the beginning of the following year, the country is no longer beneficiary of GSP and a transition period of one year is granted for the economic operators to adapt. • if a preferentialmarketaccess arrangement (typically, a bilateral free trade agreement) isapplied (even on a provisional basis), a transition period of twoyearsisgranted.

14. Focus on products most in need: graduation of sections Current • Based on import share in 21 product sections (largely based on the EU's customs categories) • Preferences are not applied if threshold of 15% of total imports by all GSP beneficiaries is reached • Lower threshold of 12.5% for textiles • Graduation applies to standard GSP and GSP+ New • Product sections further split up to improve coherence of product classification • Thresholds increased to 17.5% (general) and to 14.5% (textiles) to better identify competitive sectors and to neutralize 'over graduation effect' due to decrease in the number of beneficiaries. • Graduation only applies to standard GSP • List of graduated sectors for the period from 1 January 2014 to 31 December 2016 has been adopted by the Commission on 17 December 2012.

15. Graduated sectors (period 2014 – 2016) China: (6 newly graduated sectors): S-1a: live animals and animal products excluded fish; S-1b: fish, crustaceans, mollusc and aquatic invertebrates;S-2b: vegetables and fruits; S-2c: coffee, tea, maté and spices; S-2d: cereals, flour, nuts, resins and plaiting; S-4b: prepared foosdtuffs (excl. meat and fish), beverages, spirits and vinegar. 27 graduated sectors in total. The only sectors that are not graduated are: S-2a: vegetable products S-3: animal or vegetable oils, fats and waxes S-4a: meat products S-4c: tobacco S-5: mineral products India: (5 newly graduated sectors): S-5: mineral products; S-6a: inorganic and organic chemicals; S-6b: chemicals, other than organic and inorganic chemicals; S-8a: raw hides and skins and leather; S-17b: road vehicles, bicycles, aviation and space, boats and parts thereof.S-11a: textiles, remains graduated. Indonesia:(2 newly graduated sectors): S-1a: live animals and animal products excluded fish; S-6b: chemicals, other than organic and inorganic chemicals; S-3: animal or vegetable oils, fats and waxes remains graduated.

16. Graduated sectors (period 2014 – 2016) - continued Thailand(2 newly graduated sectors): S-4a: preparations of meat and fish; S-4b: prepared foosdtuffs (excl. meat and fish), beverages, spirits and vinegar; S-14: Pearls and precious metals is still graduated. Ecuador(2 newly graduated sectors): S-2a: vegetable products; S-4a: preparations of meat and fish. Ukraine(1 newly graduated sector): S-17a: railway and tramway vehicles and products. Nigeria(1 newly graduated sector): S-8a: raw hides and skins and leather. Costa Rica(1 newly graduated sector): S-2b: vegetables and fruits. For Vietnam, sectors 12a (footwear) and 12b (headgear, umbrellas etc. ) are no longer graduated NB: if a country is granted GSP+, the graduation does not occur

17. Focus on need: more products under preferences, larger preferences for some products Current • Standard GSP: just under 66% of tariff lines covered (either tariff reduction or zero tariffs) Products split between 'sensitive' and 'non-sensitive - Sensitive: tariff reductions - Non-sensitive: duty-free • GSP+: just over 66% of tariff lines covered (zero tariffs) Both sensitive and non-sensitive products duty-free • Everything But Arms: 99.8% of tariff lines covered (zero tariffs) All products duty-free (except arms) To note: 25% of tariff lines are subject to 0% duty. When added to the 66% tariff lines covered by GSP or GSP+, this implies that only 9% of lines carry normal duty for GSP and GSP+ beneficiaries—underlining generosity of the scheme.

18. Focus on need: more products under preferences, larger preferences for some products (continued) New • GSP: 15 more tariff lines (6-digit) under the scheme, 4 tariffs lines (8-digit) see preference expand (they move from “sensitive” to “non-sensitive”). • GSP+: 4 more tariff lines (6-digit) under the scheme. • Products carefully selected to avoid that more advanced beneficiaries put additional pressure on poorer beneficiaries.

19. Focus on need: more products under preferences, larger preferences for some products (continued) New • GSP: 15 more 6-digit tariff lines all non-sensitive

20. Focus on need: more products under preferences, larger preferences for some products (continued) New • GSP: 4 8-digit tariff lines go from sensitive to non-sensitive • GSP+: 4 6-digit new tariff lines

21. Enhanced GSP+: More incentives to join, more countries eligible Current • Graduation applies to GSP+ • Entry • Vulnerability – import share criterion: country only eligible if it represents less than 1% of imports by all GSP beneficiaries in product section • Vulnerability – non-diversification criterion: 5 largest product sections must cover at least 75% of total exports from country to EU • Entry window: every 1.5 years New • Graduation no longer applies to GSP+ • Entry • Vulnerability – import share criterion: threshold increases from 1% to 2% • Vulnerability – non-diversification criterion: number of sectors to cover at least 75% increases from 5 to 7 (neutral) • No entry windows: can apply any time • New countries which can now apply: Philippines, Pakistan, Ukraine. All eligible countries need to apply to receive GSP+, even if they are alreadybeneficiaryunder the presentscheme

22. Enhanced GSP+: improved mechanisms for implementation of conventions Current 27 conventions Entry - Commitment to ratify and implement conventions, to report and to accept monitoring Monitoring - Reporting to Council every 3 years Withdrawal mechanism - Onus on EU to show that beneficiary country is in breach of conventions - Applicable legal benchmark of 'effective implementation' undefined - Based on reports by international monitoring bodies (e.g. UN, ILO) - Undefined role for other parties (e.g. civil society)

23. Enhanced GSP+: improved mechanisms for implementation of conventions (continued) New • 27 conventions (Apartheid no longer relevant and falls, UN Framework Convention on Climate Change in) Entry • Binding commitment to ratify conventions, to accept monitoring, and to cooperate • Commitment to accept without reservations conventions' reporting requirements • Country has not formulated a reservation which is prohibited by any of those conventions • No serious problems of implementation Enhancedmonitoring • More scrutiny by Council and EP on the basis of Commission report, every 2 years Withdrawal mechanism • Onus on the beneficiaries to prove positive record • Applicable legal benchmark of 'effective implementation‘ defined • More sources of information allowed (broader than UN, ILO, …) • Specific role for "third parties" (e.g., civil society)

24. Improvement of temporary withdrawal rules Current • Reasons: • Serious and systematic violations of core human and labour rights conventions (on the basis of monitoring bodies) • Other grounds specified in the Regulation, e.g. unfair trading practices, non- compliance with customs rules, … • Rules apply to standard GSP, GSP+ and EBA New • Reasons: • Idem BUT not exclusively on the basis of monitoring bodies; also "third parties" • Clarification that unfair trading practices include those linked to raw materials • Rules continue to apply to standard GSP, GSP+ and EBA

25. Moreoperationalsafeguards Current • General safeguards: EU producers have no right to request action; legal trigger ('serious difficulty') undefined. Clothing can not benefit from general safeguards—only from special safeguards (see below). • Specific safeguards possible for agriculture • Special safeguards for clothing: in case of import volumes increase by 20% over the year or exceed 12.5% of Union imports from beneficiary countries (same threshold as in graduation mechanism). Not applicable for countries benefitting from EBA or whose share on total imports is below de minimis (8%).

26. Moreoperationalsafeguards (continued) New • General safeguards: EU producers have right to seek action, legal trigger defined (safeguard applies if EU producers suffer deterioration of their situation). Clothing also can be subject to general safeguards. • Specific provisions for agriculture maintained • Special safeguards for clothing maintained and extended to textiles and to ethanol. Thresholds adjusted to 13,5% for annual increase of imported volumes; 14,5% of share of imports from GSP beneficiary countries (new graduation threshold); de minimis share 6%.

27. Enhancedtransparency and predictability Current • Scheme has 3-year duration • Rights of parties not always defined New • More than 1 year for economic operators to adapt to the new system until new preferences apply on 1 January 2014 • Longer duration: 10 years. EBA is open-ended. • Rights of parties are specified and enhanced (GSP+ entry, withdrawal, safeguards) • Transition periods for countries which no longer benefit (1 year or 2 years, depending on the case)

28. Adapating to the Treaty of Lisbon: Council and EP on equal footing Current • No role for EP New • Lisbon rules: extensive EP role, equal footing with Council

29. Annex VI - GSP Regulation (amended by ordinary legislative procedure) Chapter I General provisions Implementing Acts Delegated Acts Decisions amending the Annexes Recitals • Regulation on procedures: • -application for GSP+ • -withdrawal/reinstatement of GSP+ • -withdrawal/reinstatement of GSP, GSP+, EBA • Safeguards Decision to amend Annex I to add or remove a country from the list of eligible countries Annex I List of eligible countries Chapter II GSP Decision to amend Annex II to add or remove a country from the list of GSP beneficiary countries Decision to establish or review a list of GSP sections that are suspended from GSP preferences Annex II GSP beneficiary list Annex V GSP product list Decision to amend Annex V to change GSP product list Annex VI Graduation thresholds Chapter III GSP+ Decision to amend Annex VI to change graduation thresholds Decision to initiate or terminate GSP+ temporary withdrawal procedure Annex III GSP+ beneficiary list Decision to amend Annex III to add or remove a country from the list of GSP+ beneficiary countries Annex VIII List of conventions Decision to amend annex III to temporary withdraw or to reinstate GSP+ preferences Annex IX GSP+ product list Decision to amend the decision to temporary withdraw preferences Decision to amend Annex IX to change GSP+ product list Annex VII Vulnerability thresholds Chapter IV EBA Decision on rules for implementing the provisions on imports of sugar products Decision to amend Annex VII to change vulnerability thresholds Annex IV EBA beneficiary list Chapter V Temporary withdrawals Decision to amend Annex IV to add or remove a country from the list of EBA beneficiary countries Decision to initiate or terminate GSP,GSP+ or EBA temporary withdrawal procedure for reasons of Art19(1) Decision to amend annex II, III or IV to temporary withdraw or to reinstate GSP, GSP+ or EBA preferences Decision to temporary withdraw the preferences, prolong or terminate temporary withdrawal in the case of fraud Decision to amend the decision to temporary withdraw preferences Decision to immediately reintroduce Common Customs Tariff duties for a period of up to 12 months in the exceptional circumstances Chapter VI Safeguards Decision to remove preferences in textile and agriculture sector Decision to reintroduce Common Customs Tariff duties due to findings of safeguard investigation Decision to suspend preferences due to serious disturbance to EU markets, in particular to outermost regions Chapter VII Common provision Decision to terminate safeguard investigation Final provisions Decision to apply surveillance mechanism in agriculture and fisheries sectors

30. NEXT STEPS • Delegated acts to amend country lists (2013) • Annex III (GSP+ beneficiaries) • Other amendments also possible • Delegated acts on some procedural aspects (GSP/GSP+ withdrawal, safeguards) (2013) • Adjustment of preferentialrules of origin (new beneficiaries) (2013) • New tariffpreferences to apply as from 1 January 2014