EU's new Generalised System of Preferences (GSP) (changes from 1 January 2014)

1. By Mr Pekka PENTTILA(pekka.penttila@eeas.europa.eu)Trade and Economic SectionDelegation of the European Union to Thailand EU's new GeneralisedSystem of Preferences (GSP) (changes from 1 January 2014)

2. AGENDA: • New EU GSP scheme • Impact to Thailand • Looking forward (EU-TH FTA)

3. 3. Looking forward: TH-EU FTA 1. New EU GSP Scheme.

4. EU GSP schemes • The Generalised System of Preferences (GSP) is a scheme of generalised tariff preferences that offers preferential access to imports (duty reduction or elimination) into the EU market from developing countries. The rules determine which country pays less or no duty when exporting to the EU. • Provided on unilateral basis– a development tool • 3 schemes; standard, GSP+ and EBA • Sensitive (MFN- 3,5%) and non-sensitive products (zero) • Wide product coverage – only 9% of tariff lines carry normal duty ( EBA 2%) • Graduation mechanism for competitive sections 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.

5. New EU GSP New scheme: Basic rules published on 31 October 2012 (Reg.978/2012). New preferences applied from 1 January 2014 • Why reform? - 3 main objectives • Focus the preferences on partners 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+, to support partners that implement international conventions on environment, labour and human rights • Make the system more transparent and predictable for economic operators Fact: more advanced economies place a lot of competitive pressure on LDC and other poorer country competitors—which lag behind. Preferences must be re-focused to help those most in need.

6. Focus on partners most in need Some beneficiaries wealthier than EU MSs Advanced developing economies accounted for 35% of all benefits

7. Focus on partners most in need New "dynamic" approach Once the new GSP entered into force, status of countries is revised continuously. When a country no longer fulfils criteria to be beneficiary, the partner exits the beneficiary list with ampletransition 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 bilateralFree Trade Agreement) applies (even on a provisional basis), a transition period of twoyearsisgranted.

8. Focus on partners most in need • From 1 Jan 2014 onwards 89 beneficiaries instead of 176 divided in 3 groups: • 40 countries benefit from 'Standard' GSP • Everything But Arms (EBA, tariff and quota-free access for all goods except arms to 49 Least Developed Countries) • GSP+ (enhanced preferences for countries that ratify and implement international human and labour rights, environment and good governance conventions) ( 13 countries so far) • Slightly increased product coverage (19 more tariff lines) • New scheme for 10 years – better predictability for traders • Graduation calculated on 3-year basis and higher thresholds ( 17.5% instead of 15%)– better predictability

9. 3. Looking forward: TH-EU FTA 2. Impact to Thailand

10. Thailand-EU Trade relations • For many years, the EU is 2nd largest export market - after ASEAN. • Thai exports in 2013: Euro 18 billion. • In 2013, EU was the fourth largest source of imports (8% of total TH’s imports)- after Asean, Japan and China. • Major exports to the EU: electrical equipment (39%), food products (12%), plastic (10%), jewelry (7%), textiles& garments (5%) . • EU imports in 2013: nearly Euro 15 billion. • EU among the biggest investors in Thailand (after Japan).

11. IMPACT TO THAILAND From 1 January 2014 • 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. • Thailand saw three exports sections graduated (2 new sections) and therefore out of the GSP benefits, but at the same time will have less competition in other exported items, where competitors countries have lost GSP benefits in total or in part.

12. Graduated sectors (period 2014 – 2016) • Thailand • Two newly graduated sections: S-4a: Preparations of meat and fish; Shrimps: processed 7% 20% Tuna: processed 20.5% 24% S-4b: Prepared foodstuffs (excl. meat and fish), beverages, spirits and vinegar; Wine Vinegar: 4.4 € /hl 6.4 € /hl • Already graduated section S-14:Pearls and precious metals is still graduated. Imitation jewellery (of base metal): 0% 4% • As explained, graduation comes because these sectors are already very competitive and keeping tariffs reduced would harm fair competition.

13. Graduated sectors for 2014 – 2016 (if a country is granted GSP+, graduation does not occur) 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 foodstuffs (excl. meat and fish), beverages, spirits and vinegar (27 graduated sectors in total). 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. 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. Vietnam:sectors 12a (footwear) and 12b (headgear, umbrellas etc. ) no longer graduated

14. IMPACT TO THAILAND:Country Exit In 2015 • TH is classified by the World bank as an Upper Middle Income Country (UMIs) 3 years in a row (2010-$4,320, 2011-$4,620 and 2012-$5,210). • The Commission Decision to defer GSP privileges from TH took place in October 2013. • A 1-year transition period will be given to the economic operators to adjust themselves. • Therefore, TH will fully exit from the EU GSP scheme 1 Jan 2015. • This means all sectionswill be graduated. • TH will no longer be a "beneficiary country" (but will remain as "eligible country").

15. Impact to exporters (by SCB)

16. Strongly affected products (high tariff gap, high utilization, reliance to EU markets)

17. SCB estimates an important loss of market share due trade diversion

18. IMPACT TO THAILAND: Regional Cumulation

19. IMPACT TO THAILAND During 2014: • The "beneficiary" country conditions of the EU GSP scheme still remain, and certain agricultural foods (tuna, shrimps, fish… listed on Annex 13.b) originated in Thailand can be used for "Regional Cumulation" with other ASEAN Member States.

20. IMPACT TO THAILAND After 2015: • As a "non-beneficiary" country of the EU GSP scheme, materials originating in Thailand cannot be used for "Regional Cumulation" with other ASEAN Member States. Art. 2 of Commission Implementing Regulation 530/2013 of 10 June 2013 "Regional Cumulation between countries within the same group shall apply… if the countries involved in the cumulation are, at the time of exportation of the products to the Union, beneficiary countries"

21. IMPACT TO THAILAND For example: RMs originating from TH cannot be cumulated in Myanmar

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