May 26, 1992

U.S. GSP RENEWAL MAY COME WITH ENVIRONMENT CONDITIONALITIES.

GENEVA, MAY 22 (CHAKRAVARTHI RAGHAVAN) -- Graduation or differentiation in treatment of countries under generalised schemes of preferences should be based on objective and rational criteria to avoid arbitrary, restrictive and often discriminatory results

This was one of the points that emerged at the UNCTAD's Special Committee on Preferences which reviewed at a week-long meeting ending Friday the Generalised System of Preferences and the various schemes of countries under the system.

The Special Committee is the only one of the various UNCTAD Committees and subordinate bodies that was not "suspended" and replaced by "ad hoc" bodies after the Cartegena Commitment adopted by the Eighth Session of the UN Conference on Trade and Development (UNCTAD-VIII), but remained intact with its mandate unchanged.

It was also the first meeting of an UNCTAD subordinate body to be held after UNCTAD-VIII, and ended with a Chairman's summing-up or conclusions which in effect binds nobody.

Perhaps the one major point of interest or outcome, apart from the discussions and the Chairman's summing up, was U.S. statement to the committee that the Administration has initiated the process for renewal of its GSP when it expires on 4 July 1993. The renewal would require Congressional action and the renewal exercise would allow every aspect of the GSP programme to be reviewed.

The U.S. remained committed to the overall aims of the GSP, and has begun the renewal process and was developing a formal position. A public announcement had been made in the Federal Register soliciting public comments and public hearings are to be held in Washington on 8-9 June. The renewal process was "an open, transparent process, engaging all interested parties, foreign and domestic" and countries should participate in the process through their representatives in Washington.

Though, it did not expand further on this in the Committee, in the various bilateral and plurilateral consultations and discussions it had with the beneficiary countries, the U.S. delegation would appear to have indicated that the renewed GSP scheme may come with some "conditionalities" attached, such as environmental, labour and intellectual property standards.

In all, 83 bilateral and plurilateral consultations were held between 20 beneficiaries and the 15 preference-giving countries and the Chairman's conclusion viewed them as having been a "positive and practical compliment" to the committee meetings.

The prospect of the new conditionalities were reportedly conveyed by the U.S. delegation in the bilateral and plurilateral consultations where several of the participants pressed the U.S. to bring its GSP schemes in line with its GATT obligations and the character of the GSP - non-discriminatory, non-reciprocal and generalised.

While the administration itself would not be initiating any such conditionalities, there were pressures in Congress, and from U.S. domestic lobbies, to attach such conditions, and this would be the price that may have to be paid to get the GSP renewed.

In other interventions, several of the preference-giving countries said that they had expanded their schemes and extend its benefits to a number of East European countries and the newly-independent former constituent units of the dissolved Soviet Union.

In providing a Chairman's conclusion of the week-long discussions, Ernst August Horig of Germany, said it was not felt necessary, as in the past, to have a formal negotiated outcome.

This first meeting after UNCTAD-VIII, Horig said, had been a test case (of the Cartegena Commitment and the new work programme) and thus it had been encouraging and hopefully would set the example for conduct of other meetings in UNCTAD.

Horig noted that the question of "graduation or differentiation" had been formally and informally openly addressed after 20 years of the application of GSP.

"It was felt", Horig said, "that graduation/differentiation in the treatment of beneficiary countries could lead to arbitrary and restrictive results. Objective and rational criteria for such treatment would be the best way to avoid such unwanted and often discriminatory results".

One positive effect of graduation/differentiation could and should be a better spreading of the benefits among developing countries. It should also open up the possibilities for increased product coverage in areas of export interest to developing countries and enhance the domestic credibility of the GSP in the preference-giving countries.

It was however felt that country/product differentiation was preferable to a complete country-exclusion because the macro-policy decision could crate problems at the micro-level for the graduated country.

Another important issue discussed at the committee, in a sessional committee, was the issue of rules of origin under the various schemes and harmonising them.

Horig in the Chairman’s conclusions said a number of points had emerged from the discussions in the sessional committee, and these had met with widespread approval, giving hop towards positive improvements.

On harmonisation, there was widespread approval for the view that the question should be treated as an issue separate from other possible improvements such as simplification and liberalisation.

It was reaffirmed that the case in favour of harmonisation of GSP rules of origin had been established.

The review of the GSP schemes being undertaken by some preference-giving countries would include origin rules and their possible harmonisation. But option on the basis and scope of harmonisation remained open. However, some movement was evident in favour of the process criterion and a similar trend existed in regard to non-GSP rules of origin too.

On the concept of donor country content (processed products incorporating raw material or components before being re-exported back with value added), the Chairman's conclusion said that the application of the donor country concept provided some relaxation of the restrictions in the rules of origin and it would encourage foreign investment in the (recipient countries) and promote international trade.

It was the view of many countries that extension of the use of the concept would be consistent with national and international trends towards liberalisation of trade.

As for "cumulation", full global cumulation was seen as having positive effects on cooperation among beneficiary countries and would in particular benefit countries outside regional groupings.

There was also a broad consensus in the Committee that in line with agreed policy, ways and means should be sought in all aspects of the GSP to offer special benefits to all least developed countries considering their limited industrial base and exporting power, the Horig's conclusion said.

During the discussions in the committee (according to its draft report), many donor countries had supported the continuance of technical assistance schemes and promised financial support. Switzerland suggested however that general activities of the GSP programme should be included progressively in the regular UNCTAD budget.

Technical assistance to the beneficiary countries was stressed to be of continuing importance to meet the growing needs as an increasing number of countries were now in a position to use GSP. But the shortfall of and need for financial support for these activities was noted. The presentation of computer software containing information on the GSP schemes of 12 important preference-giving countries or groups of countries was seen as a step in the right direction and one which can help exporters to more effectively use the GSP.