7:00 AM May 11, 1993


Geneva 10 May (Chakravarthi Raghavan) -- The Generalized System of Preferences is yet to reach its full potential and needs further evolution, but this depends among others on a successful conclusion of the Uruguay Round, which would have both positive and negative effects, a top official of the UN Conference on Trade and Development said Monday.

Carlos Fortin, Deputy to the Secretary-General of UNCTAD was addressing the UNCTAD Special Committee on Preferences which is set to undertake an annual review of the implementation of GSP schemes and explore how further benefits could be obtained under the system.

Earlier, Bachrum S. Harahap of Indonesia who was elected to chair the one-week meeting, stressed the catalytic role of the GSP for expansion of world trade. The advantages that developing countries derived from the scheme by better access to markets of developed countries, he stressed, provided them with the means to continue their development programmes and enabled them to import more.

A secretariat report before the Committee brought out that in 1991, preference-receiving countries exported over 70 billion dollars worth of products, manufactured and semi-manufactured, to the preference-giving countries under their schemes.

In his introductory statement, Fortin stressed that the system, launched in 1971 under the auspices of UNCTAD, "has not yet achieved its full potential since these imports represent barely a quarter of dutiable imports from developing countries."

The further evolution of the system, he said, depended on a host of factors including the outcome of the Uruguay Round.

An early conclusion of the Round, he suggested, would increase security in preferential access by laying firmer grounds for renewal of some major GSP schemes. The fact that the GSP schemes of the US and the EC have not yet been renewed jeopardised the GSP, Fortin said.

However, the successful conclusion of the Uruguay Round and the MFN tariff reductions that will ensue would lead to erosion of GSP margins. But such erosion of margins could be measured and necessary adjustments made to maintain the preferential margins, as agreed to at UNCTAD-VIII in the Cartegena Commitment, the UNCTAD official added.

Also, the tarification of all non-tariff measures in agriculture and a phase-out of the Multifibre Agreement (over a ten-year period contemplated in the Dunkel draft text) should be matched by a significant reduction of duties initially, to be followed by a deeper preferential margin at a later stage, he suggested.

There could also be further improvements of GSP including full duty-free preferential treatment, expanded product coverage, relaxed safeguards and simplified rules of origin.

An area where the Committee would need to act, Fortin said, was over the issue of 'graduation'. This issue, he noted, had been addressed by the committee squarely for the first time at its meeting a year ago and should be further discussed at the present session.

This would be necessary in order to develop objective and rational criteria in the application of 'graduation', and to be clear about its scope, in particular whether graduation should be product-wise or country-wise.

Fortin said that there seemed to be a general consensus that product graduation (under which duty-free GSP privileges are withdrawn from a preference receiving exporting country which is seen to be able to meet competition) was preferable to complete exclusion of a country from the GSP benefits.

The central issue in the discussions of criteria for graduation was whether this is to be based on a country's 'stage of development' or its ability to export competitively GSP covered products.

The objectives of graduation, Fortin noted, were advanced as aimed at 'sharing of benefits', 'burden-sharing', removal of beneficiaries no longer needing preferences and even integration of graduation into the disciplines of the international trading system.

Fortin also stressed the importance of technical cooperation in improving utilization of schemes and UNCTAD's technical assistance programme of Trade Analysis and Information System which was designed to enable beneficiaries and policy makers to have easy access to full details and trade implications of the GSP schemes.

The technical cooperation activities are financed through voluntary contributions.

In 1992, according to a secretariat report before the Committee, extra-budgetary funding for global GSP activities amounted to $1,141,500 of which the UNDP contributed $538,000 or 47 percent, with the balance coming from trust fund contributions of $603,000 from member-States. These latter consisted of funds of $343,800 earmarked for specific purposes, contributions in kind of $96,000 and central trust funds of $163,320 or 27 percent to undertake activities which service all GSP-related projects in the network.

Fortin said there was a large gap between the funding needs for 1993 activities and the funds so far pledged and available. He thanked in this connection Japan and Switzerland who have announced their pledges of $250,000 for the 1993 programme.

But there was need, Fortin said, for increased funds to enable activities and programmed envisaged for 1993 to be carried out. Such funds would be needed for the large number of activities needing substantive, technical and administrative backstopping, increased central trust funds for support personnel, training, travel and administration.