May 8, 1991

GSP HAS HAD REMARKABLE RESULTS, SAYS UNCTAD.

GENEVA, 6 MAY (BY CHAKRAVARTHI RAGHAVAN) The preferential-import schemes of the OECD countries under the Generalised System of Preferences (GSP), after two decades of application, has benefited the South by enabling increased exports, enhancing export supply capabilities of beneficiaries and in product diversification, according to an UNCTAD secretariat report.

The benefits, UNCTAD says in a report to its Special Committee on Preferences (TD/B/C.5/134), could have been more but for the use by the importing countries of GSP-related Non-Tariff Measures (NTMs) which are an important deterrent and run counter to the original intent of GSP, namely to extend preferential treatment to exports from the Third World.

Imports of GSP-covered products, the secretariat-reports, face a wide variety of NTMs in preference-giving countries and major beneficiaries of GSP are those most affected by them.

The importing countries, the report points out, also apply a variety of "safeguard" measures (emergency import restrictions to protect domestic industry against "injury") which over time have become less transparent and predictable.

Resort to safeguard actions, using the model of the GATT Art. XIX, rather than permanent and discretionary product/country limitations (as now) would enhance the transparency and the value of the system for beneficiaries, UNCTAD argues.

UNCTAD suggests that preference giving countries should take these into account and, in the review of their schemes for the 1990s, reduce a priori limitations and restrictions on preferential imports and also exempt GSP covered products from NTMs and refrain from imposing new NTMs.

Of the total imports of $371 billion by the preference-giving OECD countries in 1988 (the latest year for which detailed statistics are available), about 76 percent or $282 billion of imports were under MFN rates and thus technically eligible for GSP.

But only $138 billion or 49 percent of imports were actually covered by the GSP schemes of the importing countries and of this only $56.4 billion or 41 percent actually received preferences.

If the preferential imports (roughly $3 billion in 1988) by Australia and New Zealand from their beneficiaries were added to other imports of OECD preference-giving countries, preferential imports would have attained the level of $60 billion or a five-fold increase from the $12 billion recorded in 1976 - the first year when all GSP schemes were in operation.

1988 was the last year during which the four Asian Newly Industrialising Economies (NIEs) - Taiwan, Hong Kong, South Korea and Singapore - enjoyed GSP benefits on the U.S. market. Preferential imports into U.S. from these four in 1987 were $9.7 billion.

The utilisation rate (ratio of preferential imports, or imports which actually received preferential treatment, to covered imports, those covered by the GSP) varied from scheme to scheme.

It continued to decline in the two major schemes - those of the EC and the U.S. In the EC the utilisation rate dropped from 37.6 percent in 1987 to 36.8 percent in 1988, while in the U.S. the ratio dropped from 38.1 percent in 1987 to 36.7 percent in 1988.

The decline, according to the UNCTAD report, showed the importance of a priori limitations inherent in these two schemes which have a negative impact on preferential imports.

However in the United States (for which 1989 data are available), after the exclusion of four Asian NIEs the utilisation rate jumped from 36.7 percent in 1988 to 41.1 percent in 1989. The exclusion of the four NIEs, the report says, left considerable room in the U.S. market for preferential imports from other beneficiaries and allowed for a more flexible administration of the U.S. scheme.

In 1987, the preferential imports from these four NICs into the USA had amounted to $9.7 billion and their exclusion as from 1 January 1989 left considerable room for preferential imports from other beneficiaries and, in particular, allowed a more flexible administration of the U.S. GSP scheme, the report says.

In Japan, the ratio increased from 51.6 percent in 1987 to 53.4 percent in 1988, owing to recent improvements in the scheme. But due to the new limits fixed for maximum country amount (25 percent instead of one-third of the ceiling fixed for each product group), the ratio dropped to 51.6 percent in 1989.

Between 1976 and 1988 the annual average increase of preferential imports by the OECD preference-giving countries (excluding Australia and New Zealand) amounted to 15.7%. The rate of increase of preferential imports was almost twice as high as that of imports from all sources as well as total imports from beneficiaries.

However, in the case of Canada, EC, Finland, Sweden and Switzerland, the annual average increase from beneficiaries was lower than that from all sources.

The annual-average increase of "covered imports" from beneficiaries to the OECD preference-giving countries amounted to 16 percent and that of dutiable imports to 15.3 percent.

"These high rates", UNCTAD says, "could be interpreted as a remarkable result of the GSP after two decades of its application".

"The high rate of annual increase of covered imports is the result of continued efforts to increase the product coverage under the schemes. Increased dutiable imports result from an enhancement of the beneficiaries' export supply capabilities and efforts in export product diversification".

The performance is also partially due to the increased awareness of advantages of GSP resulting from technical cooperation activities undertaken in beneficiary countries by UNCTAD.