GSP IMPORTS INCREASE IN OECD COUNTRIES, BUT NTMS INHIBIT.

May 19, 1992

GSP IMPORTS INCREASE IN OECD COUNTRIES, BUT NTMS INHIBIT.

GENEVA, MAY 16 (CHAKRAVARTHI RAGHAVAN) -- Preferential imports under the Generalised System of Preference (GSP) schemes into the OECD countries in 1988-1989 increased roughly three times as high as imports from all sources, according to a report of the UN Conference on Trade and Development (UNCTAD) for its Special Committee on Preferences which begins a one-week session Monday.

But non-tariff measures (NTMs) are proving to be an important deterrent to imports of GSP covered products, and the preference-giving countries could enable improved utilisation of GSP by exemption GSP-covered products from NTMS, the report suggests.

The rate of growth - with data adjusted by excluding imports from four Asian NICs who were excluded from U.S. list of beneficiaries, and South Korea excluded from the EC list - shows an 21.9 percent increase in 1988-1989 from beneficiary countries as compared to a 8.1 percent increase in imports from the world as a whole.

Over 1976-1989, the annual average growth, calculated on the same basis, were 15.4 percent from GSP beneficiaries compared to 9.6 from the world as a whole.

"These high GSP-related growth rates", UNCTAD says, "are a demonstration of the enhancement of beneficiary export supply capabilities through efforts to diversify exports towards non-traditional products".

"They also reflect the more flexible administration of the U.S. scheme following the graduation of their previous major suppliers, the four Asian NICs, and the suspension of South Korea from the EC scheme".

The total imports of OECD preference-giving countries, other than New Zealand, in 1989, amounted to roughly $ 337 billion of which 67 percent or 226 billion were covered by most-favoured-nation (MFN) duties.

Of the $ 226 billion, only $ 109 billion or 48 percent consisted of products actually covered by GSP schemes and $ 56.3 billion of the products actually received GSP treatment.

This works out to a 51.9 percent of preferential treatment of the products covered by the scheme, but only 16.9 percent of total imports.

While GSP utilisation rates varied from one country scheme to another, the utilisation rates in U.S. and EC increased "substantially" from 1988 to 1989, according to the report, due partly to exclusion of imports from Korea in the case of the EEC and the graduation of the four NICs from the U.S. list.

Another report to the Committee on the incidence of non-tariff measures, finds that imports of GSP-covered products face in beneficiary countries a wide variety of non-tariff measures (NTMs).

The report notes that given the original objective of the GSP, and the fact that many import sensitive items are statutorily excluded from GSP-eligibility under most schemes, one might not expect covered by products to be affected by NTMs.

But this has not been the case and "considerable reliance is placed by some of the preference-giving countries on the use of 'hard-core' NTMs to limit imports eligible for preferential tariff-treatment".

Examples, the report adds, include variable levies in the EEC, Sweden and Finland, quotas and non-automatic licenses in Japan, non-automatic licenses in Canada and restrictions under the Multifibre Agreement (MFA) in the EEC, Canada and Austria.

The major beneficiaries under the various GSP schemes also appear to be those most affected by NTMs. The percentages of GSP-covered imports facing NTMs for each of the beneficiaries were found to be extremely high in all cases.

"Since major beneficiaries also tend to be affected most by quantitative limitations inherent in GSP schemes, these limitations and NTMs outside the GSP may be expected to exhibit similar country incidence patterns."

An UNCTAD secretariat study, based on updated data and use of harmonised system of customs tariff classifications for all countries, confirm previous analysis and show that Non-Tariff Measures (NTMs) "still constitute, affect and could be an important deterrent to imports of GSP-covered products".

"Preference-giving countries", the report says, "should therefore take action to deal with the NTMs which limit GSP benefits by eroding incentives inherent in preferential tariff margins".

"An important means by which improved utilisation of the GSP could be achieved would be to consider exempting GSP-covered products from NTMS", the report suggests.

Among the three principal importing markets, imports of GSP-covered products into the 12 EEC countries were affected substantially by NTMs (defined broadly) and the trade coverage of such NTMs applied to almost 36 percent of total value of such imports or $ 20.24 billion.

A wide range of individual NTMs were applied to both agricultural and manufactured goods including automatic licenses, anti-dumping and countervailing duty (AD/CV) actions, and "hard core" NTMs such as variable levies, quotas, MFA restrictions and voluntary export restraints (VERs).

The measures applied to agricultural products covered by the Common Agricultural Policy (CAP), imports of iron and steel, and restraints under the MFA which had the greatest trade coverage of any "hard-core" measures used by the EEC.

In the case of Japan, the trade coverage across all products of NTMs was $ 2.345 billion or ten percent. Non-automatic licenses and quotas were most important NTMs applied to both agricultural and manufactured products. The non-automatic licensing affected more than 20 percent of value of GSP-covered textile imports, 55.8 percent of GSP covered food items. It was also used to regulate trade in chemicals.

The trade coverage of NTMs in the U.S.A, using a broad definition, reached just under $ 1.4 billion or 5.6 percent of total value of GSP covered imports. AD/CV actions, quotas and price actions (flexible import fees) were the primary NTMs used. But unlike most other countries, the U.S. did not make use of an import licensing system. Agriculture had the highest incidence and flexible import fees were specific to the agricultural sector, and covered by Section 22 of the U.S. Agricultural Adjustment Act (covered by a full waiver from GATT obligations). These were used primarily to regulate imports of certain products containing sugar. AD/CV actions were the most important NTMs in terms of value of trade coverage - with cut flowers, iron and steel products, and non-ferrous metal products as major targets of such actions.