EU Adopts New and Simplified GSP

AMSTERDAM, the Netherlands - On January 1, 2009 a new European Generalised System of Preferences (GSP) has come into force. It applies until December 31, 2011. There are hardly any changes compared to the previous system. Main point for the bicycle business is that bicycle imports from Thailand enjoy GSP again, whereas Sri Lanka is on the verge of loosing GSP+.

The GSP is a trade arrangement through which the EU grants 176 developing countries reduced import duties. The primary objective of GSP is to contribute to the reduction of poverty and to promote sustainable development and good governance. In recent years, the value of imports under GSP has significantly increased. In 2006, GSP imports totalled € 51 billion, a 10% increase over 2005. In 2007, import value reached € 57 billion, +12% compared with 2006. In 2008, there was a further 20% growth to a total value of € 68.6 billion. So, from the statistics it appears that GSP has a positive effect.

There are 3 regimes. As a result of standard GSP, import duties on bicycles are reduced to 10.5%, on bicycles with auxiliary engines to 2.5% and on parts and accessories to 1.2%. Under GSP+, countries can enjoy additional reductions provided they have ratified and implemented 27 international conventions in the field of human and labour rights, sustainable development and good governance. At present, 15 countries enjoy GSP+.

Sri Lanka

Sri Lanka was originally among them and as a result, exported bikes, parts and accessories free of charge into the EU. But in February 2010, the European Council decided to withdraw GSP+ trade benefits. The decision is based on the findings of an exhaustive Commission investigation. This has shown significant shortcomings in respect of Sri Lanka’s implementation of 3 UN human rights conventions. The temporary withdrawal takes effect on 15 August, which still gives the country some time to remedy the human rights shortcomings. As a result of the withdrawal of GSP+, Sri Lanka will revert back to standard GSP. In 2008, Sri Lanka exported more than 625,000 bicycles to the EU at an average value of € 65.74.

The “Everything but Arms” allows the 50 Least Developed Countries (LDC) to export duty-free. The only LDC, which is relevant for the two-wheel business is Bangladesh. GSP is subject to a graduation system, which means that preferential rates are suspended or re-established whenever a country’s performance on the EU market over 3 years’ time exceeds or falls below a certain threshold. The graduation system does not apply to LDC.

With the implementation of the 2009 GSP system, the preferential rate for the product group “Transport equipment”, which includes two-wheelers, has been re-established for Thailand. This is all the more important given the fact that bicycle imports from Thailand have recently increased in a major way. The country exported almost 1.5 million bikes in 2007 and in 2008, thus becoming Europe’s second supplier. In one case only, preferences have been suspended: products under Section XII for Vietnam. The Section contains among other things footwear and headgear.

The Commission has now launched a consultation to feed into its future proposition on an updated GSP regulation.