On January 1, 2009 a new European Generalised System of Preferences (GSP) comes 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 will enjoy GSP again, whereas Sri Lanka risks to loose 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. So, from the statistics it appears that GSP has a positive effect.
Stability
Currently, 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.
Sri Lanka has qualified for GSP+ and as a result, exports bikes, parts and accessories free of charge into the EU. Thirdly, 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.
In anticipation of the new system, GSP users have pleaded for stability, predictability and transparency. Therefore, the EU has adopted a new GSP that remains broadly unchanged. Nevertheless, a number of modifications have been introduced as a result of the graduation system. Following this, 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.
Sri Lanka, Thailand and Vietnam
In view of the introduction of the new system, the necessary calculations have been made. As a consequence, the preferential rate will be re-established for the product group “Transport equipment”, which includes twowheelers, for Thailand. This is all the more important given the fact that bicycle imports from Thailand have increased in a major way last year. The country exported almost 1.5 million bikes, thus becoming Europe’s second supplier. In one case only, preferences will be suspended: products under Section XII for Vietnam. The Section contains among other things footwear and headgear.
At present, 14 countries enjoy GSP+, among which Sri Lanka. That arrangement expires at the end of 2008. Any country, including the current beneficiaries, that wishes to enjoy GSP+ from January 2009 had to submit an application before 31 October.
Sri Lanka has fulfilled that requirement but whether the country will be able to keep GSP+ is very uncertain since the Commission has initiated an investigation on the implementation of human rights conventions. This investigation results from information provided by the United Nations and by non-governmental organisations. Any interested party may submit comments until 18th February 2009. Sri Lanka strongly objects to the investigation.
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