Generalised System of Preferences for 2009 – 2013 & New System for 2014 – 2024 Approved

Laws & Regulations

BRUSSELS, Belgium – The current European Generalised System of Preferences (GSP) came into force on 1 January 2009. Originally, it applied until December 31, 2011 but was subsequently extended until 31 December 2013. Main point for the bicycle business of this system was that bicycle imports from Thailand enjoy GSP again, whereas Sri Lanka has lost its GSP+ status.

Generalised System of Preferences for 2009 – 2013 & New System for 2014 – 2024 Approved

In the meantime, the European Council and Parliament have adopted Regulation 978/2012, which establishes the new preferences. In order to allow for the necessary time to adapt, the new system will apply as of 1 January 2014.

About 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.

Different regimes

There are 3 regimes. As a result of standard GSP, import duties on bicycles have been 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 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 was based on a Commission’s investigation, which showed significant shortcomings in respect of Sri Lanka’s implementation of 3 UN human rights conventions. The temporary withdrawal of GSP+ took effect on 15 August, 2010. Consequently, Sri Lanka reverted back to standard GSP.

Least Developed Countries

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, was been reinstated for Thailand. This is all the more important given the fact that bicycle imports from Thailand have recently increased in a major way.

Important changes as of January 2014

As of 1 January 2014, a new GSP will come into force, which holds a number of important changes. One of the main objectives of the new system is to focus the preferences on those countries most in need, i.e. LDCs and other poor economies, which do not enjoy other trade preferences. As a result, the number of beneficiaries will be reduced from 176 to 89.

First of all, the EU has eliminated 76 partners with other free trade or preferential arrangements, who therefore do not need GSP anymore. Furthermore, 20 high and middle income countries as listed by the World Bank will also be excluded from GSP. The continuation of preferences would increase pressure on exports from LDC’s and other countries that need GSP more. The beneficiaries in the new system that are relevant to the bicycle business are: Bangladesh, Cambodia, China, India, Indonesia, the Philippines, Sri Lanka, Thailand and Vietnam.

Other market access arrangements

The countries that will be excluded from GSP, which play a role in the bicycle sector are Tunisia and Mexico, which enjoy other market access arrangements. Among the countries excluded because of their high or upper middle income are Brazil, Macao, Malaysia and Russia.

In the new system, GSP+ is continued and improved. Nevertheless, all countries, including those that enjoy GSP+ under the current system, must apply again. As a result, the list of GSP+ beneficiaries will only be known after these applications. One of the new countries eligible for GSP+ and relevant to the bicycle business is the Philippines. In order to enjoy GSP+ a country has to comply with 27 conventions. The UN Framework Convention on Climate Change is one of the new agreements that has been added to that list.

The new system will apply for ten years, whereas up to now it was revised every three years. It also allows for changes in the GSP status during this period. If the World Bank classifies a GSP beneficiary as high or upper middle income for 3 years in a row, GSP will be lifted with a one year transition. If a GSP country enters another preferential arrangement it will lose its GSP status with a transitional period of 2 years.

Graduation threshold

Another important change in the new system is the increase of the graduation threshold from 15% to 17.5%. This means that if the export of a product from 1 GSP country reaches 17.5% of total imports by all GSP beneficiaries, preferences do no longer apply. Despite substantial shifts in the classification of products as sensitive or non-sensitive, the classification of (electric) bicycles, components and accessories remains unchanged.

With the current system a safeguard clause was introduced which was all but clear and which so far has never been used. The new system is aimed at better defining the safeguard measures. What’s more, it now grants producers and their representative organisations the right to seek action if they believe that a product originating in a GSP-country is imported in volumes and/or at prices which cause, or threaten to cause, serious difficulties to Union producers. The measures will be further defined by means of an implementing act.

Generalised Systems of Preferences

GSP Preferential Imports
(€ millions)
Nominal Duty Loss
(€ millions)
standard GSP

Source: European Commission, DG Trade

Comment on this article