Generalized System of Preferences (GSPs)
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Generalized System of Preferences (GSPs)
Subject: Economy
Section: National Income
Context:
The Centre may engage with the industry to assess the impact of the European Union’s decision to withdraw preferential tariff benefits for certain products from India, including electrical machinery, plastics, articles of stones and articles of leather, from January 2023
Details:
- Under the scheme, the EU allows preferential access to identified products originating in certain developing countries, in its markets in the form of reduced or zero rates of customs duties.
- According to EU rules, GSP beneficiaries can lose preferences for specific product categories that are deemed to have become sufficiently competitive
- The EU adopted a new Generalized Scheme of Preferences in 2012.
- It has 3 strands:
- GSP general arrangement: for all beneficiary countries
- GSP+: A special scheme with entire removal of tariffs on essentially the same product categories as those covered by the general arrangement.
- Everything But Arms: A special arrangement for least developed countries (as recognised and classified by the UN) giving them duty- and quota-free access for all products, except arms and ammunition.
About Generalized System of Preferences (GSPs)
- The scheme was first envisaged by the UN to help developing countries integrate with the world economy.
- It was instituted in 1971 under the aegis of United Nations Conference on Trade and Development (UNCTAD)
- It is an umbrella that comprises the bulk of preferential schemes granted by industrialized nations to developing countries.
- It involves reduced Most Favored Nations (MFN) Tariffs or duty-free entry of eligible products exported by beneficiary countries to the markets of donor countries.
- The 13 countries that provide GSP preferences to emerging and developing countries are:
- Australia
- Belarus
- Canada
- European Union
- Iceland
- Japan
- Kazakhstan
- New Zealand
- Norway
- Russia
- Switzerland
- Turkey
- USA
- The motive behind granting GSPs is to help developing countries and particularly least developed countries (LDCs) to promote productive capacity development and to encourage trade and investment.