Revisions proposed in the EU-GSP scheme: implications for Bangladesh

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The proposals that have been submitted to the European Parliament for discussion, finalization and decision will have important implications for Bangladesh. Photo: Rajib Raihan

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The proposals that have been submitted to the European Parliament for discussion, finalization and decision will have important implications for Bangladesh. Photo: Rajib Raihan

As is known, the current provisions of the EU’s Generalized System of Preferences (EU-GSP) are being revised in anticipation of the new system which will be put in place from January 1, 2024. Once finalized, the system will be in effect for the next 10 years (2024-2034). Bangladesh has a keen interest in the proposed arrangements as it is one of the main beneficiaries of the scheme and has reaped considerable benefits from it in the form of increased competitive strength in the EU market and more export earnings. high results. The proposals that have been submitted to the European Parliament for discussion, finalization and decision will have important implications for Bangladesh also in the perspective of the country’s exit from the LDC group in 2026.

The EU-GSP scheme has three components: the standard GSP scheme for developing countries, the everything but arms scheme (EBA) for least developed countries (LDCs) and the PGS + scheme for certain developing countries (non-LDCs) . The EBA provides duty-free and quota-free market access for products originating in LDCs under flexible rules of origin. For example, the average import duty on clothing in the EU is 12%. An EU brand or buyer who sources ready-to-wear from an LDC such as Bangladesh does not have to pay import duties. This is the case even when the garment was produced by the PMA producer from imported fabrics since the EBA rules of origin allow a one-step conversion for garments. Exports under the EBA provide Bangladesh’s RMG exporters with a significant competitive advantage over other countries that do not have market access under the EBA. The standard GSP scheme provides preferential market access to developing countries (non-LDCs), in the form of duty-free or reduced tariffs, for 66 percent of tariff lines (of which 26 percent are duty-free and 40 percent are duty free). one hundred benefit from reduced rights). market access). It should also be noted that the Rules of Origin (RoO) are more stringent for standard SPG than for EBA (for example, for clothing, the RoO requirement involves a two-step conversion: from yarn to fabrics to ready-made clothes). The GSP + is a special regime for certain developing countries (non-LDCs) under which all items in the standard GSP regime list enjoy duty-free market access (e.g. instead of 15 percent duty exemption for clothing authorized under the standard GSP regime, the GSP + regime allows 100 percent duty-free access to the EU market for this item).

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As is the case, the EU grants outgoing LDCs an additional three-year period to take advantage of EBA benefits after graduation (e.g. for Bangladesh preferential market access under the EBA will be available until 2029). The new proposals are also relevant for Bangladesh as it will be in its best interest to try to enter the SPG + scheme when the EBA expires.

Currently, the 46 LDCs are all enjoying the benefits of the EBA regime; 11 developing countries benefit from the standard GSP and nine developing countries benefit from the SPG + scheme. The magnitude of the benefits from the EU GSP schemes can be understood by the fact that in 2019, total imports under the three EU GSPs amounted to around € 62.0 billion, or 39% of all imports from GSP beneficiary countries. The amount of imports to the EU under the EBA in 2019 was € 25.2 billion (compared to € 17.1 billion in 2014), with Bangladesh by far the largest share.

The draft GSP regulation presented to the European Parliament has proposed a number of changes that Bangladesh will need to take into account and study closely.

First, the provisions reiterate that the EU’s GSP preferences are extended to countries which “comply with international standards and principles relating to human rights, including labor rights, as well as the protection of labor. ‘environment and good governance’. The number of international conventions, on which the principles of sustainable development of the GSP are based, has been further strengthened with six additional international instruments: (a) the Paris Agreement on climate change (replacing the Kyoto Protocol); (b) the Convention on the Rights of Persons with Disabilities (CRPD); c) The Optional Protocol to the Convention on the Rights of the Child and the Involvement of Children in Armed Conflict (OP-CRC-AC); (d) ILO Convention 81 on labor inspection; and (e) ILO Convention No. 144 on Tripartite Consultation and (f) the United Nations Convention against Transnational Organized Crime.

The implication of the proposals is that Bangladesh will not only have to ratify all 32 international conventions and agreements, but will also need to take concrete steps to ensure their compliance in order to reap the benefits of the GSP. As Bangladesh will be eligible and interested in being considered for GSP +, upon expiration of the EBA, work on more comprehensive assurance of compliance should be given the prominence Bangladesh as of now. . The EU also said it would further strengthen monitoring of the implementation of the proposed regulations.

Second, in a welcome gesture, SPG’s new proposal removes the import share criterion from SPG + eligibility (previously it was set at 7.4 percent of the average import for the past three years, this which implied that any country whose share was greater than 7.4 percent of imports EU imports from GSP beneficiary countries would not be eligible for GSP +). SPG’s new proposal therefore aims to ensure a smooth transition from EBA status to SPG + status. This will greatly benefit the growing group of LDCs leaving school. The new arrangements provide that a well-defined framework will be put in place to allow current GSP + beneficiaries to adapt their policies to the new requirements, providing a transition period and requiring the articulation of an implementation plan. The removal of the cap has important implications for Bangladesh, as it would not have been eligible for the SPG + program if the cap had been in place. Indeed, in submissions made by relevant GoB bodies, the Bangladesh Mission in Brussels as well as civil society organizations such as the Center for Policy Dialogue (CPD), the arguments in favor of removing the threshold have been made. the most advanced. On the other hand, the new provisions provide for a faster institutional process with regard to the procedure for withdrawing from the GSP. This reflects tighter control of the state of compliance by the EU.

Third, under the new regulations, a product may lose the tariff preference if the value of imports of GSP eligible items exceeds the threshold of 47 percent (as a share of the value of imports of items in the relevant section) at instead of the existing 57 percent (for textiles, the corresponding value shares are 37 percent and 47 percent respectively). This lowering of the SPG eligibility ceilings by 10 percentage points is not relevant for the TSA or SPG + scheme, but could become a binding factor for the purposes of eligibility for the standard SPG scheme. Bangladesh should take note of this and make efforts to ensure the diversification of exports to the EU market.

From a readiness point of view for the new GSP regime, after the withdrawal of LDCs (plus three additional years of TSA eligibility), Bangladesh will need to undertake the necessary policy reforms and build institutional capacity to ensure better economic governance, and strengthen enforcement mechanisms to guarantee human and labor rights. Efforts to improve compliance with the various international conventions must be further stepped up. Bangladesh should ratify the Minimum Age for Admission to Work Convention as soon as possible, amend labor laws, strengthen labor inspection and improve environmental friendliness of production processes (for example, in the leather sector).

Not only the ratification of the 32 conventions and agreements, but their proper application will be important in view of the above. However, improving economic governance and ensuring labor rights, children’s rights, rights of persons with disabilities and human rights, as well as the promotion of green growth and environmental sustainability , should require priority attention, not only because they will be strictly vetted for GSP eligibility under the proposed new regulations, but also because they align with Bangladesh’s aspiration to be a country. economically developed, socially inclusive and environmentally sustainable, as articulated in Bangladesh Vision 2041.

Mustafizur Rahman is Distinguished Fellow at the Center for Policy Dialogue (CPD).


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