PORTFOLIO

What’s On & Expat Sept 18-Sept. 24, 2005
Business news


Good News for Philippine Exporters
By Loraine Balita

The European Commission (EC) will implement a new and simplified European Union Generalized System of Preferences (EU GSP) from January 2006 to December 2008. A provisional form of the GSP has been in place since July 2001 and will expire December 31, 2005.

This is good news for Philippine exporters, especially those who ship handicrafts, and food products specially tuna from Mindanao to EU member countriesThe EU's GSP is a system of tariff preferences granted unilaterally by the EU for products originating from developing countries like the Philippines. Trade has proved to be one of the most important factors in ensuring the growth of a developing country. Increasing trade will enhance its export earnings and promote industrialization and sustainable development.

Tariff preferences allow developing countries to export products that are not submitted to normal customs duties.The primary purpose of the program, which the industrialized countries initiated, is to promote economic growth in developing countries and countries in transition by stimulating their efforts.
It intends to give preferential tariff treatment to beneficiary countries until their exporters are able to compete on world markets with normal tariffs.
Beneficiary countries are not required to extend reciprocal tariff reductions but must meet certain conditions. The eligibility of countries is confirmed through an assessment of their effective implementation of core human and labor rights, good governance and environmental conventions.

Generalized System of Preferences
In 1968, the United Nations Conference on Trade and Development recommended the creation of a "Generalized System of Tariff Preferences" (GSP) that would give an advantage to developing countries.

The EU, implementing such a scheme in 1971, was the first to do so. It granted products from 178 GSP beneficiaries either duty free access or a tariff reduction. The EU GSP is the most widely used and most generous of all developed country GSP systems. Under the EU GSP the share of developing countries in total EU imports grew from 33% to 40% between 1999 and 2003.

In particular, the Philippines ranked 16th in 2003 as a GSP user based on EU preferential imports. Total Philippine exports to the EU were about P852 billion, of which P82 billion were GSP-eligible and P40 billion actually exported under the GSP, giving a utilization rate of 47%.

The European Union currently has 25 members: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Republic of Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and United Kingdom.

What's New
The new GSP is simpler; the current five schemes are now reduced to three:

1. A " General Scheme" for the 178 GSP beneficiary countries, meaning a reduction of 3.5 percentage points overt the normal customs duty for sensitive products, reduction of duties to zero for non-sensitive products, most favored nation status minus 20% for textiles/clothing;

2. An "Everything but Arms" scheme for least-developed countries, meaning duty-free and quota-free access for all products except weapons; and

3. A new "GSP Plus" incentive for vulnerable countries that meet clear, transparent and nondiscriminatory EU criteria related to sustainable development and good governance, which would result in duty-free access for around 7, 200 products.T

he GSP's general product coverage has been expanded from about 6,900 tariff lines to 7,200 in order to incorporate some 300 additional products, mostly from the agriculture and fishery sectors, including canned tuna.

The simpler, fairer graduation process involves a new graduation scheme to be applied every three years. The GSP will be withdrawn for certain product groups for one or several countries only when these products are competitive on the Community market and no longer need protection. Graduation will be based on simple criteria: when a group of products ("section" of the custom code) from a particular country exceed 15% of total EU imports of the same products under GSP over the last three consecutive years.

For textiles, the threshold would be 12.5%. Graduation is not a penalty but a sign that the GSP has successfully performed its function of encouraging exports.The Philippines will continue and is yet to take full advantage of the scheme.