INCREASED TRADE BENEFITS FROM GSP, BUT CONTINUED USE FOR

9:09 AM May 7, 1993

INCREASED TRADE BENEFITS FROM GSP, BUT CONTINUED USE FOR
Geneva May 7 (Chakravarthi Raghavan) -- Review of the implementation of the generalized system of preferences (GSP) and consultations on harmonization and improvement of rules of origin are one the of the twentieth session of the UNCTAD Special Committee on Preferences from 10 to 14 May.

A report by the UNCTAD secretariat reviewing the implementation, maintenance, improvement utilization of the GSP brings out increased use of the GSP schemes by beneficiary countries, as well as restrictions imposed by the benefit-giving industrialized countries to protect their domestic enterprises or its use to gain reciprocal benefits or for other purposes.

In the case of the United States, such use includes issues relating to unilateral determinations by the United States of 'unfair trade practices', socalled worker's rights or adequacy of intellectual property protection.

The report also brings out that less than a quarter of the trade of importing countries that would be eligible for GSP benefits actually receive such benefits.

Of the total imports in 1991 of $407 billion by the preference giving OECD countries, some 278 billion or 68 percent were MFN dutiable and thus could be eligible for coverage under the GSP.

But the trade actually covered by the schemes about half of the MFN dutiable or $136 billion and of this some $68 billion of trade actually received GSP preferential treatment.

The report also brings out that the GSP benefits have been extended by a number of principal preference giving countries to the east Europeans and to the members of the Commonwealth of Independent States.

The EC has extended the benefits to the CIS states, while Canada has extended it to Russia, Ukraine and the Baltic States.

Russia which (under the former Soviet Union) provided duty free benefits to imports from developing countries has modified its scheme temporarily, subjecting such imports to a duty rate 50 percent of the generally applicable MFN duty.

The United States scheme now covers more products to cover the imports of Central and Eastern Europe.

In the case of Japan, nearly half the ceiling levels for industrial products have been increased.

In the United States, after a request for review of beneficiaries on the grounds of adequacy of workers rights, has determined that Bangladesh and Sri Lanka have taken steps to afford internationally recognized workers rights (and thus eligible for continued enjoyment of GSP), while Syria was suspended from benefits.

In the case of El Salvador, Panama and Mauritania, the review has been extended for another year while investigations in the case of Thailand were due to end in December 1992. The outcome of this last is not given in the report.

The review of the intellectual property protection in Malta and Guatemala, reviewed as part of the 1991 cycle, have been continued for another year.

Under the US trade law provisions relating to socalled 'unfair trade practices', the United States also suspended duty free treatment on 724 GSP-eligible products imported from India. Effective 19 May 1991, these covered primarily imports of pharmaceutical, chemical and related products of a value of about $60 million out of a total of $524 million of duty-free GSP imports from India.

In terms of safeguards actions, the US waived competitive need limits on four products valued at $42.6 million (one from Chile, another from Peru and two from Malaysia). Requested waivers were however denied on 28 other products.

Two products, of a total value of $52.2 million, imported from Bahamas and Dominican Republic, were redesignated for GSP benefits.

Under US law, when products are excluded from benefits under competitive need limits, individual beneficiaries who have been benefiting could ask for a review in a subsequent year when the products exported by them fell under the limited applied in any year.

Denied such benefits, and thus 'graduated' from GSP, after review were 111 other products from 12 beneficiary countries, valued at $880 million.

By applying the de minimis rule provisions, some 213 products valued at $368 million were exempt from competitive need rules and became eligible for preferences. But trade in 22 other products with a value of $71 million were not however granted this waiver.

Among the OECD preference giving countries as a whole, the ratio of preferential imports or imports that actually received preferential imports to covered imports was 50.1 percent in 1991, according to the report.

In the case of the EC, this utilization rate which had declined in 1990 to 44.4 percent increased to 47.5 percent in 1991, but much below the 49.7 percent rate reached in 1989. The EEC's preferential imports in 1991 represented 44.4 percent or $30.2 billion of all OECD preferential imports.

The utilization rate for the US, the report shows, continued to increase and reached a maximum of 50.8 percent in 1991.

The increase is attributed by the secretariat to the exclusion of four Asian countries from the US GSP scheme in 1988, and the importers changing their sources of imports to other beneficiaries.

Another reason for increased utilization is attributed to the decline in competitive need exclusions, also following the graduation decision on the four major Asian beneficiaries.

The UNCTAD secretariat also attributes the increased use to efforts of the preference receiving countries to make better use of the schemes and the gradual adaptation of export supply capabilities.

In Japan though, the utilization rate has declined from 51.9 percent in 1989 to 47.7 percent in 1990 and stabilizing at that rate in 1991. The apparent reason for this is attributed to Japan's trade liberalization to MFN treatment of several product groups covered by its GSP schemes and previously under tariff ceilings as well as the new limits fixed for maximum country amount -- 25 percent instead of the earlier one-third.

For the OECD preference giving countries as a whole, the average increase in preferential imports between 1976 and 1991 has been 14.5 percent or almost twice as high as of total imports from all beneficiaries and more than one and a half times that from all sources.

Between 1990 and 1991, total imports from all beneficiaries by OECD preference giving countries increased by 5.7 percent or five times the total imports of these countries from all sources. Preferential imports reached a high of 25.4 percent over the same period, reflecting the greater relevancy of GSP to beneficiary countries as they adapt their production and export capabilities in products lines covered by GSP.

GSP imports of OECD countries from the least developed countries amounted to $4.8 billion in 1991.Of these, 67.7 percent or $3.2 billion value were MFN dutiable. Of these $1.9 billion or 58.9 percent consisted of products covered by the schemes. But products which actually received preferential treatment were valued at only $938.9 million. The utilization rate of preferential imports from LDCs, while varying from year to year, however remains higher than that for all beneficiaries.