Apr 12, 1985

GSP MODIFICATIONS "A PROTECTIONIST RESPONSE".

GENEVA, APRIL 10 (IFDA/CHAKRAVARTHI RAGHAVAN)— Current modifications in GSP schemes "represent a response to protectionist pressures", and the International Community should put "a firm stop to this negative process", UNCTAD's top official declared Wednesday.-

Alistair McIntyre, Deputy Secretary-General and officer-in-charge of the UN Conference on Trade and Development was speaking at the opening of the two-week meeting of the UNCTAD Special Committee on Preferences.-

Earlier, Ibrahim Sy of Seneghal who was elected chairman, said the economic crisis facing the Third World and the debt burden of many of them required full implementation of the Generalised System of Preferences (GSP), and the Belgrade UNCTAD resolution on the subject.-

McIntyre said that from its origins, the case for GSP was built up as an extension of the infant industry argument for protection to cover the export sector of Third World countries.-

The UNCTAD-II resolution on GSP in 1968 and the framework agreement of the General Agreement on Tariffs and Trade (GATT) in 1979, clearly set out the parameters for the GSP.-

These included the need for an increase in export earnings of the Third World countries, the promotion of their industrialisation, the acceleration of their growth rates, the need to take into account their overall development levels, and their financial situation.-

In both the UNCTAD and GATT decisions on GSP, development was seen as a multifaceted process, requiring a number of elements to be taken into account in determining the need of Third World for preferential access as a means of promoting their development.-

"The complexity of this process cannot evidently be reduced to a single indicator such as the level of GNP per capita", McIntyre underlined.-

In a situation of dynamic comparative advantage, as the processes of industrialisation and structural change proceeded, the need for preferential treatment could vary from one export industry to another in given countries.-

This would justify adjustments in tariff preferences accorded to individual products.-

It could well turn out that over time Third World countries might achieve a level of competitiveness consistent with undifferentiated treatment in a particular sector while at the same time needing preferential treatment to spur development of new sectors involving, say high technology.-

"Such a situation may call for periodic modifications of preference schemes on a product-specific basis".-

The GSP itself, McIntyre said, was developed in the context of the commitment of industrial countries to overall liberalisation of trade and, as such, "has essentially been a form of advance trade liberalisation in favour of developing countries".-

"If GSP is to be consistent with genuine trade liberalisation", McIntyre underlined, "then the product-specific modifications should be in the positive spirit of extending freer entry to other suppliers, thereby bringing most-favoured-nation (MFN) tariff rates closer to zero level".-

"This bears little resemblance with the current procedures of withdrawing the GSP preferences and re-introducing MFN tariffs on the exports of some countries that are essentially being penalised for becoming efficient and competitive exporters".-

"Whereas the extension of duty free treatment to a larger number of countries could be a positive approach to the further liberalisation of trade, the present modifications represent a response to protectionist pressures for safeguarding domestic production against imports".-

"It behoves the International Community to put a firm stop to this negative process", he added.-

In McIntyre's view, it was necessary to reach a multilateral consensus, with a set of criteria accepted by all, on the rules for modifying the preference schemes.-

Such a consensus, he added, would need to respond to some fundamental questions.-

These included:

-- Whether countries benefiting from the scheme could effectively compete with non-beneficiary suppliers to foreign markets without tariff advantage?

-- Whether beneficiary countries could diversify their export bases adequately in the face of a loss of tariff advantage?

-- Whether and how other Third World countries could benefit if some of them are denied GSP advantages?

-- And how the costs of adjustment to a country without GSP advantages would be borne and how such costs could be reduced?

Part of the weakness in the present GSP arrangements lay in their limited product and barrier coverage.-

"GSP schemes", he noted, "still continue to exclude any agricultural and labour-intensive products, as well as the removal of non-tariff measures affecting the exports of the Third World countries".-

"If the GSP is to remain as an important development instrument, it would be necessary to pay attention to these two dimensions of the problem".-

On the UNCTAD’s technical assistance activities on GSP and other trade laws affecting exports of the Third World, McIntyre said that the provision of cash and in-kind contributions by the preference-giving and preference-receiving countries, enable these activities to continue till the end of this year.-

By then the UNCTAD secretariat would have provided extensive backstopping for the project for two years.-

But in view of the strongest resource problems faced, it was unlikely that such resources could continue with the same intensity beyond end of 1985.-

"Without additional resources, this important activity will have to cease", McIntyre warned.-