Apr 18, 1984
GSP HAS BENEFITED BOTH PARTIES.
GENEVA, APRIL (IFDA/CHAKRAVARTHI RAGHAVAN) -- The Generalised System of Preferences (GSP) has benefited both the preference-receiving and preference-giving countries, and not simply the former, according to the UN Conference on Trade and Development.-In a report on the implementation of the schemes that were brought into force in mid-70’s, the UNCTAD secretariat points out that to the extent that the GSP has led to increased exports from beneficiary countries, it has also been associated with a deterioration in their trade balances with the preference-giving countries.- "The effect of the GSP, in terms of trade balances, has been to increase the mutual benefits of trade and not simply to benefit one group of countries".- The beneficiary countries, UNCTAD notes, have now become the main market for the export growth of the preference-giving countries and the latter's trade balances have consistently registered an excess of exports over imports.- Before 1976, the EEC was the main source of the trade-creation surpluses of the United States. After 1976, the developing country beneficiaries of the U.S. schemes had replaced the position of the European Community.- In the EEC, the EFTA (European Free Trade Association) countries receive greater preferential treatment than the GSP beneficiaries.- Before 1976, following the GSP beneficiaries, EFTA countries were a principal source of trade-creating surpluses for the EEC. After 1976, EFTA’s position has been replaced by those developing countries which have been subject to differentiation or graduation measures under EEC schemes.- In the case of Japan, since 1976, the fast-growing exporters of manufactures among the developing countries, are the second source, after the EEC, of Japan’s trade surpluses.- Also, among developing country beneficiaries of GSP, it was those most subject to restrictions on preferential access that have shown the greatest tendency to become the most dynamic markets for the preference-giving countries' exports.- The adverse movements in the balance of trade of the developed countries during recent years has not resulted from difficulties of access to the markets of the developing countries, UNCTAD adds.- On the contrary they have provided better markets opportunities than the markets of the preference-giving countries themselves.- The demands from the developed countries for improved access to the markets of the developing countries, UNCTAD says, must be viewed in this context, as well as the ability of the most indebted countries to maintain their trade dynamism.- Viewed in this light, "to the extent that a withdrawal of preferences may reduce the foreign-exchange earnings of the beneficiaries, it could initiate a chain reaction which would, among other things, jeopardise the prospects for world economic recovery and the development efforts of the beneficiary countries", UNCTAD warns.- "The GSP was conceived within a multilateral framework, but there is the danger that it could be turned into a bilateral trading instrument, thus further undermining the very nature of the trading system, with distorted interpretations of its main principles".- The introduction of measures to limit preferential access results essentially in trade diversion to the benefit of developed country exporters, and has not achieved the purpose sought, namely, of protecting domestic suppliers.- The denial of preferential benefits has demonstrated the inability of the developing countries to export on a most-favoured-nation duty basis against other, more competitive, exporters in developed countries.- Such efforts can therefore be regarded as an attempt to force concessions from developing countries for the maintenance of preferential advantages.- "Such narrow interpretations of trade opportunities are not in consonance with the realities of overall trade relations as they have developed in recent years", UNCTAD adds.- The agreement on the establishment and subsequent implementation of the GSP was "an important landmark in international trade relations".- "It represented the first concrete action on a universal and non-discriminatory basis to provide differential and more favourable treatment to the developing countries in response to their needs, given their lower stage of development".- Under the various schemes, the beneficiaries gained improved access to the developed country markets, the objective being to increase their export earnings, to accelerate their rates of economic growth and to promote their industrialisation.- The underlying philosophy of the GSP was that through a fostering of the industrialisation process, the developing countries would become more mature trading partners.- The GSP was thus viewed as an instrument to expand trade by improved market access in developed markets, and as a tool for outward looking development strategy in beneficiary countries.- "Misunderstandings about the GSP", UNCTAD argues, "arise when the GSP is treated in isolation, separated from the overall trading framework in which it functioned".- "The growing interdependence in north-south trade is thus often not sufficiently taken into account when examining the GSP", UNCTAD complains.- Paradoxically, the dynamic nature of the trade of the developing countries was often still misunderstood or given insufficient attention in relation to the GSP, as evidenced by the introduction of increasing limitations on access under GSP schemes.- "The whole thrust of the GSP exercise is thus being distorted and, although the system continues to play a positive role in facilitating access to markets, its important role of fostering development and achieving a more mature relationship among trading partners has been neglected".- While the GSP involved certain costs to the preference-giving countries, in the shape of tariff revenues foregone, the trade benefits of the GSP had to be incorporated into the equation.- Such benefits included increased exports by the preference-giving countries, benefits to their consumers through lower prices, and the facilitation of the structural adjustment process.- By 1976, when all the GSP schemes had come into operation, the U.S.A., the EEC and Japan, accounted for more than 80 percent of preferential imports into the OECD countries.- The imports accorded GSP treatment in these economies in 1976 was 8.9 billion, but was only 2.4 percent of their total imports.- In 1980, when the comparable figure was 21.6 billion, it was still only 2.9 percent of their total imports.- About the "burden-sharing" considerations, UNCTAD notes that in 1976, the U.S.A., EEC and Japan accounted for 31 percent, 38.9 percent and 17.5 percent respectively of the total OECD improved market access under GSP.- In 1980, their respective shares had fallen to 28.8 percent and 37.8 percent for the U.S.A. and EEC, but grew to 19.6 percent for Japan.- The decline in the U.S. share paralleled its overall decline in terms of its participation in total OECD imports from the world, namely from 25.3 percent in 1976 to 24.6 percent in 1980.- But the opposite was true in the case of Japan.- In the EEC, in contrast, the decline in the share of GSP imports occurred when the Community' s share of total OECD imports grew from 36.6 percent to 38.8 percent, "thus indicating a diminished importance of GSP imports in relation to total imports".- From the perspective of the beneficiary countries, in 1980 (as in 1976) the EEC market accounted for nearly 40 percent of their total non-oil exports to OECD economies.- But while in 1976, only 14 percent of these exports entered effectively under the GSP, by 1980 this share had grown to 21 percent in EEC, 22 percent in the U.S.A., and 20 percent in Japan.- But from the perspective of the latter countries, imports under GSP accounted for only 3.3 percent of the EEC' s total non-oil imports, 3.9 percent in the U.S.A. and 5.6 percent in Japan.- "The GSP thus is of greater importance to the developing countries than to the preference-giving countries".- "Any restrictions of GSP benefits will have an impact 3-1/2 to six times heavier on beneficiary countries’ exports than on preference-giving countries’ imports".-