Changes from report parliamentary committee draft to plenary report

Since 1971, the EU has granted autonomous trade preferences to developing countries under its Generalized Scheme of Preferences (GSP) and based on the WTO ‘Enabling Clause’. The primary aims of the GSP are poverty eradication, promotion of sustainable development, diversification of beneficiary economies and better integration of the beneficiary countries in the world economy. The GSP covers more than 60 countries and 2 billion people in the world. The current GSP Regulation expires at the end of 2023. The Commission proposal for GSP 2024-2033 maintains a large part of the current GSP, introducing few new elements. The GSP division into three different schemes is maintained; Standard GSP, the GSP+, and the Everything but Arms (EBA) that is automatically granted for Least Developed Countries.

The Commission’s Impact Assessment identified certain shortcomings in the current GSP Regulation. The GSP's potential to contribute to sustainable development and good governance in beneficiary countries has not been fully exploited. The GSP does not reach a sufficient impact on human rights, labour rights, good governance, and sustainable development. With regards to the GSP+ specifically, an underlying issue has been insufficient information on the GSP+ monitoring process.

Moreover, the GSP's potential for contributing to poverty eradication is not fully exploited. Some beneficiary countries, notably those most in need, have very limited utilization rate of GSP preferences, and limited export diversification. Export diversification is closely linked to the level of exploitation of GSP benefits but also dependent on the broader integration of the GSP opportunities into beneficiary country’s domestic policies.

To reach the full potential of the GSP in relation to impact on sustainable development the Rapporteur views that further clarity on the monitoring process of the GSP+ arrangement is required. Increasing clarity on the steps, benchmarks and objectives of the monitoring process would contribute to improving the leverage of the scheme. At the same time, it would provide stakeholders, including business and civil society, as well as the beneficiary country governments increased predictability. Improvements to transparency of the monitoring process equally would contribute to increased and sustained leverage for effective implementation of the international conventions and subsequently for reaching an increased impact towards sustainable development.

The Rapporteur welcomes the proposal on a mandatory Plan of Action to be submitted upon application to the GSP+ Scheme and considers that it should become the main benchmarking tool guiding the achievement of the effective implementation of the international conventions.

The Rapporteur proposes to supplement the Plan of Action proposed by the Commission with further details, deadlines and a disclosure requirement. Furthermore an advisory body consisting of stakeholders should be established to assist the Commission in assessing the Plans of Action and in the monitoring effort related to beneficiary country commitments.

To ensure an enhanced contribution to sustainable development and poverty eradication under the Standard GSP and EBA schemes, the Rapporteur regards it central to strengthen the positive conditionality in relation to the international conventions, encouraging the Standard GSP and EBA beneficiary countries to ratify the conventions. Ratification is key since it implies monitoring of compliance, thereby providing stronger assurances that the additional trading opportunities provided by the GSP support the development of the beneficiary countries in a sustainable manner.

The Rapporteur introduces more structure and detail also in the monitoring process of Standard GSP and EBA countries, notably with a view to formalising the existing practice of conducting an “enhanced engagement” whenever the situation with respecting the principles of the international conventions reaches a critical level. While withdrawal of preferences should remain a last resort decision, stronger dialogue and monitoring are the tools for enhancing and sustaining leverage towards beneficiaries while tapping on the potential that stakeholders provide when working in cooperation for increased positive impact and solving compliance issues.

The EU has introduced and will introduce legislation over the coming years to increase private sector sustainability and accountability. Beneficiary countries will benefit from working towards a conducive environment for responsible and sustainable business conduct. This will support beneficiary countries in meeting the raised EU sustainability and accountability standards. There is a close link between the state duty to protect human rights and companies’ duty to respect human rights as outlined in the UN Guiding Principles on Business and Human Rights (UNGP), unanimously adopted in 2011. For this purpose, adopting a National Action Plan on Business and Human Rights is introduced by the Rapporteur as a necessary condition for GSP+ and Standard GSP schemes while also encouraging the EBA beneficiaries to this end.

It is the firm belief of the Rapporteur that a close link between the GSP and EU development assistance needs to be established to ensure policy coherence and an improved impact of the GSP for sustainable development. GSP Regulation commitments may be place a notable burden on the beneficiary countries’ administrative capacity. The EU development assistance support to beneficiaries should prioritize supporting the effective implementation of the international conventions (GSP+) and ratification process of those conventions (Standard GSP, EBA), as well as the road map commitments of beneficiary governments under enhanced engagement.

With a view to a full utilization of the GSP preferences EU development assistance tools should support beneficiaries in promoting production capacity, economic and export diversification, value addition and inclusive sustainability. This supports beneficiaries in integrating the opportunities provided by GSP benefits more broadly in domestic policies.

Increased positive conditionality of the Standard GSP will improve the contribution to the stated aims of the GSP while diminishing the gap between Standard GSP and the GSP+ arrangement. This is conducive to encouraging Standard GSP beneficiaries (which fulfil the so called vulnerability criteria) to make the necessary efforts required for the ratification and effective implementation of the international conventions towards applying to GSP+, which provides more attractive benefits.

The EU Green Deal provides an overarching framework for EU policies. In this context, the Rapporteur’ view is that the GSP should provide additional incentives for trade in sustainable products. While the volume of exports of sustainable products to the EU is limited, this is a sector that may experience notable growth over the period of the forthcoming GSP Regulation, also in light of future policy and regulatory evolutions and which beneficiary countries should benefit from.

Regarding safeguards, the Rapporteur views that the Commission’s proposal is satisfactory. The Rapporteur supports keeping the rule of applying the General Safeguard measures to all schemes and the Automatic Safeguards to Standard GSP and GSP+. Thereby the Rapporteur has not proposed any changes to the product or geographical scope of safeguards.

The product graduation mechanism applies only to Standard GSP. The rapporteur sees the Commission’s approach as justifiable. A possible extension of product graduation to the GSP+ scheme would diminish incentives to apply to the scheme while currently several new requirements for GSP+ applicants are being proposed. Extending the product graduation mechanism to LDCs and vulnerable developing countries would be a drastic signal causing reputational damage to the EU. The Rapporteur is also supportive of the proposed modification of the vulnerability criteria for the GSP+ Scheme.

Until now the launch of the withdrawal process has been operating as a “one-way street”. Withdrawal should be seen as the very last option. Every effort should be made to avoid a withdrawal of preferences, which necessarily negatively impacts the economy of a beneficiary country and is likely to adversely affect the most vulnerable population. For this purpose the Rapporteur proposes to include an Enhanced Engagement process in the Regulation, with specific steps for avoiding a withdrawal scenario. The Rapporteur proposes to bring additional clarity to the threshold for what constitutes a “serious and systematic violation” of the international conventions consequently leading to launching an investigation for withdrawal.

The Rapporteur also proposes a specific engagement strategy for the post-withdrawal phase in view of moving towards a reinstatement of the preferences.