Mid-term evaluation of the EU’s generalised system of preferences

Abstract

The EU''s Generalised System of Preferences (GSP) is a central component of the EU''s strategy towards developing countries. That strategy is aimed at the promotion of sustainable development, where trade is seen as one of the essential elements in facilitating that development both with regard to economic and social objectives. The overall aim of this report is to consider the extent to which the EU''s GSP regimes correspond to the needs of developing countries, and in that context to put forward recommendations for possible ways forward. The methods employed in the report range from detailed descriptive analysis on preferential trade between the EU and its partner countries based on the very rich dataset (at ten-digit level), formal econometrics where we focussed on the estimation of price margins, the determinants of utilisation rates, as well as the determinants of bilateral trade flows, computable general equilibrium modelling of the likely impact of the GSP schemes, case studies, and use of secondary sources. The overall analysis concludes that the EU''s GSP preferences can be effective in increasing developing countries'' exports and welfare, but also notes that the generally low level of the EU''s MFN tariffs and the structure of developing countries'' trade constrain the effectiveness of the GSP regime. In terms of policy conclusions, the report examines inter alia the relative advantages of improving the product coverage of the scheme, reductions in remaining tariffs, increasing utilisation rates, making rules of origin more development friendly and changing graduation thresholds.