Context
In the United States, the renewal of the Generalized System of Preferences (GSP), which offers economic incentives to developing countries through tariff reductions, is currently stalled.
- The U.S. Generalized System of Preferences program, which needs periodic renewal by Congress, has been stuck since it expired in 2020, despite support from both parties.
Background of Generalized System of Preferences (GSP)
- Introduction of Preferential Tariff Rates: The idea of providing preferential tariff rates to developing countries was introduced during the inaugural UNCTAD conference in 1964.
- Generalized System of Preferences was approved at the UNCTAD conference in New Delhi in 1968 and put into effect in 1971.
- Present Programs: Thirteen national GSP schemes have been notified to the UNCTAD secretariat.
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Generalized System of Preferences (GSP)
The Generalized System of Preferencesis the oldest and largest U.S. trade preference program, aimed at promoting economic development by allowing duty-free entry for thousands of products from designated beneficiary countries. It encompasses the majority of preferential trade schemes offered by industrialized nations to developing countries.
- Goal of Generalized System of Preferences: To offer development assistance to economically disadvantaged countries by encouraging their exports to developed nations.
- It fosters sustainable development by assisting beneficiary countries in expanding and diversifying their trade with the United States.
- Tariff Reductions and Duty-Free Access: It includes reduced Most Favored Nation (MFN) tariffs or duty-free entry for eligible products exported by beneficiary countries to the markets of donor countries.
- Granting Nations: GSP preferences are provided by 15 countries, including Armenia, Australia, Belarus, Canada, the European Union, Iceland, Japan, Kazakhstan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey, the United Kingdom, and the United States.
- Non-Reciprocal Support: Historically, the GSP has been granted on a non-reciprocal basis to support development in beneficiary countries.
- U.S. GSP Policy: Nevertheless, the U.S. has connected GSP with market access and tariff reduction, departing from its traditional non-reciprocal approach.
- Periodic Renewal of GSP Benefits: GSP benefits undergo periodic renewal by the legislative bodies of implementing countries, like the U.S. Congress.
- GSP Criteria: GSP criteria commonly involve standards for labor, the environment, and intellectual property rights protection.
Most Favored Nation:
- About: According to the MFN principle of the World Trade Organization’s (WTO) General Agreement on Tariffs and Trade, every WTO member country must regard all other members as “most-favored” trading partners and treat them equally.
- Equal Treatment Principle: MFN is a key focus in the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
- Exceptions:
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- Countries have the option to establish a free trade agreement that exclusively covers goods exchanged within the group, thus showing preference to goods from within the group over those from outside.
- Additionally, they can provide developing countries with specific access to their markets.
- A nation has the authority to impose barriers against products deemed to be traded unfairly from particular countries.
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United Nations Conference on Trade and Development (UNCTAD):
- About: It is the foremost UN organization addressing trade and development matters. Established by the United Nations General Assembly in 1964, it stands as a permanent intergovernmental organization.
- Aim: Its aim is to support developing countries, particularly the least developed nations and those undergoing economic transitions, in effectively integrating into the global economy for mutual benefit.
- Headquarters: Located in Geneva, Switzerland.
- Membership: UNCTAD has a membership comprising 195 states.
- Structure:
- UNCTAD’s primary policy-making entity is the Conference, convening once every four years to establish policy directives and outline a work program.
- In the absence of the Conference, the Trade and Development Board, serving as UNCTAD’s executive body, oversees the organization’s operations.
- Publications released by UNCTAD include:
- Trade and Development Report
- World Investment Report
- The Least Developed Countries Report
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May 21, 2024