The generalized System of preferences (GSP) is a scheme designed by the UNCTAD to encourage exports of developing countries to developed countries. Under this scheme, developed countries grant duty concession on imports of specified manufacturers and semi- manufactures from developing countries.
It was a resolution adopted at the UNCTAD –II held in 1968 in New Delhi, that led to the introduction of the GSP, which is the result of the realization that temporary advantages in the form of generalized arrangements for special tariff treatment for developing countries in the market of developed countries may assist developing countries to increase their export earnings and so contribute to an acceleration in the areas of their economic growth.
The EEC countries and a number of other countries, such as the USA, Japan, Norway, New Zealand, Finland, Sweden, Hungary, Switzerland, Australia, Canada, Australia, Bulgaria and Poland have introduced the GSP.
The GSP facility is available only to developing countries; it is subject to certain stringent limitations and is applicable only for a period of 10 years from its institutions by the preference granting countries.
The preferential rates of duty allowed on the import of manufactures and semi manufacturers and processed agricultural products differ in schemes of different developed countries because each country has developed its own GSP, keeping in view its local production base and certain other factors. Each scheme has a safeguard clause or an escape clause to protect the sensitive sectors in its economy.
A particular item is qualified for GSP benefits only if the following conditions are satisfied:
1. The product must be included in the GSP list;
2. The country exporting the item should be declared under the GSP as a beneficiary country.
3. The value added requirements/process criteria must be complied with;
4. The product must be imported into the GSP donor country from a GSP beneficiary country;
5. The exporter must send to his buyer/importer a certificate of origin in form ‘A’ duly fled in and duly signed by him, ad then certified by a designated Government authority;
6. If the import of the GSP item in question is subject to a quota/ceiling, the quota/ceiling of the import from the GSP beneficiary countries has so far not been exhausted in EEC countries. However, in the USA, US imports of articles from India must not have exceeded US $ 33.442 million and must not have accounted or 50 per cent of the total US imports of the article in the previous year (known as competitive need clause).
Expansion of trade among the developing countries is viewed as an important aspect of economic cooperation among developing (ECDC). It is felt that trade preferences can help achieve expansion of South-South trade.
Although the UNCTAD gave its sanction to a scheme of trade preferences as far back as 1968, it was not until 1979 that the Group of 77drew up an action plan for collective self reliance. It took three more years for the Group to formally adopt a program of Global System of trade Preferences (GSTP).
The group of 77 ministerial conference held in New Delhi in July 1985, resolved to complete the first round of negotiations on GSTP by May1, 1987. The agreement reached at the Conference included across the board tariff preference margin of 10 per cent, the removal of reduction of non tariff barriers, selection of specific sectors and products where trade preferences could be extended and trade creating production sharing and marketing arrangements.
The inordinate delay in formulating and implementing a meaningful of GSTP is an indicator of a lack of unity of purpose and will among the developing countries. Curiously, the Generalized System of Preferences (GSP), designed by the major industrialized countries to give tariff concessions in favor of developing countries to facilitate easier access for the latter’s exports to the former, particularly of manufactures and semi-manufactures, came into being much faster than the GSTP. Indeed, the Problem of trade preferences among developing countries is a complex one. These countries form an extremely heterogeneous lot with great diversities in levels of development and industrialization trade regimes and in the least of all, approaches to development. Further however effective the GSTP may be it can only be one of the many instruments for promoting out South-South financial and monetary cooperation, new payment arrangements and joint debentures in production and marketing. On the most of these issues, the developing countries have made little progress in the past decade. Unless they display a unity of purpose and sense of urgency backed by strong political will, South-South trade will continue to remain on a weak wicket.