Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 33 - European Communities Generalised Tariff Prefences Scheme for 1979

REPORT

Outline of Scheme

1. In 1970 the United Nations Conference on Trade and Development (UNCTAD) established a generalised preferences system (GSP) under which the industrialised countries each undertook to set up and operate a scheme of tariff preferences in favour of imports from developing countries. Under the Communities’ GSP Scheme which came into operation in 1971, tariff preferences are granted on imports into the Community of certain finished and semi-finished products originating in developing countries. The preferences are autonomous and do not depend on reciprocal action by the countries benefiting. The scheme is reviewed annually and the preferences granted are embodied in EEC Regulations and ECSC Decisions which apply for twelve months. The policy has been to improve progressively the preferences each year and to widen their scope. The scheme was intended to last for ten years but the Council has indicated that it will be necessary to continue it after 1980.

2. Preferences are granted in the form of (a) imports at nil or preferential rates of duty without limit or (b) imports free of duty up to the limit of a quota distributed among the Member States or up to the limit of a specified overall ceiling. In some cases provision is made for the re-imposition of duties in whole or in part where Community producers are adversely affected.

3. As far as industrial products are concerned the grant of preferences on these products is restricted on the basis of tariff quotas for sensitive products and maximum ceilings for semi-sensitive and if required non-sensitive products, with further limitations by way of maximum country amounts applicable to beneficiary countries, other than the least developed countries in respect of semi-sensitive and non-sensitive products. The level of quotas and ceilings is determined from year to year on the basis of importations in a previous reference year.

4. The scheme also involves partial exemption from customs duties for certain processed agricultural products originating in and imported from developing countries. From 1971 to 1973 the total number of agricultural products which came under the scheme was 147 and by 1978 this number had risen to 305. The products covered by the scheme are largely tropical or mediterranean in character and therefore they do not compete with Irish products.

5. The Joint Committee has completed its examination of the Commission’s proposals [R/2553/78 (COMER 50)] for the operation of the scheme in 1979.

Commissions’ Proposals

6. As far as industrial products are concerned, the Commission’s proposals for 1979 do not propose any great change in the GSP scheme except for an important innovation in the management of the scheme, as regards the least developed countries, under which it is proposed to suspend in respect of these countries the application of the maximum country amounts provisions on both the sensitive and the special maximum country amounts lists. A further measure of liberalisation in this regard has been proposed in the Working Group on the GSP, whereby the application of ceilings for these products to the least developed countries would also be suspended.

7. The other main change envisaged in the Commission’s proposals is a re-casting of the system for preferential imports of textiles, consequent upon the re-organisation of the Multifibre Agreement and the conclusion of bilateral agreements, which involve, inter alia, voluntary restraints on exports to the EEC, with most of the Community’s suppliers of textiles, with the object of bringing the management of the GSP and these arrangements into harmony. The Joint Committee is informed, however, that the Commission’s proposals for changing the system in regard to textiles are not going to be pursued at present because of objections by Member States that they have not had time to examine the implications. The intention instead is to give a straight 5 to 10 per cent increase over 1978.

8. As has been the normal practice all the ceilings have been recalculated to bring into account a more recent reference year i.e. 1976. However, because of the economic situation in several industrial sectors, notably steel and footwear, no increase is being proposed for 1979, while for a number of other products the full effect of the re-calculation cannot be applied. The overall increase in the ceilings for non-sensitive products proposed for 1979 is the usual 15 per cent.

9. As far as agricultural processed products are concerned the Commission is proposing for 1979 to include a number of new products in the scheme and to improve some of the existing preferences. They are also proposing to exempt the 28 least developed countries altogether from payment of customs duties in respect of all of the agricultural products covered by the scheme.

10. The Commission proposes that the European Unit of Account (EUA) be applied to the GSP scheme from 1st January, 1979. In the Regulations governing the current scheme, ceilings and quotas etc. for products, except textiles, are expressed mostly in value terms and set out in units of account (ua’s) which have remained for some years at a fixed value of 2.4 units of account to the pound sterling. With the introduction of the new unit of account the pound will have a value of 1.5 EUA.

General Views of the Joint Committee

11. The Joint Committee fully supports the granting of tariff preferences by the Community to help developing countries and favours any development that directs that aid towards the areas of greatest need. Accordingly, it warmly welcomes the concessions proposed for 1979 for the least developed countries. Moreover it agrees with the proposal that the quotas for South Korea, Romania and Hong Kong in respect of products covered by MFA should correspond to a proportion of other beneficiaries’ shares in view of the special competitive position of those countries and their strong position on the Community market.

12. The problem of aiding developing countries by conceding tariff preferences is one of balancing the need of those countries for access to the Community market with the legitimate expectations of the Community’s own industries. The Committee is advised that the GSP scheme has had, broadly speaking, no marked adverse effect on Irish industries to date. Textiles, clothing and footwear have proved perhaps the most sensitive areas in the past. No increase at all is proposed in the ceiling for footwear in 1979 in view of the precarious economic situation in that sector. As far as textiles are concerned, the Committee is advised that the changes made arising from the MFA Agreement will help to lessen the possibility of market disruption by the concentration of low cost imports on one sector of the market. It has, however, been represented to the Committee that the current system of categories based on the NIMEXE should be kept under constant review to preserve its relevance. Apart from the proposed application of the EUA, to which reference is made in paragraph 14 of this report, the Committee finds the scheme for 1979, as it is now emerging, broadly acceptable.

13. The position regarding leather goods has been specifically drawn to the Committee’s attention. The price of raw hides has risen in consequence of a control of exports exercised by countries of origin whose own industries, with their access to cheap raw material, export leather goods with which Irish manufacturers find it difficult to compete. Although it is advised that the exclusion of such goods from the GSP would not of itself solve the problem the Committee is of the opinion that there are no grounds in the circumstances indicated for giving these goods preferential treatment.

Application of EUA

14. The Joint Committee is advised that the effect of applying the EUA to the GSP from 1979, as proposed by the Commission, would be to increase by about 60 per cent Ireland’s potential duty free import commitment in value terms as expressed in sterling. The other soft currency countries, the UK and Italy, would be affected in the same way (Italy to a somewhat greater extent), while for the hard currency countries, Germany and the Benelux Group, a reduction in value terms as expressed in their currencies would be expected. The Committee is advised that the Council Working Group on the GSP is examining the question of effecting the change-over to EUA over a period of ten years. The Committee would question the advisability of agreeing to a change of any kind at this stage. In its view the matter should be deferred until there is an opportunity of assessing the effects of the new European Monetary System. Moreover, the Committee considers it unacceptable that a change to EUA should be associated with a proposal to remove the 50 per cent limitation on imports of certain products into any one Member State.

Publicity

15. The Joint Committee notes that in dealing with the GSP for 1976 and 1977 its predecessor called for a better briefing of industry on the provisions of the GSP. From the evidence heard by the Committee it would appear that this need still exists. It has been represented to the Committee that there is a great deal of confusion in industrial and business circles, not merely about the GSP itself but also about its relationship with the Community’s obligations under the Lomé Convention and the GATT and its associated agreements such as the MFA. The Committee has accordingly decided to ask that the Commission organise a seminar in Dublin in association with the Confederation of Irish Industry and the Department of Industry, Commerce and Energy with a view to briefing commercial and industrial interests on aspects of these matters of concern to their businesses.

Acknowledgements

16. The Joint Committee wishes to acknowledge with sincere thanks the considerable help it received in considering this proposal from Córas Tráchtála, the Confederation of Irish Industry and the Irish Fishermen’s Organisation Ltd.

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

6th December, 1978.