The effectiveness of EU's Generalised System of Preferences. Evidence from ASEAN countries

• Date: 23 March 2012
• DOI: https://doi.org/10.1108/14770021211210696
• Pages: 65-81
• Published date: 23 March 2012
• Author: Weifeng Zhou,Ludo Cuyvers
• Subject Matter: Economics

The effectiveness of EU’s

Generalised System of

Preferences

Evidence from ASEAN countries

Weifeng Zhou

Faculty of Applied Economics, University of Antwerp, Antwerp, Belgium, and

Ludo Cuyvers

Faculty of Applied Economics, University of Antwerp, Antwerp, Belgium,

Centre for ASEAN studies, Antwerp, Belgium,

European Insitute for Asian studies, Brussels, Belgium and

North-West University, Potchefstroom, South Africa

Abstract

Purpose – The European Union’s Generalised System of Preferences (GSP) has existed for over

40 years and it aimed to promote the export growth in the developing countries. The purpose of this

paper is to highlight the evolution and characteristics of the EU’s GSP regime and examine the

effectiveness of the EU’s GSP in promoting the export growth of ten ASEAN beneficiary countries.

Design/methodology/approach – The authors analyse the trade flows between the EU and

ASEAN beneficiary countries under the GSP scheme by referring to trade data (1990-2007) at the

aggregate level, the sectoral level and individual beneficiary country level.

Findings – The authors find that using the EU’s GSP to promote the exports growth of the ASEAN

countries has very limited effectiveness. Although the total EU imports from the ASEAN countries

experienced a significant increase during the period 1990-2007, the preferential imports under the GSP

scheme remained stagnated at the same period. However, the least developed ASEAN members

reported very high utilization rates and successfully exploited GSP preferences for pushing up their

exports to the European market.

Originality/value – This work provides new evidence on whether the EU’s GSP really works and to

what extent the EU’s GSP enhances the export growth of ASEAN beneficiary countries. The empirical

findings may provide trade policymakers with some guidance in making EU trade policy.

Keywords European Union,International trade, Developing countries,

Generalised Systemof Preferences, South east Asia,ASEAN beneficiary countries, Utilization rate,

GSP preferentialimport, Export growth

Paper type Research paper

GSP is a vital tool of our pro-development EU trade policy, the continuation of GSP will

ensure stability and predictability for beneficiaries and traders in the EU and developing

countries (Former EU Trade Commissioner Peter Mandelson).

1. Introduction

The Generalized System of Preferences (GSP) concept, which consists essentially of

non-reciprocal tariff preferences being given by all developed countries to products of

all developing countries, has been controversial from the time that its concept was first

The current issue and full text archive of this journal is available at

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The effectiveness

of EU’s GSP

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Journal of International Trade Law

and Policy

Vol. 11 No. 1, 2012

pp. 65-81

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/14770021211210696

introduced and discussed internationally in 1964. To its proponents, the GSP promised

through “trade rather than aid” to increase the exports and purchasing power

of developing countries in the short run and to diversify least development country

(LDC) economies in the longer run by encouraging the exports of manufactured and

semi-manufactured products (Graham, 1978). However, many scholars argued that the

GSP proposal threatened the delicately constructed GATT international trading

system by undermining its cornerstone “the most-favored-nation (MFN) principle of

nondiscrimination” (Whalley, 1990) and that it was economically ineffectual.

In 1968, the United Nations Conference on Trade and Development (UNCTAD)

favorably advised for the creation of the GSP[1]. These preferences were to be generalized,

i.e. available to all developing countries and no longer restricted to countries having

privileged relationships with certain industrialized countries. Following this understanding

the European Union[2] was the first to implement a “Generalised System of Tariff

Preferences” in 1971 as recommended by the UNCTAD. Since then, around a dozen other

industrialized countries have also introduced GSP schemes, all differing in the scope of

products that are covered and the depth of the preferences that are offered, depending on

particular sensitivities to the preference-granting country. The EU’s GSP as a trade policy

instrument provides the most beneficial market access to the developing countries.

As a major trading power, the EU is the largest trading partner for the developing

countries. In 2008 the total volume of EU’s GSP preferential imports, amounting to

e68.6 billion, was larger than the volume of imports under the US, Canadian and

Japanese GSP systems combined. It is generally accepted that the EU’s GSP is by far the

most generous system currently applied for the developing world (UNCTAD, 1999).

The Association of Southeast Asian Nations (ASEAN) had preferential access from the

beginning in 1971 of the EU’s GSP and was its main beneficiary. These trade preferences

enabled ASEAN’s agricultural, industrial and textile products to enter into the European

market at lower tariffs. Despite these special provisions in the EU’s GSP, critics have

noted that such GSP schemes are either cosmetic, poorly enforced or less effective on

promoting export growth in the developing countries[3].

Although there are many studies on issues of EU trade preferences, little has been

written on whether the EU’s GSP really works and to what extend the EU’s GSP enhances

the export growth of the developing countries. This article attempts to fill this gap by

analysing the trade flows between the EU and ASEAN beneficiary countriesby referring t o

trade data at the sectoral level and at individual beneficiary country level. Our analysis

suggests that using the EU’s GSP to promote the exports growth of the ASEAN

countries has very limited effectiveness. Although the total EU imports from the ASEAN

countries experienced a significant increase during the period 1990-2007, but the

preferential imports under the GSP scheme remained stagnated at same period. However,

the least developed ASEAN members reported very high utilization rates and successfully

exploited GSP preferences for pushing up their exports to the European market.

The rest of paper is organized as follows. Section two highlights the evolution of the

European Union’s GSP and characterizes its major beneficiaries. Section three uses

trade data for 1990-2007 to examine the export growth of ASEAN countries under the

EU GSP scheme. In particular, the EU’s GSP imports from ten ASEAN members and

their utilization rate, preferential imports in the three sectors (agricultural, industrial

and textile sector) and the EU GSP imports from individual ASEAN member are

analyzed. Section four concludes.

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