Non-tariff measures and industrial nation imports of GSP-covered products.

• Author: Clark, Don P.
• Position: Generalized System of Preferences

1. Introduction

   The Generalized System of Preferences (GSP) program was proposed at the first United Nations Conference on Trade and Development (UNCTAD) held in 1964.(1) Under the GSP, most industrial nations extend tariff preferences to certain manufactured and semi-manufactured articles exported from designated beneficiary developing countries, while retaining most-favored-nation (MFN) duties on imports from non-preferred supply sources. Tariff preference margins create static price advantages intended to enhance the competitiveness of exports from beneficiaries and encourage investment in export-related activities.

   Several studies have identified features of GSP schemes which limit access to preferential treatment thereby reducing the effectiveness of the schemes as trade creating instruments |9; 10; 16~. First, an initial agreement to have a non-discriminatory GSP led preference-giving countries to approve exhaustive beneficiary lists and simultaneously limit product coverage to avoid undue market disruption caused by import surges from advanced beneficiaries. Many low technology and unskilled labor intensive products of export interest to beneficiaries are statutorily excluded from eligibility under most schemes.(2) A second factor limiting utilization is the GSP's stated intention to shift production emphasis from primary products to manufactured goods. Most processed and semi-processed agricultural, forestry, and fishery products of export interest to beneficiaries are treated as falling outside the GSP. Third, ceilings on preferential imports and graduation, advanced as means of restricting trade shares for the poorer beneficiaries by limiting preferential trade shares of the more advanced suppliers, basically operate as safeguards for import-sensitive activities.(3) Finally, complex Rules of Origin and other administrative regulations unduly restrict preferential imports of assembled items.

   Recently, GSP beneficiaries have expressed considerable concern over the proliferation of non-tariff measures (NTMs) in several preference-giving countries which limits their effective utilization of the GSP Complaints were voiced in a political context in UNCTAD during the seventeenth session of the Special Committee on Preferences.(4) When exports of GSP-covered products confront NTMs in markets of preference-giving countries, beneficiaries find it difficult to expand exports since NTMs erode static price incentives inherent in tariff preferences.

   The present study identifies NTMs outside the GSP which are currently applied by preference-giving countries to products covered under GSP schemes. Trade coverage ratios are calculated to assess the incidence of NTM use on GSP-covered products. Major beneficiaries affected by NTMs are identified. A finding that NTMs constitute important deterrents to imports of GSP-covered products would support concerns expressed by the beneficiaries, and would suggest possible strategies to address the problem.

2. Methodology

   Non-tariff measures encompass any measures (public or private) other than tariffs that can operate directly or indirectly to restrict international trade flows. NTMs raise prices of both imports and import-competing goods, and favor domestic over foreign supply sources by causing importers and foreign exporters to charge higher prices and/or restrict import volumes. Non-tariff measures include a wide variety of specific measures which differ greatly in degree of restrictiveness.(5) UNCTAD's Data Base on Trade Control Measures codes more than 100 different NTMs. A necessary step in assessing the extent of NTM application on imports is to establish meaningful NTM categories. The UNCTAD secretariat has adopted three basic working definitions: "broad" definition NTMs; "narrow" definition NTMs; and quantitative restrictions.

   The broad definition of NTMs includes certain para-tariff measures, import deposits and surcharges, variable levies, anti-dumping/countervailing duty actions (including investigations, duties, and undertakings), quantitative restrictions (including quotas/prohibitions, restraints under the Multi-Fibre Arrangement (MFA), non-automatic licenses, voluntary export restraints, state monopolies), import surveillance, automatic licenses, and certain price control measures. All NTMs applied at the border for which information is available from UNCTAD's Data Base on Trade Control Measures are included in the broad definition.

   The narrow definition excludes from the broad group para-tariff measures, import deposits and surcharges, anti-dumping/countervailing duty actions, automatic licensing, and import surveillance measures. The excluded NTMs are those which have a potential for restricting imports, but are viewed as being less restrictive in impact than the NTMs retained in the narrow definition group. For example, automatic licenses may be freely granted. They may be used primarily to...