EU proposes overhaul of trade preferences scheme

BRUSSELS: The European Union plans to end tariff benefits for dozens of countries that have outgrown the need for preferential trade treatment under sweeping reforms presented by the bloc’s trade chief on Tuesday.
Brazil, Argentina, Russia, Saudi Arabia and scores of other relatively prosperous developing countries will be excluded from trade preferences under the plan, which must be approved by the European Parliament and the EU’s 27 member states.
The EU, the world’s largest trading bloc, will instead focus on poorer countries it views as being in greater need of growth-boosting trade benefits, including Pakistan and Ukraine.
“Global economic imbalances have shifted tremendously in the last decades. World tariffs are at all-time lows. If we grant tariff preferences in this competitive environment, those countries most in need must reap the most benefits,” Trade Commissioner Karel De Gucht said in a statement, as he laid out reforms that are a broad reworking of EU trade policy.
The plans, expected to ruffle feathers and take until 2014 to complete, reflect European ambitions to protect its industries from booming export economies while at the same time using trade as a foreign policy and development tool.
The EU has extended preferential trade treatment to developing countries under the so-called Generalised System of Preferences since 1971. In 2008, concessions to poor countries were granted on more than 6,000 products and were worth about 3 billion euros, according to EU figures.
Brazil and Russia dropped
Under the reform, some of the tariff regime’s main beneficiaries will be dropped from the system, notably Brazil and Russia, which will lose discounts on roughly 3 billion euros’ worth of exports each.
Brazil’s Foreign Ministry responded to the proposal with concern, saying late on Tuesday that the end of preferential treatment would penalize exports of local manufactured products to one of the country’s principal markets.
The value of imports entering under discounted duties will fall to about 37.7 billion euros, according to EU data, compared to almost 60 billion today.
That could prompt countries to seek preferential deals with the EU through bilateral free trade agreements (FTAs), a cornerstone of Europe’s long-term trade strategy.
“I believe that (the reform) could and should boost our FTA effort,” De Gucht told journalists in Strasbourg.
Also in line with the EU’s long-term interests is a clause to deny discounts to countries that withold scarce and coveted raw material crucial for EU production – a slight for China, which has raised export taxes on raw materials in recent years.
Europe’s main business lobby group, BusinessEurope, praised the plan, saying it would end an outdated regime which most benefits the more prosperous emerging economies.
Trade activists warned the reform would pressure poor African countries into entering unpopular free trade pacts with the EU.
“It threatens to further completely undermine regional integration in Africa while increasing pressure on less developed countries to sign free trade agreements,” said Rebecca Varghese Buchholz, trade policy adviser at UK-based Tradecraft.