Generalized System of Preferences

The Generalized System of Preferences, or GSP, is a formal system of exemption from the more general rules of the World Trade Organization (WTO), (formerly, the General Agreement on Tariffs and Trade or GATT). Specifically, it's a system of exemption from the most favored nation principle (MFN) that obliges WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their "most favored" trading partner. In essence, MFN requires WTO member countries to treat imports coming from all other WTO member countries equally, that is, by imposing equal tariffs on them, etc.

GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for the least developed countries, without also lowering tariffs for rich countries.

Effects

From the perspective of developing countries as a group, GSP programs have been a mixed success. On one hand, most rich countries have complied with the obligation to generalize their programs by offering benefits to a large swath of beneficiaries, generally including nearly every non-OECD member state. Certainly, every GSP program imposes some restrictions. The United States, for instance, has excluded countries from GSP coverage for reasons such as being communist (Vietnam), being placed on the U.S. State Department's list of countries that support terrorism (Libya), and failing to respect U.S. intellectual property laws.

Criticism has been leveled noting that most GSP programs are not completely generalized with respect to products, and this is by design. That is, they don't cover products of greatest export interest to low-income developing countries lacking natural resources. In the United States and many other rich countries, domestic producers of "simple" manufactured goods, such as textiles, leather goods, ceramics, glass and steel, have long claimed that they could not compete with large quantities of imports. Thus, such products have been categorically excluded from GSP coverage under the U.S. and many other GSP programs. Critics assert that these excluded products are precisely the kinds of manufactures that most developing countries are able to export, the argument being that developing countries may not be able to efficiently produce things like locomotives or telecommunications satellites, but they can make shirts.

Supporters note that even in the face of its limitations, it would not be accurate to conclude that GSP has failed to benefit developing countries, though some concede GSP has benefited developing countries unevenly. Some assert that, for most of its history, GSP has benefited "richer developing" countries - in early years Mexico, Taiwan, Hong Kong, Singapore, and Malaysia, more recently Brazil and India - while providing virtually no assistance to the world's least developed countries, such as Haiti, Nepal, and most countries in sub-Saharan Africa. The U.S., however, has closed some of these gaps through supplemental preference programs like the African Growth and Opportunity Act and a newer program for Haiti, and Europe has done the same with Everything But Arms.

See also

• [[Global System

External links

• "UNCTAD Introduction to Generalized System of Preferences". Information from the UNCTAD about GSP programs in general.
• "U.S." Introduction to the U.S. GSP program by the U.S. Trade Representative.
• "E.U. Generalised System of Preferences". Information from the European Commission on the E.U. GSP arrangements.
• "Japan Generalized System of Preferences". Introduction to Japan's GSP program by the Japanese Ministry of Foreign Affairs.