The EU and the Gulf Cooperation Council (GCC): Limited impact of revised trade scheme - UPDATE

Generalised Scheme of Preferences (GSP) Brussels, 26 July 2013

Revising the EU’s GSP: a tool to support economic growth in developing countries through better trade opportunities

The main aim of the EU’s preferential trade scheme the so-called “Generalised Scheme of Preferences” (GSP) is to help developing countries by making it easier for them to export to the European Union. The system was revised in October 2012. One of the most important objectives of this reform has been to focus trade preferences on those countries most in need – Least Developed Countries and other poorest developing economies.

Accordingly, as of 1 January 2014, those countries currently benefitting from GSP preferences that have been classified as high income or upper-middle income by the World Bank for three consecutive years will not fall under the preferential trade scheme anymore. The income criterion used by the EU’s revised GSP is based on the World Bank’s GNI per capita, Atlas method. In line with the principles of WTO rules on GSP, the criterion used by the EU is an objective, internationally accepted and widely used indicator. Each year, the World Bank uses it to define categories of countries and to reflect the different needs to which the EU’s Generalised Scheme of Preferences responds.

Countries that will no longer benefit from preferential access to the EU market include eight high income countries and territories (Saudi Arabia, Kuwait, Bahrain, Qatar, United Arab Emirates, Oman, Brunei Darussalam, Macao), and twelve upper middle income countries (Argentina, Brazil, Cuba, Uruguay, Venezuela, Belarus, Russia, Kazakhstan, Gabon, Libya, Malaysia and Palau). From February 2014, GSP preferences will also be deferred for Iran and Azerbaijan. A full overview can be found here.

Limited impact for countries of Gulf Cooperation Council (GCC)

Under the revised scheme, current trade preferences will be lifted for the Gulf Cooperation Council (GCC) countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates) because all these countries have been classified for a long time as high-income economies by the World Bank. Some have a pro capita income which is higher than many (or all) EU Member States.

This means that from 1 January 2014, normal customs duties will apply on all products from GCC countries.

The impact of this deferral of preferences is nevertheless limited: the actual duties on products that the EU imports from GCC countries (minerals, oil and plastics) are low or non-existent. On those mineral products covered by GSP, the duties range from 0% to 4.7%. Overall, GCC countries will pay average duties of 1%-1.5% instead of 0%.

Effects on aviation fuel

Jet fuel (code 2710 19 21 in the EU Combined Nomenclature system) from GCC countries will pass from 0% to 4.7% as of 1 January 2014. However, air transport agreements between the EU and/or Member States on one hand, and third countries on the other, include binding provisions exempting jet fuels from duties and taxes.