Lorand Bartels and Christian Haeberli have an interesting article on GSP in the latest edition of the JIEL, in which they propose two ways "to increase the security and predictability of these preferential schemes, permitting decisions by investors and traders to be taken without fear of an arbitrary withdrawal of preferences."
The first proposal is "to make tariff preference schemes, which are currently voluntary, binding obligations using the mechanism provided in Article II of the GATT." There are two aspects to this. First, they suggest binding the tariff preferences themselves. That is, rich countries offering tariff preferences to developing countries would make commitments in their GATT Schedules to continue these preferences as promised. So, if you promise a 0% tariff on certain goods from certain countries, you cannot later revoke this preference. Second, any "qualifications" to these preferences would also be bound. They note that existing tariff preference programs "are limited in a number of ways, including ex ante product and country exclusions, graduation, safeguards and non-trade conditionality." All of these qualifications would also be bound, in the sense that whatever limitations there are on the preferences would not be made less favorable to the developing countries than what was committed to. Thus, if you promised graduation would be conducted under certain terms, you could not change the terms so that they are worse for developing countries.
The second proposal is "to establish and bind objective and transparent criteria for when developing countries and their products can be excluded from tariff preference programs." They note that current exclusions of this kind are of "unclear legality." They explain that currently, there are a number of reasons for these exclusions:
One reason is that a developing country as a whole, or a particular industry, is considered not to have any relevant need for preferences, or that they have lesser needs than other developing countries or their industries. A different reason for excluding certain imports is to protect domestic industry: this can be done by a priori product and country exclusions, or by means of a temporary or permanent sector or country ‘graduation.’ And finally, some preference programs apply exclusions based on the compliance of beneficiary countries with non-trade conditions, such as compliance with human rights and environmental standards.
They propose that "objective and transparent product and country graduation criteria be established."
I'll offer a few brief thoughts.
First, I always like the idea of bringing greater certainty to the law, and this seems to be an area with a lot of uncertainty. While an exporter can never be completely sure what the future will bring for a particular product, there are varying degrees of security and predictability, and the current GSP system arguably does not do very well in this regard. So, in principle, this sounds to me like a great idea.
Second, it's hard to imagine rich countries binding the preferences they have offered without getting something in return. But if they could bind the qualifications as well, as the authors propose, perhaps this could work. It seems to me that there are a number of aspects of existing preference programs that likely violate WTO rules in this area (as interpreted by the Appellate Body in the EC - GSP case). If these likely violations could be legitimized through this kind of binding commitment process, that would provide certainty for rich countries which may counterbalance the loss of flexibility with regard to the preferences themselves.
Third, as to the criteria for country/product exclusions, this sounds like the most difficult part of the negotiating process, but perhaps something could be achieved here. Graduation is one thing. I can imagine that some rules or guidelines could be worked out. Conditionality seems more difficult, though. I would guess the starting points on the U.S./EU side would be "unlimited conditions," with developing countries countering with "no conditions." I'm not sure where the middle ground lies.
Generally speaking, it seems to me that this is a great issue to be talking about. There are many subjects that arise in trade negotiations for which I often think, why is everyone wasting so much time on that? By contrast, this issue seems to me to address a real problem in a core area of trade law, for which new rules would be extremely valuable. As to whether any progress could actually be achieved, well, that one is beyond me. But I think it's worth a try.
(As a final point, it's worth noting that the authors are not claiming that tariff preferences are good policy, noting: "we do not suggest that preferential schemes are a necessary or even a useful tool of development.")
