A recent report from the United Nations Conference on Trade and Development suggests a number of actions that could be considered to increase the effectiveness of trade preference programs in fostering economic growth and diversifying exports among beneficiary countries.
The report points out that 16 developed economies and nine developing countries currently have non-reciprocal trade preference schemes similar to the Generalized System of Preferences. However, the proliferation of free trade agreements, declining most-favored nation tariffs, the emergence of non-tariff measures, and the prominence of global value chains have eroded the effectiveness of these schemes. As a result, benefits currently accrue to only a few specific markets, products, and exporters.
The report therefore offers suggestions for improving trade preference programs, including the following.
- fine tuning product coverage by targeting products of particular interest to non-least-developed countries in a manner that does not reduce preferences for LDCs
- reforming rules of origin to reflect the reality of production processes across global value chains (e.g., rules such as single transformation” in the apparel sector and the harmonization of origin rules across different preference schemes)
- modernizing regional cumulation to promote the development of regional value chains
- expanding the number of preference-granting countries
- providing for longer operational periods to reduce compliance costs, particularly for small and medium-sized enterprises, and enhance predictability and stability
- incentivizing exports of value-added environmental products or processed critical minerals to secure supplies for preference-granting economies while developing value chains and increasing local value addition in developing countries
- making transitional arrangements for LDC graduation more smooth to help mitigate the possible loss of preferential benefits
- improving coordination between GSP-granting countries and beneficiaries to maximize the benefits from trade preference programs at the international level
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