Nepal seeks extension of GSP facility in EU

Kathmandu, August 22

Nepal has appealed with the European Union to extend the generalised system of preference facility in exports to the European nations, as a support to the local economy to recover from the devastating earthquakes of last year, which was then followed by months-long border blockade.

From the beginning of 2017, the EU is planning to phase out the facility referred to as ‘GSP’, which was extended to the least developed countries (LDCs).

Citing the blow to Nepal’s economy due to the massive temblor and disruptions of supply lines due to the border blockade in the southern plains, the government has requested the EU for extension of the facility, according to Rajendra Singh, senior officer at the Trade and Export Promotion Centre.

Like Nepal, other LDCs have also been requesting the 28-nation bloc for the extension of the facility as they are incapable of strengthening their economy sans the facility due to various circumstances.

EU has been offering zero duty facility for products (except arms and ammunitions) manufactured in the LDCs during imports to the European market. The EU had adopted a reformed GSP law on October 31, 2012 which offered zero tariff facility to the LDCs to provide them level with playing field in the markets of developed countries. The developed countries offered this facility so that the industrial (production) base of the LDCs could be strengthened.

The European Commission submits its report on GSP every year in the European Parliament. The parliament’s approval is a must for the extension of the facility to LDCs. The share of preferential import in the European market is just around 12 per cent of its total import. Despite of the facility provided to the LDCs, preferential import has not surged significantly in the European market, as per the latest report submitted by the European Commission in the European Parliament.

As the rules came into effect from October 31, 2012, LDCs started enjoying the GSP facility from 2013. The total import of the European nations under the GSP facility stood at 5.87 billion euros or 11.8 per cent of the total import in 2013. The preferential import surged nominally in 2014 to 6.48 billion euros or 12.8 per cent of the total import, as per the report.

Data show that the LDCs have not been able to expand their exports despite huge potential in the European market because the GSP facility is provided only to the products of LDCs with 30 per cent value addition.

According to Singh, the criteria may be lowered to 25 per cent value addition for the products manufactured by LDCs if the facility is extended for another term. This would be in line with the commitment made by the developed countries to provide 25 per cent value addition criteria for LDCs to support them to uplift their economy during the 10th Ministerial Conference of the World Trade Organisation held in December of 2015.

LDCs believe that the European Parliament will allow the authorities to extend the facility to the LDCs as they are sustaining in weak export base. The United States had also renewed the GSP facility for LDCs in 2015, which had expired in July of 2013.

“Similar to other LDCs, Nepal has also not been able to expand its export base to the European market,” informed Binayak Shah, president of European Economic Chamber of Trade, Commerce and Industry.

Carpet, readymade garments and handicraft are the major export products of Nepal to the European Union.


A version of this article appears in print on August 23, 2016 of The Himalayan Times.

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