Textiles 'graduate' from GSP

Garment exports to continue enjoying preferential treatment

Breaking a three-month old deadlock, the European Union has reached an agreement over its new Generalised System of Preferences (GSP), under which India will continue to get preferential access for its clothing exports but, not for textiles. The agreement will be formally adopted by the council tomorrow.

As per the new GSP regime, to be effective from January 1, 2006, products from beneficiary countries in a particular sector, accounting for more than 15 per cent of the EU imports, will 'graduate' out of the GSP and cease to benefit from preferential access.

The 'graduation threshold' for textiles and clothing has been set at 12.5 per cent, but the EU has decided that the threshold will be assessed separately for textiles and clothing.

Accordingly, Indian clothing would continue to get benefits of the GSP, while textiles would graduate out of the GSP. Nearly 80 per cent of China's exports to the EU would also graduate out of the GSP.

A Sakthivel, chairman of the Apparel Export Promotion Council, welcomed the agreement, but said that there were still apprehensions in the industry about greater benefits being given to competing countries like Pakistan, Bangladesh and Sri Lanka, under the new regime.

He said the threshold limit of 12.5 per cent for clothing was satisfactory as India's exports accounted for only around 8.6 per cent of the EU's market share.

Textile Export Promotion Council (Texprocil) officials were also of the view that most of the exporters will continue to enjoy preferential access to the EU markets.

They pointed out, of the total Indian exports of 4.26 billion euro during 2004, clothing exports accounted for 3.06 billion Euro and textiles 1.21 billion Euro.

Countries like Sri Lanka are expected to get increased benefits under a new 'GSP Plus' incentive scheme targeted at especially vulnerable countries that have ratified and effectively implemented key international conventions on sustainable development, labour rights and good governance.

The GSP plus scheme proposes to cover around 7,200 products which will enter the EU duty free. The GSP Plus incentive scheme will be fast-tracked to enter into force on a provisional basis on 1 July 2005.

Commission sources said that the coverage of new GSP would be extended to 300 additional products mostly in the agriculture and fishery sectors. The new regime, would remain unchanged until the end of 2008, after which it would be reviewed.

Through its Generalised System of Preferences, the European Union extends preferential access to its markets to developing countries.

The current GSP, in place since 1995, applies to imports from developing countries that pay duty on entering the EU market and that are not already duty-free under Most Favoured Nation agreements.

In 2003, EU imports under GSP totalled €52 billion. Under the EU GSP between 1999-2003 developing countries share in total EU imports grew from 33 to 40 per cent.