Exploring Other Duty-Free Exporting Schemes

CURRENT LEGAL CONCERNS

Elpidio V. Peria
15 January 2011

Exploring Other Duty-Free Exporting Schemes
to Other Countries under GSP or GSTP Schemes

While DTI Usec Adrian Cristobal, Jr, in a Business Mirror online news article dated 13 January 2011 urged Filipino exporters to continue exporting to the US under its duty-free scheme called the Generalized System of Preferences (GSP) which even if it expired last December 2010 will most likely be renewed, Filipino exporters should also consider exploring the other GSP schemes of other countries, or the duty-free schemes among developing countries, called the Generalized System of Trading Preferences. (GSTP).

According to the UN Conference on Trade and Development (UNCTAD), the original international body tasked by the United Nations to tackle issues relating to trade and development, the GSP, is a scheme of preference-giving done by developed countries whereby “selected products originating in developing countries are granted reduced or zero tariff rates over the most favored-nation or MFN rates. The least developed countries (LDCs) receive special and preferential treatment for a wider coverage of products and deeper tariff cuts.”

The so-called most favored-nation or MFN rate is a rate that is provided by countries that are trading with each other, which means a preferential rate that is not usually given to countries that don’t have a trading partner relationship with such country.

Under the rules of the World Trade Organization, such concept has been enshrined as key principle of the global trading system whereby each country trading with each other are supposed to give such treatment to each other. There are other trading principles such as “national treatment”, among others, which can be discussed in later columns.

The UNCTAD website also notes that “the idea of granting developing countries preferential tariff rates in the markets of industrialized countries was originally presented by Raul Prebisch, the first Secretary-General of UNCTAD, at the first UNCTAD conference in 1964. The GSP was adopted at UNCTAD II in New Delhi in 1968”.

According to UNCTAD, there are currently “ 13 national GSP schemes notified to the UNCTAD secretariat. The following countries grant GSP preferences: Australia, Belarus, Bulgaria, Canada, Estonia, the European Union, Japan, New Zealand, Norway, the Russian Federation, Switzerland, Turkey and the United States of America.”

Checking further the GSP handbooks from the same website, the Philippines is a beneficiary of GSP schemes of Belarus, Canada, EU, Japan, New Zealand, Norway, Russia, Switzerland, Turkey, and of course, the US.

In the case of Australia, the trade preferences given out by this country could be seen in the recently signed EU-ASEAN Free Trade Agreement, of which the Philippines is a signatory, being an ASEAN member country.

Exporters therefore should consider also the possibility of exporting to these countries as they are also eligible for duty-free or low-tariff preferences in these countries. It might be useful for them to consult further the websites or embassies of these countries here in the Philippines for the details of these trade preferences, which may either include duty-free entry of export products to these countries or preferential tariff rates.

The Global System of Trade Preferences among Development Countries or GSTP, meanwhile is also another trade preference agreement among developing countries, of which Philippines is an original signatory on April 13, 1988, with 48 developing countries, in then unified Yugoslavia.

A check on the GSTP website within the UNCTAD website shows that as of 1989, a total of 43 countries have provided their tariff concessions to members, including, as a matter of surprise considering their developed-country status now, South Korea and Singapore.

The GSTP is a South-South trading scheme that predated the WTO trading system, thus it remains, on top of the developing countries’ respective commitments in the WTO.

Data from UNCTAD’s trade analysis unit show that intra-GSTP exports are growing faster than GSTP countries’ exports to the rest of the world, where between 2000-2005, intra-GSTP exports increased by 50%, while exports by GSTP to the rest of the world increased by 39%.

Total GSTP exports to the world (2005) were 17.5% of total world exports or 48.7% of total DC exports to the world.  Total exports from GSTP to the rest of the world totaled $1.8T in 2005.

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