European Union Council extends Andean Generalized System of Preferences

December 14, 2001

The Council of the European Union this past December 10 approved the Regulations (Law) for application of a generalized tariff preferences plan for the period January 1, 2002 to December 31, 2004.

The Regulations cover the so-called Andean GSP, in effect since November 13, 1990. The European Union granted the subregion these tariff preferences as support for the Andean Community’s war on drugs, under the principle of shared responsibility.

The new Regulations not only favor the Andean countries, but also continue the support to the Central American nations and Panama started in 1995, and extend the benefits to Pakistan for the first time.

They consider the possible renewal of the Andean preferential system for the decade of 2005-2014, which will depend upon a general evaluation of the results to be conducted over the three-year period of 2002-2004. Special weight will be placed on the observance, by the beneficiary countries, of the ILO’s key labor standards, their performance in controlling drugs, and their effective use of the preferences in 2002-2004.

The European Commission has been entrusted with that evaluation and in performing it will bear in mind the conclusions reached by the pertinent international organizations. The results of that evaluation will not, however, affect in any way the application of the preferences during the cited three-year period.

The Andean GSP enjoyed special and privileged treatment as compared with the general GSP in the European Union. Not only did this instrument permit the preferential entry of a broad range of Andean products with a zero tariff, while most of the countries benefited by the European GSP had a more limited coverage and margin of preference, but it was also not subject to general GSP provisions that suspended preferences for a beneficiary country or a sector of that country totally or in part for different reasons. These general provisions, however, are now applicable to the Andean GSP.

In any case, and even though the percentage of coverage and the average margin of preference of the Andean GSP have been declining over time because of the tariff reduction commitments assumed by the EU at the conclusion of the Uruguay Round, the socioeconomic merits of the instrument have been clearly demonstrated. During their period of heaviest growth, from 1993 to 1996, Andean preferential exports to the European Union increased by US$ 983 million and generated a gross value of production US$ 1 billion 877 million larger and an additional 119,000 direct and indirect new jobs, with an investment of close to US$ 300 million.

Today, despite having fallen to a coverage of less than 23%, the Andean GSP continues to be important to the subregion. In 2000, it upheld preferential exports valued at US$ 1 billion 275 million, for a production of US$ 2 billion 532 million, which generated roughly 160,000 new jobs, both direct and indirect.

Last but not least, the Andean GSP made it possible to diversify Andean exports to the European Union, as shown by the increase in number of NANDINA headings effectively used, which rose from 1,554 in 1991 to 1,923 in 2000.

The rapidly growing new Andean exports to the European Union encompass a large variety of chemicals and agrofood products, specific metal manufactures, jewelry, ceramics, fruits and vegetables, and alcoholic and non-alcoholic beverages.