GSP Scheme

Overview

The Generalised System of Preferences (GSP) is a trade arrangement that allows developed countries to offer preferential tariff treatment to imports from developing and least-developed countries. Although the GSP is not a WTO agreement itself, it operates within the WTO framework under the “Enabling Clause,” which permits differential and more favourable treatment for developing countries.

Objectives of the GSP Scheme

The primary objective of the GSP scheme is to promote economic growth and development in beneficiary countries by enhancing their access to markets in developed countries. By reducing or eliminating import duties, the scheme helps developing countries increase exports, attract investment, generate employment, and diversify their economies.

Key Features

Under the GSP scheme, eligible countries can export specified goods to preference granting countries at reduced or zero tariff rates. The scheme is non-reciprocal, meaning beneficiary countries are not required to offer similar trade concessions in return. Each preference-granting country determines its own product coverage, eligibility criteria, and graduation rules.

Relationship with WTO Rules

The GSP scheme is permitted under WTO rules through the Enabling Clause, which allows developed members to depart from the Most-Favoured-Nation (MFN) principle in favour of developing countries. This flexibility recognises the need for special and differential treatment to address development gaps among WTO members.

Significance in International Trade

The GSP scheme plays an important role in integrating developing countries into the global trading system. It supports export-led growth and complements WTO multilateral trade agreements by addressing inequalities in market access and promoting inclusive global trade.