The Enabling Clause is the World Trade Orgnisation legal basis for the Generalized System of Preferences (GSP). Under the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to products originating in developing countries.
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The EUs GSP has several goals.
Key is obviously to speed up economic growth in developing countries.
Furthermore, many developing countries primarily rely on one or two commodities for export such as garments and food items. Such specialization also creates vulnerability in case of market price fluctuations.
Hence, GSP aim to diversify the economy of developing countries by reducing import tariffs on many goods. Through tariff reductions the production of goods can become more competitive on the international market. This often also leads to an increase of Foreign Direct Investments in GSP beneficiary countries.
Finally, GSP can also be used as a tool to safeguard the financial and economic interests of the EU by through the use of import quotas and import tariffs.
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The Generalised Scheme of Preferences (GSP) is a trade mechanism developed by the European Union (EU) that establishes a unilateral trade relationship between the EU and developing countries. There exist three different GSP mechanisms: Standard GSP, Everything But Arms (EBA), and GSP+.
The three mechanisms apply differently to countries with varying needs and strengths at the level of international trade. Through these three GSP mechanisms, countries can export products originating on their territory into the EU single market. The rules that define each GSP mechanism are laid down under EU regulation 978/2012, which is valid until 2023. After that, a new regulation will stipulate similar or adapted rules for each mechanism.
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The GSP+ mechanism does not apply automatically to countries that fall under its conditions, contrary to the Standard GSP and EBA. Rather, a country needs to apply in order to benefit from the GSP+ trade preferences. In order to be eligible for the GSP+ mechanism, a country needs to fulfil the following criteria:
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The Everything But Arms (EBA) trade preferences automatically apply for an unlimited period of time to all countries who are defined by the UN Committee for Development Policy as a least-developed country. Least developed countries are defined as countries having a low income, a low level of human assets and to be highly vulnerable to economic and environmental shocks . A country can temporarily lose its EBA preferences in the very specific case where it violates the principles of human rights and labour rights conventions it had to adhere to in the context of the EBA mechanism.
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