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GSP PLUS, LINKING TRADE TO HUMAN RIGHTS AND GOOD GOVERNANCE

The joy of a celebration depends on its reasonableness; for emotional people, there is little room for reason. The news of grant of GSP Plus status to Pakistan by the EU in December 2013 overwhelmed the Pakistani media who, for many weeks, defined and dissected its tone. But, the outcome opinion wasn’t unanimous rather it was divided as some celebrated while others lamented this new phenomenon. Nevertheless, the case of GSP Plus presents a case for exploration, serious deliberation and examination. Here is a compact analysis of this cherished status:

First, the edifice of GSP Plus is based on the capitalist claim that free trade is the panacea to world’s all economic ills. The critics of the free trade, however, have dissenting opinions amongst themselves. The debate on creation and distribution of wealth is, indubitably, not new, and in this regard, free trade economists have never enjoyed universal approbation and hail. Anyhow, the fact still remains that GSP Plus is obligated by free trade economics.

Second, how on earth, then, ‘preferences’ kick in a ‘free trade economics’ is a moot question that every thinking mind invariably poses. This calls for a bit of background footnote.

The General Agreement on Tariffs and Trade (GATT), which came about in post World War II scenario, remained relatively low in Cold War era. It was only in 1994 that with the evolution of World Trade Organization (WTO) ‘which took the organizational and functional role of GATT’ that free trade economics came to fore globally. The cardinal principles of WTO Agreement are that all the nations will grant each other equal status and the equality will be translated into Most-Favoured Nation (MFN) and non-discrimination within the states. The EU states, which have ratified WTO Agreements in capacity of a bloc and not as individual states, have entered into their own European Union Treaty, which, in turn, is another trade treaty as its basis is free movement of goods and persons.

The two treaties of WTO and EU Treaty then apparently look at odds with each other; one advocates global economic affinity whereas the other argues regional economic unity. With these prima facie existential realms, the two treaties are similar in one respect. The WTO Agreement has a provision for developing countries, namely the ‘Enabling Clause’, by which preference can be accorded to a developing country against the cardinal principles of WTO Agreement mentioned above. On similar lines, the EU Treaty has through two Regulations (EU Regulation 978/2012 and EU Regulation 155/2013) provided for two sets of schemes called GSP and GSP Plus for different types of countries. The EU Regulations were initiated in 2004 whereas the Enabling Clause was introduced to erstwhile GATT through a Ministerial Decision of 1979, which was inherited by the extant WTO. The description of the two sets of treaties is essential to enrich comprehension of the GSP Plus dynamics and, therefore, the above space was dedicated to snapshot brief details.

Third, the GSP Plus lays down stringent criteria. The criteria are categorized as (a) economic criteria; and (b) sustainable development criteria. The two criteria are interesting as any objective analysis must weigh the both for deciding on the utility of the facility to a given country. Both of these criteria deserve a small comment:

a.    ECONOMIC CRITERION

The economic criterion comprises two types of ratios: One is the import-share ratio while the other is non-diversification ratio. The import-share ratio sets the threshold for eligibility of a country for GSP Plus, if its GSP covered imports represent less than 2% of the EU’s imports from all GSP beneficiaries (note: not all EU imports!). The non-diversification ratio implies that an eligible country’s seven largest GSP covered product sections must cover at least 75% of its total GSP0-covered exports to the EU.

b.    SUSTAINABLE DEVELOPMENT CRITERION

For a lawyer, the sustainable development criterion begs more attention as it is free of mathematics and is more pegged into social, legal and political matters as compared to economic criterion. The eligible countries for GSP Plus must sign an undertaking that they will abide by twenty-seven core international conventions. The undertaking covers maintaining ratifications to the international conventions, accepting without reservation reporting and monitoring requirements of the conventions and cooperating with EU for implementation of the conventions. The interesting part is that the onus of proof for compliance rests on the country enjoying GSP Plus not on the EU. Hence, a reversal of the burden of proof has been introduced providing the EU an upper hand in dealing with the matter as it can withdraw the status any time if it finds, after investigation, that a country is not complying with its undertaking. The list of twenty-seven conventions merits mention due to the overwhelming importance of its ingredients. The conventions are outlined in Annex VIII of Regulation 978/2012 as:

PART A: Core Human & Labour Rights UN/ILO Conventions

1. Convention on the Prevention and Punishment of the Crime of Genocide (1948)
2. International Convention on the Elimination of All Forms of Racial Discrimination (1965)
3. International Covenant on Civil and Political Rights (1966)
4. International Covenant on Economic Social and Cultural Rights (1966)
5. Convention on the Elimination of All Forms of Discrimination Against Women (1979)
6. Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (1984)
7. Convention on the Rights of the Child (1989)
8. Convention concerning Forced or Compulsory Labour, No 29 (1930)
9. Convention concerning Freedom of Association and Protection of the Right to Organize, No 87 (1948)
10. Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, No 98 (1949)
11. Convention concerning Equal Remuneration of Men and Women Workers for Work of Equal Value, No 100 (1951)
12. Convention concerning the Abolition of Forced Labour, No 105 (1957)
13. Convention concerning Discrimination in Respect of Employment and Occupation, No 111 (1958)
14. Convention concerning Minimum Age for Admission to Employment, No 138 (1973)
15. Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, No 182 (1999)

PART B: Conventions related to the environment and to governance principles

16. Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973)
17. Montreal Protocol on Substances that Deplete the Ozone Layer (1987)
18. Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1989)
19. Convention on Biological Diversity (1992)
20. The United Nations Framework Convention on Climate Change (1992)
21. Cartagena Protocol on Biosafety (2000)
22. Stockholm Convention on persistent Organic Pollutants (2001)EN L 303/60 Official Journal of the European Union 31.10.2012
23. Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998)
24. United Nations Single Convention on Narcotic Drugs (1961)
25. United Nations Convention on Psychotropic Substances (1971)
26. United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)
27. United Nations Convention against Corruption (2004)

A cursory reading of the above-mentioned international conventions clearly shows that GSP Plus is not purely trade- and economics-related in its significance, but it impinges upon important areas of national sovereignty of a country. Tying trade with human, labour and good governance laws makes the GSP Plus more political than economic in effect.

Fourth, the above-mentioned introduction of the GSP Plus legal framework is a reminder of how the West uses trade to dictate its terms. The undertaking part of the Regulation is much out of balance to be regarded as an instrument of reciprocity upon which all foreign relations rest.

Fifth, Pakistan has been accorded the benefit of GSP Plus for the first time and is categorized as a low and lower middle income partner country. The product coverage in GSP Plus has been divided into non-sensitive and sensitive categories. The non-sensitive products enjoy duty-free access whereas the sensitive products like textile, clothing, apparel, etc., benefit from tariff reductions.

For Pakistan, it may be noted that Article 29 of the Regulation provides for safeguarding mechanism for sensitive products like textiles, therefore, Pakistan’s overzealous response textiles and apparels needs to be diluted and be reflected in more conscious terms rather than multiplying peoples’ expectations.
Finally, by way of conclusion, it may be deduced that though GSP Plus may temporarily be celebrated as a success, it should not be seen as a destination. At best, it’s a temporary respite and cannot be seen as a permanent solution of any kind. Besides, the concessional schemes of trade which relate foreign relations with non-trade matters usually are designed to advance political agendas and have little intrinsic economic and developmental value; GSP Plus does not appear as an exception to this general propensity.

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