Sustainable trade preferences for the 21st century: Fine-tuning the EU‘s General System of Preferences to make it a more effective tool for development
This policy report, written for the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), provides policy recommendations on how to reform the EU’s Generalised System of Preferences (GSP), which was set to expire and required renewal. The GSP is one of the EU’s primary trade and development instruments, providing unilateral tariff preferences to developing countries and least developed countries (LDCs) to support their economic growth and integration into the global trading system.
The report analyses the existing GSP framework across its three tiers: the standard GSP, GSP+ (which offers enhanced preferences in exchange for ratification and implementation of international conventions on human rights, labour, environment, and governance), and Everything But Arms (EBA, which provides duty-free, quota-free access for LDCs). It assesses the strengths and weaknesses of each tier and their effectiveness in promoting sustainable development and trade diversification.
A key focus of the report is on how the reformed GSP could better integrate sustainability objectives. At a time when the EU was increasingly embedding environmental and social requirements into its trade policy, the report examines how the GSP can be designed to provide incentives and support for beneficiary countries to adopt higher sustainability standards. It also examines the relationship between the GSP and the EU’s broader development cooperation framework, including Aid for Trade programmes, providing recommendations on how to strengthen the linkages between trade preferences and development support, ensure that the GSP contributes to building productive capacity in beneficiary countries, and enhance monitoring and evaluation mechanisms.
The report concludes with specific reform proposals aimed at making the GSP more effective as a tool for inclusive and sustainable trade, including simplified rules of origin, enhanced product coverage, stronger conditionality on sustainability commitments, and improved technical assistance for compliance.
