Mid-Term Evaluation of the EU s Generalised Scheme of Preferences (GSP)

Transcription

1 Mid-Term Evaluation of the EU s Generalised Scheme of Preferences (GSP) Final Inception Report Prepared by DEVELOPMENT Solutions [April 2017] The views expressed in the report are those of the consultant, and do not present an official view of the European Commission.

2 EUROPEAN COMMISSION Directorate-General for Trade Directorate D Sustainable Development; Economic Partnership Agreements Africa Caribbean and Pacific; Agri-food and Fisheries Unit D1 Trade and Sustainable Development, Generalised system of Preferences Contact: European Commission B-1049 Brussels

3 EUROPEAN COMMISSION Mid-Term Evaluation of the EU s Generalised Scheme of Preferences (GSP) Final Inception Report Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

4 Europe Direct is a service to help you find answers to your questions about the European Union. Free phone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( 4

5 EUROPEAN COMMISSION About DEVELOPMENT Solutions DEVELOPMENT Solutions (DS) is a European consultancy which serves the international donor and business community in support of sustainable development and sustainable investment objectives, world-wide. Our expertise is built on our strong grounding in project design and management, research, policy and regulatory analysis, and the management of capacity strengthening programmes for governments. Our primary projects are in support of EU external policies and cooperation in third countries, which includes deep experience in the area of trade policy, environment and sustainable solutions. This work has served as a valuable demonstration as to how trade and environmental policies can support developing countries to transition towards sustainable growth, which can bring economic efficiency and contribute to local and international efforts for sustainable development outcomes. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

6 Executive summary In 1971, the European Community first introduced a Generalised Scheme of Preferences (GSP) following a resolution of the United Nations Conference on Trade and Development (UNCTAD) to create a system of preferences to support developing countries. Throughout the following decades, the scheme saw a number of reforms on product coverage and beneficiary countries and introducing special arrangements to support developing countries in their engagement concerning human and labour rights, environment and good governance, including combatting drugs production and trafficking. Regulation (EU) No. 978/2012 ( the GSP Regulation ) introduced further reforms to the scheme, including on the number of beneficiary countries, product coverage, mechanisms for graduation and temporary withdrawal and the Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ). The objectives of the reform were (i) to contribute to poverty eradication by expanding exports from countries most in need; (ii) to promote sustainable development and good governance; and (iii) to ensure better safeguards for the EU s financial and economic interests. The GSP Regulation entered into force on 1 January 2014 for a period of ten years. The scheme offers three different preference arrangements: 1. A general arrangement ( Standard GSP ); 2. A Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) for vulnerable countries; and 3. An Everything But Arms ( EBA ) arrangement for Least Developed Countries (LDCs). Following Article 40 of the Regulation, the European Commission will submit a report on the application of the Regulation to the European Parliament and the Council by 21 November In this context, the Directorate General for Trade of the European Commission (DG Trade) contracted DEVELOPMENT Solutions Europe Limited to carry out the Mid-Term Evaluation of the EU s GSP. In the study, the Project Team will assess the functioning of the GSP Regulation, the extent to which it achieves its objectives and its impact on economic, social, including human rights and environmental conditions in the beneficiary countries. As found during the preliminary review of existing studies and research on the EU s GSP, the scheme s impacts vary greatly between the specific arrangements, beneficiary countries and economic, social and environmental dimensions. The economic impact of the GSP on its beneficiary countries is linked to the assumption that trade preferences result in the increase of the respective country s exports and thereby foster economic growth and support export diversification. In this respect, the utilisation rates and impact on exports differ greatly between the three arrangements. In 2014, the largest number of GSP imports entered the EU market under the Standard GSP, accounting for EUR 27.3 billion, whereas the EBA and GSP+ arrangements accounted for EUR 17.1 billion and EUR 6.5 billion respectively. Furthermore, studies show that on average the GSP has led to an increase in the export of GSP-covered products of up to 5 per cent. However, this number varies significantly between arrangements, individual product groups and beneficiary countries. Finally, the literature documents a positive impact of the GSP on the beneficiaries export diversification and foreign direct investment (FDI). The social impact of the GSP is widely linked in literature to poverty reduction, labour standards and human rights conditions as the GSP+ offers preferential market access in 6

7 EUROPEAN COMMISSION exchange for the implementation of international conventions on human rights and labour. Existing studies therefore focus on the implementation of the relevant conventions. The environmental impact of the GSP is (as for the other "clusters" of conventions) measured by the fulfillment of obligations of international environmental conventions listed in the GSP Regulation. The GSP+ arrangement conditions preferential market access upon the ratification of international conventions, out of which 8 are related to environmental protection. In this respect, the literature shows that there are significant differences in the implementation status of the different conventions. A vast majority of the countries still have compliance issues with the respective environmental conventions, which can be attributed to the costs associated with implementation and yearly reporting. The GSP+ is based on the integral concept of sustainable development. The concept that international trade should benefit sustainable economic development in developing countries lies at the basis of the World Trade Organization s (WTO) enabling clause for special and differential treatment provisions. The GSP+ grants additional tariff preferences to vulnerable countries in order to help them assume the special burdens and responsibilities resulting from the ratification and implementation of international conventions on human rights, labour rights, environmental protection and good governance. In this respect, the beneficiary countries have demonstrated the necessary commitment to engage in the GSP+ process, both in terms of political will and introducing institutional and legislative reforms. This Draft Inception Report provides an overview of the general approach of the Project Team in carrying out the Mid-Term Evaluation and establishes the foundation for the methodology, research and analysis. Moving forward, this Report will serve as a guide to the discussion between the Project Team and the Inter-Service Steering Group leading to the next phases and the Interim Report, to be followed by a Final Report in October The Inception Report is divided into five sections. Section 1, Background and introduction, outlines the historical development of the scheme over the past decades, followed by a descriptive account of the current GSP Regulation and an introduction to the project. Section 2, Conceptual framework and approach presents the logic behind Regulation (EU) No. 978/2012, including the problems it aims to address and the expected results and impact of the reformed Regulation. The section further presents the Project Team s methodological approach to the Mid-Term Evaluation and the research questions. As to comprehensively analyse the functioning and impact of the GSP, the Project Team employs two complementary approaches: (i) a scientific and objective assessment of the scheme s impact using state-of-the-art available indicators and up-todate international trade measurement techniques; and (ii) and inclusive and extensive consultation process with knowledgeable and affected stakeholder groups. This section further sets out the preliminary intervention hypothesis and the Project Team s approach to the main risks and challenges of the study. Section 3, Case studies, presents the Project Team s approach to the country and sector specific case studies. The Project Team will conduct a total of six case studies on the impact of the GSP on the textile sector and machinery, the impact of GSP+ in Bolivia and Pakistan, and the impact of EBA on Bangladesh and Ethiopia. This qualitative approach will serve to provide more in-depth knowledge on the economic, social, human rights and environmental impact of the GSP scheme. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

8 Section 4, Stakeholder Consultation Strategy, outlines the consultation activities and tools to be employed by the Project Team. The stakeholder consultation process will serve to collect invaluable information and insights from a wide range of stakeholders to feed into the study, as well as further raise awareness of the EU s GSP among relevant stakeholders. The consultation activities and tools utilised to achieve these objectives will include four local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan, two Civil Society Dialogues in Brussels, a 12-week online public consultation, a dedicated project website and electronic outreach tools, interviews and meetings with relevant stakeholders and an on-going dialogue with the Commission Inter-Service Steering Group. Section 5, Project timeline, presents a detailed timeline for the implementation of the Mid-Term Evaluation, specifying the different tasks and activities to be completed throughout the project. Finally, the annexes provide a number of documents pertinent to this report. Annex I provides an overview of the GSP+ covered conventions, Annex II provides an overview of existing studies and research on the GSP, Annex III presents the 2011 Impact Assessment Problem Tree that forms the basis for the preliminary intervention hypothesis, and Annex IV outlines the stakeholder consultation network. 8

9 EUROPEAN COMMISSION Table of contents Executive summary... 6 List of tables List of figures List of abbreviations Background and introduction The EU s Generalised Scheme of Preferences Historical development of the GSP The reform of the GSP with Regulation (EU) No. 978/ The GSP arrangements Product coverage Tariffs Graduation mechanism Withdrawal mechanism Beneficiary countries Safeguard mechanism The Mid-Term Evaluation of the GSP Summary of engagement of the Project Team with the Inter-Service Steering Group Conceptual framework and approach Intervention logic Context of the GSP reform Objectives of the GSP reform Operational objectives and implementation activities Intermediate effects and expected results Literature review Economic impact Social impact, including human rights Environmental impact Analytical approach to Mid-Term Evaluation Economic analysis Social analysis, including human rights Environmental analysis Main risks and challenges Case studies Analytical approach to case studies Case study outlines Provisional overview of literature and data per case study Stakeholder Consultation Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

10 4.1. Objective and scope Stakeholder mapping Stakeholder consultation process Dedicated website for the GSP Evaluation Electronic stakeholder outreach tools Public online consultation Interviews and meetings Civil Society Dialogues Local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan Meetings with the European Commission and Inter-Service Steering Group Project timeline Inception phase (Month 1 3) Inputs Activities Outputs Implementation phase (Month 3 8) Inputs Activities Outputs Finalisation phase (Month 9 12) Inputs Activities Outputs Annex I: GSP+ covered conventions Annex II: Overview of existing studies and research Annex III: Impact assessment problem tree Annex IV: Stakeholder consultation network

11 EUROPEAN COMMISSION List of tables Table 1: Summary overview of the three GSP arrangements Table 2: Beneficiary countries by GSP arrangement included in the study Table 3: Value of total imports (TI), eligible imports (EI), preferential imports (PI) and utilisation rates (UR) for all GSP beneficiaries (in billion EUR) Table 4: Analytical Framework for the Mid-Term Evaluation of the EU s GSP Table 5: Project timeline List of figures Figure 1: Intervention Logic for the Mid-Term Evaluation of the EU s GSP Figure 2: Overview of the stakeholder consultation activities and tools Figure 3: Homepage of the project website at 78 Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

12 List of abbreviations AA APC CBD CPI CPIA CSD DCFTA DG AGRI DG DEVCO DG ENER DG ENV DG ESTAT DG GROW DG MARE DG SANTE DG SJ DG TAXUD DG TRADE DS EBA EC EEAS EPA EU FDI FKI FTA GATT GIBF GHG GSP GSP+ HS IEA ILO ISSG Association Agreement The African, Caribbean and Pacific Group of States Convention on Biological Diversity Corruption Perception Index Country Policy and Institutional Assessment Civil Society Dialogue Deep and Comprehensive Free Trade Agreement The Directorate General for Agriculture and Rural Development of the European Commission The Directorate General for International Cooperation and Development of the European Commission The Directorate General for Energy of the European Commission The Directorate General for Environment of the European Commission The Directorate General for Eurostat European Statistics of the European Commission The Directorate General for Internal Market, Industry, Entrepreneurship and SMEs of the European Commission The Directorate General for Maritime Affairs and Fisheries of the European Commission The Directorate General for Health and Food Safety of the European Commission The Directorate General for Legal Services of the European Commission The Directorate General for Taxation and Customs Union of the European Commission The Directorate General for Trade of the European Commission Development Solutions Everything But Arms European Commission European External Action Service Economic Partnership Agreement European Union Foreign Direct Investment Finger-Kreinin Index Free Trade Agreement General Agreement on Tariffs and Trade Global Biodiversity Information Facility Greenhouse Gas Generalised Scheme of Preferences Special Incentive Arrangement for Sustainable Development and Good Governance Harmonized System International Energy Agency International Labour Organization Inter-Service Steering Group 12

13 EUROPEAN COMMISSION ITC LDC MFN NGO OECD PCD RECPI RoO RTA SMEs ToR UN UNCTAD UNDP WB WCO WITS WTO International Trade Centre Least Developed Country Most Favoured Nation Non-governmental Organisation Organization for Economic Co-Operation and Development Policy Coherence for Development Relative Export Competitive Pressure Index Rules of Origin Regional Trade Agreement Small and Medium Sized Enterprises Terms of Reference United Nations United Nations Conference on Trade and Development United Nations Development Programme World Bank World Customs Organization World Integrated Trade Solution World Trade Organization Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

14 1. Background and introduction 1.1. The EU s Generalised Scheme of Preferences This section will provide a detailed overview of the EU s Generalised Scheme of Preferences (GSP), including its development over the past decades, the current GSP and its arrangements, the rationale behind the scheme, the objectives, the beneficiary countries and the safeguard mechanism Historical development of the GSP In 1968, the United Nations Conference on Trade and Development (UNCTAD) adopted a resolution on the creation of a generalised system of preferences: the objectives of the generalized, non-reciprocal, non-discriminatory system of preferences in favour of the developing countries, including special measures in favour of the least advanced among the developing countries, should be: (a) to increase their export earnings; (b) to promote their industrialization; and (c) to accelerate their rates of economic growth. 1 In 1971, a waiver to Article 1 on General Most-Favoured-Nation Treatment of the General Agreement on Tariffs and Trade (GATT) enabled developed countries to create their own system of preferential market access. The same year, the European Community implemented its GSP scheme through regulations for industrialised products, textile products, agricultural products and products covered by the Treaty on the European Coal and Steel Community. The scheme was adopted for an initial period of 10 years, after which it was extended for another decade, during which yearly revisions of product coverage, quotas, ceilings and beneficiaries were made. 2 After the negotiations for the GATT Uruguay Round were concluded in 1994, the third phase of the European Community s GSP entered into force on 1 January The separate Council Regulations for industrial products and agricultural products were replaced by Council Regulation (EC) No. 2820/98, applying a multiannual scheme of generalised tariff preferences for the period 1 July 1999 to 31 December This scheme was succeeded by Council Regulation (EC) No. 2501/2001, applying a scheme of generalised tariff preferences which introduced five different arrangements: 4 i. a general arrangement; ii. a special incentive arrangement for the protection of labour rights; iii. a special incentive arrangement for the protection of the environment; iv. a special arrangement to combat drug production and trafficking; and v. a special arrangement for the least developed countries (LDCs): the Everything but Arms (EBA) initiative. Council Regulation (EC) No. 980/2005 simplified the GSP by reducing the number of arrangements to the current three: a general arrangement, a special incentive arrangement for sustainable development and good governance ( GSP+ ) and EBA. This 1 UNCTAD. Available at: 2 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 2. Available at: 3 Ibid., p.2 4 Ibid., p.2 14

15 EUROPEAN COMMISSION scheme was extended until 31 December 2013, after which the current legal framework for the GSP entered into force The reform of the GSP with Regulation (EU) No. 978/2012 Regulation (EU) No. 978/2012, applying a scheme of generalised tariff preferences 6 ( the GSP Regulation ) was adopted on 25 October 2012 and introduced major changes. The rationale for the reform of the GSP scheme raised from the Mid-Term review of the instrument, in which it was recommended that the scheme should be adapted to better reflect the current global landscape, and focus on the countries which are most in need. This is also in line with the Commission s commitment in its Policy Coherence for Development (PCD). Reducing the eligibility of countries which already benefit from other preference arrangements enhances coherence and reduces erosion of preference margins beneficiary countries for which the impact of the GSP scheme as a result of general tariff reductions has declined. 7 Likewise, the reform included more incentives under GSP+ and stronger monitoring mechanisms for beneficiaries compliance with international conventions and cooperation with international monitoring bodies. An additional reason for the GSP reform was the entry into force of the Lisbon Treaty, which changed the EU s institutional environment and reinforced the role of the European Parliament. 8 Furthermore, the Lisbon Treaty included an enhanced focus on the PCD. The GSP scheme thus needed to be amended to reflect these changes. The main changes introduced by this regulation are listed below. These do not apply to the criteria for eligibility of benefits of the EBA initiative for LDCs according to the United Nations (UN) definition, which remain the same as in the previous scheme Expiration period Extended from 3 to 10 years for the GSP and GSP+ schemes, while the EBA scheme has no expiration period. 2. Number of beneficiary countries Reduced from 177 to 88 countries, in accordance with the country graduation criteria. 3. Tariff rates The current scheme differentiates between sensitive and nonsensitive products and incorporates this distinction in the method for calculating tariff rates. 4. Graduation mechanisms The reformed GSP scheme expands the set of criteria for removal of beneficiary countries from the list, and for the removal of certain product sections for a given beneficiary country. Likewise, the thresholds of these criteria have been increased. 5. Product coverage Slightly expanded, increasing preference margins for the products included, mainly raw materials. 6. GSP+ scheme Further incentives were introduced in the reformed scheme for countries to join the GSP+. Monitoring measures to ensure compliance with international conventions are enhanced in the current scheme. 5 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 2. Available at: 6 Regulation (EU) No. 978/2012 of the European Parliament and of the Council of 25 October 2012 applying a scheme of generalised tariff preferences and repealing Council Regulation (EC) no. 732/2008, available at: 7 European Commission (2015), Policy Coherence for Development: 2015 EU Report, p Available at: 8 European Commission. (October 2014) The EU s Generalised Scheme of Preferences (GSP), p. 6. Available at: 9 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

16 Furthermore, the procedural requirements for temporary withdrawal and safeguard mechanism have been amended, empowering the Commission to act rapidly in urgent cases. The reform of the GSP scheme will be discussed in more detail in the section below. The reformed scheme entered into force on 1 January 2014 and will remain in place for a period of 10 years to increase predictability for the GSP beneficiaries. Objectives The general objective of the EU s GSP reform has been as follows: (i) to contribute to poverty eradication by expanding exports from countries most in need; (ii) to promote sustainable development and good governance; and (iii) to ensure a better safeguard for the EU s financial and economic interests. 10 The 2011 Commission Impact Assessment 11 translated these objectives into specific and operational objectives for the new GSP Regulation. The six specific objectives of the scheme are: 1. To better focus the preferences on the countries most in need; 2. To remove disincentives for diversification for countries most in need; 3. To enhance consistency with overall trade objectives, whether bilateral or multilateral; 4. To strengthen the support for sustainable development and good governance; 5. To improve the efficiency of safeguard mechanisms ensuring that the EU s financial and economic interests are protected; and 6. To enhance legal certainty, stability and predictability of the scheme. The objectives were translated into the following seven operational objectives: 1. To revise the beneficiary country list by deferring benefits to those countries, which based on their development, financial and trade needs, no longer need the preferences; 2. To target graduation on the prime beneficiaries ensuring that GSP preferential rates are withdrawn from competitive products; 3. To simplify the GSP+ entry mechanism; 4. To develop a more effective and transparent mechanism for monitoring and evaluating the GSP+ countries commitment and progress in the implementation of GSP+ conventions; 5. To develop credible and efficient procedures for temporary withdrawal of the preferences and procedures for renewal of the preferences; 6. To improve the administrative procedure of safeguard mechanisms; and 7. To redefine product sections to reflect more homogeneous product categories The GSP arrangements The current GSP offers three different preference arrangements: a general arrangement ( Standard GSP ); a Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ); and an Everything But Arms ( EBA ) arrangement. 10 European Commission. (2011). Impact Assessment Accompanying the Proposal for a Regulation on Applying a Scheme of Generalised Tariff Preferences (SEC (2011) 536 final). Available at: p Ibid. 16

17 EUROPEAN COMMISSION Beneficiaries Table 1: Summary overview of the three GSP arrangements 12 Standard GSP GSP+ EBA low or lower-middle income countries vulnerable Standard GSP beneficiaries in terms of export diversification and import volumes Number of beneficiaries 13 Non-sensitive goods Sensitive goods - specific duty - ad volorem duty LDCs duty suspension duty suspension duty suspension duty reduction: - 30 per cent percentage points duty suspension duty suspension The Standard GSP The Standard GSP arrangement is targeted at developing countries that are classified by the World Bank as lower or lower-middle income countries and that do not have equal preferential access to the EU market through another arrangement or measure for example an Association Agreement (AA), Free Trade Agreement (FTA) or Economic Partnership Agreement (EPA). Countries that are eligible for trade preferences under the Standard GSP are listed in Annex II of the Regulation, which is reviewed on a yearly basis. If beneficiaries no longer meet the requirements set out above, they will no longer be granted trade preferences under the Standard GSP. 14 As of Dec 2016, there are 23 beneficiaries under the Standard GSP arrangement and 8 under the GSP+. The Standard GSP beneficiary countries can benefit from duty suspension for nonsensitive products, except for agricultural components, as well as from duty reduction for sensitive products across approximately 66 per cent of all EU tariff lines. A beneficiary country can lose its trade preferences for a specific product group if Union imports of products exceed the thresholds set out in the Regulation for three consecutive years ( the graduation mechanism ). 15 The GSP+ arrangement The GSP+ arrangement was introduced in 2006 to support vulnerable developing countries in assuming the requirements tied to the ratification and effective implementation of 27 international conventions on human rights, labour rights, environmental protection and climate change, and good governance (please refer to Annex I for an overview of the conventions covered by the GSP+). While the overall number of GSP beneficiaries has been reduced under the reform, the aim of the GSP+ scheme was to increase the number of applications by GSP countries. For this objective, the number of conventions included has not been expanded; the graduation by section no longer applies to GSP+ countries and applications are accepted 12 Situation as of 1 January At time of writing, December Regulation (EU) No. 978/2012, Chapter II: General Arrangement, Article Regulation (EU) No. 978/2012, Chapter II: General Arrangement, Article 7-8. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

18 at any time rather than once every 18 months. 16 The removal of more advanced developing countries and highly competitive sectors from the general GSP scheme has relaxed competition for GSP+ beneficiaries. Furthermore, the current GSP Regulation relaxes the eligibility criteria for the GSP+. In the 2008 Regulation, GSP beneficiaries were eligible for GSP+ if their GSP covered imports represented less than 1 per cent in value of total GSP imports to the EU. This was increased to 2 per cent with Regulation (EU) 978/ The threshold was further increased to 6.5 percent by Commission Delegated Regulation (EU) 2015/602 of 9 February GSP beneficiary countries can apply for GSP+ preferential market access if they satisfy the following conditions: 1. The beneficiary is considered to be vulnerable due to a lack of export diversification and insufficient integration within the international trading system. Annex VII of the Regulation mentions the following thresholds: a. The seven largest sections of GSP covered exports represent more than 75 per cent of its total GSP covered exports to the EU as an average during the last three consecutive years; and b. The beneficiary s GSP covered imports represent less than 6.5 per cent of the total GSP covered imports to the EU as an average during the last three consecutive years. 2. The beneficiary has ratified the 27 GSP+ covered conventions and the relevant monitoring bodies do not identify serious failure to effectively implement any of the relevant conventions in their most recent conclusions. and 3. The beneficiary gives its binding undertaking to maintain ratification of the relevant conventions and to ensure the effective implementation thereof, to accept the reporting requirements imposed by each of those conventions and to accept regular monitoring and review under said conventions and to participate in and cooperate with the GSP+ monitoring process. 19 If the beneficiary country no longer fulfils the conditions set out in Regulation (EU) 978/2012, they can be (temporarily) withdrawn from the scheme. There are currently 8 beneficiaries under the GSP+ arrangement. GSP+ beneficiary countries can benefit from complete duty suspension for products across approximately 66 per cent of all EU tariff lines. 20 The graduation mechanism for the Standard GSP does not apply to the GSP+ arrangement. Another important reform introduced by Regulation (EU) No. 978/2012 is the improved monitoring mechanism. In line with the objective of policy coherence, this mechanism aims to implement the commitments for sustainable development and good governance of the beneficiary countries. This is carried out through two interrelated tools: (i) the "scorecard" an annual list of issues covering shortcomings in implementation of the 16 European Commission. (October 2014) The EU s Generalised Scheme of Preferences (GSP), p. 12. Available at: 17 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 2. Available at: 18 Commission Delegated Regulation (EU) 2015/602 amending Regulation (EU) No. 978/2012 of the European Parliament and the Council as regards the vulnerability threshold defined in point 1(b) of Annex VII to that Regulation, Article 1 19 Regulation (EU) No. 978/2012, Chapter III: Special Incentive Arrangement for Sustainable Development and Good Governance, Article Regulation (EU) No. 978/2012, Chapter III: Special Incentive Arrangement for Sustainable Development and Good Governance, Article

19 EUROPEAN COMMISSION international conventions and cooperation with international monitoring bodies; and (ii) the GSP+ dialogue where the EU engages with the respective beneficiary countries focuses on the beneficiary s shortcomings, achieving progress on these shortcomings and on overcoming challenges. The GSP+ dialogue builds on existing bilateral fora, which allows focus on the specific country s national context. 21 On top of these mechanisms, the reformed GSP+ scheme establishes the following practices to improve monitoring 22 : 1. Reports are now required every 2 rather than 3 years. Scrutiny by the European Parliament is added to that of the Council of the EU. 2. Beneficiary countries are strictly required to fully cooperate with international monitoring bodies and fulfil their reporting requirements, without reservations. 3. Specific criteria for withdrawal have been provided for by the current GSP Regulation. These criteria rely on conclusions and reports from relevant monitoring bodies and are supplemented by sources beyond the reports if necessary. Moreover, the burden of proof has been reversed, so that the beneficiary country is responsible to demonstrate how it has improved on issues previously identified as problematic. The EBA arrangement The EBA is a permanent arrangement, covering the 49 LDCs as classified by the United Nations (UN). This initiative, which was put in place in 2001 and incorporated into the updated GSP regulation, allows duty-free and quota-free access for all products originating in LDCs, except for arms and ammunition listed in the World Customs Organization (WCO) Harmonized System (HS) chapter 93. It was not affected by the reform of the GSP scheme. Hence, unlike other GSP countries, LDCs are not excluded from the scheme if they benefit from other preferential arrangements. This makes tariffs treatment and product coverage more advantageous for LDCs compared to earlier arrangements such as the Cotonou Agreement. 23 As a result of the reformed graduation criteria under Regulation (EU) 978/2012, fewer countries benefit from the GSP and GSP+ arrangements. This has reduced the competitive pressure for LDCs and has provided these countries with more export opportunities. In this respect, the reforms have also made the EBA arrangement more effective. Policy changes which are especially relevant for the EBA arrangement are the updated Rules of Origin (RoO) under the GSP, which entered into force on 1 January The reformed RoO differentiate between beneficiaries of the standard GSP and GSP+ on the one hand and EBA on the other. The latter now benefit from a lower value addition threshold for several products. This allows LDCs to use more non-originating materials. 24 Also under the reformed RoO, the African, Caribbean and Pacific Group of States (ACP countries) which are included in the GSP can no longer enjoy cumulation with other ACP countries, as they did under the Cotonou agreement. However, this does not apply to 21 European Commission (2016). GSP+ Report on sustainability, human rights and good governance. Questions and Answers, p European Commission. (October 2014) The EU s Generalised Scheme of Preferences (GSP), p. 12. Available at: 23 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 13. Available at: 24 S. Bilal, I. Ramdoo and Q. de Roquefeuil, GSP Reform: Principles, values and coherence, p. 10. Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

20 LDCs, which can still profit from the Cotonou agreement s conditions where these are more favourable to them Product coverage As mentioned above, with the exception of EBA which covers all products except arms and ammunition, product coverage under the reformed GSP scheme has been slightly expanded, resulting in increased preference margins for the covered products. In particular, the GSP scheme encompasses 6,350 eligible products under the GSP and GSP+ arrangements, and 7,200 for the EBA arrangement. The GSP and GSP+ changes involved mainly raw materials and can be divided into three categories: Category A, adding 15 new tariff lines to non-sensitive (duty-free access) products; category B, converting 4 tariff lines that were sensitive (reduced tariff access) to non-sensitive; and category C, adding 4 new tariff lines to GSP+ (duty-free access). The GSP and GSP+ product coverage now includes a number of agricultural and fishery products listed in HS chapters 1-24, and almost all processed and semi-processed industrial products, including ferroalloys, that are listed in HS chapters 25-97, except for chapter 93 (arms and ammunition). The expansion of the product coverage has resulted in increased preference margins for these products. 26 To prevent the extended product coverage from disrupting the EU market, especially for agriculture and fishery products, if need arises, a special surveillance mechanism for HS chapters 1 24 has been included in the GSP scheme since Tariffs The GSP Regulation includes three possible methods of calculating tariff reductions for sensitive products, with limited exceptions for textiles and clothing. This differentiates sensitive products from other, non-sensitive ones: A flat rate reduction of 3.5 percentage points to the most-favoured-nation duty (applicable to the ad valorem duties). 2. A 30 per cent reduction in the most-favoured-nation duty where only specific duties apply; 3. A flat rate reduction of 3.5 percentage points applicable to the ad valorem duties only, where duties are composed of both ad valorem and specific duties. These calculation methods were put in place in Concerns have been raised that for certain products this might lead to more favourable treatment than 3.5 percentage points. Accordingly, since the 2008 GSP scheme, in such cases the previous preferential duty rates apply Graduation mechanism Under the updated Regulation the criteria for removal of a country from the list of beneficiaries include two conditions: (i) the country already benefits from other preferential market access arrangements providing the same tariff preferences as the scheme, or for substantially all trade; or (ii) the country is classified by the World Bank as high-income or upper-middle-income countries for 3 consecutive years. 25 Ibid., p UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 7. Available at: 27 Ibid., p

21 EUROPEAN COMMISSION In addition, an individual product section can graduate from the GSP if it has become too competitive (Article 8). The reformed scheme expanded the number of product sections from 21 to 31 to reflect more homogeneous product categories. Moreover, the thresholds for product section graduation have been increased from 15 to 17.5 per cent, and from 12.5 to 14.5 per cent for textiles. 28 The thresholds were again revised by Commission Delegated Regulation (EU) 2015/1978 of 28 August 2015 to take into account China s graduation from the GSP. The thresholds were increased from 17.5 to 57 per cent and from 14.5 to 47.2 per cent for textiles. The threshold for live trees and other plants, oils and fats and magnesium oxide, mineral fuels and quicklime remained at 17.5 per cent. 29 These changes do not apply for GSP+ beneficiaries. The list of countries and product sections which have been removed is subject to a review by the Commission every three years. 30 The most updated list of countries which will graduate from the scheme was published on August These countries will cease to benefit from the GSP preferences as of 1 st January The most updated list of product sections which graduated from the GSP scheme was published in March Countries which are removed from the list remain eligible for the GSP scheme. Hence, in case the conditions above change, they may be re-included as beneficiaries. In order to make the process of adding or removing a country from the beneficiary list more efficient and timely, the Commission has been empowered under the current regulation to amend the list through delegated acts rather than through the much longer ordinary legislative procedure Withdrawal mechanism Article 19 of the current GSP regulation defines the reasons for which preferences may be temporarily withdrawn in respect of all or of certain products 34 : 1. Serious and systematic violation of principles laid down in the conventions listed in annex VIII, part A of the Regulation; 2. Export of goods made by prison labour; 3. Serious shortcomings in customs controls on the export or transit of drugs (illicit substances or precursors), or failure to comply with international conventions on antiterrorism and money laundering; 4. Serious and systematic unfair trading practices, including those affecting the supply of raw materials, which have an adverse effect on the Union industry and which have not been addressed by the beneficiary country. For those unfair trading practices, which are prohibited or actionable under the WTO Agreements, 28 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 7. Available at: 29 Commission Delegated Regulation (EU) 2015/1978 of amending Regulation (EU) No. 978/2012 of the European Parliament and the Council as regards the modalities for the application of Article 8 listed in Annex VI to that Regulation. 30 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 7. Available at: 31 Commission Delegated Regulation (EU) 2015/1979 of 28 August Available at: 32 Commission Implementing Regulation (EU) 2016/330 of 8 March Available at: 33 European Commission. (October 2014) The EU s Generalised Scheme of Preferences (GSP), p. 14. Available at: 34 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 18. Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

22 the application of this article shall be based on a previous determination to that effect by the competent WTO body; 5. Serious and systematic infringement of the objectives adopted by regional fishery organizations or any international arrangements to which the European Union is a party concerning the conservation and management of fishery resources. In Article 21 of the Regulation, the concept of administrative cooperation is introduced, requiring a beneficiary country to timely communicate, assist and update on the rules of origin (RoO). The Article further specifies the EU s means to verify the information provided by the beneficiary country and lays out the ground for identification and prevention of RoO violations. The Regulation also define the procedures to be followed in case of a temporary withdrawal. These procedural requirements have been amended by the current regulation. Under the amended procedural rules, the European Commission acquired the power, in urgent cases, to withdraw preferences in an expedited manner Beneficiary countries The 2011 Impact Assessment 36 found that some of the main beneficiaries of the scheme had become globally competitive and reached a high level of export diversification. These countries no longer need privileged access to the EU market and create competitive pressure for LDCs and lower and lower-middle income countries that do need trade preferences. The reform of the GSP therefore readjusted the focus of the scheme to those countries most in need and significantly reduced the number of beneficiary countries (from 177 to 88). In addition to the conditions mentioned under the graduation mechanism (see section above), overseas countries or territories that are under the administration of the EU Member States or other developed countries also can no longer benefit from preferences under the GSP. Since the Regulation entered into force on 1 January 2014, the list of beneficiary countries has continuously been updated as countries became eligible to join the scheme; countries were granted access to the GSP+ arrangement; or exited the scheme because they graduated to high or upper-middle income country status or signed an agreement with the EU that grants them trade preferences. The updated status of countries which cease to benefit from the different mechanisms is published on the Commission s website. 37 The beneficiary countries that will be included in this study are listed in Table 2 below. 35 Regulation (EU) No 978/2012 of the and of the Counci, article 21, paragraph 3). Correction and editing required 36 European Commission. (2011). Impact Assessment Accompanying the Proposal for a Regulation on Applying a Scheme of Generalised Tariff Preferences (SEC (2011) 536 final). Available at: see also the section on graduation mechanism above. 22

23 EUROPEAN COMMISSION Table 2: Beneficiary countries by GSP arrangement included in the study 38 GSP GSP+ EBA 1. Cameroon (since 1 October 2014) 2. Congo 3. Cook Islands 4. Cote d Ivoire (since 1 October 2014) 5. Fiji (since 1 October 2014) 6. Ghana (since 1 October 2014) 7. India 8. Indonesia 9. Iraq 10. Kenya (since 1 October 2014) 11. Marshall Islands 12. Micronesia 13. Nauru 14. Nigeria 15. Niue 16. Sri Lanka 17. Swaziland (since 1 October 2014) 18. Syria 19. Tajikistan 20. Tonga 21. Ukraine Uzbekistan 23. Vietnam 1. Armenia 2. Bolivia 3. Cape Verde 4. Kyrgyzstan Mongolia 6. Pakistan 7. Paraguay 8. Philippines (since 25 December 2014) 1. Afghanistan 2. Angola 3. Bangladesh 4. Benin 5. Bhutan 6. Burkina Faso 7. Burundi 8. Cambodia 9. Central African Republic 10. Chad 11. Comoros Islands 12. Democratic Republic of Congo 13. Djibouti 14. Equatorial Guinea 15. Eritrea 16. Ethiopia 17. Gambia 18. Guinea 19. Guinea-Bissau 20. Haiti 21. Kiribati 22. People s Democratic Republic Lao 23. Lesotho 24. Liberia 25. Madagascar 26. Malawi 27. Mali 28. Mauritania 29. Mozambique 30. Myanmar/Burma 31. Nepal 32. Niger 33. Rwanda 34. Samoa Sao Tome and Principe 36. Senegal 37. Sierra Leone 38. Solomon Islands 39. Somalia 40. South Sudan 41. Sudan 42. Tanzania 43. Timor-Leste 44. Togo 45. Tuvalu 46. Uganda 47. Vanuatu 48. Yemen 49. Zambia 38 European Commission. (2016). Report on the Generalised Scheme of Preferences covering the period Available at: 39 Ukraine will cease to benefit from GSP preferences on 1 January 2018, following a 2 year transition period after entry into force of the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA). 40 Kyrgyzstan has been granted GSP+ preferences on 25 November 2016 (Commission Delegated Regulation (EU 2016/79). 41 Samoa will graduate to Standard GSP status on 1 January 2019 as it is no longer identified as an LDC by the UN. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

24 Safeguard mechanism The objective of this mechanism is to prevent serious difficulties for European producers as a result of the preferences given under the GSP scheme. The process for applying safeguard measures may be initiated independently by the Commission, or after a request by an EU member state, any legal person or any association. The Commission s newly acquired authority to issue delegated acts in urgent cases, as discussed above, apply to the safeguard mechanism as well (Article 27). For textile, agriculture and fishery products, specific safeguard clauses were added in the current regulation (Articles 29-31). This is in addition to the surveillance mechanism for agriculture and fishery products, which already existed in the previous regulation. However, these specific safeguard measures under the current regulation do not apply to beneficiary countries of the EBA initiative and neither to countries with not more than a 6 per cent share of the imports into the EU from all GSP-covered countries The Mid-Term Evaluation of the GSP On 2 May 2016, the Directorate General for Trade of the European Commission (DG Trade) published an Evaluation and Fitness Check Roadmap 43 to announce its interim evaluation of Regulation (EU) No. 978/2012 on a scheme of generalised tariff preferences ( the GSP Regulation ). The Commission will present its findings on the application of the GSP Regulation to the European Parliament and the Council by 21 November 2017, which will be used to assess the need to review the GSP scheme. The 2017 GSP Evaluation Report will provide a full assessment of the scheme, covering all three arrangements and all beneficiary countries. In order to support the 2017 GSP Evaluation, the Commission commissioned the Mid- Term Evaluation of the GSP. The evidence-based report that will result from this study will provide relevant data and will feed into the Commission s Evaluation Report. The goal of this study is to assess the current scheme s effectiveness, efficiency, coherence and relevance, and to formulate conclusions and recommendations based on this analysis. The scope applied for the Mid-Term Evaluation is comprehensive and will consider the trade, economic, social, environmental and human rights impact of the current GSP in all beneficiary countries and the EU, thereby taking into account all essential features and elements of the current GSP Summary of engagement of the Project Team with the Inter- Service Steering Group Initial engagement of the Project Team with the Inter-Service Steering Group (ISSG) took place during the project kick-off meeting on 17 November The meeting focused on the context and the scope of the Mid-Term Evaluation, as well as more specifically on the methodology and data to be employed. Among the points discussed were: 42 UNCTAD. (2015). Generalized System of Preferences: Handbook on the Scheme of the European Union, p. 21. Available at: 43 European Commission. (2016). Roadmap: Interim Evaluation of the Regulation (EU) No. 978/2012 on a scheme of generalised tariff preferences (GSP Regulation). Available at: 24

25 EUROPEAN COMMISSION The Mid-Term Evaluation will assess the functioning of the current GSP Regulation, identify the risks and problems and recommend how these should be addressed. It will form the basis for the European Commission Report on the application of the Regulation to the European Parliament and the Council, to be submitted by 21 November 2017 ( 2017 GSP Evaluation Report ). The Mid-Term Evaluation should be based on trade data for to deliver an up-to-date and relevant study. It is expected that social, human rights and environmental indicators will not have moved much, because the new scheme only entered into force in Additionally, as a result of the delay in data on the social, environmental and human impact, data is only available up until 2014 or It will therefore be essential to rely on extensive stakeholder consultation and look into what is happening on the ground, for example improved cooperation with international monitoring bodies or the formulation of action plans. The Project Team will make use of a set of readily available indicators and data complemented by in-depth case studies and information acquired through stakeholder consultation. The consultation activities, in particular the local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan, should be planned well in advance and organised in close coordination with the EC, EEAS, the relevant Delegation of the EU and other relevant stakeholders. EU departments represented at the kick-off meeting 44 Directorate General for Trade (DG TRADE) Directorate General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) Directorate General for Agriculture and Rural Development (DG AGRI) Directorate General for Maritime Affairs and Fisheries (DG MARE) European External Action Service (EEAS) 44 The full list of EU departments represented in the Inter-Service Steering Group can be found in Section 4.4. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

26 2. Conceptual framework and approach This section will provide an overview of the conceptual framework and analytical approach to the Mid-Term Evaluation. Firstly, this section will set out the intervention logic of the current scheme, including its objectives and the context of the reform. Secondly, it will present an overview of the initial literature review on the economic, social, human rights and environmental impact of the scheme. This section is followed by the analytical approach to the Mid-Term Evaluation, including the economic analysis, social and human rights analysis and the environmental analysis. Lastly, it will present the main risks and challenges identified for the project Intervention logic Context of the GSP reform The 2011 European Commission Impact Assessment on a proposal for a Regulation on applying a scheme of generalised tariff preferences 45 provided the background for the revision of the GSP. The Impact Assessment demonstrated that while the GSP has generally proven to be effective in contributing to welfare generation, poverty eradication and sustainable development in the beneficiary countries, the potential benefits of the scheme were constrained by several factors. The following section will provide an overview of the problems and their drivers that were identified in the Impact Assessment and which are to be addressed by the current Regulation. These problems and drivers are based on the Impact Assessment s problem tree, which can be found in Annex III. Preferences are not focused on the countries most in need The GSP as an instrument to support developing countries will only be effective if trade preferences are targeted on those countries most in need. The 2008 GSP Regulation did not sufficiently focus on the countries most in need of preferential market access as a result of suboptimal targeting of beneficiary countries, a suboptimal graduation mechanism, a limited product coverage and a suboptimal entry mechanism into GSP+. Firstly, a number of high and upper-middle income countries continued to benefit from the scheme while they had established sufficient resources to support the expansion and diversification of their exports. In addition to this, some countries had concluded a trade agreement with the EU, already granting them preferential market access. Secondly, a number of beneficiaries had become highly competitive in certain product categories without graduating from the scheme. These two factors created additional competitive pressures from Standard GSP beneficiaries for EBA and GSP+ beneficiaries, which limited their ability to benefit from the scheme. The ability to benefit from preferential market access was further limited for some countries as a result of insufficient product coverage and obstacles to entry in the GSP+ arrangement, limiting their ability to benefit from duty suspension. Insufficient support to diversification of exports The GSP aims to support beneficiary countries in diversifying their exports, as some decades ago these countries were mostly dependent on (agricultural) commodities. While the 2008 GSP supported emerging economies in diversifying their exports, it 45 European Commission. (2011). Impact Assessment on a proposal for a Regulation on applying a scheme of generalised tariff preferences. SEC (2011) 536 final. Available at: 26

27 EUROPEAN COMMISSION provided limited support to LDCs to achieve export diversification. The main drivers for this are a suboptimal targeting of beneficiary countries and a suboptimal graduation mechanism. High and upper-middle income countries, as well as beneficiary countries that had become highly competitive in certain product sections, exerted significant competitive pressures on the more vulnerable GSP+ and EBA beneficiaries. This has made it difficult for these beneficiary countries to capture most of the preferences, especially for new product categories. Inconsistency with overall trade objectives The general objectives of the GSP are specific to the scheme, and differ from the EU s trade objectives. The GSP aims to support developing countries in their integration into the world market, poverty reduction and commitments towards sustainable development and good governance. In its 2015 Strategy on Trade and Investment, 46 the Commission declared open markets and newly to be established trade agreements to be essential elements for the overall EU trade strategy. At first glance, these objectives might not appear to be inconsistent. However, when taking a more detailed look into the effects of trade agreements on GSP beneficiaries, it appears that bilateral and multilateral trade agreements can negatively affect a beneficiary country s competitiveness and utilisation of the scheme. Especially countries with vulnerable economies, such as GSP+ and EBA beneficiaries, face additional competitive pressure from countries that have established a trade agreement with the EU. This is the result of the generally low tariff levels set out in the EU s trade agreements and the thereby diminishing preference margins for GSP beneficiaries. The potential development impact of the scheme can therefore be limited by the overall open market and trade agreement expansion objective. Furthermore, the GSP can discourage a country s willingness to render in trade negotiations with the EU. The preferential market access a beneficiary receives under the GSP is non-reciprocal and can be more beneficial than preferences under a trade agreement due to the large product coverage and low duty rates. Low level of utilisation of preferences by some countries The 2011 Impact Assessment demonstrated that the utilisation rate of trade preferences under the GSP was low. The low utilisation rate is a direct result of the suboptimal targeting of beneficiary countries. The suboptimal targeting of beneficiary countries affects the utilisation rate in two ways. Firstly, countries that had also concluded a trade agreement with the EU might choose to utilise these preferences, leading to competition between GSP and MFN preferences. As a result, this lowers the utilisation rate of preferences under the GSP. Secondly, the large number of GSP beneficiaries exerted competitive pressures on GSP+ and EBA beneficiaries, leading to relatively smaller and irregular exports to the EU. This decreases the incentive for importers to go through the process of claiming preferences, leading to a lower utilisation rate. Insufficient support to sustainable development and good governance The most direct way to support sustainable development and good governance efforts of beneficiary countries is through the GSP+ arrangement. While the GSP+ beneficiaries have generally signed and ratified the international conventions, there are some 46 European Commission. (2015). Trade of All: Towards a more Responsible Trade and Investment Policy. Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

28 shortcomings in the implementation of the conventions in practice. The 2008 Regulation insufficiently supported the GSP+ beneficiaries in this respect as a result of a suboptimal entry mechanism and a suboptimal monitoring mechanism for the implementation of the GSP+ covered conventions. The strict entry requirements set out for the GSP+ arrangement left some vulnerable countries unable to qualify for GSP+ preferences, limiting the incentive for these countries to ratify and implement the international conventions and thereby undermining the promotion of sustainable development and good governance. Even when countries did meet the entry requirements, it could take up to 18 months before they were granted GSP+ benefits. Furthermore, monitoring of the implementation of the international conventions was restricted as a result of the Commission s dependence on the relevant international monitoring bodies and country reporting. Additionally, the GSP aims to support sustainable development and good governance through its withdrawal mechanism. This mechanism allows the Commission and the EU Member States to withdraw a country s trade preferences in case of systematic violations of the international conventions. The 2008 Regulation included a suboptimal mechanism for withdrawal of preferences as it had unclear procedural rules and investigation procedures and was lacking a procedure for re-instatement of trade preferences. Insufficient safeguarding of EU economic interests The preferential market access granted to beneficiary countries under the GSP can result in increased competition and economic difficulties for domestic producers. To defend the economic and financial interests of the EU and EU industry, the GSP Regulation includes safeguard mechanisms. The safeguard mechanisms in the 2008 GSP Regulation insufficiently protected the interests of EU industry. The inefficiency of the safeguard mechanisms is illustrated by the fact that the mechanisms were never used in practice. This can be attributed to the unclear procedural arrangements some of the key legal concepts, rights and obligations remained unclear or undefined, leaving EU producers unaware of how to exercise their rights and their required involvement in the process. Furthermore, the procedural arrangements were non-transparent and unpredictable as the result of the lack of details in the framework Objectives of the GSP reform The 2011 Impact Assessment sets out the three general objectives of the GSP: (i) to contribute to poverty eradication by expanding exports from countries most in need; (ii) to promote sustainable development and good governance; and (iii) to ensure a better safeguard for the EU s financial and economic interest. These general objectives have been translated into six specific objectives for the Regulation: 1. To better focus the preferences on the countries most in need; 2. To remove disincentives for diversification for countries most in need; 3. To enhance consistency with overall trade objectives, whether bilateral or multilateral; 4. To strengthen the support for sustainable development and good governance; 5. To improve the efficiency of safeguard mechanisms ensuring that the EU s financial and economic interests are protected; and 6. To enhance legal certainty, stability and predictability of the scheme. 28

29 EUROPEAN COMMISSION The intervention logic aims to link the various elements of the scheme and will thereby demonstrate the channels through which the scheme achieves its objectives Operational objectives and implementation activities 1. The 2011 Impact Assessment sets out seven operational objectives to help achieve the specific and general objectives:to revise the beneficiary country list by deferring benefits to those countries, which based on their development, financial and trade needs, no longer need the preferences; 2. To target graduation on the prime beneficiaries ensuring that GSP preferential rates are withdrawn from competitive products; 3. To redefine product sections to reflect more homogeneous product categories; 4. To simplify GSP+ entry mechanism; 5. To develop a more effective and transparent mechanism for monitoring and evaluating the GSP+ countries' commitment and progress in the implementation of GSP+ conventions; 6. To develop credible and efficient procedures for temporary withdrawal of the preferences and procedures for renewal of the preferences; and 7. To improve the administrative procedures of safeguard mechanisms. These operational objectives have to be considered in line with the changes to the legislative framework of the GSP. They form the basis for the implementation activities carried out by the Commission to enforce the current Regulation. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

30 Figure 1: Intervention Logic for the Mid-Term Evaluation of the EU s GSP 30

31 EUROPEAN COMMISSION Revision of the beneficiary country list In order to address the low level of utilisation, insufficient support to diversification of exports, suboptimal targeting of beneficiary countries and inconsistency with overall trade objectives, the Commission honed the conditions under which a country can be granted preferential market access under the GSP. Compared to the 2008 Regulation, the current framework for the GSP excludes upper-middle income countries (Article 4(a)) and countries that benefit from the same tariff preferences through another preferential market access arrangement (Article 4(b)), such as an FTA. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/2012 Article 3 1. A beneficiary country shall be removed from the scheme when it has been classified by the World Bank as a high-income country during three consecutive years, and when the value of imports for the five largest sections of its imports covered by the GSP into the Community represents less than 75 % of the total GSP-covered imports from that beneficiary country into the Community. Article 4 An eligible country shall benefit from the tariff preferences provided under the general arrangement referred to in point (a) of Article 1(2) unless: (a) it has been classified by the World Bank as a high-income or an upper-middle income country during three consecutive years immediately preceding the update of the list of beneficiary countries; or 2. When a beneficiary country benefits from a preferential trade agreement with the Community which covers all the preferences provided for by the present scheme to that country, it shall be removed from the list of beneficiary countries. (b) it benefits from a preferential market access arrangement which provides the same tariff preferences as the scheme, or better, for substantially all trade These tightened eligibility criteria have significantly reduced the number of countries that can receive trade preferences under the GSP. When the Regulation was published in October 2012, the number of beneficiaries was initially reduced from 176 to 89 countries. 47 The countries which ceased to benefit from the scheme were countries that were either classified by the WB as high or upper-middle income countries for 3 consecutive years (for example Brazil and Russia) or that benefitted from other EU preferential market access measures (for example Mexico through the EU-Mexico FTA, and Egypt through the Euro-Mediterranean Partnership). To effectively enforce the eligibility criteria, the Commission has to monitor the WB classification of the beneficiary countries to ensure that the preferences are targeted at the countries most in need. Furthermore, it has to exclude the countries it has signed an agreement with that provides equal or better preferential market access to the EU. Since the Regulation was published, the Commission has consequently adopted a number of Delegated Regulations to exclude, include and change the status of the beneficiary countries. Date No. Description 17/12/2012 No. 154/ Delegated Regulation to remove Azerbaijan and Iran from the beneficiary list because the countries have been classified as upper-middle income countries for three consecutive years. 30/10/2013 No. Delegated Regulation to remove Croatia from the beneficiary 1421/ list because the country became a member of the European 47 Regulation (EU) No. 978/2012 of the European Parliament and of the Council of 25 October Available at: 48 Commission Delegated Regulation (EU) No. 154/2013 of 18 December Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

32 Union; and to remove China, Ecuador, the Maldives and Thailand from the beneficiary list because the countries have been classified as upper-middle income countries for three consecutive years. The Delegated Regulation further includes South Sudan as an EBA beneficiary because it has become an independent state that is classified as an LDC. 28/08/ / Delegated Regulation to remove Fiji, Iraq, the Marshall Islands and Tonga from the beneficiary list because the countries have been classified as upper-middle income countries for three consecutive years; and to remove Georgia and Cameroon because the countries have other preferential market arrangements in place with the EU. The Delegated Regulation further removes Samoa as an EBA beneficiary because it no longer classifies as an LDC. 05/12/ / Delegated Regulation to remove Tonga from the beneficiary list, because the country has been classified as upper-middle income country for three consecutive years; and to remove Ukraine from the beneficiary list as of 1 January 2018, because the EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA) provides better tariff preferences for substantially all trade. Reform of the graduation mechanism In order to address the insufficient support of export diversification, suboptimal targeting of beneficiary countries and the inconsistency with overall trade objectives, the Commission reformed the scheme s graduation mechanism to better reflect the competitiveness of product sections. The reformed graduation mechanism in Regulation (EU) No. 978/2012 aims to reflect the revised eligibility criteria set out above. The graduation thresholds were increased from 15 per cent to 17.5 per cent of total EU imports within a specific product section and from 12.5 per cent to 14.5 per cent for textiles (Sections S-11a and S-11b) (Article 8(1) and Annex VI). This increase in the thresholds has to be considered in the context of the significant reduction in the number of beneficiary countries. Furthermore, the Regulation no longer includes an exception for beneficiaries of which the specific product section represents more than 50 per cent in value of all GSP covered imports from that country. However, while in the 2008 Regulation the graduation mechanism was a common provision, in the 2012 Regulation it only applies to the Standard GSP arrangement. On 17 December 2012, the Commission adopted Commission Implementing Regulation (EU) No. 1213/ to enforce the provisions regarding the graduation mechanism set out in the Regulation. The Implementing Regulation establishes a list of products of GSP sections for which the tariff preferences are suspended. It suspends preferences for China, Costa Rica, Ecuador, India, Indonesia, Nigeria, Ukraine and Thailand for specific product sections. This list is reviewed by the Commission every three years (Article 49 Commission Delegated Regulation (EU) No. 1421/2013 of 30 October Available at: 50 Commission Delegated Regulation (EU) 2015/1979 of 28 August Available at: 51 Commission Delegated Regulation (EU) 2017/217 of 5 December Available at: 52 Commission Implementing Regulation (EU) No. 1213/2012 of 17 December Available at: 32

33 EUROPEAN COMMISSION 8(3)), to ensure that competitive product sections are excluded and to re-establish trade preferences for those product sections that have lost their competitiveness. On 28 August 2015, the Commission adopted Delegated Regulation (EU) 2015/ to amend the graduation threshold to reflect the removal of China, Ecuador, the Maldives and Thailand from the beneficiary list. To maintain the same weight of the thresholds, the following amendments were made: the overall graduation threshold increased from 17.5 per cent to 57 per cent; the graduation threshold for vegetable products, animal or vegetable oils, fats and waxes, and mineral products (Sections S-2a, S-3, S-5) remains 17.5 per cent; and the graduation threshold for textiles (Sections S-11a and S-11b) increased from 14.5 per cent to 47.2 per cent. On 8 March 2016, the Commission adopted a second list of products of GSP sections for which the tariff preferences are suspended. The list adopted with Commission Implementing Regulation (EU) 2016/ suspends trade preferences for India, Indonesia, Kenya and Ukraine for specific product sections. Redefinition of product sections In order to improve the GSP s support for countries most in need, the Commission redefined the scheme s product sections to reflect more homogeneous product categories. Annex V and Annex IX to Regulation (EU) No. 978/2012 set out the product lines and product sections covered by the Standard GSP and the GSP+, respectively. The reform has expanded the number of product sections from 21 to 32, by dividing existing sections to create more homogeneous categories. This has helped to create a better graduation mechanism, reflecting better when a beneficiary has become highly competitive in a specific product or product section. Additionally, the reform has slightly expanded product coverage under the Standard GSP and the GSP+ arrangement, by adding several product lines to the scheme. Simplification of the GSP+ entry mechanism In order to address the suboptimal targeting of countries most in need and insufficient support to sustainable development and good governance, the Commission simplified the GSP+ entry mechanism in the new Regulation. The conditions under which a GSP beneficiary can be granted preferences under the GSP+ arrangement are laid out in Article 9 of Regulation (EU) No. 978/2012. The revised Regulation has eased the conditions under which a country is to be considered vulnerable and insufficiently integrated within the international trading system. Annex VII states that a country is considered to be vulnerable if the GSP-covered imports to the EU represent less than 2 per cent in value of the total GSP-covered imports to the EU, as opposed to 1 per cent in the 2008 Regulation. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/ Commission Delegated Regulation (EU) 2015/1978 of 28 August Available at: 54 Commission Implementing Regulation (EU) 2016/330 of 8 March Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

34 Article 8 1. The special incentive arrangement for sustainable development and good governance may be granted to a country which: (a) has ratified and effectively implemented all the conventions listed in Annex III Article 9 1. A GSP beneficiary country may benefit from the tariff preferences provided under the special incentive arrangement for sustainable development and good governance referred to in point (b) of Article 1(2) if: ( ) (b) It has ratified all the conventions listed in Annex VIII (the relevant conventions ) and the most recent available conclusions of the monitoring bodies under those conventions (the relevant monitoring bodies ) do not identify a serious failure to effectively implement any of these conventions Furthermore, the Regulation took into consideration the difficulty of assessing whether the GSP+ covered conventions are effectively implemented by the beneficiary country. The reformed GSP therefore clarified the language of the Regulation and can grant a beneficiary GSP+ preferences if the relevant monitoring bodies do not identify a serious failure to effectively implement the GSP+ covered conventions. Additionally, while previously beneficiaries could only apply for GSP+ preferences every 18 months, the new Regulation allows countries to apply for the GSP+ arrangement at any time. On 18 December 2012, the Commission adopted Delegated Regulation (EU) No. 155/ establishing rules related to the procedure for granting GSP+ preferences. The Delegated Regulation aims to simplify the GSP+ entry mechanism and ensure transparency and predictability of the process. When a Standard GSP beneficiary requests GSP+ status, the country will have to submit a dossier on the ratification of the GSP+ conventions, the reservations made by the requesting country and the objections to these reservations made by other parties to the convention. Additionally, the country has to sign a binding undertaking stating its commitment to the ratification and effective implementation of the GSP+ conventions, the reporting requirements imposed by each convention and cooperation with the Commission GSP+ monitoring procedure. The Commission will then examine whether the country meets the conditions set out in Article 9(1), making use of recent conclusions from the ILO and UN monitoring bodies. It will then formulate a decision on whether the country is eligible for GSP+. On 9 February 2015, the Commission adopted Delegated Regulation (EU) 2015/ to amend the vulnerability threshold to reflect the removal of China, Ecuador, the Maldives and Thailand from the beneficiary list. To maintain the same weight of the vulnerability threshold, it has been revised from 2 per cent to 6.5 per cent of the total GSP-covered imports to the EU. Additionally, the Commission adopted Delegated Regulations to grant GSP+ preferences to a number of beneficiaries. Date No. Description 28/08/2013 No. 1/ Delegated Regulation to grant GSP+ status to Armenia, 55 Commission Delegated Regulation (EU) No. 155/2013 of 18 December Available at: 56 Commission Delegated Regulation (EU) 2015/602 of 9 February Available at: 57 Commission Delegated Regulation (EU) No. 1/2014 of 28 August Available at: 34

35 EUROPEAN COMMISSION Bolivia, Cape Verde, Costa Rica, Ecuador, Georgia, Mongolia, Pakistan, Paraguay and Peru. 17/12/2013 No. 182/ Delegated Regulation to grant GSP+ status to El Salvador, Guatemala and Panama. 19/08/2014 No. 1386/ Delegated Regulation to grant GSP+ status to the Philippines. 25/11/ /79 60 Delegated Regulation to grant GSP+ status to the Kyrgyz Republic. Reform of the GSP+ monitoring mechanism In addition to the simplification of the GSP+ entry mechanism, the Commission reformed the GSP+ monitoring mechanism to address the scheme s insufficient support for sustainable development and good governance. The reformed GSP strengthens the GSP+ monitoring mechanism and the responsibilities for the beneficiary country. Article 9 of the Regulation explicitly specifies that a GSP+ beneficiary should give a binding undertaking to participate in and cooperate with the monitoring procedure referred to in Article 13. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/2012 Article 8 3. The Commission shall keep under review the status of ratification and effective implementation of the conventions listed in Annex III by examining available information from relevant monitoring bodies. The Commission shall inform the Council if this information indicates that there has been a diversion, by a beneficiary country, from the effective implementation of any of the conventions. Article As of the date of the granting of the tariff preferences provided under the special incentive arrangement for sustainable development and good governance, the Commission shall keep under review the status of ratification of the relevant conventions and shall monitor their effective implementation, as well as cooperation with the relevant monitoring bodies, by examining the conclusions and recommendations of those monitoring bodies. 2. In this context, a GSP+ beneficiary country shall cooperate with the Commission and provide all information necessary to assess its respect of binding undertakings referred to in points (d), (e) and (f) of Article 9(1) and its situation as regards point (c) of Article 9(1). Article 13 of Regulation (EU) No. 978/2012 sets out the conditions for a more effective and transparent mechanism to monitor the GSP+ beneficiaries progress on the effective implementation of the relevant conventions. It has expanded the scope of the monitoring by including cooperation with the relevant monitoring bodies in addition to the ratification and effective implementation of the conventions. Furthermore, the GSP+ beneficiary countries are obliged to cooperate with the Commission and provide relevant information on the implementation of the international conventions and the fulfilment of the reporting requirements and cooperation. Article 14 of the reformed Regulation has made the monitoring mechanism of the Commission more independent. While previously monitoring was based on conclusions 58 Commission Delegated Regulation (EU) No. 182/2014 of 17 December Available at: 59 Commission Delegated Regulation (EU) No. 1386/2014 of 19 August Available at: 60 Commission Delegated Regulation (EU) 2016/79 of 25 November Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

36 and recommendations from relevant monitoring bodies, the Commission may now also include its own conclusions on whether a beneficiary respects its binding undertakings to comply with reporting and cooperation and information from third parties, including civil society, social partners, the European Parliament or the Council. The Commission will present their findings in biannual reports to the European Parliament and the Council. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/2012 Article 8(3) In time for discussion on the next Regulation, the Commission shall present, to the Council, a summary report on the status of ratification and available recommendations by relevant monitoring bodies Article By 1 January 2016, and every two years thereafter, the Commission shall present to the European Parliament and to the Council a report on the status of ratification of the relevant conventions, the compliance of the GSP+ beneficiary countries with any reporting obligations under those conventions and the status of the effective implementation thereof. In line with these provisions, the Commission in close cooperation with the European External Action Service (EEAS) has set up a structured monitoring process consisting of two interrelated tools: a scorecard and an on-going GSP+ dialogue between the EU and the beneficiary country. 61 The scorecard identifies shortcomings in the compliance with and implementation of the GSP+ conventions. The first scorecard is prepared by the Commission based on assessments by the UN, ILO and other international monitoring bodies. The scorecard is updated annually based on documentation provided by the beneficiary country. The scorecards are discussed with the relevant authorities in the beneficiary country and the beneficiary is expected to actively engage in improving the identified shortcomings. The on-going GSP+ dialogue aims to promote compliance with and implementation of the GSP+ conventions. The dialogue involves relevant local, regional and central authorities, business, social partners, civil society and local offices of international organisations. The Commission furthermore engages the European Parliament, the Council and civil society in the EU in the process. The dialogue firstly involves formal visits, field visits and local workshops aimed to (i) discuss with the beneficiary country s authorities the issues regarding the implementation of the GSP+ covered conventions; (ii) gather first-hand information; (iii) establish a connection with local stakeholders; (iv) improve the mutual understanding on the impact of the GSP+; and (v) encourage cooperation between local stakeholders and the authorities to address the shortcomings. Secondly, it consists of written exchanges with the relevant stakeholders. In the monitoring process, the Commission takes into account the beneficiary s identified constraints to full compliance and implementation. In this context, the Commission may support a beneficiary country by promoting administrative capacity to fulfil its commitments and obligations under the GSP+ conventions. 62 The monitoring process further takes note of the beneficiary s political commitment to comply with the GSP+ provisions. This commitment is equated with the country s institutional coordination and set-up dedicated to adhere to its obligations under the conventions. 61 European Commission. (2017). European Union s GSP+ scheme. Available at: 62 An example of such efforts are the 2015 joint projects with the ILO to support GSP+ beneficiaries administrative capacity to effectively implement and report on the fundamental ILO conventions. 36

37 EUROPEAN COMMISSION The GSP+ monitoring occurs in two-year cycles, after which a report is published on the beneficiary countries performance regarding the compliance with and implementation of the international conventions. The reports are based on the scorecards, scorecards documentation and outcomes of the dialogues. 63 Reform of the temporary withdrawal procedures In order to further address the scheme s insufficient support to sustainable development and good governance, the Commission reformed the procedures for temporary withdrawal from the scheme. The reformed Regulation furthermore introduces the temporary withdrawal of GSP+ preferences in Article 15. The Commission can withdraw the preferences where a country does not respect its binding undertakings to reporting and monitoring or where they have adopted or formulated a reservation which is prohibited or incompatible with the relevant conventions. The burden to proof otherwise lays with the beneficiary country. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/2012 Article Without prejudice to paragraph 1, the special incentive arrangement referred to in Section 2 of Chapter II may be withdrawn temporarily, in respect of all or of certain products included in this arrangement and originating in a beneficiary country, in particular if the national legislation no longer incorporates those conventions referred to in Annex III which have been ratified in fulfilment of the requirements of Article 8(1) and (2) or if that legislation is not effectively implemented. Article The special incentive arrangement for sustainable development and good governance shall be withdrawn temporarily, in respect of all or of certain products originating in a GSP+ beneficiary country, where in practice that country does not respect its binding undertakings as referred to in points (d), (e) and (f) of Article 9(1), or the GSP+ beneficiary country has formulated a reservation which is prohibited by any of the relevant conventions or which is incompatible with the object and purpose of that convention as established in point (c) of Article 9(1). 2. The burden of proof for compliance with its obligations resulting from binding undertakings as referred to in points (d), (e) and (f) of Article 9(1), and its situation as referred to in point (c) of Article 9(1), shall be on the GSP+ beneficiary country. The reformed Regulation gives a less prominent role to the ILO and UN monitoring bodies. The Commission no longer necessarily relies on the identification and systematic violations of labour and human rights by these monitoring bodies. Furthermore, third parties are invited to send their contributions and evidence to be considered in the monitoring and evaluation period. Regulation (EC) No. 732/2008 Regulation (EU) No. 978/2012 Article The preferential arrangements provided for in this Regulation may be withdrawn temporarily, in respect of all or of certain products originating in a beneficiary country, for any of the following reasons: Article The preferential arrangements referred to in Article 1(2) may be withdrawn temporarily, in respect of all or of certain products originating in a beneficiary country, for any of the following reasons: (a) the serious and systematic violation of (a) serious and systematic violation of principles 63 European Commission. (2016). Report on the Generalised Scheme of Preferences covering the period COM (2016) 29 final. Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

38 principles laid down in the conventions listed in Part A of Annex III, on the basis of the conclusions of the relevant monitoring bodies; laid down in the conventions listed in Part A of Annex VIII; The independence of the Commission is further increased by the reformed Regulation. In the 2008 Regulation, a Member State could request consultations from the Generalised Preferences Committee, made up of Member States representatives. The Commission would need to report to this Committee and Member States could request to be involved in the investigations. The proposal for temporary withdrawal ultimately had to be accepted by the Council. Additionally, regarding non-compliance with RoO, a Member State could refer a decision to the Council, who could then reverse the decision for temporary withdrawal. These provisions have not been included in the reformed Regulation. Lastly, the time span for the temporary withdrawal procedure has been reduced. Previously, the Commission or a Member State would have to request consultations from the Committee. After a one-month consultation process, the decision to initiate a oneyear investigation would be made. As necessary, the investigation would be followed by a Commission announcement on its intention to propose temporary withdrawal and a six-month period for monitoring and evaluation. The Commission would then submit its proposal to the Council, which would have two months to make a decision. Under the current legislative framework, the Commission adopts an implementing act to initiate the temporary withdrawal procedure, after which it will monitor and evaluate the country for six months. After at the latest three months, the Commission will submit a report on its findings and conclusions. Within six months after the monitoring and evaluation period, the Commission will decide whether to withdraw the tariff preferences. It will then adopt an implementing act to terminate the procedure or a delegated act to withdraw the tariff preferences and amend the list of beneficiaries. The period of temporary withdrawal cannot exceed six months. After six months, the Commission will decide whether to terminate or extend the temporary withdrawal. Before this, the Commission can reconsider its decision and the beneficiary country can submit a written request for reinstatement of preferences. The Commission will adopt a delated act to reinstate the tariff preferences. Commission Delegated Regulation (EU) No. 1083/2013 of 28 August established the rules for the temporary withdrawal procedure to ensure the procedure s transparency and predictability. The most notable provisions are that third parties are invited to provide information for the monitoring and evaluation period and that GSP+ beneficiaries will need to submit all necessary information providing proof of compliance with the binding undertaking. In line with these provisions, the Commission will have to monitor whether there are serious and systematic violations of labour and human rights, prison labour, shortcomings in customs control on drug export and transit, failures to comply with antiterrorism and money laundering conventions, unfair trading practices, infringements of Regional Fishery Organisations objectives and compliance with RoO on part of the beneficiaries. The Commission can first engage in dialogue with the beneficiary countries to address concerns about this. Then the Commission may decide to initiate an investigation. 64 Commission Delegated Regulation (EU) No. 1083/2013. Available at: 38

39 EUROPEAN COMMISSION To date, the Commission has not initiated a monitoring and evaluation period. However, on 30 October 2013, the Commission adopted Delegated Regulation (EU) No. 1421/ to reinstate EBA preferences for Myanmar/Burma. Revision of the safeguard mechanisms In order to address the insufficient safeguarding of EU economic interests by the 2008 Regulation, the European Commission improved the administrative procedure of the safeguard mechanisms. Chapter VI of Regulation (EU) No. 978/2012 lays out the specific provisions for the safeguard mechanisms under the GSP, with specific provisions on safeguards in the textile, agriculture and fisheries sectors in Section II of the Chapter. Overall, the changes made to these provisions aimed to simplify and clarify its procedures and provisions, while simultaneously increasing the transparency of the mechanism. In order to clarify and simplify the administrative procedures of the safeguard measures, the new Regulation expanded the right to call for investigation of safeguard measures from merely the Commission or a Member State to legal persons, associations or representatives of EU producers (Article 24(2)). Furthermore, the Regulation clarifies that serious difficulties are considered to be a deterioration of the economic and/or financial situation of EU producers. The special provisions on safeguards for agriculture, fisheries and textile decreased the threshold for these automatic safeguards from an increase in volume by 20 per cent, to an increase in volume by 13.5 per cent. Furthermore, where initially the country would need to trigger a 12.5 per cent share in value of the total EU imports, the reformed Regulation reduced this to 6 per cent. These thresholds were reduced to reflect the reduction in the number of beneficiary countries. On 28 August 2013, the Commission adopted Delegated Regulation (EU) No. 1083/ on the adoption of general safeguard measures. It sets out the provisions regarding the procedure to call for safeguard measures, including on submitting a request for investigation, the investigation procedure, verification visits, non-cooperation and review of the safeguard measures. In line with these provisions, the Commission will each year evaluate whether the safeguards in the textile, agriculture and fisheries sector have been triggered, and accordingly adopt an implementing act to abolish the tariff preferences. Additionally, the Commission will have to evaluate requests for investigations from Member States, legal persons or associations on behalf of Union producers that claim to suffer deterioration in their economic and financial situation. It would furthermore need to consider prima facie evidence to start an investigation on its own initiative. It would then need to investigate the claim and if necessary adopt an implementing act to reintroduce the Common Customs Tariff duties Intermediate effects and expected results The reformed GSP Regulation and the activities to implement and enforce the scheme create a specific set of incentives in the intermediate term (the intermediate effects) for 65 Commission Delegated Regulation (EU) No. 1421/2013 of 30 October Available at: 66 Commission Delegated Regulation (EU) No. 1083/2013 of 28 August Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

40 the GSP beneficiaries. These incentives will influence the behaviour of the beneficiary countries (the expected results) in order to achieve the scheme s specific objectives (impact). The following section will set out the intermediate effects of the reformed GSP and the Commission s implementation activities and the expected results linked to them. Reduced competitive pressures on the countries most in need The Commission has reduced the number of beneficiaries by excluding upper-middle income countries and those with other preferential market access to the EU, excluded highly competitive industries through a reformed graduation mechanism, redefined product sections and simplified access to the GSP+ arrangement. These reforms to the legislative framework and the European Commission activities linked to this aimed to reduce the competitive pressures faced by the beneficiary countries, in particular for the EBA and GSP+ beneficiaries. The reduced competitive pressures will be an incentive for beneficiaries to benefit more from the scheme. Consequently, it is expected that the beneficiary countries will increase their exports to the EU under the scheme, diversify their exports and that they will better utilise the trade preferences provided by the scheme. Increased preference margin Through the tightened eligibility criteria for the scheme, countries that receive preferential market access to the EU through another arrangement and highly competitive countries have been excluded. Furthermore, the Commission aims to better focus the preferences on countries most in need by excluding highly competitive industries through graduation. Furthermore, the simplified entry mechanism for the GSP+ arrangement allows vulnerable beneficiaries to enjoy a duty suspension for approximately 66 per cent of the tariff lines. These reforms and Commission activities aim to create an incentive for beneficiaries by increasing the preference margin. An increased preference margin makes it more attractive for beneficiaries to export to the EU. This is expected to result in an increase in exports to the EU market, an increased utilisation rate and export diversification. Enhanced ease-of-use of the scheme The reform of the GSP has clarified definitions and used less ambiguous text in the provisions. Additionally, the legislative framework includes redefined product sections, simplified entry to the GSP+ arrangement and improved administrative procedures for the safeguard mechanism. This aimed to enhance the understanding and ease-of-use of the scheme for all parties involved. This has created an incentive for beneficiaries to make more use of the preferential market access, thereby increasing the utilisation rate of the trade preferences. It is furthermore expected to result in an increase in exports to the EU and increased export diversification. Additionally, it is expected to have a positive impact on the overall legal certainty, stability and predictability of the scheme. Decreased competition between GSP and FTA preferences The Commission has tightened the eligibility criteria and thereby excludes beneficiaries that receive preferential market access to the EU through another arrangement, such as an FTA or EPA. This change should decrease the competitive pressure between GSP and FTA preferences. Countries that receive other preferential market access to the EU can thus no longer export under the GSP, reducing the competitive pressure within the scheme. The expected result of this would be that beneficiaries increase their exports to the EU 40

41 EUROPEAN COMMISSION market, make more use of the preferences under the scheme and increasingly diversify their exports. Increased pressure to effectively implement international conventions In order to better support sustainable development and good governance in the beneficiary countries, the Commission has simplified the GSP+ entry mechanism, allowing vulnerable countries to join the special incentive arrangement more easily. Furthermore, the Commission has strengthened the GSP+ monitoring mechanism to better evaluate whether the beneficiaries are effectively implementing and complying with the GSP+ conventions. Additionally, the Commission improved the temporary withdrawal procedure, especially with regard to temporary withdrawal in case of severe and systematic violations of labour and human rights. This has created additional pressure on beneficiary countries to correctly implement and comply with international conventions. As a result of the legislative reforms and Commission activities, the beneficiary countries are expected to have increased their compliance with and effective implementation of the GSP+ covered international conventions. Furthermore, they are expected to better cooperate with the UN, ILO and other international monitoring bodies governing these conventions. Additionally, it is expected that the social, environmental and human rights conditions in the countries have improved as a result of this increased pressure. Improved ease-of-use of the safeguard mechanism The Commission has simplified and improved the administrative procedures linked to the safeguard mechanisms. The increased transparency and simplicity of the safeguard mechanism will have improved its ease-of-use and understanding of the provisions. This will have created an incentive for the Member States, legal persons and business associations representing EU producers to increase the use of the safeguard mechanism when they face deterioration of their economic and financial situation as result of the trade preferences Literature review The following literature review will provide a synopsis of existing studies on the impact of the EU s GSP. Special attention was given to the objectives, methodology, data sources, and findings of each study (a summary overview is included in Annex II). This section will further dissect research undertaken on the impact of the EU s GSP on the 3 main dimensions under investigation: the economic, social (including human rights), and environmental dimensions. A provisional list of sources is detailed below, which includes EC reports, evaluation studies, impact assessments and research papers. Institution Title Year EU European Commission (and HR) Report from the Commission to the European Parliament and the Council on the Generalised Scheme of Preferences covering the period (COM (2016) 29 final) 2016 Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

42 Joint staff working document on the EU Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) covering the period (SWD (2016) 8 final) 2016 Universities, research institutes and think tanks Centre for the Analysis of Regional Integration at Sussex (CARIS) Centre for Economic Policy Research Copenhagen Economics European Peacebuilding Liaison Office Friedrich-Ebert- Stiftung German Council of Economic Experts Graduate Institute of International and Development Studies HEI Graduate Institute of International Studies Indian Council for Research and International Economic Relations Lund University National Centres of Competence in Research Overseas Development Institute Oxford University University of Calabria Cardamone, P. and Scoppola, M. Mid-Term Evaluation of the EU s Generalised System of Preferences The impact of Trade Policies on Pakistan s Preferential Access to the European Union The European Union s Generalised System of Preferences: An Assessment of the Empirical Evidence The European Union s Generalised System of Preferences: An Assessment of the Evidential Base Assessment of Economic Benefits Generated by the EU Trade Regimes Towards Developing Countries The Impact of EU Trade Agreements on Conflict and Peace GSP Plus Status and Compliance of Labour Standards: Pakistan The Dark Side of the Generalised System of Preferences A Comparative Analysis of Generalised System of Preferences: Challenges, Constraints and Opportunities for Improvement Do Unilateral Trade Preferences Help Export Diversification? An Investigation of the European Unilateral Trade Preferences on the Extensive and Intensive Margin of Trade Is the GSP Scheme of the EU benefitting India s Exports? EU Trade Preferences and Export Diversification Do Social Clauses in Generalised Systems of Preferences Advance the Cause of Women? The Poverty Impact of the Proposed Graduation Thresholds in the Generalised system of Preferences (GSP) Trade Scheme GSP+ and Human Rights: Is the EU s Approach the Right One? Climate change and the generalised system of preferences Do Trade Preferential Agreements enhance the Export of Developing Countries? Evidence from the EU s GSP The Impact of EU Preferential Trade Agreements on Foreign Direct Investment

43 EUROPEAN COMMISSION Economic impact The GSP with its three arrangements forms a core part of the EU s trade and development strategy. The expected economic impact of the GSP scheme on the beneficiary countries is linked to the assumption that it encourages higher economic growth via the widening of the export market for the respective country. Furthermore, this is expected to result in higher export rates and a better integration into the regional and world market. 67 Along with these economic drivers, positive impacts on diversification as well as increased foreign direct investment (FDI) are also anticipated. Studies indicate that the GSP has led to an increase in exports from developing countries to the EU and has had an overall positive effect on the economic and social development of the respective countries. On the contrary, a major weakness in the context of the overall global economic development has been identified. The scheme intends to stimulate a beneficiary country s economic growth by widening their preference margins and so intends to contribute to the respective country s competitiveness. However, as general trade barriers are gradually lowered via the multilateral system and other regional or bilateral FTAs, the value of the GSP trade preferences may diminish. Several studies have paid attention to this development and investigated the impact on these preference margins. 68 The GSP offers three distinct arrangements: Standard GSP, GSP+ and EBA. According to the reviewed literature, the economic impacts differ between these three arrangements. Differences in findings are evident given that these arrangements are analysed separately. Table 3: Value of total imports (TI), eligible imports (EI), preferential imports (PI) and utilisation rates (UR) for all GSP beneficiaries (in billion EUR). 69 Standard GSP (first 6 months) TI EI PI UR TI EI PI UR TI EI PI UR % % % GSP % % % EBA % % % Total % % % A number of large economies, such as India and Vietnam, benefit from the Standard GSP. As a result of this, the Standard GSP represents the biggest share in terms of trade volume, as demonstrated by the 2016 European Commission Report. 70 Imports under Standard GSP made up 53,7 per cent of all imports in the EU under the GSP. The main beneficiaries of this scheme were India, Vietnam and Indonesia, which together 67 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences. Available at: 68 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences; Cirera, X. (2010). The Impact of Trade Preferences on Export Prices in the European Union Who Captures the Preference Rent? 69 European Commission. (2016). Report from the Commission to the European Parliament and the Council on the Generalised Scheme of Preferences covering the period (COM(2016) 29 final). 70 European Commission. (2016). Report from the Commission to the European Parliament and the Council on the Generalised Scheme of Preferences covering the period (COM(2016) 29 final). Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

44 accounted for 87.8 per cent of all imports where standard GSP preferences had been used. 71 In 2014, the preferences under the EBA arrangement made up 33.6 per cent of GSP imports in the EU. 72 The EBA arrangement induced the highest growth rates out of all arrangements, with both import and utilisation rates increasing. To illustrate this, in 2013 EUR 14.5 billion worth of goods entered the EU with preferences under the EBA arrangement, which increased to EUR 17.1 billion in Bangladesh was by far the leading beneficiary of the EBA arrangement, followed by Cambodia. In 2014, these two beneficiaries together accounted for 85.4 per cent of all imports where EBA preferences had been used. 74 Since the GSP+ is a preferential arrangement for vulnerable beneficiary countries, it represents the smallest portion in terms of trade volume, covering 12.8 per cent of preference based imports. In 2014, Pakistan and the Philippines were the leading exporters to the EU under this arrangement, accounting for 87.8 per cent of GSP+ preferential imports. 75 As of 2016, GSP+ is applied in 9 countries - Kyrgyzstan being a recent member. In 2014, when still 15 countries benefitted from GSP+, imports to the EU with GSP+ trade preferences amounted to EUR 6.5 billion. 76 Based on the reviewed literature, the EU s GSP has had an overall positive impact on the beneficiary countries and has increased the beneficiary countries exports and welfare. 77 The distribution of increased exports to the EU among beneficiaries, however, is highly unequal. EU imports under GSP from East Asia, the Pacific and South Asia are significantly greater than any other countries or regions included in the GSP. 78 It was also observed that the economic impact of the EU s GSP in the respective countries is already measurable after a relatively short period of time. The Copenhagen Economics assessment of the economic benefits generated by the GSP arrangement in developing countries finds that the impact on exports have, on average, occurred within two years after preferences have been granted. 79 Furthermore, it was found that despite the low share in of EU GSP imports, the EBA arrangement has realised the greatest increase in exports in its beneficiary countries. As stated Preferences under the Everything but Arms scheme has generated an export increase approximately 2 times higher than that under the GSP General Arrangement or GSP+ scheme. 80 Hence, the increase in exports under EBA is significantly greater than those attributable to the GSP Standard and GSP+ arrangements. The literature suggests that the actual economic impact of the GSP for the EU is limited. Indicators suggest that the importance of preference regimes in the total EU imports is rather low. As a result of this, in 2008, only 4.18 per cent, 0.46 per cent and 0.46 per cent of EU imports entered under respectively the GSP, GSP+ and EBA arrangements Ibid., p Ibid., p European Commission. (2016). (COM(2016) 29 final), p Ibid., p Ibid., p Ibid., p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences.; European Commission. (2016). (COM(2016) 29 final). 78 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences. 79 Copenhagen Economics. (2015). Assessment of Economic Benefits Generated by the EU Trade Regimes Towards the Developing Countries, p Ibid., p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p

45 EUROPEAN COMMISSION In 2014, the total imports to the EU with GSP trade preferences were valued at EUR 50.8 billion. 82 One of the main economic indicators used to assess the impact of the GSP arrangement is preference margins. As mentioned above, lowering tariffs at the multilateral and bilateral levels can diminish the impact of the GSP scheme. Naturally, this development has had an effect on the degree of the competitive advantage the GSP arrangement intends to induce. A more detailed look on the literature s findings on preferential trade margins suggests that there are a significant number of cases where preferences are not utilised and eligible export flows for preferences pay the full Most Favoured Nation (MFN) tariff. 83 Furthermore, a case study on Mozambique suggests that the impact of the preference regime is likely to be overstated, because a significant number of products exported by developing countries do not benefit from any positive preferential margin. 84 This has significant implications for the GSP as the extent of its success, therefore, must depend on the extent of that preference margin, as well as on the relationship between that margin, and the incentive for firms and countries to utilize the preferences on offer. 85 There is some disagreement in the literature on where eventual tariff margins and preference rents are absorbed. The case study on Mozambique shows that exporters are unable to capture the price margin associated to preferences, 86 whereas other studies suggest otherwise. Indicating that export prices and the preference rents of the decreased tariffs are partly absorbed by the exporters 87 as stated in CARIS We find that both market share and the size of the preference margin is positively transmitted to the price margin, which suggests that preference margins are transmitted to exporters. 88 To conclude, no general agreement could be found in the literature on preference margin absorption and its importance on beneficiary countries. It is therefore useful to analyse a specific case, as was done in the Mozambiquean case study. The case study shows that exports benefit from an average de jure preference margin of between 9 and 12 per cent. 89 Furthermore, low tariff margins have not had a negative effect on utilisation, which according to the authors suggest that costs of compliance do not have a direct influence on utilisation. 90 The study concludes that these findings cast doubts on the value of preferences and their potential impact on developing country exports. 91 The GSP s utilisation rates vary significantly from country to country and also among the differing arrangement types. As for the Standard GSP arrangement, general utilisation rate in 2014 was 70.3 per cent, decreasing slightly from 2013 (-1,2 percentage points). Under the EBA arrangement, the trend is a different one, although the utilisation rate also varies greatly between beneficiaries. Here, the utilisation rate increased from 83.1 per cent in 2013 to 87.1 per cent in The lowest utilisation rate was found under 82 European Commission. (2016). (COM(2016) 29 final), p Cirera, X. (2010). The Impact of Trade Preferences on Export Prices in the European Union Who Captures the Preference Rent?, p Cirera, X. and Alfieri, A. (2011). Unilateral Trade Preferences in the EU: An Empirical Assessment for the Case of Mozambican Exports, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p Cirera, X. and Alfieri, A. (2011). Unilateral Trade Preferences in the EU: An Empirical Assessment for the Case of Mozambican Exports, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p. 69; Cirera, X. (2010). The Impact of Trade Preferences on Export Prices in the European Union Who Captures the Preference Rent? 88 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p Cirera, X. and Alfieri, A. (2011). Unilateral Trade Preferences in the EU: An Empirical Assessment for the Case of Mozambican Exports. 90 Ibid., p Ibid., p. 1. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

46 the GSP+ arrangement, with a rate of 69.7 per cent in 2013, which slightly declined to 66.1 per cent in The literature further suggests that the EU s GSP has had a positive impact on countries export diversification. The theoretical explanations for this expected benefit are rooted in the infant industry assumption or the more recent explanation of the heterogeneous firm trade theory. In short, both theoretical argumentations place importance on preferential treatment to young industries. In doing so, it is suggested that through the reduction of trade barriers, more firms and producers are encouraged to export. The 2013 IFN study on the EU s impact on export diversification suggests that Standard GSP and GSP+ have had a significantly positive effect on export diversification. 93 Looking at the effect of preferences on FDI in beneficiary countries, CARIS estimates a very high impact. Their results suggest a difference of FDI inflow from beneficiaries to non-beneficiaries of over 200 per cent. It is however made clear that the results shall not be taken too literally as the data providing the source for this calculation is limited in number and high in variation. Hence the large impact on FDI under the GSP scheme can possibly be traced back to the selection of data obtained. 94 Another point which has been made clear in the literature is that when the economic impact of the GSP is analysed, one needs to take into account that integration into a preferential tariff regime is merely one factor that may propel the growth of an economy. The GSP operates in an overall bigger context and it can at best only be a facilitator, albeit potentially a significant one, towards the meeting of the growth and development objectives. 95 Methodology and data One of the most widely used quantitative models to conduct ex-post analyses of trade agreements is the gravity model. Gravity modelling has been used extensively to analyse the impact of the EU s GSP on beneficiary countries. This model was firstly applied by J. Tinbergen in 1962, and assumes that export flows are positively influenced by the economic mass of trading countries and negatively influenced by the distance between them. For the purpose of investigating the GSP s impact, the gravity model is linked to the assumption that preferential treatment will increase the exports to the preferencegiving countries. 96 Analyses on the export diversification or price margin impact of the scheme have made use of other analysis tools. Export diversification is measured by considering the number of goods exported, the Herfindahl Index, or other export concentration indices, such as the Theil and Gini indices. 97 The studies further made use of various methods for determining price margins, such as setting a counterfactual with non-utilisation prices 98 or the average MFN unit value for specific goods. 99 The reviewed literature showed that attention was paid to potential drawbacks of trade data. In order to manage these limitations, tools such as data refinement, regression analysis and 92 European Commission. (2016). (COM(2016) 29 final). 93 Persson, M. and Wilhemsson, F. (2013). EU Trade Preferences and Export Diversification, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p cfmid-term Aiello, F. and Demaria, F. (2009). Do trade preferential agreements enhance the exports of developing countries?, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p. 179; Cadot, O., Carrere, C. and Strauss-Khan, V. (2011). Export Diversification: What s behind the Hump?, p Cirera, X. and Alfieri, A. (2012). Unilateral trade preferences in the EU: An empirical assessment for the case of Mozambican exports. Economics Research International. 99 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p

47 EUROPEAN COMMISSION impact estimation of preferences were used. 100 Studies further included robustness analysis to ensure that the results shown in the respective analyses are robust to changes in the sample. 101 In the literature reviewed, the most widely used data sources were the EUROSTAT and the UN Comtrade databases. As for country-specific variables, analyses have made use of the CEPII dataset. Further, differing levels of data aggregation have been found, lasting from 6, 8 up to highly detailed 10-digit trade and tariff data Social impact, including human rights Literature on the social impact of the GSP has largely been of descriptive and qualitative nature. Country case studies have largely been used, aimed at providing detailed accounts on implementation processes, human rights standards and ratification of conventions. Human rights, sustainability and good governance are integrated into the EU s trade policy, with the GSP constituting one important instrument of that policy. GSP+ channels preferential market access in exchange for the acceptance of international standards in the field of human rights, labour, sustainable development and good governance. Hence, the social, human rights and environmental impact is usually linked with the effectiveness of the conventions included in the scheme. The GSP+ covers a total of 27 international conventions on human rights, labour standards, environmental standards, good governance and illegal drug prevention. Overall the literature does not offer any consensus on the concrete impact of the EU s GSP on human rights, labour, environment and good governance. The EU may decide to withdraw the trade preferences temporarily when it identifies serious and systematic infringements of the basic obligations for the GSP, including the EBA. These violations include unfair trading practices, export of goods made by prison labour and systematic violations of international conventions and agreements. It has been pointed out various times that the EU has so far not applied this conditioning mechanism towards all countries equally. Some cases of violation of core labour standards such as in Uzbekistan and Turkmenistan have not had negative consequences for the respective countries, whereas in other cases the EU has reacted and withdrew preferences from the violating country such as Myanmar, Belarus and Sri Lanka. It has been argued that the EU has not always applied the GSP scheme consistently and that the effectiveness of the GSP in the social dimension is compromised by this inconsistent application of the sanctioning element. 102 The literature even suggests that the impact and credibility of the EU s approach to human rights in its external trade policy has been called into question because of the selective and uneven application of these human rights instruments. 103 Nonetheless, there was overwhelming consensus on the potential beneficial effect on social, labour and human rights standards within the EU s GSP. The studies suggest that the GSP+ has potential to bring about change in law and practice of labour and women 100 Persson, M. and Wilhemsson, F. (2013). EU Trade Preferences and Export Diversification; Cirera, X. and Alfieri, A. (2011). Unilateral Trade Preferences in the EU: An Empirical Assessment for the Case of Mozambican Exports; Cirera, X. (2010). The Impact of Trade Preferences on Export Prices in the European Union Who Captures the Preference Rent?, 101 Persson, M. and Wilhemsson, F. (2013). EU Trade Preferences and Export Diversification. 102 Velluti, S. (2016). The Promotion and Integration of Human Rights in EU External Trade Relations; Beke, L., D Hollander, D., Hachez, N. and Pérez de las Heras, B. (2014). Report on the integration of human rights in EU development and trade policies. 103 Velluti, S. (2016). The Promotion and Integration of Human Rights in EU External Trade Relations, p. 41. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

48 rights. 104 As demonstrated by the specific case of El Salvador, in which the country s Supreme Court found ILO Convention No. 87 (on freedom of association and the right to organise) to be incompatible with the El Salvadorian Constitution. This ruling was followed by an examination of the European Commission, which was very likely instrumental for the following Constitutional changes. The fear of losing GSP+ benefits are therefore believed to have had an effect on the labour and social standards in the country. 105 Another point made in the CARIS study is that effective implementation of human rights conventions are mainly related to the social and economic rights component, the adequate provision of education and health services. The monitoring process is in practice difficult to carry out and is accompanied by high costs for the beneficiary country. Nonetheless, although these costs are high, the literature suggests that benefits outweigh costs by a large margin. 106 The GSP s concrete impacts and improvements for social and human rights standards depend highly on the actual case and specific country and are thus not uniformly describable. Enforced by the fact that each country concerned seeks to meet its GSP, and more specifically GSP+ commitments, in its individual context they face different issues, challenges and constraints. 107 The literature suggests that, in order to have a tangible positive impact on the social conditions of a beneficiary country, effective monitoring of the actual implementation of these provisions and conventions is essential. Regarding the impact of the EU s GSP scheme on poverty reduction, wide evidence suggests that trade and economic growth have a positive effect on poverty reduction. In this reasoning, economic growth is seen as an instrument to reduce poverty, as growth triggered through trade liberalisation drives poverty reduction. 108 Nonetheless, it has to be pointed out that no link between trade liberalisation, economic growth and poverty reduction has yet been identified. The literature review shows that it is unclear how liberalisation, growth and poverty interact. The literature found that the notion of poverty reduction induced by the GSP is largely outdated and can give no clear information on the actual impact the various reforms of recent years had on this issue. To conclude, evidence suggests that the GSP can have an indirect effect on poverty reduction, when fostering human rights and so inducing structural change and thus contributing to an overall reduction of poverty. 109 As demonstrated by the European Commission Staff Working Document on the GSP+, several countries still lack full compliance with the convention s requirements. Requirements are insufficiently implemented in domestic laws or lack adequate reporting Humbert, F. (2008). Do Social Clauses in Generalised Systems of Preferences Advance the Cause of Women? 105 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p. 154; Velluti, S. (2016). The Promotion and Integration of Human Rights in EU External Trade Relations; Beke, L., D Hollander, D., Hachez, N. and Pérez de las Heras, B. (2014). Report on the integration of human rights in EU development and trade policies. 106 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p European Commission. (2016). GSP+ report on Sustainability, Human Rights and Good Governance. Questions and Answers. Available at: trade.ec.europa.eu/doclib/docs/2016/january/tradoc_ pdf 108 Cardamone, P. and Scoppola, M. (2012). The Impact of EU preferential Trade Agreements on Foreign Direct Investment. Available at: CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences; Beke, L., D Hollander, D., Hachez, N. and Pérez de las Heras, B. (2014). Report on the integration of human rights in EU development and trade policies. 110 European Commission. (2016). Joint Staff Working Document on the EU Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) covering the period (SWD (2016) 8 final). 48

49 EUROPEAN COMMISSION Environmental impact The environmental impact is largely measured on the fulfillment of the conventions covered by the GSP+. The GSP+ arrangement conditions preferential market access upon the ratification of international conventions, out of which 8 are directly related to environmental protection. Whether the conditioning is beneficial for the countries environmental condition is according to the literature difficult to measure. 111 The effective environmental impact of the GSP scheme has not been comprehensibly analysed. This is due to a variety of reasons: firstly, tangible indicators for measuring environmental improvements caused by the GSP are lacking; and secondly, environment as a public good can hardly be assessed apart from the bigger regional context. Hence a GSP impact assessment is difficult as this type of evaluation would necessarily need to distinguish between GSP beneficiary and non-beneficiary countries. 112 Therefore, the majority of literature makes use of a simple approach to assess the environmental impact of the EU s GSP the environmental impact of the GSP in a beneficiary country is equated with the country s ratification and implementation of the respective environmental conventions and whether its abiding to the reporting requirements. 113 The shortcomings of this approach are obvious but it is often used as an appropriate indicator for the environmental impact of the scheme. Overall it has been found in specific case studies that effective implementation was the strongest for the conventions covering the environment in comparison with labour conventions. 114 Taking a more detailed look into the recently published joint staff working document of the EC, one finds that despite the fact that the beneficiary countries included in the GSP+ have ratified the respective environmental conventions, the vast majorities of countries have compliance issues with the conventions (the Stockholm Convention on Persistent Organic Pollutants, the Cartagena Protocol on Biosafety and especially the Convention on International Trade in Endangered Species of Wild Fauna and Flora CITES) Analytical approach to Mid-Term Evaluation The following section will outline the Project Team s approach to assess the application and impact of the current GSP scheme from economic, social, human rights, and environmental standpoints. An overview of this approach is depicted in the Analytical Framework in Table 4 below. The Analytical Framework includes the six evaluation questions for the study, the judgment criteria for each question, the required evidence/indicators 116 for the analysis, and the sources of evidence and methodological tools to be utilized. More in-depth information is provided on the approach to economic, social, human rights and environmental analyses in subsequent sections. 111 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences. 113 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences; European Commission. (2016). (SWD (2016) 8 final). 114 CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences, p European Commission. (2016). (SWD (2016) 8 final). 116 The EC Better Regulation Guidelines define an indicator as a quantitative or qualitative measure to analyse and compare performance. By identifying relevant indicators to measure the trade, economic, social, human rights and environmental impact, the Project Team will be able to assess the impact of the GSP against the initial socio-economic, environmental and human rights situation. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

50 50

51 EUROPEAN COMMISSION Table 4: Analytical Framework for the Mid-Term Evaluation of the EU s GSP Evaluation questions Judgement criteria Required evidence and analysis/possible indicators 1. (i) To what extent are the objectives of the current GSP on track to be achieved? Following the application of Regulation (EU) No 978/2012: i. Have preferences been better focused on countries most in need? ii. Have disincentives for diversification been removed for countries most in need? iii. Has there been enhanced consistency with overall trade objectives, whether bilateral or multilateral? iv. Has support been strengthened for sustainable development and good governance? v. Has the efficiency of safeguard mechanisms been improved to ensure that the EU s financial and economic interests are protected? vi. Has the legal certainty, stability and predictability of the scheme been enhanced? The Project Team will analyse: i. Revised eligibility criteria and ii. Reduced number of iii. beneficiaries; Reformed graduation and increased thresholds; iv. Simplified GSP+ entry mechanism; v. A more effective and transparent mechanism for monitoring and evaluating the GSP+ countries commitment and progress in the implementation of GSP+ conventions; vi. Clarified temporary withdrawal provisions and procedures; vii. viii. Simplified and clarified safeguard mechanisms; and Redefined product sections and increased product coverage. Sources of evidence/methodological tools i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Analysis of tariff and trade data between the EU and GSP beneficiary countries (overall and by vii. sector) Econometric analyses using data from EUROSTAT and TARIC primary sources, and UNCOMTRADE, WITS and World Bank Open Data as secondary sources. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

52 Evaluation questions Judgement criteria Required evidence and analysis/possible indicators (ii) What has been the impact of the present scheme on developing countries and LDCs? Following the application of Regulation (EU) No 978/2012: i. What has been the economic impact of the present scheme on developing countries and LDCs? In order to determine the economic impact, The Project Team will: i. Analyse detailed trade in goods and tariff data between the EU and the GSP beneficiary countries over the period (preparing indicators such as the utilisation rate, coverage rate and preference margins) ; ii. Analyse the importance of the EU market to GSP beneficiary countries; iii. Analyse, as precisely as possible, the role of the GSP scheme itself on economic growth and development in beneficiary countries; iv. Analyse the impact of the GSP on specific sectors in beneficiary countries (descriptive statistical analysis of sectoral trends and developments, including export Sources of evidence/methodological tools i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Analysis of tariff and trade data between the EU and GSP beneficiary countries (overall and by sector) vii. Econometric analyses using data from EUROSTAT and TARIC primary sources, and UNCOMTRADE, WITS and World Bank Open Data as secondary sources. 52

53 EUROPEAN COMMISSION Evaluation questions Judgement criteria Required evidence and analysis/possible indicators diversification) v. Conduct econometric analyses to determine the impact of GSP reform on trade flows and export diversification. ii. What has been the social and human rights impact of the present scheme on developing countries and LDCs? In order to determine the social and human rights impact, the Project Team will analyse the impact of the current GSP scheme on the following: i. Employment rate; ii. Female employment rate; iii. Youth employment rate; iv. Wage rate; v. Social protection rate; vi. Social inclusion rate; vii. Poverty rate; viii. Civil liberties index; ix. Gender equality rate; x. Voice and accountability Index; xi. Political stability index; xii. Government effectiveness index; Sources of evidence/methodological tools i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Analysis of social and human rights indicators using data from national statistical agencies, the ILO, World Bank, Freedom House, Transparency International, among others. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

54 Evaluation questions Judgement criteria Required evidence and analysis/possible indicators xiii. Regulatory quality index; xiv. xv. xvi. Rule of law index; Corruption perceptions index (CPI); Control of corruption index; Sources of evidence/methodological tools iii. What has been the environmental impact of the present scheme on developing countries and LDCs? In order to determine the environmental impact, the Project Team will analyse the impact of the current GSP scheme on the following: i. Waste generation; ii. Environmental sustainability rate; iii. Forest area coverage; iv. Land use and competition; v. Land tenure and ownership rights; vi. Terrestrial and freshwater biodiversity; vii. Proportion of fish i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Analysis of environmental indicators using data from the IEA, World Bank, FAO, Global Resources Assessment, UN agencies, CBD and AQUASTAT, among others. 54

55 EUROPEAN COMMISSION Evaluation questions Judgement criteria Required evidence and analysis/possible indicators stocks; viii. Biodiversity; ix. Climate change; x. CO 2 emissions; xi. Biofuels ; xii. Renewable energy. Sources of evidence/methodological tools 2. What are the factors (positive and negative) influencing the achievements observed? i. What positive factors have contributed to the economic, social, human rights and/or environmental impact of the present scheme on developing countries on developing countries and LDCs? ii. What negative factors have contributed to the economic, social, human rights and/or environmental impact of the present scheme on developing countries on developing countries and LDCs? i. Identification of the factors that have positively contributed to the impact deduced from the economic, social, human rights and environmental analyses outlined above. ii. Identification of the factors that have negatively contributed to the impact deduced from the economic, social, human rights and environmental analyses outlined above. i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Economic, social, human rights and environmental analyses undertaken in fulfillment of Evaluation Question (1) above. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

56 Evaluation questions Judgement criteria Required evidence and analysis/possible indicators 3. What unintended consequences, if any, can be linked to the design, implementation, or use of the current GSP? i. What economic, social, human rights and/or environmental impacts have resulted from the design of the current GSP? - Have there been any positive unintended effects? - Have there been any negative unintended effects? ii. What economic, social, human rights and/or environmental impacts have resulted from the implementation of the current GSP? - Have there been any positive unintended effects? - Have there been any negative unintended effects? i. Identification of the effects of the GSP reform on environmental protection, labour rights and human rights. ii. Identification of stakeholder groups that have been affected by the reform in an unintended manner. iii. Identification of positive/negative side effects of the reform in the beneficiary countries and the EU. Sources of evidence/methodological tools i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. rights and environmental analyses undertaken in fulfillment of Evaluation Question (1) above. Economic, social, human iii. What economic, social, human rights and/or environmental impacts have resulted from the use of the current GSP? - Have there been any positive unintended effects -Have there been any negative unintended effects? 56

57 EUROPEAN COMMISSION Evaluation questions Judgement criteria Required evidence and analysis/possible indicators 4. To what extent is the current GSP efficient? 5. To what extent is the current GSP coherent with the EU s relevant policies? i. How does the current GSP scheme compare with the previous GSP scheme? ii. To what extent are the costs proportionate to the benefits achieved? What factors are influencing any particular discrepancies? i. What synergies or inconsistencies exist between the current GSP scheme and other EU trade policies? ii. What synergies or inconsistencies exist between the current GSP scheme and EU development policies? iii. What synergies or inconsistencies exist between the current GSP scheme and the EU foreign policy? iv. What synergies or inconsistencies exist i. Identification of the ratio between the costs and benefits of the current scheme compared with the previous scheme (evidenced by the results of the Mid- Term Evaluation of the EU s GSP in 2010); ii. Identification of the ratio between the inputs and outputs of the current GSP reform The Project Team will analyse whether EU trade objectives have been enhanced or hindered as a result of reform of the GSP scheme. Sources of evidence/methodological tools i. Desk research ii. Online Public Consultation iii. Stakeholder interviews iv. Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Case studies for selected countries and sectors vi. Economic, social, human rights and environmental analyses undertaken in fulfillment of Evaluation Question (1) above. i. Desk review, consisting mainly of review of EU s trade and development policies ii. Online Public Consultation iii. iv. Stakeholder interviews Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

58 Evaluation questions Judgement criteria Required evidence and analysis/possible indicators between the current GSP scheme and other EU policies? Sources of evidence/methodological tools 6. To what extent is the current GSP scheme relevant to the development needs which it is intended to address? How does the current GSP scheme contribute to sustainable development and poverty eradication objectives? The Project Team will analyse whether specific reforms undertaken were the most appropriate to address the problems identified with the previous scheme i. Desk review, consisting mainly of review of the old and new GSP Regulation ii. Online Public Consultation iii. iv. Stakeholder interviews Stakeholder outreach workshops in Bangladesh, Ethiopia, Bolivia and Pakistan v. Economic, social, human rights and environmental analyses undertaken in fulfillment of Evaluation Question (1) above. 58

59 EUROPEAN COMMISSION Economic analysis One of the general objectives of the EU s GSP is to contribute to poverty eradication by expanding exports from countries most in need. The Project Team has recognised that the extent to which the GSP could have positive economic impacts on developing countries depends on the importance of the EU market in the country s overall exports. Additionally, the GSP s effectiveness will also depend on the domestic institutional environment and appropriate domestic policies. Taking these factors into account, the Project Team will conduct an in-depth analysis of the economic impacts of the different GSP arrangements on beneficiary countries using the most up-to-date and detailed economic, trade and tariff data from the European Commission. This will be complemented by qualitative analyses in the form of case studies, where appropriate. The Project Team will decompose, as precisely as possible, the role of the GSP scheme itself, as opposed to the impact of other changes in trade policy either within the countries themselves or regarding other trading partners. Significant emphasis will be placed on the extent to which the preferences align with the structure of developing country exports. This involves looking at the share of each country s exports covered by the regimes and comparing this to the shares of Most Favoured Nation (MFN) tariff-zero trade. More in-depth quantitative work will focus on the determinants of preference nonutilisation as well as decomposing the economic and welfare effects of participation in the GSP scheme, particularly within the context of the six case studies. The extent of such quantitative work, however, will depend on adequate cooperation with national governments, local think tanks and research institutes, as well as international institutions. The empirical quantitative economic analysis will consist of two main parts: (i) an econometric analysis of trade data from 2011 to 2016, provided by the EC at a 6-digit or 8-digit level disaggregation; and (ii) a diagnostic and descriptive analysis of data at the HS 6-digit level from trade databases such as the UN ComTrade or WB World Integrated Trade Solution (WITS). The methodology used for the quantitative data analysis is threefold: (i) Identification of policy changes: For an effective quantitative analysis of the trade and economic impact of the GSP, it is essential to have a clear overview of the changes to the GSP over the period under examination. In this respect, the following activities will be undertaken: a. Identification of the beneficiary countries under each of the three arrangements for each year. b. Identification of all country-sector combinations that graduated from the scheme or where trade preferences were reinstated. The product sections on which graduation is calculated changed with the introduction of the reformed GSP in c. Identification of the changes to GSP tariffs that were introduced with the reformed scheme. d. Identification of changes in the RoO. (ii) Descriptive/diagnostic analysis: The following descriptive and diagnostic analyses will be conducted: a. Analysis of the extent to which countries that were withdrawn from the GSP compete with the current beneficiary countries (by GSP arrangement) in the Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

60 EU market. This involves replicating previous analysis and calculating indicators such as Finger-Kreinin Index (FK) and Relative Export Competitive Pressure Index (RECPI) with up-to-date data. b. Analysis of patterns of trade with EU and non-eu countries by TDC sector based on HS 6-digit data. c. Descriptive analysis of relevant trade statistical indicators: Utilisation rate: Preferential imports as a percentage of eligible imports Coverage rate: Eligible imports divided by total imports Preference margins Share of trade by tariff category (MFN, GSP, Regional Trade Agreements (RTA)) Export diversification: - Number of 8-digit product lines exported - Number of 8-digit product lines per sector (diversification can only have occurred within a specific sector) - Concentration indices by country and country-sector combinations Spill-over: Any evidence of export diversification. (iii) Econometric modelling: The Project Team will run regressions to measure trade flows and export diversification. For effective econometric modelling, the trade data will have to be cleaned and matched with tariff data and will allow the Project Team to analyse the impact of the GSP reform as precisely as possible. To further enhance the accuracy of the economic analysis, the Project Team will look at trade data from three years before to three years after the scheme s reform. An analysis over a longer period of time would create significant data distortions as a result of influences from different factors and changes in policy over the years. This will comparative approach will allow the Project Team to more accurately assess the impact of Regulation (EU) No. 978/2012. To ensure consistency of data, the Project Team will make use of EU import data instead of export data from the beneficiary countries. This will enhance the overall consistency and comparability of the findings. The table below lists the primary sources of data that will be utilised in the study. Institution Database Title Year European Commission Eurostat TARIC Trade data at HS-6 level, including utilisation rate, for (Data for 2016 will be made available from March 2017). Trade data at HS-10 level is not available to the public. Therefore, request for DG TRADE to provide Project Team with current HS-10 level trade data by the end of January Outstanding 2016 data is to be provided by the beginning of March The integrated tariff of the European Communities is a database which integrates all measures relating to EU customs tariffs, commercial and agricultural legislation. United Nations UN Comtrade UN Comtrade is a repository of official international trade statistics and relevant analytical tables (available up to September 2016 at the HS-6 level) (updated to December 2016)

61 EUROPEAN COMMISSION World Bank WITS The World Integrated Trade Solution (WITS) software provides access to international merchandise trade, tariff and non-tariff measures (NTM) data. Groningen Growth and Development Centre World Bank Open Data World Input Output Database Database of economic indicators (GDP, GDP per capita, Real Income, Terms of Trade). The WIOD provides time series of world input-output tables. Data is included for more than 40 separate countries covering +/- 85% of world GDP Social analysis, including human rights The GSP is one of the main instruments that the EU uses to link social and human rights issues to trade. To carry out the social analysis section of the evaluation, the Project Team will seek to gain a picture of the social impact associated with participation in the GSP scheme. The Project Team will examine the impact of the GSP on the following elements: Employment; Decent Work Agenda (job creation, labour standards, social protection and social dialogue); Working conditions; Wage levels and their changes over time Poverty reduction; Gender equality; Human rights; and Good governance. The Project Team will make use of a wide range of social and human rights indicators as set out in the table below. Indicator Description Source Employment Female employment Youth unemployment Wages Social Protection Rating Social Inclusion Employment-to-population ratio to measure the proportion of the country s working age population that is employed. Share of women in wage employment The unemployment rate for the age group 15 to 24 years. Average real wages; and average real wage growth. Assessment of government policies in social protection and labour market regulation that reduce the risk of becoming poor, assist those who are poor to better manage further risks and ensure a minimum level of welfare to all people Assessment of policies for social inclusion and equity cluster, including gender equality, equity of National statistics World Bank (WB) Data; National statistics ILO; National statistics National statistics Country Policy and Institutional Assessment (CPIA) World Bank; available up until 2015 CPIA World Bank; available Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

62 Rating public resource use, building human resources, social protection and labour and policies and institutions for environmental sustainability Poverty rate Proportion of the population below the international poverty line of $ 1.90 per day Civil Liberties Index Gender Equality Rating Voice and Accountability Index Political Stability Index Government Effectiveness Index Regulatory Quality Index Rule of Law Index Corruption Perceptions Index (CPI) Control of Corruption Index Civil Liberties Index Assessment of civil liberties in a country covering indicators on freedom of expression and belief; associational and organisational rights; rule of law; and personal autonomy and individual rights Assessment of the extent to which a country has installed institutions and programs to enforce laws and policies that promote equal access for men and women in education, health, the economy and protection under law Assessment of citizens ability to select their government, freedom of expression, freedom of association and a free media covering indicators on human rights, press freedom, electoral process, freedom of association and assembly etc. Assessment of the likelihood of political instability and politically motivated violence, including terrorism covering indicators on armed conflict, social unrest, violent demonstrations, government stability etc. Assessment of the quality of public services, civil service, policy formulation and implementation, and the government s commitment to its policies covering indicators on bureaucracy, quality of education, citizen satisfaction etc. Assessment of the government s ability to formulate and implement policy and regulations that permit and promote private sector development covering indicators on discriminatory tariffs and taxes, price controls, investment freedom, burden of government regulations etc. Assessment of agents confidence in and abide by the rules of society and likelihood of crime and violence covering indicators on crime, property rights, confidence in the police force and judicial system, the informal sector etc. Assessment of the perceived level of public sector corruption in a country on a scale of 0 (highly corrupt) to 100 (very clean). Assessment of the extent to which public power is exercised for private gain and involvement in the state by elites and private interests covering indicators on corruption, irregular payments, public trust etc. Assessment of political rights in a country covering indicators on the electoral process; political pluralism and participation; and functioning of government up until 2015 World Bank; available up until 2014 Freedom House; available until 2016 up CPIA World Bank; available up until 2015 World Bank; available up until 2015 World Bank; available up until 2015 World Bank; available up until 2015 World Bank; available up until 2015 World Bank; available up until 2015 Transparency International; available up until 2015 World Bank; available up until 2015 Freedom House; available until 2016 up 62

63 EUROPEAN COMMISSION Given that the evaluation period only spans two years ( ), the Project Team has found that the number of readily available and up-to-date social and human rights indicators is limited. Furthermore, it is highly unlikely that the indicators would have changed much over the course of 2 years. In order to account for these limitations and to reveal what is happening on the ground in the beneficiary countries, the case studies will provide a more in-depth analysis of the social impact. The case studies will rely heavily on literature review to account for the impact not covered by the abovementioned social and human rights indicators, national statistics and reports, and monitoring reports by international monitoring bodies, such as the ILO. Additionally, the analysis in the case studies will be based on a wide array of stakeholder consultations and concrete developments, such as improved cooperation with international organisations and monitoring bodies, submission of missing reports and assessments, and the formulation of action plans. Finally, where possible, the Project Team will contact the relevant international organisations and monitoring bodies in order to obtain more recent data on the indicators. The approach to the case studies will be described in more detail in Section Environmental analysis One of the general objectives of the GSP is to promote sustainable development in beneficiary countries. To carry out the environmental analysis section of the evaluation, the Project Team will prepare a review of the existing literature and datasets of environmental goods and services traded under the GSP scheme. Additionally, using extensive research on the pre-determined indicators and with substantial input from stakeholder engagement activities, identify the most significant environmental issues that emanate from participation in the GSP, and present the results in case studies. The Project Team will examine a wide range of environmental impacts which include: Air and water purity/pollution; Waste; Natural resources, including forests, wildlife and fisheries; Biodiversity; Climate change. The Project Team will make use of a wide range of environmental indicators set out in the table below. Indicator Description Source Waste generation Environmental Sustainability Rating Forest Area Coverage Land use and competition Municipal waste per capita, municipal waste recovery rates Assessment of the extent to which environmental policies foster the protection and sustainable use of natural resources and management of pollution Forest area as a percentage of land area, tree cover loss/gain, tree cover %, deforestation/reforestation rates, LULUCF-related CO2 emissions, carbon stocks Increased competition for land resources (and potential resource scarcity) between staple crops, IEA Country Profiles CPIA World Bank; available up until 2015 World Bank; available up until 2015; FAO Global Resources Assessment; Global Forest Watch FAOSTAT; available Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN up

64 Land tenure and ownership rights Terrestrial and freshwater biodiversity Proportion of fish stocks commodity crops and livestock; leading to either intensification of crop/livestock production (where inputs are available) or agricultural expansion for increased cropland and grassland (leading to deforestation, soil erosion, loss of biodiversity and various others) Private ownership of land and further investments in land improvements (i.e. increased economic returns per unit of land) UN SDG indicator on the proportion of important sites for terrestrial and freshwater biodiversity that are covered by protected areas UN SDG indicator on the proportion of fish stocks within biologically sustainable levels Biodiversity Proportion of terrestrial and marine areas protected, number of threatened species Climate change CO2 emissions Climatology indexes including precipitation, humidity, temperature, weather extremes, GHG emissions and concentrations, etc. UN MDG indicator on total CO2 emissions and per capita emissions until 2014/2015; FAO Global Resources Assessment FAOSTAT: available up until 2014/2015; FAO Global Resources Assessment UN; FAOSTAT: available up until 2014/2015; AQUASTAT UN CBD, GBIF and InforMEA Country Profiles UNDP Climate Change country profiles; WHO Climate Change and Human Health Country Profiles UN; Country Profiles Biofuels Use of biofuels IEA Country Profiles Renewable energy UN SDG indicator on the renewable energy share in the total final energy consumption UN; Country Profiles IEA IEA Given that the evaluation period only spans two years ( ), the Project Team has found that the number of readily available and up-to-date environmental impact indicators is limited. Furthermore, it is highly unlikely that the indicators would have changed much over the course of 2 years. In order to account for these limitations and to reveal what is happening on the ground in the beneficiary countries, the case studies will provide a more in-depth analysis of the environmental impact. The case studies will rely heavily on literature review to account for the impact not covered by the abovementioned environmental indicators, national statistics and reports, and monitoring reports by international monitoring bodies, such as the UN. Additionally, the analysis in the case studies will be based on a wide array of stakeholder consultations and concrete developments, such as improved cooperation with international 64

65 EUROPEAN COMMISSION organisations and monitoring bodies, submission of missing reports and assessments, and the formulation of action plans. Finally, where possible, the Project Team will contact the relevant international organisations and monitoring bodies in order to obtain more recent data on the indicators. The approach to the case studies will be described in more detail in the section below Main risks and challenges The following section will identify the main risks and challenges for the Mid-Term Evaluation of the EU s GSP and will present the Project Team s approach to mitigate these risks. A relevant and up-to-date Final Report The Project Team aims to present a relevant and up-to-date Final Report of the Mid- Term Evaluation of the GSP to the Commission in autumn One of the main challenges in this respect is the lack of trade data and the recent entry into force of the Regulation: Trade data on the current GSP is only available for Furthermore, the trade data to be made available by Eurostat and the European Commission need to (i) cover all GSP, GSP+ and EBA countries; (ii) indicate the eligible and preferential imports; and (iii) provide a sufficient level of sectoral disaggregation to track the preferential imports of the machinery and the textile sectors (at least at HS-6 digit codes). Project Team approach: In order to present an up-to-date and relevant Final Report, it is essential that trade data for 2016 is included. The delay for detailed trade data is relatively short, and data is expected to become available around March The Project Team will start analysing trade data for and update this when data for 2016 becomes available. The Project Team will continuously liaise with DG Trade and Eurostat regarding the time-frame of the availability of the 2016 data. The full data analysis is scheduled to be completed by the end of June Another main challenge in this respect is the delay in data on the social, environmental and human rights impact of the scheme. While a wide variety of indicators and indexes available from international organisations such as the ILO, the UN and the World Bank, most of the data is only available up until 2014 or Project Team approach: The Project Team will make use of the most up-to-date and readily available indicators and indexes where possible. This data will be complemented for the country case studies by in-depth qualitative analysis of national sources as well as stakeholder consultation. A final challenge in this respect is the broad scope of the project. Project Team approach: The Project Team will strategically use the six case studies to capture the impact and functioning of the GSP. It will be assessed to what degree the country-case studies are representative (or not) for the other GSP+ and EBA countries. Extensive and in-depth stakeholder consultation The Project Team aims to have an extensive and in-depth stakeholder consultation process in order to include invaluable insights into the impact of the GSP from stakeholders on the ground. One of the main challenges in this respect is the low response rate to online public consultation and the rigidity in the form of feedback. Project Team approach: The Project Team will reach out to an extensive number of stakeholders to receive a large Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

66 number of invaluable input. Furthermore, the Project Team will follow-up on survey recipients where feasible and useful for the research objectives of the project. Another main challenge in this respect is to organise four local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan in rapid succession. Project Team approach: The Project Team will start organising the local workshops at an early stage of the project. For a smooth organisation of the workshops, the Project Team will closely cooperate with the European Commission and the Delegations of the EU to the respective countries, as well as draw heavily on the contacts and experience of the Project Team in the regions. Positioning and organising large data volumes, stakeholder input and research The Project Team will employ both quantitative and qualitative analysis in its Mid-Term Evaluation of the GSP. This will require the positioning and organisation of large data volumes, stakeholder input and research. Project Team approach: The Project Team will build on its experience with Sustainability Impact Assessments to present the quantitative and qualitative analysis of the GSP in an efficient and clear manner. The Project Team will furthermore demonstrate how input from stakeholders is incorporated in the study. Aligning research direction and analytical outputs The Project Team aims to align its research direction and analytical outputs with ongoing policy thinking and dialogue within the Commission to deliver a high value-added study. Project Team Approach: The Project Team will work in close liaison with the Commission to ensure alignment of research direction and analytical outputs and will provide regular updates on the project s progress. This includes meetings with counterparts across multiple services during the Inter-Service Steering Group meetings. 66

67 EUROPEAN COMMISSION 3. Case studies Given the broad scope of this evaluation, the use of case studies will be integral to a systematic analysis of the economic, social, environmental, and human rights impacts of GSP preferences on key countries and sectors. The case studies will mostly draw on qualitative literature research and in-depth stakeholder engagement. Stakeholder questionnaires, interviews and workshops will be used to gather invaluable information and insights from stakeholders concerning the countries and sectors covered in the case studies. Importantly, statistic tools will also complement the qualitative analysis with the development of key indicators over the past years to ultimately produce valuable output in the form of specific policy recommendations. The Project Team will conduct six case studies on the impact of the different GSP arrangements on beneficiary countries and sectors. The six case studies can be divided into the following three categories: (i) Case studies on the textiles and machinery sectors - The Project Team will conduct two case studies to analyse the impact of the GSP on producers and industries in the EU and in the beneficiary counties. The textile sector has been selected because the sector benefits the most under the scheme. The machinery sector has been selected due to concerns about intensifying competition for EU industry in this sector as a result of the trade preferences. The Project Team will carefully analyse the impact of the GSP preferences on EU producers and industries using, or competing with, imported goods under the scheme. Additionally, further examination will be undertaken to assess the global competitiveness of the EU and partner countries in both industries. (ii) Case studies on the GSP+ in Pakistan and Bolivia - The Project Team will conduct two case studies to analyse the economic, social, environmental, and human rights impact of the GSP+ arrangement in Pakistan and Bolivia. Pakistan has been selected because it is the biggest beneficiary under the GSP+. Bolivia has been selected for a case study to extend the focus of the evaluation beyond Asia and Africa. A special focus will be placed on the ratification and implementation of international conventions and potential unintended consequences of the GSP+ in these countries. The Project Team will furthermore examine the effect of the GSP+ monitoring framework and the awareness of GSP+ requirements among key stakeholders. (iii) Case studies on the EBA in Ethiopia and Bangladesh: The Project Team will conduct two case studies to analyse the economic, social, environmental, and human rights impact of the EBA arrangements in Ethiopia and Bangladesh. Bangladesh has been selected for a case study because it is the biggest beneficiary under the EBA arrangement. Ethiopia has been selected because its economy is relatively diversified and to extend the focus of the study beyond Asia and South-America. A special focus will be placed on the effect of the EBA arrangement on economic development, poverty reduction and the distribution of gains, as well as possible unintended consequences. In order to ensure uniformity and comparability of the case studies, the Project Team will develop an analytical approach and annotated outlines for the case studies, Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

68 incorporating comments by the Commission, to facilitate comparative analysis and draw conclusions for the three categories of case studies Analytical approach to case studies The analytical approach to the case study series will be designed to take into account country/sector-specific conditions, as well to address common research questions using state-of-the-art available indicators and methodologies. Consistency across case studies will allow for the constitution of a final qualitative dataset from which systemic conclusions can begin to be drawn. The case study approach will combine high quality desk research, including review of local, regional and relevant international literature sources, with on-the-ground stakeholder consultations. To the extent possible, the Project Team will dovetail case studies with project actions in situ, i.e. workshops and/or field research. Case studies will also incorporate analysis of locally produced data sources, comparing wherever possible with corresponding figures from the EU or international organisations. Transparency and reliability of domestic institutions will be a consistent theme across case studies in this regard as improvement of domestic institutional capacity is closely aligned with the primary objectives of the EU s external sustainable development platform. The Project Team will synthesise from the abovementioned resources its original analysis of the GSP s effects in the target country. This analysis will reflect the scheme s economic, social, environmental and human rights impacts. Each case study will further contain sections detailing any unanticipated effects of the GSP scheme encountered during the course of research, and will also characterise and disaggregate from the rest of the GSP cohort the reference country s trade profile with the EU. Finally, the case studies will systematically include policy recommendations specific to bilateral trade between the reference country and the EU, as well as preliminary identification of thematic recommendations applicable to comparable GSP beneficiaries. The case-study approach will incorporate the following analytical questions: Case study Impact of the GSP on the textile sector and machinery Analytical questions - What is the impact of the GSP arrangements on producers and industries in beneficiary countries? - What is the impact of the GSP arrangements on EU producers and industries using or competing with goods imported under GSP preferences? - What is the impact of the GSP preferences on the global competitiveness of beneficiary countries industries and EU industry? - What is the impact of the GSP arrangements on the development of global value chains? - What is the impact of the reduction in the number of GSP beneficiary countries under Regulation (EU) 978/2012? o Have competitive pressures been reduced for EU producers and industries previously competing with producers and industries o in excluded countries? Have competitive pressures been reduced for producers and industries in beneficiary countries? - What is the impact on production costs and overall competitiveness for EU producers that rely on imports under GSP preferences? - What is the impact on costs for EU consumers? Impact of the - What are the economic, social, environmental, human rights and 68

69 EUROPEAN COMMISSION GSP+ in Pakistan and Bolivia Impact of the EBA in Ethiopia and Bangladesh good governance impacts of the GSP+? - What is the impact of the GSP+ on the implementation of GSP+ relevant international conventions since the country s adhesion to GSP+? o How is the political will in the country to implement and adhere to these international conventions? - What is the role of the GSP+ and its monitoring framework in the positive and/or negative changes that occurred? - What is the level of awareness among key stakeholders of GSP+ requirements? - Are there any unintended consequences of GSP+? - What are the economic, social, environmental and human rights impacts of EBA? - What is the impact of EBA on economic development? - What is the impact of EBA on poverty reduction? - What is the impact of EBA on the distribution of gains? - Are there any unintended consequences of EBA? 3.2. Case study outlines This section outlines the different case studies to be included in the study. Summary Impact of the GSP arrangements on the textile sector and machinery Synopsis of the main findings and policy recommendations Introduction to the sector in focus Definition of the sector in focus: o Textile: HS Chapters o Machinery: HS Chapter 84 NB. Subsections will be further defined based on their relative importance under the GSP arrangements and in exports to and imports from the EU. GSP coverage, including for the specified tariff lines GSP utilisation rates, including top GSP beneficiaries exporting under the specified tariff lines Impact of the GSP arrangements Impact on producers/industries in beneficiary countries: o Competitive pressures, taking into account the reduction in the number of GSP beneficiaries Impact on EU producers/industries: o Competitive pressures, taking into account the reduction in the number of GSP beneficiaries o Costs of production o Functioning of the graduation mechanism o Functioning of the safeguard measures Impact on global competitiveness for: o EU producers/industries o Producers/industries in beneficiary countries Unintended consequences Overview of the unintended consequences of the GSP arrangement on the sectors, potentially: o Increased costs of the GSP for EU industry Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

70 o o Increased competition for EU industry Negative impact on overall trade objectives Impact of the GSP+ arrangement on Pakistan and Bolivia Summary Synopsis of the main findings and policy recommendations Introduction to the country in focus Country profile, including information on GSP+ admission Awareness among key stakeholders of the GSP+ arrangement Impact of the GSP+ arrangement Assessment of the economic impacts, including: o Coverage rate o Utilisation rate o Trade volumes and terms of trade: observed values o Economic diversification o Economic growth rate Assessment of the human rights impacts, including: o Civil liberties o Non-discrimination, minority rights and equality before the law o Political participation o Individual liberties and individual security o Procedural fairness in law o Physical integrity Assessment of the social impacts, including: o Employment development o Decent Work Agenda (job creation, labour standards, social protection and social dialogue) o Wage development o Working conditions o Poverty incidence o Social inclusion o Inequality o Gender equality Assessment of the environmental impacts, including: o Air and water quality o Waste o Natural resources (including forests, wildlife and fisheries) o Biodiversity o Air pollution o Climate change o CO2 and Greenhouse Gasses (GHGs) emission per unit of output Assessment of the impact on good governance, including: o Voice and accountability o Political stability and absence of violence/terrorism o Government effectiveness o Regulatory quality o Rule of law o Corruption o Political rights Implementation of GSP+ covered international conventions Impact of the GSP+ on the implementation of GSP+ covered international 70

71 EUROPEAN COMMISSION conventions o Role of GSP+ and its monitoring framework o Political will in the beneficiary country to implement the conventions, including assessment of action plans, cooperation with international monitoring bodies, etc. Awareness among key stakeholders of the GSP+ requirements Unintended consequences of the GSP+ arrangement Overview of unintended consequences of the GSP+ arrangement in the beneficiary country, potentially: o Decreased utilisation and exports under the GSP+ arrangement o Trade diversion from GSP+ beneficiaries to FTA beneficiaries o Decreased export diversification o Negative economic, social, environmental, human rights or good governance impact Summary Impact of the EBA arrangement on Bangladesh and Ethiopia Synopsis of the main findings and policy recommendations Introduction to the country in focus Country profile Awareness among key stakeholders of the EBA arrangement Impact of the EBA arrangement Assessment of the economic impacts, including: o Coverage rate o Utilisation rate o Trade volumes and terms of trade: observed values o Economic diversification o Economic growth rate Assessment of the social impacts, including: o Employment development o Decent Work Agenda (job creation, labour standards, social protection and social dialogue) o Wage development o Working conditions o Poverty incidence o Social inclusion o Inequality o Gender equality Assessment of the environmental impacts, including: o Air and water quality o Waste o Natural resources (including forests, wildlife and fisheries) o Biodiversity o Air pollution o Climate change o CO2 and GHGs emission per unit of output Assessment of the human rights impacts, including: o Civil liberties o o Non-discrimination, minority rights and equality before the law o Political participation o Individual liberties and individual security o Procedural fairness in law o Physical integrity Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

72 Unintended consequences Overview of unintended consequences of the EBA arrangement in the beneficiary country, potentially: o Decreased utilisation and exports under the EBA arrangement o Trade diversion from EBA beneficiaries to FTA beneficiaries o Decreased export diversification o Negative economic, social, environmental or human rights impact 3.3. Provisional overview of literature and data per case study This section presents an overview of the literature and data that will be used for the case studies. This list is provisional and will be expanded as the project progresses. Institution Title Year EU Universities, research institutes and think tanks International organisations Newspaper articles and Internet sources European Commission and International Labor Organization Overseas development institute; The North-South Institute L Institut Nord-Sud International Journal of Scientific & Technology Research Bangladesh Foreign Trade Institute Centre for Policy Dialogue Association for Research and Study of Iberoamerican Issues (AIETI) United Nations, Department of Economic and Social Affairs International Centre for Trade and Sustainable Development New Age Foreign Affairs Insights & Reviews BANGLADESH Joint Statement: Staying Engaged: A Sustainability Compact for Continuous Improvements in Labour Rights and Factory Safety in the Read-Made Garment and Knitwear Industry in Bangladesh Study on the poverty impact of changing the graduation threshold in the Generalised System of Preferences (GSP) trade scheme Impact of EU GSP Facilities on Export Growth of Bangladesh: Especially on Readymade Garments Industry The Revised Generalized System of Preference Scheme of European Union: Implications for Bangladesh Increasing the Market Access for Agricultural Products from Bangladesh to the EU European Union Trade Policy and the Poor: Towards Improving the Poverty Impact of the GSP in Latin America. Trade Benefits for Last Developed Countries: the Bangladesh Case. Market Access Initiatives, limitations and Policy Recommendations EU, Bangladesh Agree on Sustainability Compact in Wake of Factory Collapse Bangladesh to lose GSP facilities in EU after attending MIC status: EU envoy Changes in the Rule of Origin of EU-GSP Scheme and Bangladesh s RMG Industry The Daily Star Get ready for GSP Plus: EU 2016 BOLIVIA 72

73 EUROPEAN COMMISSION EU International organisations Newspaper articles and Internet sources National governments Universities, research institutes and think tanks NGOs Newspaper articles and Internet sources EU International organisations Universities, research institutes and think tanks European Commission Justice & Peace Joint Staff Working Document: the EU Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) covering the period The EU Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) covering the period Generalized System of Preferences Plus (GSP+). Advancing Labour and Human Rights Through Trade ILO ILO CEACR observations - Bolivian thoughts in an Emerging World Bolivia needs to use its trade preferences with the EU UnderCurrentNews Bolivia keeps EU GSP+ status 2013 U.S. Department of State, Bureau of Economic and Business Affairs Mizan Law Review International Development Research Centre Traidcraft Exchange ETHIOPIA 2013 Investment Climate Statement Ethiopia WTO Accession in the Ethiopian Context: A Bittersweet Paradox Trade Liberalization and Poverty in Ethiopia: A CGE Analysis Economic Partnership Agreements still pushing the wrong deal for Africa? Capital EU to boost Ethiopia s export 2013 All Africa European Commission Trade Related Technical Assistance (TRTA II) Programme ILO FIDH and HRCP Durham University & Durham Global Security Institute Journal of Economic Library Ethiopia: Why Ethiopia s Economic Diplomacy Pays off PAKISTAN 2015 The EU s New GSP and Pakistan 2013 Joint Staff Working Document: the EU Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) covering the period The EU Special Incentive Arrangement for Sustainable Development and Good Governance ( GSP+ ) covering the period Enhancing Pakistan s Trading Benefits from the Proposed EU GSP Plus Scheme GSP+ and Pakistan s EU Export Opportunities: A Business Guide ILO CEACR observations Assessment of Pakistan s compliance with GSP+ obligations ( ) Just Another Carte Blanche? EU GSP Plus Status and Human Rights in Pakistan Export Boost of Textile Industry of Pakistan by Availing EU s GSP Plus n/a n/a Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

74 Others Newspaper articles and Internet sources Universities, research institutes and think tanks Journal of European Studies Friedrich Ebert Stiftung The Pakistan Business Council Pakistan Workers Confederation Pakistan Readymade Garments Manufacturers & Exporters Association International The News Dawn Business Recorder The Express Tribune The World Economy Journal of Economics Library International Journal of Textile Science Cambridge Journal of Regions, Economy and Society An Assessment of Opportunities for the EU s Enhanced Engagement with Pakistan GSP Plus Status and Compliance of Labour Standards A Road Map for Optimising Pakistan s GSP Plus Status European Union GSP Plus and Challenges of Labour Standards Compliance in Pakistan A Presentation on EU GSP Plus: Massive Trade Opportunities for Pakistan Pakistan Fails to Fully Exploit EU s GSP Plus Concession Steps Sought for Complying with EU s GSP Plus Conventions Exports to EU Increased by $1bn under GSP-Plus Status n/a n/a GSP Plus Review 2015 GSP Plus Review Mission to Arrive on October 30 Pakistan s GSP Plus Status Could Be Under Threat, Says EU TEXTILE SECTOR Garment Industry in Sri Lanka and the Removal of GSP Plus by EU Export Boost of Textile Industry of Pakistan by Availing EU s GSP Plus Role of Textile and Clothing Industries in the Growth and Development of Trade and Business Strategies of Bangladesh in the Global Economy Trade Policy and Regionalism in Global Clothing Production Networks Stakeholder Consultation A continuous and wide-ranging consultation process shall be conducted throughout the project. This inclusive consultation process is a key characteristic of all EU impact assessments and evaluations. The effective delivery of stakeholder consultation requires adherence to the common methodological framework outlined in the Better Regulation Toolkit 117 and Better Regulation Guidelines, 118 as well as in the formulation of a robust methodological approach in response to the specific requirements of this evaluation. The Project Team will establish a dynamic and robust methodological approach that will 117 European Commission. (2015). Better Regulation Toolbox. Available at: European Commission. (2015). Better Regulation Guidelines (SWD(2015) 111 final). Available at: 74

75 EUROPEAN COMMISSION adhere to the minimum standards for stakeholder consultation 119 to ensure that the consultation process is: Comprehensive: giving all stakeholders the opportunity to express their views; Balanced: ensuring that the consultation is representative; Timely: allowing sufficient time for stakeholder inputs and contributions; Tailored: ensuring that the needs of specific target audiences are met; and Incorporated: taking into account all feedback and input in the study. This section outlines the methodologies and tools the Project Team will employ in conducting stakeholder engagement and consultation Objective and scope The objective of the stakeholder consultation process is two-fold: (i) to collect invaluable information, ideas, opinions and insights from a wide range of stakeholders to complement the data analysis and literature review; and (ii) to raise awareness of the EU s GSP among relevant stakeholders. The focus of the stakeholder consultation process will be to assess whether the objectives set by the GSP Regulation are on track to be achieved. The following key aspects will be consulted on: Effectiveness To what extent are the objectives of the current GSP on track to be achieved? What has been the impact of the present scheme on developing countries and LDCs? What are the factors (positive and negative) influencing the achievements observed? What unintended consequences, if any, can be linked to the design, implementation, or use of the current GSP? Efficiency To what extent is the current GSP efficient? Coherence To what extent is the current GSP coherent with the EUo thelevant policies? Relevance To what extent is the current GSP scheme relevant to the development needs which it is intended to address? A particular focus of the consultation process and activities will be on the countries and sectors covered in the case studies: Bangladesh, Ethiopia, Bolivia and Pakistan and the textile sector and machinery. Through the different stages of the consultation process, the feedback, results, and data gathered among others will feed into answering these questions in the Final Report Stakeholder mapping A preliminary list of key stakeholders in the EU, Bangladesh, Ethiopia, Bolivia and Pakistan is included in Annex IV. To establish the list, initial desk research was conducted to identify relevant stakeholders from national and regional government 119 European Commission. (2016). Handbook for trade sustainability impact assessments 2 nd edition. Available at: Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

76 administrations, businesses, social partners, international organisations, civil society and research institutes. The preliminary stakeholder list will serve as a database for the consultation and stakeholder outreach activities: Local workshops priority stakeholders will be selected from the database, in close consultation with the European Commission and the respective EU Delegations, to attend the local workshops. Correctly assessing the most adequate participants to attend and speak at the workshops is of ultimate importance, as the quality of the data gathered from the workshops relies on this. Priority stakeholders are therefore selected taking into account various aspects, such as the relevance of the administration or organisation and involvement with the GSP. Interviews and meetings priority stakeholders will be selected from the database to conduct interviews in the context of the case studies on Bangladesh, Ethiopia, Bolivia, Pakistan and the textile and machinery sectors. Online public consultation stakeholders in the database will be invited to complete the stakeholder questionnaire, given their expertise and experience with the GSP, trade policy and social rights, human rights and environmental protection. Please note that this list contains suggested stakeholders and will be expanded and refined throughout the project in consultation with the Inter-Service Steering Group and EU Delegations Stakeholder consultation process The Project Team will employ a wide range of consultation activities and tools to ensure a comprehensive and well-balanced consultation process. The activities and tools include a dedicated project website and electronic outreach tools, a 12-week online public consultation, interviews and meetings with relevant stakeholders, Civil Society Dialogues in Brussels, local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan and an ongoing dialogue with the ISSG. The consultation activities and tools, including their respective timing, will be discussed in more detail in the sections below. 76

77 EUROPEAN COMMISSION Figure 2: Overview of the stakeholder consultation activities and tools Dedicated website for the GSP Evaluation The Project Team has designed and launched a dedicated GSP Evaluation website at to serve as the main platform for conducting online consultation as well as for regularly and pro-actively informing stakeholders on the Mid- Term evaluation and will include the following features: Publication of all relevant information concerning the evaluation s progress through uploading of reports (both draft and final versions), minutes of Civil Society Dialogues and the local workshops, a summary on the stage of the evaluation process, relevant background information and newsletters (as approved by the Commission); Questionnaire functionalities for the online stakeholder consultation; Publication of stakeholder input (permission based); Detailed information on local workshops and Civil Society Dialogues; Dedicated address for the GSP Evaluation (comments@gspevaluation.com); and Data collection tools built on the website s back-end to easily collect and collate information on website usage ( hits ). Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

78 The website be updated to coincide with the completion of each phase and the main project deliverables. The website will ensure long-term visibility of the project throughout its continued maintenance for 24 months following the approval of the final report. An information depository within the GSP Evaluation website will house all project documentation (reports, public meeting reports, list of stakeholders (permission based), publication/documentation sources and other outputs as approved by the Commission). Figure 3: Homepage of the project website at Electronic stakeholder outreach tools In addition to the dedicated website, the Project Team will maintain contact with relevant stakeholders through various other electronic tools to disseminate information on the progress on the Mid-Term Evaluation, namely electronic newsletters, social media channels such as Twitter and LinkedIn. Electronic newsletter: A newsletter will be disseminated electronically to the stakeholder network throughout the study. The newsletter will include a summary of the ongoing evaluation process, consultation activities and preliminary results of the project. The newsletter will be distributed both via within the network and will also be made publicly available on the project website. Twitter: Twitter will form an integral part of the evaluation s visibility strategy. The Project Team will utilise this tool to post frequent updates on the evaluation process, 78

79 EUROPEAN COMMISSION links to the project reports and other sections of the project website, as well as other sources of useful, relevant information. LinkedIn: The Project Team will maintain an active LinkedIn account in order to promote relevant materials, such as infographics, reports, meetings and information on the local workshops, as well as links to relevant sections of the project website. Through LinkedIn, the Project Team will be able to share content with stakeholders and build stakeholder engagement. Additionally, the Project Team will create an ongoing community dialogue by asking stakeholders to ask and answer project related questions. This will also help to increase project s visibility Public online consultation The purpose of the public online consultation will be to collect information, views and opinions on the application of the GSP Regulation and its effectiveness, efficiency, coherence and relevance. The main advantage of using questionnaires is in their ability to gather large volumes of standardised information with a relatively efficient use of budgetary and personnel resources. In addition, stakeholders are given appropriate time to prepare responses, allowing them to gather and utilise information that may not be readily available during an interview. Two major drawbacks of using questionnaires include the generally low response rates as well as the rigidity in this form of feedback. Inevitably, in some cases the questions asked may not be entirely applicable to the stakeholder. In order to minimise these risks and aim for a high rate of responses, the Project Team will followup on survey recipients with telephone calls where feasible. The public online consultation is expected to be launched in February 2017 and will run for 12 weeks. The questionnaire will be produced and made available on the website in English, French, Spanish, Portuguese and Russian. The questionnaire will further be distributed to participants at the local workshops. The EU adopts many good practices for democratic decision making, placing a high priority on considering the input of business and civil society stakeholders. To conduct questionnaire consultation with EU stakeholder groups, this Evaluation can leverage on existing consultation mechanisms such as the Your Voice in Europe 120 platform on the DG Trade website which can be linked to the dedicated website of the project, as well as tap into networks and dialogues established in the Committee of the Regions and European Economic and Social Committee Interviews and meetings Interviews conducted over telephone and face-to-face meetings will constitute the most direct form of stakeholder engagement under the GSP Mid-Term Evaluation. Structured interviews will allow for the Project Team to interact directly with the stakeholder groups and obtain detailed information. The main objective of these interviews is to facilitate detailed discussions with stakeholders on the various impacts of the GSP. Additionally, interviews will allow the Project Team to obtain in-depth qualitative data on the subject, and also give insight into a range of different perspectives. However, one major constraint of interviews is that they can be time-consuming. To ensure maximum efficiency, the Project Team will 120 The Your Voice in Europe platform can be found at Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

80 develop a standard list of questions as a basis for conducting interviews while allowing a degree of flexibility to the interviewer to interact with the interviewee. Interviews will also be the main form of consultation when engaging with the identified stakeholders; given that response rates tend to be higher in interviews than in the alternative method of distributing surveys. A further benefit of conducting interviews is that this will also mitigate against the constraints of internet access and usage that may negatively impact the response rate to web-based feedback in many developing countries, particularly LDCs Civil Society Dialogues The Project Team will participate in two Civil Society Dialogues (CSDs) organised by DG Trade, involving participants from registered civil society organisations. The CSDs will serve to obtain feedback from EU civil society on the project reports and invaluable insight on the impact of the GSP Regulation on EU industry. The first CSD will take place after the submission of the Draft Inception Report, and the second meeting will take place following the submission of the Draft Interim Report. The reports will be posted online for external stakeholders prior to the public meetings. During the meetings, the Project Team will present the objectives and planned activities under the GSP Mid-Term Evaluation and will discuss feedback with stakeholders. The Project Team will prepare full recordings of the meetings and publish the meeting minutes on the dedicated project website after approval by the European Commission. As necessary, ad-hoc meetings and consultation interviews can be scheduled within the margins of these meetings Local workshops in Bangladesh, Ethiopia, Bolivia and Pakistan A critical component of the consultative mechanism for the evaluation is the organisation of workshops. Four full-day workshops will be held in target countries identified by the Commission, namely Bangladesh, Ethiopia, Bolivia and Pakistan. The workshops are aimed at gathering the views of key stakeholders about the EU s GSP, as well as raising overall awareness about the GSP. The targeted stakeholders include: private businesses, national and regional administrations, social partners including trade unions, international organisations that are present on the ground, and civil society. The first workshop was held at Le Meridien Dhaka, Bangladesh on 7 February 2017.The full-day workshop was designed to promote dialogue and to gather the perspectives of participants on the impact and application of the EU s EBA in Bangladesh. It brought together around 70 stakeholders from government, industry and civil society. Notable ministries/organizations which were represented include: the Ministry of Commerce, Bangladesh; the Department of Environment, Ministry of Environment and Forests, Bangladesh; the United Nations Development Programme, Bangladesh; the International Labour Organization, Bangladesh; the Centre for Policy Dialogue; the Bangladesh Garment Manufacturers and Exporters Association; the Bangladesh Centre for Worker Solidarity; the IndustriALL Council Bangladesh; and the Bangladesh Poribesh Andolon. High level speakers included H.E. Mr. Tofail Ahmed, Honourable Minister of Commerce, Bangladesh and H.E. Mr. Pierre Mayaudon, Ambassador and Head of the European Union Delegation to Bangladesh. Throughout the workshop, participants were provided with the opportunity to learn more about the EU s GSP, to comment on the preliminary findings of the Mid-Term Evaluation 80

81 EUROPEAN COMMISSION with respect to Bangladesh, and to share their views on the impact and application of the GSP. Local experts and government representatives were invited to comment specifically on the trade, economic, social, and environmental impacts of the EBA in Bangladesh. In like manner, representatives from the European Commission and the Project Team shared background information on the GSP, the objectives of the Mid-Term Evaluation, and the preliminary findings of the Evaluation with respect to Bangladesh. Overall, the workshop was well-received by the Bangladeshi stakeholders. It featured a good mix of government, industry and civil society stakeholders who were very enthusiastic about sharing their views on the EBA in Bangladesh. This resulted in fruitful dialogue and useful feedback, which was ably recorded by the Project Team. However, for future workshops, it is recommended that breakout sessions can be utilized to better channel more detailed discussion on thematic issues, such as the environment and human rights. Additionally, it is believed that consultation with stakeholders prior to and immediately following the local workshops may be desirable and effective for data gathering purposes. It would be ideal for the local EU Delegations to be involved in these meetings. The second workshop is proposed to take place in Addis Ababa, Ethiopia on 7 March The third workshop is tentatively scheduled to take place in La Paz, Bolivia in April Lastly, the fourth workshop is proposed to take place in May in Islamabad, Pakistan. The Project Team will organise these workshops in close liaison with the Commission and local EU Delegations. For each workshop, the Project Team will invite up to 30 participants. A diverse and balanced participation from government, civil society and industry stakeholders will be ensured. The Project Team will consult the local EU Delegation on the selection of participants and the final list of participants will be approved by the Inter-Service Steering Group. Detailed information, such as the date, venue, speakers and briefing documents, will be published on the dedicated project website and other electronic communication tools. Additionally, local media will be used to advertise and cover the workshops and the evaluation as well as raise awareness about the GSP. Both before and after each workshop, a press release targeting the local media will inform all stakeholders and other interested parties. Stakeholders will be invited to participate and comment on the work delivered during the interim project phase. At least 2 weeks in advance of the workshop, participants will be provided with the agenda and other relevant briefing documents, prepared by the Project Team in consultation with the ISSG. During the local workshops, key experts will present the intermediate findings of the evaluation and case studies as well as provide a general presentation of the evaluation process. Local experts will be invited to make presentations outlining the impacts of the GSP and participants will be invited to comment and ask questions. A proposed workshop agenda is presented below and builds on experience gained through the delivery of consultation workshops for previous projects implemented by the Project Team. The programme of each workshop will be finalised in consultation with the Inter-Service Steering group and the EU Delegation. The working language for the workshops in Pakistan, Ethiopia and Bangladesh will be English, while the working language for the workshop in Bolivia will be Spanish. All workshop participants will be invited to complete a workshop evaluation form outlining their views on the workshops just prior to the closing remarks. The evaluation will be designed to capture quantitative and qualitative feedback of technical relevance for the assessment and the merits of the workshop as well as of the logistics, Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

82 content and areas of future improvement. The summary of the results will be reported to DG Trade as part of the Interim and Final Reports. Following the workshop, the participants will be encouraged to further contribute to the evaluation through the public online consultation. They will furthermore be added to the project mailing list to be kept informed of project developments. As a follow-up to each workshop, the Project Team will publish a workshop report on the dedicated project website. This report will include summaries of the presentations, a detailed overview of the stakeholder contributions to the discussions and questions raised and a participant list. The PowerPoint presentations provided by the speakers will also be uploaded on to the dedicated website. Finally, a short overview and a link to the workshop report will be featured in the GSP Evaluation Newsletter. Proposed workshop agenda for workshops in Bangladesh and Ethiopia Timing Topic 08:30-09:00 Registration of participants 09:00-09:15 Opening remarks EC Representative/Local Government Representative/Project Team 09:15-09:30 EU s GSP and EBA: Rationale from the EU s perspective EC Representative 09:30-09:45 EU s GSP and EBA: Rationale from the Local Government s perspective Local Government Representative 09:45-10:15 The GSP Evaluation: Methodology and main interim findings Willem VAN DER GEEST, Team Leader 10:15-10:30 Discussion and feedback 10:30-11:00 Coffee break and networking 11:00-11:30 EBA: Preliminary findings and introduction to the case study Willem VAN DER GEEST, Team Leader 11:30-11:45 Discussion and feedback 11:45-12:15 Presentation of local or regional case study on the EU s GSP Local Expert 12:15-12:30 Discussion and feedback 12:30-13:30 Lunch and networking 13:30-14:00 The social impact of EBA in the specific country ILO Expert/Local Expert/Human Rights expert 14:00-14:15 Discussion and feedback 14:15-14:45 The environmental impact of EBA in the specific country Local Expert 14:45-15:00 Discussion and feedback 15:00-15:30 Coffee break and networking 15:30-16:00 Trade and economic impact of EBA in the specific country Willem VAN DER GEEST, Team Leader 16:00-16:15 Discussion and feedback 16:15-17:00 Ensuring stakeholder input into the GSP Evaluation: Concerns, progress 82

83 EUROPEAN COMMISSION and opportunities Panel discussion with speakers 17:00-17:15 Closing remarks EC Representative Proposed workshop agenda for workshops in Pakistan and Bolivia Timing Topic 08:30-09:00 Registration of participants 09:00-09:15 Opening remarks EC Representative/Local Government Representative/Project Team 09:15-09:30 EU s GSP+: Rationale from the EU s perspective EC Representative 09:30-09:45 EU s GSP+: Rationale from the Local Government s perspective Local Government Representative 09:45-10:15 The GSP Evaluation: Methodology and main interim findings Senior Project Expert 10:15-10:30 Discussion and feedback 10:30-11:00 Coffee break and networking 11:00-11:30 GSP+: Preliminary findings and introduction to the case study Senior Project Expert 11:30-11:45 Discussion and feedback 11:45-12:15 Presentation of local or regional case study on the EU s GSP+ Local Expert 12:15-12:30 Discussion and feedback 12:30-13:30 Lunch and networking 13:30-14:00 The human rights and social impact of GSP+ in the specific country Human Right expert/ilo Expert/Local Expert 14:00-14:15 Discussion and feedback 14:15-14:45 The environmental impact of GSP+ in the specific country Local Expert 14:45-15:00 Discussion and feedback 15:00-15:30 Coffee break and networking 15:30-16:00 Trade and economic impact of GSP+ in the specific country Senior Project Expert 16:00-16:15 Discussion and feedback 16:15-17:00 Ensuring stakeholder input into the GSP Evaluation: Concerns, progress and opportunities Panel discussion with speakers 17:00-17:15 Closing remarks EC Representative Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

84 4.4. Meetings with the European Commission and Inter-Service Steering Group In addition to the above listed forms of consultation, the Project Team will attend meetings with EC officials and the Inter-Service Steering Group throughout the project. During the meetings, the Team Leader (supported where necessary by the DS team and relevant Key Expert Team members) will provide a detailed update on the GSP Mid-Term Evaluation progress to date, and will consult with the EC to confirm DG Trade s priorities are addressed. These meetings will be important in ensuring that the work plan of the GSP Mid-Term Evaluation remains highly relevant to the work of the EC. The overall direction of the work of the Project Team will be agreed at these meetings. The following EU departments are represented in the ISSG: The Directorate General for Trade (DG TRADE); The Directorate General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW); The Directorate General for International Cooperation and Development (DG DEVCO); The Directorate General for Agriculture and Rural Development (DG AGRI); The Directorate General for Maritime Affairs and Fisheries (DG MARE); The Directorate General for Environment (DG ENV); The Directorate General for Health and Food Safety (DG SANTE); The Directorate General for Energy (DG ENER); The Directorate General for Eurostat European Statistics (DG ESTAT); The Directorate General for Taxation and Customs Union (DG TAXUD); The Directorate General for Legal Services (DG SJ); The European Commission Secretariat General; and The European External Action Service (EEAS). 84

85 EUROPEAN COMMISSION 5. Project timeline In this section the Project Team will present an organised timeline for the delivery of the project objectives as outlined above. The Team has organised the project timeline into three phases; the inception phase focuses on project preparation, planning evaluation methodology and background research, the implementation phase on stakeholder outreach, data analysis and case studies, and the finalisation phase will focus on the final GSP Mid-Term Evaluation report. Table 5 provides an overview of the timing of the different project activities. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

86 Table 5: Project timeline Key deliverables Kick-off meeting Website launch Draft Inception Report ISSG meeting Civil Society Dialogue Final Inception Report Surveys and interviews Online Public Consultation Workshop Bangladesh Workshop Ethiopia Workshop Bolivia Workshop Pakistan Draft Interim Report ISSG meeting (to be confirmed) Civil Society Dialogue (to be confirmed) Final Interim Report Draft Final Report ISSG meeting (to be confirmed) Final Report Y M NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT W

87 EUROPEAN COMMISSION 5.1. Inception phase (Month 1 3) In the inception phase of the GSP Evaluation, relevant literature and data has been reviewed. This has further led to data preparation, methodology refinement and identifying indicators for quantitative and qualitative research planned for the following implementation phase. In parallel, the Project Team has developed a comprehensive Stakeholder Consultation Strategy to ensure a broad involvement of stakeholders throughout the entire evaluation process. The inception phase will further include the design, content development and launch of the dedicated project website as part of the consultation process, as well as the initial planning for the local workshops Inputs Refine contact database; Website creation and launch; Preparations for the local workshops Activities The activities conducted by the Project Team during the inception phase were largely of a planning and preparatory nature. At the outset of the project, on 17 November 2016, the Project Team has initiated the kick-off meeting with the ISSG to set out the context and scope of the study. Furthermore, the Team has conducted a two-step process in which firstly relevant literature and data sources have been selected and reviewed. Based on the review of literature and data, the preliminary intervention hypothesis has been formulated and the methodological approach to the study has been further developed. Additionally, the Project Team has composed a descriptive account of the GSP with detailed information on the historical development, objectives and functioning of the scheme. The Project Team has also developed a Stakeholder Consultation Strategy and commenced consultation work with the stakeholder network through initial contact. The Consultation Strategy includes an overview of the consultation process objectives, activities and principal stakeholders to be consulted. As an essential part of the consultation process, the Project Team has designed and developed the dedicated GSP website, which serves as an important tool in raising awareness about the scheme and collecting stakeholder input. To summarise, the Project Team has conducted the following activities: Kick-off meeting with the ISSG; Preliminary literature review; Descriptive account of the GSP; Preliminary intervention hypothesis; Development of methodological approach; Development of stakeholder consultation strategy; Design and development of the dedicated website Outputs Project website; Stakeholder consultation network; Workshop proposal for the first local workshop in Bangladesh (draft delivered); Inception Report (draft delivered); Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

88 Meeting minutes of the kick-off meeting; 5.2. Implementation phase (Month 3 8) During the implementation phase, the Project Team will conduct extensive quantitative and qualitative research based on analysis of relevant literature, data sources and stakeholder contributions. A comparative analysis of the economic, social, environmental and human rights impact of the GSP Regulation will be based on the relevant data since The Project Team will also assess the impact of different GSP arrangements through six case studies: the impact of the Standard GSP on the textile industry and machinery, the impact of GSP+ in Pakistan and Bolivia, and the impact of EBA in Ethiopia and Bangladesh. Local workshops, public online consultation and targeted surveys and interviews will feed into these case studies and the overall study. These consultation activities will be ongoing and will actively invite stakeholder to contribute to the GSP Evaluation and provide their feedback Inputs Preparations for the local workshops; Development of the stakeholder questionnaire; Collection of quantitative and qualitative data Activities The main element of the implementation phase is the extensive quantitative and qualitative analysis and research to be conducted by the Project Team. The evaluation of the GSP s impact and effectiveness, efficiency, coherence and relevance will be based on research and analysis of relevant literature, data and stakeholder contributions. After initial contact with relevant stakeholders during the inception phase, stakeholders have been actively involved in the evaluation process through a range of consultation tools and activities. Stakeholder have been encouraged to contribute to the study through the dedicated project website, newsletters, online public consultation, local workshops, interviews and surveys and the Civil Society Dialogues. This qualitative research will complement the quantitative research for the case studies on the impact of the GSP in beneficiary countries. The Project Team will ensure that all contributions and feedback from stakeholders will be incorporated in the report and will display the contributions on the project website (permission based) to ensure a transparent, open, inclusive and coherent consultation process. To summarise, the Project Team has conducted the following activities at time of writing: Launch the online public consultation; Local workshops in Bangladesh, Ethiopia and Bolivia; Meetings and interviews with relevant stakeholders; Quantitative and qualitative analysis of the economic, social, environmental and human rights impact of the GSP. The Project Team will conduct the following activities in the coming months: Online public consultation; Local workshop in Pakistan; Quantitative and qualitative analysis of the economic, social, environmental and human rights impact of the GSP; 88

89 EUROPEAN COMMISSION Meeting with the ISSG; Second Civil Society Dialogue in Brussels Outputs Case studies on the impact of the GSP in Pakistan, Bolivia, Ethiopia and Bangladesh, in the textile and machinery sector; Preliminary evaluation of the GSP s effectiveness, efficiency, coherence and relevance; Surveys and interviews; Workshop reports and presentations; Interim Report; Meeting minutes of the ISSG; Report and presentation for the Second Civil Society Dialogue in Brussels; Meeting minutes of the Second Civil Society Dialogue Finalisation phase (Month 9 12) The finalisation phase will deliver a final round of qualitative and quantitative analysis outputs for the overall assessment and case studies to form part of the Draft Final Report. This phase will capture the final feedback and comments received online and through the stakeholder consultation network, as well as feedback from the Commission and the Inter-Service Steering Group. As a result of the revised analysis and all stakeholder input received throughout the evaluation process, risk and opportunities regarding the GSP s objectives, efficiency and effectiveness will be identified and policy recommendations will be suggested to mitigate these risks and to review the GSP Regulation Inputs Quantitative and qualitative analysis of the GSP s impact Activities The Project Team will direct its main focus on formulating an answer to the research questions of the evaluation. After the in-depth impact assessment carried out during the implementation phase, the Project Team will provide a clear overview of the economic, social, environmental and human rights impact of the three GSP arrangements. The Project Team will further identify the main risks and opportunities for the current GSP Regulation and develop concrete policy recommendations and flanking measures building on the quantitative and qualitative analysis of the GSP. In the fourth and final meeting with the ISSG during the finalisation phase, the Draft Final Report will be presented. The feedback provided during this meeting will be incorporated as input for final revisions to the analysis. To summarise, the Project Team will conduct the following activities: Formulation of policy recommendations and conclusions; Meeting with the ISSG. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

90 Outputs Stakeholder Consultation Report; Draft Final Report; Meeting minutes of the ISSG; Final Report. The Final Report, to be submitted by October 2017, will include the following elements: Descriptive account of the EU s GSP; Detailed description of the methodology used for the evaluation; Outcomes and results of the impact assessment; Conclusions reached and proposals for policy recommendations and flanking measures; Details of communication and consultation activities: o Outline of contacts with stakeholders in the EU and the beneficiary countries; o Minutes of the local workshops in Pakistan, Bolivia, Ethiopia and Bangladesh, including key stakeholder positions and points of view; o Minutes of the Civil Society Dialogues held in Brussels, outlining key stakeholder positions and points of views, programmes and a list of participants; o Concise summary of comments, suggestions and feedback received and how such feedback was incorporated in the Final Report; and o Overview of the level of use of the dedicated project website. References and data sources used. 90

91 EUROPEAN COMMISSION Annex I: GSP+ covered conventions UN Conventions on human rights 1948 Convention on the Prevention and Punishment of the Crime of Genocide 1965 International Convention on the Elimination of All Forms of Racial Discrimination 1966 International Covenant on Economic, Social and Cultural Rights 1966 International Covenant on Civil and Political Rights 1979 Convention on the Elimination of All Forms of Discrimination Against Women 1984 Convention against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment 1989 Convention on the Rights of the Child ILO Conventions on labour rights 1930 Convention concerning Forced or Compulsory Labour (No. 29) 1948 Convention concerning Freedom of Association and Protection of the Right to Organise (No. 87) 1949 Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively (No. 98) 1951 Convention concerning Equal Remuneration of Men and Women Workers for Work of Equal Value (No. 100) 1957 Convention concerning the Abolition of Forced Labour (No. 105) 1958 Convention concerning Discrimination in Respect of Employment and Occupation (No. 111) 1973 Convention concerning Minimum Age for Admission to Employment (No. 138) 1999 Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour (No. 182) UN Conventions on environmental protection and climate change 1973 Convention on International Trade in Endangered Species of Wild Fauna and Flora 1987 Montreal Protocol on Substances that Deplete the Ozone Layer 1989 Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal 1992 Convention on Biological Diversity 1992 The United Nations Framework Convention on Climate Change 1998 Kyoto Protocol to the United Nations Framework Convention on Climate Change 2000 Cartagena Protocol on Biosafety 2001 Stockholm Convention on persistent Organic Pollutants UN Conventions on good governance 1961 UN Single Convention on Narcotic Drugs 1971 UN Convention on Psychotropic Substances 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances 2004 UN Convention against Corruption Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

92 Annex II: Overview of existing studies and research Study Objective Methodology Main findings/conclusions CARIS. (2010). Mid-Term Evaluation of the EU s Generalised System of Preferences. Copenhagen Economics. (2015). Assessment of Economic Benefits Generated by the EU Trade Regimes Towards the Developing Countries European Commission. (2016). Report from the Commission to the European Parliament and the Council on the Generalised Scheme of Preferences covering the period (COM(2016) 29 final) Aiello, F. and Demaria, F. (2009). Do trade preferential agreements enhance the exports of developing countries? Evidence from the EU Evaluating whether the EU s GSP meets the needs of developing countries and resulting in policy recommendations. Descriptive and quantitative assessment of the impact of preferential access schemes on the growth and diversification of exports from developing countries to the EU over time. Report to the European Parliament and the Council on the functioning of the GSP scheme, with special attention to the GSP+ arrangement. Analysing the impact of the EU s GSP on developing countries exports. Gravity modelling, CGE Evaluation, econometric analysis and legal analysis Trade flow mapping, tripledifference estimator - The GSP triggered preference margins positively impact trade and investment through different channels. Utilisation rates are related to the height of the tariffs. - The EU operates in a constrained environment when attempting to impact countries total exports. - GSP+ conditioning has limited effects on factual implementation of conventions. - Preferences under the EBA scheme have generated export increases that is approximately two times higher than that under the Standard GSP or GSP+ scheme. - Preferences have had an especially large impact on LDCs. - Full impacts on exports have occurred within two years. Data visualisation - Increase of preferential imports to the EU under the Standard GSP, GSP+ and EBA. The number of eligible imports have slightly decreased. - GSP+ monitoring provides a strong incentive for beneficiaries to improve the implementation and reporting on international conventions. Gravity modelling; estimation method - The largest impact on export increases is brought about by the EBA arrangement. - The GDP coefficient for importing countries is positive and statistically significant in two cases: oils-fats and residues from the food industry. 92

93 EUROPEAN COMMISSION GSP. Cirera, X. (2010). The Impact of Trade Preferences on Export Prices in the European Union Who Captures the Preference Rent? Cirera, X. and Alfieri, A. (2011). Unilateral Trade Preferences in the EU: An Empirical Assessment for the Case of Mozambican Exports. Analysing the preference rent capture induced via PTAs. Case study on the impact of unilateral trade preferences on developing countries. Econometric analysis analysing the degree of pass-through from tariffs to export prices; practical fixed-effects estimation Preference margin calculations, data visualisation of utilisation rates and MFN tariff - Exporters obtain a larger price margin under a preferential regime than under MFN. - Preference rent is only partially appropriated by exporters. - A large number of product lines are tariffed under zero. - Export margins utilisation rates are generally high. - No positive price margin captured by Mozambican exporters compared to MFN competitors. Humbert, F. (2008). Do Social Clauses in Generalised Systems of Preferences Advance the Cause of Women? Analysis and comparison of the GSP social clauses contained in the EU and the US. Assessment on adequacy on these means to tackle poor working conditions and advancing the cause of women. Case study, literature review. - Multilateral framework provides benefits de lege ferenda for GSP social clauses. - The current EU special incentive arrangement for sustainable development and good governance is compatible with WTO law. - GSPs with labour and women rights conditionality clauses have a greater potential to bring about changes in legislation. Beke, L., D Hollander, D., Hachez, N. and Pérez de las Heras, B. (2014). Report on the integration of human rights in EU development and trade policies. A contextualisation and conceptualisation of the EU s development-trade-human rights nexus. Primary sources, secondary sources and semistructured interviews with officials from the EU External Action Service and the European Commission - Trade, development and human rights are intertwined, acting as communicating vessels. - The EU has refined its legal and policy frameworks provision of development assistance and developed more coherent transversal policies. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

94 Velluti, S. (2016). The Promotion and Integration of Human Rights in EU External Trade Relations. Siles-Brügge. (2014). EU Trade and Development Policy Beyond the ACP: Subordinating Developmental to Commercial Imperatives in the Reform of the GSP. European Commission. (2016). Joint Staff Working Document on the EU Special Incentive Arrangement for Sustainable Development and Good Governance (GSP+) covering the period (SWD (2016) 8 final). Evenett, S. (2009). The European Union s Generalised System of Preferences. An Assessment of the Empirical Evidence. Brown, O. (2013). The Impact of EU Trade Agreements on Conflict and Peace. Assessing the EU s promotion and integration of human rights in its external trade relations. Specific focus is placed on changes introduced by the 2009 Treaty of Lisbon on EU practice. Assessing the relative importance of the EU s developmental agenda in relation to commercial imperatives. Assessing the ratification and implementation of GSP+ covered international conventions. Analysis of the effects and utilisation of GSP+. Evaluation of the economic evidence on the functioning and effects of the EU s GSP. Evaluation of the impact of trade agreements on peace and conflict. Legal analysis, ex ante and ex post assessment - The EU has significant human rights impact outside of its borders. - The EU s approach suffers from a lack of transparency, selective conditionality and the application of double standards. - There is absence of a uniform understanding and approach to the integration of human rights in the EU s external trade policy. Literature review - The GSP reforms are expected to have little impact on the total EU imports. - The GSP reforms intend to improve the EU s leverage in negotiations with emerging economies. Legal analysis - GSP+ has highly differing effects on the implementation of different types of conventions and on beneficiary countries. CGE modelling, gravity modelling - The GSP can create diversion away from long-standing non-eu trading partners. - The EU s GSP regime has a greater effect on recipient country exports than the US GSP. Literature review. - No systematic assessment of the potential impact of trade agreements on conflict dynamics. - Trade agreements can provide a vehicle for 94

95 EUROPEAN COMMISSION Persson, M. and Wilhemsson, F. (2013). EU Trade Preferences and Export Diversification. Hoda, A. and Prakash, S. (2011). Is the GSP scheme of the EU benefitting India s Exports? Pasha, H. (2014). GSP Plus Status and Compliance of Labour Standards in Pakistan. Investigating the impact of the EU s GSP on export diversification. Evaluation of the GSP scheme s impact on exports of India into the EU Assessment of the impact of GSP Plus on the economic condition and labour standards in Pakistan. Export diversification measures as the number of products the EU to influence conflict and peace dynamics. - Negative effect on export diversification for ACP countries under the GSP. Trend analysis - Expanding coverage of FTAs diminishes the significance of the EU s GSP scheme. - The Standard GSP has a mild effect on imports from the covered developing countries. - The GSP only mildly stimulated India s exports of manufactured products. Literature review, trend analysis and legal analysis - Pakistan increased its exports to the EU under GSP Plus. - Continuous violations of conventions on labour rights, including discrimination based on sex and child labour. Interim Evaluation of the EU s Generalised Scheme of Preferences 2017 Final Inception Report April 2017 EN

96 Annex III: Impact assessment problem tree Source: European Commission. (2011). Impact Assessment Accompanying the Proposal for a Regulation on Applying a Scheme of Generalised Tariff Preferences (SEC (2011) 536 final). Available at: p.10 96