Indian textiles are excluded from EU''s GSP, Sri Lanka and Bangladesh to profit

27 June 2005 -  India''s textile exports to the European Union will be excluded from EU''s new GSP scheme, due to be effective from 1 January 2006. India''s apparel exports will still enjoy tariff reductions by contrast. Bangladesh continues negotiating a change in rules of origin under the so-called EBA provision that grants duty-free entry while Sri Lanka will get duty-free access from 1 July.

The EU''s Generalised System of Preferences (GSP) scheme that has been in operation for the past ten years has just been revised. EU member states last week approved a simplification of the system that grants tariff reductions to imports from developing countries.

China''s textile and apparel exports to the European Union were excluded from GSP benefits, however. If Indian apparel qualifies for GSP due to be implemented on 1 January 2006, its textiles will also be excluded or ''graduated out''.

The new GSP will therefore not include a range of Indian textile products such as cotton yarns, fabrics and home textiles.

Sri-Lanka gets major benefit

Sri Lanka will become a major beneficiary country. The GSP ''plus'' that will offer duty-free access to Sri Lankan apparel is due to be implemented on 1 July 2005. Sri Lanka as a vulnerable country and having ratified certain criteria relating to human rights, labour rights and sustainable development, is therefore be due to benefit from the GSP-Plus.

Within the GSP criteria, there is also an EBA provision (Everything But Arms) that is aimed at poorest countries or LDC''s (Least Developed Countries) which include a host of African nations and a handful of Asian countries such as Bangladesh.

The EBA will continue to offer such countries duty free access to the EU. Bangladesh is currently in the midst of negotiations with EU trade officials to conclude a deal relating to new Rules of Origin (ROO).

Bangladesh negotiating new rules

The ROO previously required a country to demonstrate a double stage of production within that country in order to gain duty free access to the EU. To this end, fabrics and apparel had to be produced in Bangladesh. This can be waived if fabrics are imported from other SAARC countries such as India. Free trade rule permit such imports as they may be considered as having Bangladeshi origin.

The European Union could now ease its rules of origin by eliminating the double-stage requirement.

Also being discussed is the share of value added in the country, or percentage of the total unit price relative to the country of production. Bangladeshi apparel manufacturers are pushing for a much lower share. Producers prefer to see 25% in place of the current 51%.