Sri Lankan textiles may cut Indian shares in EU

The scheme, designed with a view to benefit vulnerable economies, will be in operation for a period of three years ending 2008.

Although Pakistan was trying hard to be part of the GSP Plus scheme, it was unlikely to benefit under the new dispensation. India, too, will not qualify to be a GSP Plus beneficiary.

To benefit from the GSP Plus scheme, countries would be required to demonstrate that their economies are poorly diversified and therefore dependent and vulnerable. The other qualifying criteria is that the GSP-covered imports from the qualifying country should represent less than 1 per cent of total EU imports under the GSP.

The GSP plus scheme will be one of the three sub-schemes of the revised GSP scheme to be announced shortly by the EU. The two other schemes include a normal GSP scheme and a GSP scheme for least developed countries. At present, there are five GSP schemes.

LDCs like Bangladesh and various African nations, sources said, would continue to have duty-free access to the European market under the GSP (for LDCs).

There is a question mark, however, on whether India will continue to qualify for the normal GSP scheme under which countries get preferential treatment but not duty free access. Certain EU members including France and Italy are objecting to India’s inclusion on the grounds that it does not require preferential treatment any more.

If India is kept out of the GSP scheme and Sri Lanka qualifies for the GSP plus scheme, it will be a double blow for the Indian industry which is already suffering due to preferential treatment given by the EU to a number of its less developed competitors.

The EU, it may be mentioned, absorbs about one-fifth of developing country exports. As much as 40 per cent of EU imports originate in developing countries. World’s 50 poorest countries, including 34 from sub-Sahara region, export to EU duty-free and quota-free.

Among the current GSP beneficiaries, the largest are China (35.8 per cent of imports under GSP), India (11.8 per cent) and Indonesia (5 per cent). Under the new scheme, as much as 80 per cent of China’s past GSP exports are expected to graduate out of the GSP.