EU to halve Asian tariff concessions next year

EU to halve Asian tariff concessions next year

BRUSSELS (DPA): Asian exporters, who get millions of dollars worth of tariff concessions under the European Union's Generalized System of Preferences (GSP), will see their access to the scheme slashed by 50 percent as of Jan. 1, 1997.

India, Pakistan, Thailand, Indonesia, Malaysia, and China are set to see their access to the Union's preferential tariff system cut by half for exports of such key products as textiles, garments, leather goods and fishery products.

The European Commission, which manages the tariff concessions, says the move is part of its determination to "graduate" countries out of the GSP once they become competitive in certain key areas.

"The GSP is a development tool," says an E.U. trade expert. "It's designed to help developing countries to sell their industrial and farm products on the European market. It can't and shouldn't go on indefinitely."

The Commission argues that once countries become internationally competitive, they do not need special tariff- slashing concessions to sell their products on the European market.

But, Asian nations are critical of the move. "It's difficult to understand why tariff benefits are being cut for Asian countries when the E.U. continues to give special tariff concessions to countries in eastern Europe and the Mediterranean region," says an Asian trade expert. "You can't argue that these countries are poorer than us."

In Thailand, seafood companies have called for a boycott of European whisky, Airbus jets and Louis Vuitton bags in protest at the E.U. move.

But, E.U. officials deny that they are being protectionist. "When some countries graduate out of the system, it opens the way for poorer countries to grab a share of the E.U. market," says one trade expert. "But, clearly it's never easy to give up privileges."

Under the E.U. plan, most Asian nations will see their tariff preferences for textile, leather and fishery products cut by 50 per cent on January 1, 1997.

One year later, the countries will be completely "graduated" from the E.U. system and will have to start paying the full tariff for these products.

South Korea, Hong Kong and Singapore, the most dynamic of the Asian tiger economies, lost their access to the special tariff scheme for products such as electronics, leather goods and steel in 1996.

The E.U. system for "graduating" countries out of the system is based on the evaluation of each nation's performance in certain key sectors.

Economic factors like per capita income, industrial development and sector specialization are taken into account.

For instance, although India and Pakistan are losing their GSP access for textiles and leather goods, they will still get tariff preferences for their other industrial and farm products to Europe.

E.U. trade experts say that the procedure should also help developing nations to diversify their export base.

But, until that happens, Asians say their exports of textiles, leather and fishery products will be badly hurt.

"The European market is a very competitive one," says an Asian trade official. "Tariff cuts help us to sell our products in the face of competition from other regions."

Asian textile exporters are specially angry because the E.U. has already a 20 per cent provisional anti-dumping fine on their exports of unbleached cotton fabric to European markets.

They also say the E.U. is not being as generous as it promised it would be in liberalizing its imports of textiles and garments as part of a commitment made in the World Trade Organization.