An assessment of United Kingdom's trade with developing countries under the generalised system of preferences

Abstract

The European Union (EU) generalised system of preferences (GSP Scheme) grants preferential treatment to 88 eligible countries. There are, however, concerns that the restrictive features (such as rules of origin, low preference margin and low coverage) of the existing scheme indicate gravitation towards commercial trade agenda to which efficiency imperatives appear subordinated. Whether these concerns are genuine is an empirical question whose answer largely determines whether, after Brexit, the United Kingdom continues with the existing specifics of the EU scheme or develops a more inclusive United Kingdom-specific GSP framework. This study quantitatively examines the efficiency of the EU GSP as it relates to United Kingdom beneficiaries from 2014 to 2017. We draw on the descriptive efficiency estimation (the utilisation rate, potential coverage rate and the utility rate) using import data across 88 beneficiary countries and agricultural products of the Harmonised System Code Chapter 1 to 24. Asides the Rules of Origin that, generally, harm the uptake of GSP, low preference margin is found to cause low utilisation rates in a non-linear manner. Essentially, a more robust option (such that allows “global Cumulation” or broader product coverage) could, substantially, lower the existing barriers to trade and upsurge the efficiency of the GSP scheme.