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International Trade
International Trade

Global System of Trade Preferences (GSTP) (as of July, 2014)

  • The Agreement establishing the Global System of Trade Preferences (GSTP) among Developing countries was signed on 13th April, 1988 at Belgrade following conclusion of the First Round of Negotiations. The GSTP came into being after a long process of negotiations during the Ministerial Meeting of the Group of 77, notably at Mexico City in 1976, Arusha in 1979 and Caracas in 1981. The Ministers of Foreign Affairs of the Group of 77 in New York set up the GSTP Negotiating Committee in 1982. The New Delhi Ministerial meetings, held in July 1985, gave further impetus to the GSTP negotiation process. The Brasilia Ministerial Meeting held in May 1986 launched the First Round of GSTP Negotiations. At the conclusion of the First Round in April 1988 in Belgrade, the GSTP Agreement was signed on 13 April 1988. The Agreement entered into force on 19th April 1989. Forty-four countries have ratified the Agreement and have become participants. The GSTP establishes a framework for the exchange of trade concessions among the members of the Group of 77. It lays down rules, principles and procedures for conduct of negotiations and for implementation of the results of the negotiations. The coverage of the GSTP extends to arrangements in the area of tariffs, para-tariff, non-tariff measures, direct trade measures including medium and long-term contracts and sectoral agreements. One of the basic principles of the Agreement is that it is to be negotiated step by step improved upon and extended in successive stages.
  • The current round of GSTP negotiations, also known as “São Paulo Round” was launched in 2004 with 22 participating countries, on the occasion of the UNCTAD XI Quadrennial Conference in Sao Paulo in Brazil. At the end of the negotiations, Ministerial Modalities were adopted on 2 December, 2009 wherein Ministers agreed to modalities based on a tariff reduction of at least 20% on at least 70% of all dutiable tariff-lines. Members who were in the process of their WTO accession namely, Algeria and Iran were to be given specific flexibilities. The modalities on market access adopted by the Ministers are as under:
    • Across-the-board, line-by-line, linear cut of at least 20% on dutiable tariff lines;
    • Product coverage to be at least 70% of dutiable tariff lines;
    • Product coverage shall be 60% for participants having more than 50% of their national tariff lines at zero duty level;
    • Tariff cuts shall be made on the MFN tariffs applicable on the date of importation. Alternatively, participants may choose to apply the cuts on the MFN tariffs applicable on the date of conclusion of the Third Round;
    • The Negotiating Committee shall also consider proposal for revision of the GSTP rules of origin.
  • Based on these modalities, intensive negotiations were held in 2010 for finalisation of the schedules of Members. During this period, Cuba, Egypt, India, Indonesia, Korea, Malaysia, Mercosur and Morocco submitted their schedules and bilateral negotiations were held to finalise the schedule. It is significant to note that India unilaterally offered a tariff reduction of 25% on 77% of its tariff lines for Least Developed Countries (LDCs).
  • A Ministerial Meeting of the GSTP Negotiating Committee was held on 15 December,2010 in Foz do Iguacu, Brazil for signing of the “Final Act Embodying the Results of the Sao Paulo Round” and the “Sao Paulo Round Protocol on the Agreement on GSTP”. The Ministers or Head of the Delegations of Members who have submitted their final schedules namely Cuba, Egypt, India, Indonesia, Korea, Malaysia, Mercosur and Morocco signed the two documents. India was represented by H.E. Mr. B.S. Prakash, Ambassador of India to Brazil.
  • As of July, 2014; 8 out of 44 member countries, including India, have signed the protocol. Of these 8 countries, three countries, viz. India, Malaysia and Cuba have ratified it. The Cabinet Committee on Economic Affairs (CCEA) has approved implementation of India’s Schedule of Concessions under the Third Round of negotiations.
  • The schedules of concessions under the Third Round of negotiations will be implemented when a minimum of four participants ratify the schedules and inform the GSTP Secretariat. The tariff concessions will be implemented amongst such four participants and other participants will avail of the concessions after they ratify their schedules.