How EU GSP Thailand Benefits Ended in 2015
EU GSP Thailand exporters relied on for tariff-free market access ended on schedule in 2015, when Thailand’s upper-middle-income classification triggered exclusion from the reformed program.Since 1971, the EU’s Generalized System of Preferences (GSP) allows developing countries easier market access to the European Union through tariff reductions. It is a unilateral measure by the EU and there is no expectation or requirement that this access is reciprocated by the countries concerned.
Thailand is one of the beneficiaries of the GSP.
With the latest reform of the GSP being applicable from January 1, 2014, out of the 172 countries previously eligible for the GSP, the following will not continue to be the recipient of GSP benefits:
- 33 overseas countries and territories of the EU Member States,
- 20 high and upper middle income countries as classified by the World Bank during three consecutive years, based on Gross National Income (GNI) per capita, and
- 34 countries with a preferential trade agreement (FTAs—with two years of transition to allow for adjustment to the new regime) or a special autonomous trade regime.
The rationale behind this EU GSP Thailand reform reflects a broader shift in the EU’s approach to development assistance — concentrating preferential access on the world’s poorest and most vulnerable economies, rather than spreading benefits across a wide range of middle-income countries that have already achieved substantial economic growth. For Thailand, this meant that continued strong GDP growth over the preceding decade, while a genuine economic success, ultimately worked against its continued eligibility for preferential tariff treatment.
Thailand is still on the list of countries receiving the GSP benefits for the year 2014. Beginning January 1, 2015, however, China, Ecuador, Maldives and Thailand will be excluded from GSP benefits, as they have been classified by the World Bank as upper-middle-income countries. Their exports will then enter the EU with a normal tariff applicable to all other developed countries.
It was expected that at the time of removal of the GSP benefits for Thailand, the EU and Thailand would already have concluded a Free Trade Agreement (FTA). Taking the current political struggle into consideration, it seems to be a goal that will not be achieved on time. The impact of that failure on Thai businesses cannot be underestimated.
Thai exporters who previously relied on EU GSP Thailand tariff preferences to remain competitive in European markets have had to absorb the resulting cost increase since 2015, underscoring how closely tied Thailand’s trade competitiveness remains to the status of ongoing EU-Thailand free trade negotiations.>
In the years since 2015, Thailand and the EU have continued discussions toward a comprehensive Free Trade Agreement, though the timeline for its conclusion has remained uncertain. Businesses exporting to the EU from Thailand should monitor these negotiations closely, since a concluded FTA would restore preferential tariff treatment on a reciprocal, contractual basis — a more durable arrangement than the GSP’s unilateral, non-reciprocal preferences ever provided.