Under the generalized system of preferences (GSP), preference-giving countries extend tariff preferences to certain products exported from designated beneficiary countries while retaining most-favoured-nation duties on imports from non-preferred supply sources (developed countries). Tariff preferences are intended to stimulate exports from beneficiaries and encourage investment in export-related activities. When exports of GSP-covered products confront non-tariff measures (NTMs) in markets of preference-giving countries, beneficiaries find it difficult to expand exports in response to tariff preferences, since NTMs counter the price incentives inherent in the preferential tariff margins.
Almost one quarter ($7.7 billion) of GSP-covered products ($33.3 billion) in 1986 trade terms were affected by NTMs in 10 OECD preference-giving countries.
NTMs constitute an important deterrent to imports of GSP-covered products. Preference-giving countries should take appropriate action to deal with the NTMs which limit access to GSP preferential treatment. In this regard, an important means by which improved utilization of the GSP could be achieved would be to exempt GSP-covered products from NTMs used in market of preference-giving countries.