REGIONAL

GLOBAL SYSTEM OF
TRADE
TRADE PREFERENCES
AGREEMEN
(GSTP)
T
 THE GLOBAL SYSTEM OF TRADE
PREFERENCES
AMONG DEVELOPING COUNTRIES
The Agreement on the Global System of Trade Preferences among Developing
Countries (GSTP) was established in 1988 as a framework for the exchange of
trade preferences among developing countries in order to promote intra-
NAME: Swati Binani
developing-country trade. It lays down rules, principles and procedures for
conduct of negotiations and for implementation of the results of the negotiations.
ENROL NO: 08BS0003534
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.
SUBJECT: International
The idea received its first political expression at the 1976 ministerial meeting of
the Group of 77 (G77) in Mexico City and was further developed at G77
Marketing
ministerial meetings in Arusha (1979) and Caracas (1981).In 1982, the Ministers
of Foreign Affairs of the Group of 77 in New York defined the basic components
FACULTY: Prof. Dipankar Dey
of the Agreement and established a framework for negotiations. In 1984, the G77
began preparatory work in Geneva on various aspects of a framework agreement.
In 1985, the New Delhi ministerial meeting provided further impetus to the
SECTION: “B”
process of negotiations in Geneva. The ministerial meeting in Brasilia in 1986
established the provisional framework of the Agreement and launched the first
round of negotiations on preferential trade concessions. In 1988, the text of the
Agreement was adopted and the first round of negotiations concluded in Belgrade.
To date, 44 countries have ratified/acceded to the Agreement: Algeria, Argentina,
Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba,
Democratic People's Republic of Korea, Ecuador, Egypt, Ghana, Guinea, Guyana,
India, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Morocco, Mozambique,
Myanmar, Nicaragua, Nigeria, Pakistan, Peru, Philippines, Republic of Korea,
Romania, Singapore, Sri Lanka, Sudan, Thailand, Trinidad and Tobago, Tunisia,
Tanzania, Venezuela, Viet Nam and Zimbabwe. The GSTP received a further
boost on 20th October, 2006 with the accession of Mercosur, the Southern
Common Market, comprising of Argentina, Brazil, Paraguay and Uruguay.
Romania has verbally informed GSTP of its withdrawal in view of their accession
to the European Union, scheduled for 1st January 2007. The withdrawal of
Romania would diminish the current concessions under the GSTP by about 105
tariff lines.
 IMPORTANT FEATURES OF GSTP AGREEMENT

The Agreement was envisaged as a dynamic instrument of economic cooperation,

proceeding with step-by-step negotiations in successive stages. Following are
several principles and features of the Agreement:
• The GSTP is reserved for the exclusive participation of members of the
Group of 77 and China and the benefits accrue to those members that are
also "participants" in the Agreement.
• The GSTP must be based and applied on the principle of mutuality of
advantages in such a way as to benefit equitably all participants, taking into
account their respective levels of economic development and trade needs.
The Agreement recognizes the special needs of the LDCs and envisages
concrete preferential measures in their favor.
• To provide a stable basis for GSTP preferential trade, tariff preferences are
bound and form part of the Agreement.
• The GSTP must be negotiated step-by-step and improved and extended in
successive stages, with periodic reviews.
• The GSTP must supplement and reinforce present and future sub regional,
regional and interregional economic groupings of developing countries and
must take into account their concerns and commitments.
BENEFITS OF GSTP
• The agreement on GSTP, which was signed by 48 members of G-77 in
1988, was the first instrument available to developing countries for
promoting trade and economic cooperation among themselves.
• GSTP is a useful instrument for promoting South-South cooperation on a
broad front.
• GSTP Participants could increase their participation in the global economy
and identify complementarities among their economies so as to open the
tremendous potential for trade cooperation envisaged when they adopted the
Agreement in 1988.
• GSTP's importance lies in the fact that as developing countries become
more comfortable with tariff reductions, much wider range of products and
more substantial preferences can be offered under this instrument.
• It could also be used to draw in countries that have so far benefited little
from trade preferences.
 ROLE OF INDIA IN GSTP
India has been an active member of GSTP ever since its genesis. During the First
Round India exchanged concessions with 14 countries. The number of tariff lines
on which concessions were granted by India is 31 and in return India received
tariff concessions on a wide range of products of its export interest from these 14
countries.
In order to carry forward the exchange of concessions, the Second Round of
GSTP Negotiations was launched in 1991. During the Second round, India held
bilateral negotiations for exchange of concessions with 12 countries. These
concessions have not been implemented so far.
The Third Round of the GSTP was launched at a special ministerial session of
UNCTAD XI meeting with the adoption of the Sao Paulo Declaration.
Participants including India expressed strong support to revitalize the GSTP and
to ensure the success of the third round of negotiations through broader and
deeper exchange of tariff preferences among developing countries.
India articulated its full support for the rejuvenation of GSTP keeping in mind that
the broadening of trade and economic cooperation across the full breadth of
developing countries would bring in the attendant benefits of increased
investment flows, technology transfer and maximization of economic strengths of
each country besides boosting south-south trade.
CURRENT SCENARIO
GSTP Agreements to date are not economically significant. The reduction of tariff
barriers in developing countries has happened through unilateral action (often
under the pressure of IMF and World Bank), and through multi-lateral and
regional agreements. GSTP negotiations have suffered from the unwillingness of
some members to make concessions in the hope that they could gain benefits for
free. The effectiveness of GSTP in future depends on the political will of the
members, and its capacity to recruit more participants. The GSTP needs to be
strengthened and extended, both in terms of the number of countries and in scope
so as to include investment, production and marketing.

REFERENCES
➢ www.eicindia.org

➢ www.commerce.nic.in

➢ www.g77.org

➢ www.escwa.un.org

➢ www.unctadxi.org

➢ www.unctad.org

➢ Wikipedia