Assignment On

“Generalized System of Preferences”

Prepared For

Mr.Md.Ruhul Amin

School of Business Studies

Southeast University

Prepared By

Name ID1.Md.Saddam Hossain 20110100003752.Tanzil Tonim 20110100003543.Rawshanara Akter 20110100003644.Sameer Siddique 20110100003495.Azmol Hossain 2011010000355

Batch: 27th

Section: B

Southeast University

Date of Submission

25 August, 2014

Letter of Transmittal

August 25, 2014

Mr.Md.Ruhul AminFacultySchool of BusinessSoutheast UniversityBanani, Dhaka.

Dear Sir,

We are grateful to submit the Assignment on ‘GSP ’

This Assignment is carried out as part of completing our FIN-4141 course. The project was assigned to us as a group work and sufficient time and guidance was provided. We tried to show the comparative analysis of Balance of trade among Bangladesh ,India ,Pakistan and Nepal. We followed the format given by you strictly and tried to be as structured as possible.

We would like to thank you for your support, patience and guidance.

We hope you find this business plan satisfactory. 

Sincerely yours, 

Name ID1.Md.Saddam Hossain 20110100003752.Tanzil Tonim 20110100003543.Rawshanara Akter 20110100003644.Sameer Siddique 20110100003495.Azmol Hossain 2011010000355

Contents

Introduction:...............................................................................................................................................4

Definition GSP:............................................................................................................................................4

History of GSP:.............................................................................................................................................4

Function of GSP:..........................................................................................................................................5

Members of GSP:.........................................................................................................................................6

Members Country.......................................................................................................................................6

Eligible Products..........................................................................................................................................9

Rules of Origin.............................................................................................................................................9

Cumulation of origin:.................................................................................................................................10

Balance of Trade between Bangladesh and United State..........................................................................11

Balance of Trade between India and United State....................................................................................12

Balance of Trade between Pakistan and United State...............................................................................13

Balance of Trade between Nepal and United State...................................................................................13

Comparative Analysis:...............................................................................................................................14

Findings:....................................................................................................................................................15

Reference :................................................................................................................................................16

Introduction: The Generalized System of Preferences (GSP) program gives unilateral, nonreciprocal preferential tariff treatment to certain products imported from designated beneficiary developing countries (BDCs). The

United States, the European Union, and other developed countries have implemented such programs since the 1970s in order to promote economic growth in developing countries by stimulating their exports. The U.S. program (as established by Title V of the Trade Act of 1974) is subject to periodic renewal by Congress, and was last extended through July 31, 2013, in P.L. 112-40. GSP expiration means that program renewal, and possible reform, may continue to be a legislative issue in the second session of the 113th Congress. Renewal of the GSP program has been somewhat controversial in recent years, and there has been considerable discussion in Congress about GSP reform. For example, some in Congress have asserted that certain “more advanced” developing countries (such as Brazil and India) are receiving GSP benefits so that least-developed countries (LDCs) are not receiving the maximum benefits and support possible. This report presents, first, a brief summary of GSP developments and legislation introduced in the 113th Congress. Second, it provides a brief history, economic rationale, legal background, and comparison of GSP programs worldwide. Third, the report describes in more detail the U.S. implementation of the GSP program. Fourth, the report analyzes the U.S. program’s effectiveness and stakeholder positions. Fifth, possible options for Congress are discussed.

Definition GSP:

The Generalized System of Preferences (known as GSP for short) is a scheme whereby a wide range of industrial and agricultural products originating in certain developing countries are given preferential access to the markets of the European Union. Preferential treatment is given in the form of reduced or zero rates of customs duties.

The GSP scheme is specifically designed to benefit certain developing countries and integrate them into the world economy.

History of GSP:

The idea of tariff preferences for developing countries was the subject of considerable discussion within the United Nations Conference on Trade and Development (UNCTAD) in the 1960s. Among other concerns, developing countries claimed that MFN was creating a disincentive for richer countries to reduce and eliminate tariffs and other trade restrictions with enough speed to benefit developing countries.

In 1971, the GATT followed the lead of UNCTAD and enacted two waivers to the MFN that permitted tariff preferences to be granted to developing country goods. Both these waivers were limited in time to ten years. In 1979, the GATT established a permanent exemption to the MFN obligation by way of the enabling clause. This exemption allowed contracting parties to the GATT (the equivalent of today's WTO members) to establish systems of trade preferences for other countries, with the caveat that these systems had to be "generalized, non-discriminatory and non-reciprocal' with respect to the countries they benefited (so-called "beneficiary"

countries). Countries were not supposed to set up GSP programs that benefited just a few of their "friends.'

Function of GSP:

The statutory goals of the GSP are to

(1) Promote the development of developing countries;

(2) promote trade, rather than aid, as a more efficient way of promoting economic development;

(3) Stimulate U.S. exports in developing country markets; and

(4) Promote trade liberalization in developing countries.

It is difficult to assess whether or not the program alone has achieved these goals, however, because the GSP is only one of many such foreign aid initiatives used by the United States to assist poorer countries. Economic success within countries is also related to internal factors, such as governance, stability, wise policy decisions, availability of infrastructure to foster industry, and legal/financial frameworks that encourage foreign investment.

What follows, therefore, are general comments, rather than hard data, about the impact of GSP on developing countries, and possible economic effects on the U.S. market. The positions of various stakeholders regarding the value of the program are also discussed

Members of GSP:

Independent countries

Afghanistan

Albania

Algeria

Angola

Argentina

Armenia

Bangladesh

Belize

Benin

Bhutan

Bolivia

Bosnia and Hercegovina

Botswana

Brazil

Burkina Faso

Burundi

Cambodia

Cameroon

Cape Verde

Central African Republic

Chad

Colombia

Comoros

Congo (Brazzaville)

Congo (Kinshasa)

Costa Rica

Côte d'Ivoire

Croatia

Djibouti

Dominica

Dominican Republic

East Timor

Ecuador

Egypt

Equatorial Guinea

Eritrea

Ethiopia

Fiji

Gabon

Gambia, The

Georgia

Ghana

Grenada

Guinea

Guinea-Bissau

Guyana

Haiti

India

Indonesia

Iraq

Jamaica

Jordan

Kazakhstan

Kenya

Kiribati

Kyrgyzstan

Lebanon

Lesotho

Liberia

Macedonia, Former

Yugoslav Republic of

Madagascar

Malawi

Mali

Mauritania

Mauritius

Moldova

Mongolia

Mozambique

Namibia

Nepal

Niger

Nigeria

Oman

Pakistan

Panama

Papua New Guinea

Paraguay

Peru

Philippines

Russia

Rwanda

St. Kitts and Nevis

Saint Lucia

Members Country123

Saint Vincent and

the Grenadines

Samoa

Sao Tomé and Principe

Senegal

Serbia and Montenegro

Seychelles

Sierra Leone

Solomon Islands

Somalia

South Africa

Sri Lanka

Suriname

Swaziland

Tanzania

Thailand

Togo

Tonga

Trinidad and Tobago

Tunisia

Turkey

Tuvalu

Uganda

Ukraine

Uruguay

Uzbekistan

Vanuatu

Venezuela

Republic of Yemen

Zambia

Zimbabwe

Anguilla

British Indian Ocean

Territory

Christmas Island

(Australia)

Cocos (Keeling)

Islands

Cook Islands

Falkland Islands

(Islas Malvinas)

Gibraltar

Heard Island and

McDonald Islands

Montserrat

Niue

Norfolk Island

Pitcairn Islands

Saint Helena

Tokelau

Turks and Caicos Islands

Virgin Islands, British

Wallis and Futuna

West Bank and Gaza

Strip

Western Sahara

Afghanistan

Angola

Bangladesh

Benin

Bhutan

Burkina Faso

Burundi

Cambodia

Cape Verde

Central African

Republic

Chad

Comoros

Congo (Kinshasa)

Djibouti

East Timor

Equatorial Guinea

Ethiopia

Gambia, The

Guinea

Guinea-Bissau

Haiti

Kiribati

Lesotho

Liberia

Madagascar

Malawi

Mali

Mauritania

Mozambique

Nepal

Niger

Rwanda

Samoa

Sao Tomé and

Principe

Sierra Leone

Somalia

Tanzani

Togo

Tuvalu

Uganda

Vanuatu

Republic of Yemen

Zambia

Bolivia

Colombia

Ecuador

Peru

Venezuela

Botswana

Mauritius

Tanzania

Bangladesh

Bhutan

India

Nepal

Pakistan

Sri Lanka

Benin

Burkina Faso

Côte d'Ivoire

Guinea-Bissau

Mali

Niger

Senegal

Togo

Cambodia

Indonesia

Philippines

Thailand

Belize

Dominica

Grenada

Guyana

Jamaica

Montserrat

St. Kitts and Nevis

Saint Lucia

Saint Vincent and

Eligible Products

The Trade Act of 1974 authorizes the President to designate certain imports as eligible for duty- free treatment under the GSP after receiving advice from the United States International Trade Commission (USITC).62 “Import sensitive” products specifically excluded from preferential treatment include most textiles and apparel goods; watches; footwear and other accessories; most electronics, steel, and glass products; and certain agricultural products that are subject to tariff- rate quotas.63 The lists of eligible products and the list of beneficiary developing countries are reviewed and revised annually by the GSP Subcommittee.64 Any modifications to these lists usually take effect on July 1 of the following calendar year.65

In terms of product coverage, more than 3,500 products are currently eligible for duty-free treatment, and about 1,500 additional articles originating in LDBDCs may receive similar treatment. Leading GSP imports in 2013 included petroleum products, especially crude oil; car and truck tires; ferrosilicon; aluminum alloy plates, sheet, and strip; and car and truck tires.

Rules of Origin

Eligible goods under the U.S. GSP program must meet certain rules of origin (ROO) requirements in order to qualify for duty-free treatment. First, duty-free entry is only allowed if the article is imported directly from the beneficiary country into the United States. Second, at least 35% of the appraised value of the product must be the “growth, product or manufacture” of a beneficiary developing country, as defined by the sum of (1) the cost or value of materials produced in the BDC (or any two or more BDCs that are members of the same association or countries and are treated as one country for purposes of the U.S. law, see Table C-1), plus (2) the direct costs of processing in the country.

Cumulation of origin:

Bilateral Cumulation

Regional Cumulation

Extended Cumulation

Cumulation with goods originating in Norway, Switzerland and Turkey

Neither diagonal Cumulation nor full Cumulation is permitted.

Regional Cumulation of origin

The groups that may benefit from this are:

Group I: Brunei- Darussalam , Cambodia , Indonesia , Laos , Malaysia , Philippines , Singapore , Thailand , Vietnam ;

Group II: Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Peru, Venezuela;

Group III: Bangladesh , Bhutan , India , Maldives , Nepal , Pakistan , Sri Lanka;

Group IV: Argentina, Brazil, Paraguay and Uruguay.

By removing the previously existing value condition the new reformed rules of origin provide for a simplified regional Cumulation system compared to the one which used to apply to three regional groups. Regional Cumulation between countries in the same regional group shall apply only under the condition that the working or processing carried out in the beneficiary country where the materials are further processed or incorporated goes beyond "minimal" operations and, in the case of textile products, also beyond the operations set out in Annex 16 of Regulation No 1063/2010. In order to guard against distortion of trade between countries having different levels of tariff preference, certain sensitive products are excluded from regional Cumulation. In addition, Cumulation is now possible between individual Group I and Group IV countries, upon request and under certain conditions.

Extended Cumulation of origin

Extended Cumulation between a beneficiary country and a country with which the European Union has a free-trade agreement in force, may be granted by the Commission upon request of a beneficiary country, provided that the countries involved in the Cumulation have undertaken, inter alia, to provide the necessary administrative co-operation both with regard to the European Union and also between themselves and that the undertaking has been notified to the Commission by the beneficiary country concerned.Materials falling within Chapters 1 to 24 of the Harmonized System are excluded from extended Cumulation.

Cumulation with goods originating in Norway, Switzerland and Turkey

Because the GSP schemes offered by Norway, Switzerland and Turkey are similar to EC GSP, a certain linkage between them is possible. Beneficiary countries have, since 2001, been permitted to cumulate origin with goods falling within Chapters 25 to 97 of the Harmonized System originating in Norway and Switzerland.

Balance of Trade between Bangladesh and United State

Years Export Import Balance

2014 782.3 2,703.4 -1,921.1

2013 708.7 5,355.8 -4,647.0

2012 508.2 4,916.1 -4,407.9

2011 1,144.1 4,877.1 -3,733.0

2010 575.7 4,293.9 -3,718.2

2009 434.6 3,699.0 -3,264.4

2008 468.1 3,748.4 -3,280.4

2007 456.0 3,432.1 -2,976.1

2006 333.0 3,271.4 -2,938.4

2005 319.8 2,693.0 -2,373.3

U.S.-Bangladesh Trade Facts

Bangladesh is currently our 58th largest goods trading partner with $6.1 billion in total (two way) goods trade during 2013. Goods exports totaled $712 million; Goods imports totaled $5.4 billion.  The U.S. goods trade deficit with Bangladesh was $4.6 billion in 2013.

Exports

Bangladesh was the United States' 90th largest goods export market in 2013.

U.S. goods exports to Bangladesh in 2013 were $712 million, up 41.9% ($210 million) from 2012 and up 215% from 2003.

The top export categories (2-digit HS) in 2013 were: Machinery ($121 million), Cotton, Yarn and Fabric ($106 million), Electrical Machinery ($63 million), Iron and Steel ($46 million), and Miscellaneous Grain, Seed, and Fruit (Soybeans) ($44 million).

U.S. exports of agricultural products to Bangladesh totaled $253 million in 2013. The leading categories were: cotton ($105 million), soybeans ($34 million), soybean meal ($31 million), and wheat ($25 million). 

Imports

Bangladesh was the United States' 46th largest supplier of goods imports in 2013.

U.S. goods imports from Bangladesh totaled $5.4 billion in 2013, a 9.0% increase ($440 million) from 2012, and up 158% from 2003.

The five largest import categories in 2013 were: Woven Apparel ($3.7 billion), Knit Apparel ($1.2 billion), Miscellaneous Textile Products ($185 million), Headgear ($110 million), and Fish and Seafood (Shrimp and Prawn) ($59 million).

U.S. imports of agricultural products from Bangladesh totaled $19 million in 2013. The leading category was Tobacco ($11 million).

Trade Balance

The U.S. goods trade deficit with Bangladesh was $4.6 billion in 2013, a 5.2% increase ($230 million) over 2012.

Investment

U.S. foreign direct investment (FDI) in Bangladesh (stock) was $368 million in 2012 (latest data available).

There is no information on the distribution of U.S. FDI in Bangladesh.

Bangladesh's FDI in the United States (stock) was $5 million in 2012 (latest data available), up 25% from 2011.

The distribution of Bangladesh's FDI in the United States is not available.

Balance of Trade between India and United State

Years Export Import Balance

2014 9,709.0 22,392.6 -12,683.6

2013 21,842.3 41,845.3 -20,003.0

2012 22,105.7 40,512.6 -18,406.9

2011 21,542.2 36,154.5 -14,612.3

2010 19,248.9 29,532.9 -10,284.1

2009 16,441.4 21,166.0 -4,724.6

2008 17,682.1 25,704.4 -8,022.3

2007 14,968.8 24,073.3 -9,104.4

2006 9,673.6 21,830.8 -12,157.3

2005 7,918.6 18,804.2 -10,885.6

Balance of Trade between Pakistan and United State

Years Export Import Balance2014 786.7 1,828.3 -1,041.6

2013 1,645.7 3,688.2 -2,042.

2012 1,530.0 3,627.5 -2,097.5

2011 1,988.8 3,832.1 -1,843.3

2010 1,901.1 3,509.1 -1,608.0

2009 1,618.0 3,162.8 -1,544.9

2008 1,897.8 3,591.1 -1,693.2

2007 1,943.6 3,577.6 -1,634.1

2006 1,722.6 3,672.2 -1,949.6

2005 1,251.6 3,253.2 -2,001.6

Balance of Trade between Nepal and United State

Years Export Import Balance

2014 21.3 40.2 -18.9

2013 32.5 77.8 -45.3

2012 37.0 83.5 -46.5

2011 40.4 77.4 -37.1

2010 28.3 60.5 -32.2

2009 31.0 54.7 -23.7

2008 28.5 84.9 -56.4

2007 29.0 89.9 -61.0

2006 16.6 99.4 -82.8

2005 24.7 111.2 -86.5

Reference of Balance of trade Between USA and Bangladesh, India, Pakistan, Nepal

https://www.census.gov/foreign-trade/balance/

Comparative Analysis:

The  pe r fo rmance  o f  Bang l adesh ’ s   expo r t   s ec to r   i n   r e cen t   yea r s   i s   qu i t e  impre s s ive especially in the 1990s when we compare it with that of world and SAARCCountries. The average annual growth rate of Bangladesh export (11.91%) is higher than those of the world (9.48%) and SAARC countries (10.69%) during 1990-2003. Because of the lower export performance in the 1980s, annual average growth rate of this sector during1980-2003 is not as impressive compared to other Asian countries and the world, thought his sector shows competitiveness compared to other SAARC countries (IMF various yea r s ) .  Ove r   t he pe r i od o f   1980 -2003 Bang l adesh ’ s expo r t s a s   a   pe r cen t age o f   t he world’s exports remain around 0.11% to 0.12% with the exception of 1984, when it was0.14%, and 1990-1994, when the ratio was around 0.09%. Bangladesh’s exports as a percentage of SAARC countries’ exports show slightly increased trend especially in 2000and 2001.For these two years Bangladesh’s exports are 11% and 12% of the SAARC countries ‘exports  respectively. Bangladesh’s share of SAARC country’s’ exports was the lowest, 7.72%, in 1983. Bangladesh’s exports share in the Asian developing countries, however, shows a decreasing trend in the 1990s compared to the1980s though the ratio is slightly h ighe r i n 1998 and 1999 compa red t o immed ia t e e a r l i e r yea r s . The r a t i o d ropped t o 0.59% in 2003 from 1.46% in 1980 though it was 0.75% in 2001 (IMF various years).

Findings: Bangladesh has had a negative trade balance since independence in 1971. In the mid-1980s, the annual pattern was for exports to cover only around 30 percent of the cost of imports (see table 14, Appendix). Merchandise exports reached the value of US$1 billion in FY 1987 for the first time, and in that year import payments were US$2.6 billion, leaving a trade deficit of over US$1.5 billion, about average throughout the 1980s. The annual deficit was limited by government controls to between US$600 and US$700 million on capital goods and US$500 million on nonagricultural industrial commodities. The largest component in the latter category was crude oil and petroleum products. In addition, Bangladesh incurred a debt each year for grain and other food needs, always higher than US$200 million, and sometimes going to double or even more (at least US$607 million in FY 1985). The country had a positive balance on nonfood agricultural production, because jute and ready-made garment exports eliminated the deficit in fibers, textiles, and garments. 

In FY 1986, the United States was the leading buyer of Bangladeshi exports, taking some 25 percent of the total. The American portion had increased from 16 percent the year before and 12 percent the year before that. The dynamic new element was readymade garments; the United States purchased over 80 percent of this new industry's production, adding to Bangladesh's traditional base of jute manufactures (mostly carpet backing) and seafood. The next biggest customer for Bangladesh (but with only 28 percent of the American volume) was Japan, which chiefly purchased frozen seafood. Other important customers in FY 1986 were Britain, Italy, Pakistan, Singapore, and Belgium. Trade with communist countries was also significant. Almost 10 percent of exports were under barter terms with the Soviet Union, China, Bulgaria, Hungary, and Czechoslovakia.One way the society has been able to turn its economic problems and overpopulation to some advantage is by exporting workers to wealthy, Islamic countries, chiefly in the Persian Gulf. The remittances from these workers have come to constitute one of Bangladesh's greatest sources of

foreign exchange. In FY 1986 remittances were nearly US$575 million, covering 23.5 percent of import financing requirements and substantially exceeding the total receipts from jute, the chief export. The government maintained records only of new recruits working abroad each year--a peak of 77,694 in 1985--but knowledgeable observers believed that possibly as many as 450,000 were overseas at any one time. Throughout the 1980s, more than a third went annually to Saudi Arabia with a peak of 39,350 new recruits in 1987 (see table 6, Appendix). Other countries receiving large number of Bangladeshi workers in 1987 included the United Arab Emirates (9,953), Kuwait (9,559), Qatar (5,831), and Iraq (3,847). Such workers normally contracted to remain abroad three years and often stayed several years longer. They worked as laborers, under terms negotiated government to government, and generally lived under segregated conditions that effectively prevented Bangladeshi men (who cannot bring their families with them) from assimilating with the local population or experiencing non-Bangladeshi ways of life. When they have returned to Bangladesh with savings and material acquisitions, they generally have had no difficulty fitting back into their society.  

Reference :1. Cumulation origin:

http://ec.europa.eu/taxation_customs/customs/customs_duties/rules_origin/preferential/article_781_en.htm

2.Origin of GSP:

http://exporthelp.europa.eu/thdapp/display.htm?page=cd/cd_RulesOfOriginGSP.html&docType=main&languageId=EN

3.GSP :

http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-system-preference-gsp