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The Brazilian Government has learned, with concern, of a European Commission proposal to modify the European Generalised System of Preferences (GSP), due to take effect by January 2014.

The proposal provides that “high income” or “middle-high income” countries, ranked by the World Banked in the past 3 years, would not be eligible for trade preferences granted under the GSP.  Based on current data, the proposed criteria would result in the exclusion of Brazil, among several other countries, from the system.

The exclusion from the GSP could also lead to a more significant concentration of primary goods in Brazil’s export mix, since goods with greater added value comprise the largest tranche of goods benefitted by the System.  In addition to contributing to the creation of jobs, GSP preferences are important to European investments in Brazil in different sectors, such as automaking, due to intrafirm trade.  Brazil’s participation in the GSP also ensures more than one supply source for the EU.  The eventual removal of our country could also lead to higher costs for European producers and consumers.

Inasmuch as the GSP reform aims at channeling preferences for least developed countries, Brazil’s export mix under the European System does not coincide with that of the LDCs.  Furthermore, the permanence of highly competitive economies in the proposed reform casts doubts on the propriety of the adopted criteria. 

The Brazilian Government will continue to examine the economic, commercial and legal impacts of the proposal and follow up on contacts with European officials about the matter.

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