CC BY
22Ishmetova Shakhida,
Ph.D. researcher at Tashkent State University of Law ORCID: 0000-0002-6255-7555 E-mail: shakhidasaipova@gmail.com
Sharipova Hilola,
Ph.D. researcher at Tashkent State University of Law ORCID: 0000-0001-7437-0897 E-mail: beksharipov@mail.ru
EU AND WTO EXPERIENCE OF THE APPLIANCE OF PREFERENCES IN THE EXTERNAL TRADE RELATIONS
Abstract: This article focuses on examining the system of preferences in international trade relations development based on the experience of the EU. In this part historical analyses were made, and also specific EU Regulations were studied. A significant part of the article is dedicated to the legal issues of the appliance ofpreferences provided by the World Trade Organization and the European Union. It is shown that the origin-determining criteria are fundamental to the rules of origin. They determine how and when a product can be considered as originating in a GSP beneficiary country. According to the rules, a product is considered originating in a beneficiary country if it has been wholly obtained or sufficiently worked or processed from imported materials.
In conclusion, the system of preferences is shown as a key point on the way of liberalization of international trade law; moreover, it contributes to harmonizing the national legislation of countries, which participate in the agreements on preferential trade. It has a positive tendency to change refocusing on the countries most in need, in the result of changing economic criteria of the countries.
Keywords: preferences, tariff preferences, external trade, international trade, lex mercatoria.
I. Introduction
Trade is perhaps the most dynamic area of social relations. Competition compels trade participants to create new products and services, seek out and develop new markets, and expand contacts internationally. Trade is usually associated with a high risk. Therefore, it requires clear, predictable, stable and fair rules that can be adapted to the changing economic situation in order to preserve the balance of interests of the parties. However, the differences between the regulation of business turnover by national legislation often create unnecessary legal obstacles to cross-border trade. Many legal orders do not sufficiently take into account the current level of business turnover. As a result of applying different norms to the same type of relations, the rights of various states are subject to conflicts and discrepancies. It is worth emphasizing that international transactions lack a reliable legal basis.
II. Legal issues of the appliance of preferences provided by the European Union
Trade policy plays a vital role in international relations of the European Union with other states. The
European Union cooperates with developing and least developed countries and assists them so that they can enter into the world trade relations in full. Therefore, many states can cooperate and benefit from the preferences that European Union provides.
The EU's trade policy aims to ensure continued prosperity, solidarity and security in Europe and around the world. It is committed to actively help developing countries to find their way out of poverty [1]. Europe has opened its markets for imports for all the poorest countries and works actively to help developing countries build the capacity to take advantage of trade. The EU's new GSP preferential trade scheme entered into force on January 1st, 2014. It increases the focus of EU's unilateral preferences on developing countries in sectors where they need them. The number of beneficiaries has been reduced, thus creating more space for the exports of poorer countries. The new GSP further promotes sustainable development and good governance by allowing more countries to become eligible for GSP+, which provides additional preferences to vulnerable countries that ratify and effectively implement core
international conventions on environment, labor and human rights. The new GSP also maintains the "Everything But Arms (EBA)" scheme, which provides duty-free and quota-free access to all products from all LDCs with the exception of arms and ammunition.
The EU has boosted its bilateral and regional relations with developing countries. Negotiations with African, Caribbean and Pacific (ACP) countries started in 2002 to conclude Economic Partnership Agreements. In parallel, the EU has launched a series of Free Trade Agreements with other developing countries in Asia, Latin America, Europe's Eastern neighborhood and the Southern Mediterranean. The EU pursues a comprehensive approach which looks beyond tariffs at a wide range of 'behind-the-border issues' such as trade facilitation, technical, social and environmental rules, services, intellectual property rights and public procurement, all of which can play an increasingly important role in making trade work for development.
EU is now promoting foreign direct investment through favorable local conditions, including through relevant provisions in Free Trade Agreements. It encourages developing countries, particularly LDCs, to mainstream trade in their development strategies and prioritizes their trade-related needs in their cooperation with the EU to maintain a steady flow of EU Aid for Trade, including Trade-Related Assistance. It also supports small traders in developing countries to help them access the EU market, providing information and capacity building via the Export Helpdesk and a series of projects carried out by the International Trade Center (ITC), Standards Map and Small Traders Capacity Building [1]. The EU has been at the vanguard of creating relationships between trade and sustainable development, including through the GSP+ scheme and through the inclusion of a 'Trade and Sustainable Development Chapter' covering specific provisions on labor and environment in its trade agreements. At the same time, the EU's trade and development policy emphasizes the importance of developing countries' good governance and ownership of their own development strategies, which is a key to their success. Developing countries, therefore, need to implement sound domestic policies and undertake necessary domestic reforms to stimulate trade and investment, ensure that the poor benefit from trade-led growth and secure the sustainability of their development. While the EU already provides more trade-related development assistance than the rest of the world put together, the Communication "Trade, growth and development" assesses the main next steps. For example, the traditional group of "developing countries" is outdated amid the rise of emerging economies. More tailor-made trade and development policies are needed that go beyond reducing customs duties at borders (tariff reductions) and tackle the major problem of improving the 'business environment'.
The proposal underlines that developing countries' leadership must also face up to their responsibilities to achieve this goal. Developing countries need to undertake domestic reforms to ensure that the poor do, indeed, benefit from trade-led growth. European Commissioner for Trade, Karel De Gucht said "The rise of emerging economies like India, China and Brazil shows that trade-driven development is possible and that open markets can play a major role in generating growth. Yet those trailing behind need help. World tariffs have never been this low and the EU already offers very favourable market access to poor countries. What will make a difference are non-tariff issues - such as standards, services, intellectual property rights, public procurement, infrastructure and packaging facilities. None of this can work without political governance" [1].
The first GSP scheme of the European Community spanned an initial phase of 10 years (1971-1981) and was subsequently renewed for a second decade (19811991). During this time, the scheme was reviewed each year. The reviews involved changes in product coverage, quotas, ceilings, administration, beneficiaries, and depth of tariff cuts for agricultural products. In 1991, at the end of the second decade, the scheme was due for significant revision. Despite pending the outcome of Uruguay Round under the General Agreement on Tariffs and Trade (GATT), the 1991 scheme was extended with various amendments until 1994.
In 1994, the European Community made another 10-year offer as the third cycle for the period from 1995 to 2004. The first phase lasted from January 1st, 1995, when the Community adopted the following basic legislative acts: Council Regulation (EC) No. 3281/94, concerning industrial products, and Council Regulation (EC) No. 1256/96, concerning agricultural products. During the second phase, from July 1st 1999 to December 31st 2001, the European Community revised its GSP scheme on the basis of Council Regulation (EC) No. 2820/98 [2].
For the period from January 1st, 2002 to December 31st, 2005, the European Community put in place the third phase of the scheme by adopting Council Regulation (EC) No 2501/2001 of December 10th, 2001 [3] applying a scheme of generalized tariff preferences for the period from January 1st, 2002 to December 31st, 2004, which introduced major changes in the design of the GSP scheme of the European Community with five different arrangements:
- General arrangements;
- Special incentive arrangements for the protection of labour rights;
- Special incentive arrangements for the protection of the environment;
- Special arrangements to combat drug production and trafficking;
- Special arrangements for the least developed countries (LDCs): Everything but Arms (EBA) initiative.
Based on the guidelines drawn up in 2004 for the decade between 2006 and 2015, the European Community adopted on June 27th, 2005 Council Regulation (EC) No. 980/2005 covering the period from January 1st, 2006 to December 31st, 2008 and simplified the scheme by reducing the number of arrangements from five to three, namely:
I. General arrangements;
II. Special incentive arrangements for sustainable development and good governance - GSP Plus;
III. Special arrangements for LDCs - EBA. [4]
This basic structure was maintained under the
European Union's new GSP scheme effective January 1st, 2009 to December 31st, 2011, as provided by Council Regulation (EC) No. 732/2008 of July 22nd 20081 renewing the scheme for the three-year period. The scheme was further extended until December 31st,
2013, with a few technical changes by Regulation (EU) No. 512/2011 of the European Parliament and of the Council of May 11th, 2011 [5].
Regulation (EU) No. 978/2012 of the European Parliament and of the Council of October 25 th 2012 applying a scheme of generalized tariff preferences and repealing Council Regulation (EC) No. 732/2008 introduced a major reform of the GSP scheme of the European Union that went into effect January 1st, 2014 (appendix I). The reformed scheme, which preserves the general architecture of the GSP scheme of the European Union, is composed of three arrangements: a general arrangement, GSP Plus and the EBA for LDCs. The revised scheme was introduced with major changes.
On January 1st, 2011, the reform of the GSP rules of origin of the European Union went into force and introduced four significant changes in the rules for determining origin. First, while previously the same rules of origin applied to developing countries and LDCs, the new rules frequently include separate provisions for LDCs to address concerns about their capacity constraints. The origin-determining requirements for developing countries have also been modified. Second, the list of products and working or processing operations that confer originating status has been simplified to some degree, and the product-specific origin requirements in the current list differ from those in the previous one. Third, substantial changes have been made in the cumulation provisions that expand the possibility of cumulation. Fourth, the new procedures are effective from January 1st, 2017.
The main change in the GSP scheme of the European Union is a significant reduction in the number of beneficiary countries. Under the previous scheme, there were 177 beneficiary countries, but as of July 4th,
2014, and to these days, there are 88.
The Commission's Impact Assessment Study reviewing the impact of the previous scheme found that some of the primary beneficiaries of the GSP scheme of the European Union became globally competitive and that GSP benefits became less important for these countries while other lower-income countries and LDCs continued to rely on the benefits in exporting competitively to European Union markets. Based on this assessment, the European Union came to the conclusion that high-income or upper-middle income countries had achieved a high level of diversification and would no longer require preferential treatment to the same extent as lesser developed economies. Therefore, the goal of the current GSP scheme of the European Union is to refocus GSP benefits on those countries that are most in need.
Accordingly, three categories of countries no longer benefit from unilateral preferential treatment:
1. Overseas countries or territories that are under the administration of the European Union or other developed countries;
2. Countries with other preferential market access arrangements of the European Union, such as economic partnership agreements and autonomous preferential arrangements for some Balkan countries (LDCs are not subject to this exclusion);
3. Countries that are classified by the World Bank as high-income or upper-middle-income countries for three consecutive years based on gross national income per capita;
It is essential to note that tariff preferences offered by the current GSP scheme differ according to the sensitivity of the products concerned: non-sensitive products enjoy duty-free access to the European Union market while sensitive products benefit from tariff reductions. This is another mechanism of protection of the national economy.
As we noted before, GSP is overviewed periodically by the Commission, and according to Article 4 of the Regulation [No. 978/2012] [6] beneficiary countries (except LDCs) shall be removed from the list of GSP beneficiary countries (annex II of the Regulation) if they meet either of the following criteria:
(a) The country is classified by the World Bank as a high-income or upper-middle-income country for three consecutive years immediately preceding the update of the list of beneficiary countries;
(b) It benefits from a preferential market access arrangement that provides the same tariff preferences as the scheme, or better, for substantially all trade. [7]
Either condition can trigger country graduation. Countries that have graduated from the general GSP scheme of the European Union remain eligible for the scheme but are no longer beneficiaries thereof. This means that if their situation changes, that is to say, if they are no longer classified as high- or middle-upper-income
economies, they would again become beneficiaries of the GSP scheme of the European Union.
The 2001 EBA initiative, as currently incorporated in the Regulation (articles 17 and 18) extends duty and quota-free access to all products originating in LDCs, except for arms and ammunition. The EBA initiative covers all agricultural products, including sensitive products. For most of products, the pre-EBA GSP scheme provided a percentage reduction of most-favored-nation rates, which would apply solely to the ad valorem duties, thus making the specific duties still applicable in full. The 2002-2005 GSP scheme of the European Community changed this provision, and the current 2012 regulation states in article 18, paragraph 1, that "The Common Customs Tariff duties on all products that are listed in chapters 1 to 97 of the combined nomenclature, except those in chapter 93, originating in an EBA beneficiary country, shall be suspended entirely". [8] Thus, specific and other duties are not applicable to exports from LDCs, an example being the rather complicated entry price system used to regulate the access of certain products.
Taking into account that products covered by the Common Agricultural Policy still face customs duties under the Cotonou Agreement, the EBA initiative made the GSP of the European Union a more favorable scheme for LDCs in terms of tariff treatment and product coverage than the preferential trade arrangements available under the Agreement.
The European Union's GSP rules of origin, which went into force on January 1st, 2011, contain origin-determining requirements specific to LDCs to address the problem of capacity constraints in LDCs. Two major improvements in this regard are as follows:
1. The allowance for the use of non-originating materials has been increased for many manufactured products originating in LDCs;
2. The use of imported fabric is allowed for apparel products to be considered originating; that is to say, there is a single transformation requirement.
However, the possibility of cumulation under the GSP rules of origin of the European Union is very much limited, while the Cotonou Agreement allows full cumulation with partners from African, Caribbean, and Pacific (ACP) States. On the one hand, if an ACP State desires to take advantage of the EBA duty- and quota-free treatment, it will have to do so as a GSP beneficiary and thus lose the opportunity for full cumulation its ACP partners. On the other hand, if an LDC that is an ACP State wants to take advantage of the more favorable Cotonou cumulation system, it will be subject to the customs duties and quantitative limitations specified under the Cotonou Agreement, where applicable.
Similarly, LDCs must be aware that, since the EBA initiative is an integral part of the GSP scheme of the European Union, such duty- and quota-free treatment
is subject to the procedural rules of that scheme, such as the unilateral and unbound character of the GSP, the possibility of the temporary withdrawal of the preferences and its rules of origin. A beneficiary country should graduate from the EBA initiative when it is excluded from the United Nations list of LDCs. The Commission reviews the eligibility of countries continuously. However, it is the Commission that will decide on the removal of the country from the EBA and the establishment of a three-year transitional period.
The 2006 GSP of the European Community introduced a special incentive arrangement focusing on sustainable development and good governance, known as "GSP Plus". This scheme provides a more favorable tariff treatment for a range of products originating in those countries that meet certain conditions. GSP Plus originates in three different special incentive systems introduced in the 2002-2004 GSP scheme to protect labor rights and the environment and combating drug production and trafficking. However, due to a WTO dispute case brought by India concerning special arrangements to combat drug production and trafficking, the 2006 GSP scheme of the European Community introduced the GSP Plus arrangements replacing the three special incentive schemes.
The special incentive arrangement for sustainable development and good governance of the European Union, GSP Plus, was revamped on January 1st, 2014. It is designed to help developing countries assume the special burdens and responsibilities resulting from the ratification of core international conventions on human and labor rights, environmental protection, good governance, and the effective implementation thereof. The reformed GSP Plus arrangement provides more incentives for countries to join while at the same time enhances its monitoring to ensure compliance with core international conventions.
One of the important special incentive arrangement is eligibility criteria. Regulation [No. 978/2012] in article 9 sets strict and clear criteria for granting GSP Plus. First, the applicant must meet economic criteria; that is, it must be a vulnerable developing country. Vulnerability is defined as follows:
(a) The country has a non-diversified economy, as measured by the fact that its seven largest sections of GSP-covered imports represent more than 75 percent in value of its total GSP-covered imports to the European Union as an average during the past three consecutive years;
(b) The country's GSP-covered imports to the European Union represent less than 2 percent in value of total GSP imports as an average during the past three consecutive years. [9]
In addition, the country must have ratified 27 core international conventions required under GSP Plus. It must not have formulated reservations that are prohibited
by these conventions, and the most recent conclusions of the monitoring bodies under those conventions must not identify any serious failure to implement them effectively.
Under article 19 of the Regulation, preferences may be temporarily withdrawn in respect of all or of certain products for the following reasons:
1. Serious and systematic violation of principles laid down in the conventions listed in annex VIII, part A of the Regulation;
2. Export of goods made by prison labor;
3. Severe shortcomings in customs control on the export or transit of drugs (illicit substances or precursors), or failure to comply with international conventions on antiterrorism and money laundering;
4. Serious and systematic unfair trading practices, including those affecting the supply of raw materials, which have an adverse effect on the Union industry and which have not been addressed by the beneficiary country. For those unfair trading practices, which are prohibited or actionable under the WTO Agreements, the application of this article shall be based on a previous determination to that effect by the competent WTO body;
5. Serious and systematic infringement of the objectives adopted by regional fishery organizations or any international arrangements to which the European Union is a party concerning the conservation and management of fishery resources [10].
The origin-determining criteria are fundamental to the rules of origin. They determine how and when a product can be considered as originating in a GSP beneficiary country. According to the rules, a product is considered originating in a beneficiary country if it has been wholly obtained or sufficiently worked or processed from imported materials. When imported inputs are used to manufacture a finished product, the rules of origin require these non-originating materials to be sufficiently worked or processed.
In particular, sufficient working or processing is defined as follows: "Products which are not wholly obtained in the beneficiary country concerned within the meaning of article 75 shall be considered to originate there, provided that the conditions laid down in the list in annex 13 for the goods concerned are fulfilled" [11].
In order to identify the origin requirements for a specific product, an exporter needs to establish the tariff classification of the product under the HS and check the conditions laid down in the list for that specific product. Also, the exporter must fulfill the horizontal requirements that are applied to all products with imported materials.
Now we will analyze the basic provisions for determining origins for products with imported materials, highlighting the changes made from the previous rules of origin. The current rules of origin contain the origin-
determining requirements that are specific to LDCs in an effort to address the problem of capacity constraints in LDCs. There are two main improvements in this regard:
1. Allowance for the use of non-originating materials has been increased for many manufactured products originating in LDCs;
2. Use of imported fabric is allowed for apparel products to be considered as originating, that is, there is a single transformation requirement. Previously, the value added criteria often required 60 per cent or higher domestic content for LDCs, but under the current rules of origin it has been reduced to 30 per cent.
For apparel products to obtain originating status, these products had to be assembled with fabrics that had been woven or knitted domestically; that is, there was a double transformation requirement. The change from double to single transformation requirements is a particularly significant improvement for LDCs, as most of these countries do not possess the weaving capacity to meet the double transformation requirement for apparel products.
Concluding this paragraph, we should emphasize that the norms of General System of Preferences of the European Union has changed a lot. As we noted before, only 88 countries are currently enjoying benefits from GSP Plus, although before 2014, there were 177 of such states. Nevertheless, we think that the EU has made the right choice because it is more concentrated on the poorest countries with means of reducing the number of beneficiary developing countries. Now Least Developed Countries have more opportunities to get benefits from the trade with the EU in the EBA framework. First of all, many developing countries cannot concur with LDC's on the EU's market on a previous basis anymore due to their withdrawal from the GSP Plus. Second of all, the norms like rules of origin, cumulation, non-alert principle and many others have liberalized sufficiently and positively for the LDC's. We think that these tendencies, when the trade policy is more concentrated to help those who are "most in need", will positively impact the well-being of the poorest countries on the way of achieving sustainable development goals.
III. Legal issues of the appliance of preferences provided by the World Trade Organization
After World War II, the world community needed to recover its economy, therefore in 1947 General Agreement on Tariffs and Trade was signed by 23 nations in Geneva. GATT is a multilateral agreement that regulates international trade. Its purposes are the substantial reduction of tariffs and other trade barriers and eliminating preferences on a reciprocal and mutually advantageous basis [12]. For 50 years, GATT was performing functions of an international organization (now we know it as World Trade Organization). With the help of various agreements, number of international
trade barriers were reduced: tariff barriers, import quotas, trade subsidies, and others.
Major breakthroughs in the liberalization of global trade were achieved under the auspices of GATT. In the frame of GATT, main principles of international trade were established. One of them is the principle of the Most Favoured Nation - a status or level of treatment accorded by one state to another in international trade. The term means that the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favoured nation" by the country granting such treatment. (Trade advantages include low tariffs or high import quotas.) In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country. There is a debate in legal circles whether MFN clauses in bilateral investment treaties include only substantive rules or also procedural protections [13].
The members of the World Trade Organization (WTO) agree to accord MFN status to each other. Exceptions allow for preferential treatment of developing countries, regional free trade areas, and customs unions [14]. Together with the principle of national treatment, MFN is one of the cornerstones of WTO trade law.
"Most favored nation" relationships extend reciprocal bilateral relationships following both GATT and WTO norms of reciprocity and non-discrimination. In bilateral reciprocal relationships, a particular privilege granted by one party only extends to other parties who reciprocate that privilege, while in a multilateral reciprocal relationship, the same privilege would be extended to the group that negotiated a particular privilege. The non-discriminatory component of the GATT/WTO applies a reciprocally negotiated privilege to all members of the GATT/WTO without respect to their status in negotiating the privilege.
Analyzing the practice of MFN, we can see that there are several benefits:
First of all, it increases trade creation and decreases trade diversion. A country that grants MFN on imports will have its imports provided by the most efficient supplier if the most efficient supplier is within the group of MFN. Otherwise, that is, if the most efficient producer is outside the group of MFN and additionally is charged higher rates of tariffs, then it is possible that trade would merely be diverted from this most efficient producer to a less efficient producer within the group of MFN (or with a tariff rate of 0). This leads to increase in economic costs for the importing country, which can outweigh the gains from free trade.
Secondly, MFN allows smaller countries, in particular, to participate in the advantages that larger countries often grant to each other, whereas on their own, smaller countries would often not be powerful enough to negotiate such advantages by themselves.
Thirdly, granting MFN has domestic benefits: having one set of tariffs for all countries simplifies the rules and makes them more transparent. Theoretically, if all countries in the world confer MFN status to each other, there will be no need to establish complex and administratively costly rules of origin to determine which country a product (that may contain parts from all over the world) must be attributed to for customs purposes. However, if at least one nation lies outside the MFN alliance, customs cannot be avoided.
Fourthly, MFN restrains domestic special interest from obtaining protectionist measures.
As MFN clauses promote non-discrimination among countries, they also tend to promote free trade in general.
GATT members recognized in principle that the "most favored nation" rule should be relaxed to accommodate the needs of developing countries, and the UN Conference on Trade and Development has sought to extend preferential treatment to the exports of the developing countries [15].
There was another issue related to the "most favored nation" principle that has been applied by regional trade blocs such as the European Union and the North American Free Trade Agreement (NAFTA), which have lowered or eliminated tariffs among the members while maintaining tariff walls between member nations and the rest of the world. Trade agreements usually allow for exceptions for regional economic integration.
Through history, we can see that MFN status was not kind of universal rule because some states on a bilateral level still can exclude other states from granting MFN; we can see it as an example with the USA. It never grants MFN status to some members of Soviet Union, including the Russian Federation on the basis of the Jackson-Vanik amendment [16], or, for example, Pakistan does not grant MFN status to China for political reasons.
Another main principle is National treatment. According to National treatment, a state grants a particular right, benefit or privilege to its own citizens, and it must also grant those advantages to the citizens of other states while they are in that country. In the context of international agreements, a state must provide equal treatment to those citizens of other states that are participating in the agreement. Imported and locally produced goods should be treated equally — at least after the foreign goods have entered the market.
While this is generally viewed as a desirable principle, in custom, it conversely means that a state can deprive foreigners of anything of which it deprives its own citizens. An opposing principle calls for an international minimum standard of justice (a sort of basic due process) that would provide a base floor to protect rights and access judicial process. The conflict between national treatment and minimum standards
has mainly played out between industrialized and developing nations, in the context of expropriations. Many developing nations, having the power to take control over their own citizens' property, wished to exercise it over the property of aliens as well.
Though support for national treatment was expressed in several controversial (and legally non-binding) United Nations General Assembly resolutions, the issue of expropriations is almost universally handled through treaties with other states and contracts with private entities, rather than through reliance upon international custom.
National treatment only applies once a product, service, or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax [17].
As we see, national treatment prohibits discrimination between imported and domestically produced goods with respect to internal taxation or other government regulation. The principle of national treatment is formulated in Article 3 of the GATT 1947 (and incorporated by reference in GATT 1994); Article 17 of the General Agreement on Trade in Services (GATS); and in Article 3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The aim of this trade rule is to prevent internal taxes or other regulations from being used as a substitute for tariff protection [18].
The Enabling Clause officially called the "Decision on Differential & More Favourable Treatment, Reciprocity & Fuller Participation of Developing Countries» was adopted under GATT in 1979 and enabled developed members to give differential and more favorable treatment to developing countries. The Enabling Clause is the WTO legal basis for the Generalized System of Preferences (GSP). Under the GSP, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to products originating in developing countries. Preference-giving countries unilaterally determine which countries and which products are included in their schemes. The Enabling Clause is also the legal basis for regional arrangements among developing countries and for the Global System of Trade Preferences (GSTP), under which a number of developing countries exchange trade concessions among themselves.
We see that the enabling clause was adopted in order to permit trading preferences targeted at developing and least developed countries, which would otherwise violate Article I of the GATT. Paragraph 2(a) provides a legal basis for extending the Generalized System of Preferences (GSP) beyond the original ten years. In practice, it gave a permanent validity to the GSP. The enabling clause permits developed countries
to discriminate between different categories of trading partners (in particular, between developed, developing, and least developed countries), which would otherwise violate Article I of the GATT, which stipulates that no GATT contracting party must be treated worse than any other (this is known as most favored nation treatment). This allows developed countries to give preferential treatment to poorer countries, particularly to least developed countries. Paragraph 2(c) permits developing countries to enter into preferential trade agreements, which do not meet the strict criteria laid out in GATT Article XXIV for regional free-trade agreements. It allows developing countries to enter into agreements, which may be non-reciprocal, or cover a very limited range of products (which would otherwise contravene the GATT).
In 1995, during the Uruguay Round General Agreement on Tariffs and Trade was replaced by the World Trade Organization. It officially commenced on January 1st, 1995 under Marrakesh Agreement, signed by 123 states on April 15th, 1994. This organization absorbed all the aims and tasks that GATT had, and of course, the principles. Uruguay Round considered to be the biggest negotiating mandate on trade ever agreed: the talks were going to extend the trading system into several new areas, notably trade in services and intellectual property, and to reform trade in the sensitive sectors of agriculture and textiles; all the original GATT articles were up for review. However, GATT 1994 is not the only legally binding agreement included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into six main parts, the Agreement Establishing the WTO, the Multilateral Agreements on Trade in Goods, the General Agreement on Trade in Services, the Agreement on Trade-Related Aspects of Intellectual Property Rights, Dispute settlement, and reviews of governments' trade policies. In terms of the WTO's principle relating to tariff "ceiling-binding" (No. 3), the Uruguay Round has been successful in increasing binding commitments by both developed and developing countries, as may be seen in the percentages of tariffs bound before and after the 1986-1994 talks [19].
The WTO launched the current round ofnegotiations, the Doha Development Round, at the fourth ministerial conference in Doha, Qatar in November 2001. It was supposed to be an ambitious effort to make globalization more inclusive and help the world's poor, particularly by slashing barriers and subsidies in farming [20]. The initial agenda comprised both further trade liberalization and new rule-making, underpinned by commitments to strengthen substantial assistance to developing countries.
Progress stalled after over differences between developed nations and the major developing countries
on issues such as industrial tariffs and non-tariff barriers to trade, particularly against and between the EU and the US over their maintenance of agricultural subsidies - seen to operate effectively as trade barriers. Repeated attempts to revive the talks were without success, although adoption of the Bali Ministerial Declaration in 2013 addressed bureaucratic barriers to commerce, despite the fact that the future of the Doha Round remains uncertain. There are 21 subjects in the work program of the Doha Round, and the deadline of January 1st, 2005 was missed. We should say that there is a tension among developed countries and developing countries: developed countries request farm subsidies for the domestic agricultural sector (what again leading to protectionism), and developing countries request substantiation of fair trade on agricultural products. This impasse has made it impossible to launch new WTO negotiations beyond the Doha Development Round. As a result, there has been an increasing number of bilateral free trade agreements between governments. Nowadays, there are various negotiation groups in the WTO system for the current agricultural trade negotiation, which is in a stalemate.
Concluding this chapter, we would like to add that GSP in the frame of WTO played a very important and active role in the way of liberalizing world economy and fostering its growth, but yet developed countries still use subsidies to protect their national markets, the spirit of protectionism is still there. Agricultural and textile products are almost the only spheres where developing and least developed countries can be somehow competitive. That is why during the Doha Round, these issues should be decided in a positive way for developing and least developed countries.
IV. Conclusion
The system of preferences is a complex mechanism that is formed by the international community in order to contribute to global development, especially to increase global trade by assisting developing and least developed countries to enter the national markets of developed countries on preferential terms. This helps developing and least developed countries to gain economic and financial benefits, increase and diversify their exports and participate more actively in the international division of labor and global trade. As a result, economic levels of the states become more closer and it also contributes to the eradication of hunger and poverty and ensuring prosperity for all, what, in its turn, is one of the goals, that are set in the Agenda of Sustainable Development of the United Nations [21].
The system of preferences is a crucial point on the way of liberalization of international trade law; moreover, it contributes to the harmonization of the national legislation of countries, which participate in the agreements on preferential trade.
For several decades, the General Agreement on Tariffs and Trade serves as a legal foundation for creating and functioning for all preferential systems provided by developed countries and organizations. It contains all the main principles of international preferential trade.
European Union's General System of Preferences is the most complex preferential system, that is distinctly elaborated to assist not only to global trade development but also it is targeted at assisting developing countries to meet international standards on human and labor rights as well as environmental protection and good governance [22]. It has a positive tendency to change, refocus on the countries most in need, and change the countries' economic criteria.
References:
1. European Union. Available at: https://www.ec.europa.eu/trade/policy
2. Council Regulation (EC) No 2586. Available at: https://eur-lex.europa.eu/legal-content/EN/ TXT/?uri=CELEX%3A32001R2586
3. Proposal for a Council Regulation amending Council Regulation (EC) No 2501/2001 applying a scheme of generalised tariff preferences for the period from 1 January 2002 to 31 December 2004.
Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=C0M:2003:0043:FIN
4. Generalised Scheme of Preferences (GSP).
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