Assignment On

Generalized System of Preferences

Prepared For
Mr.Md.Ruhul Amin
School of Business Studies
Southeast University
Prepared By

Batch: 27
th

Section: B
Southeast University
Date of Submission
25 August, 2014



Name ID
1.Md.Saddam Hossain 2011010000375
2.Tanzil Tonim 2011010000354
3.Rawshanara Akter 2011010000364
4.Sameer Siddique 2011010000349
5.Azmol Hossain 2011010000355

Letter of Transmittal

August 25, 2014

Mr.Md.Ruhul Amin
Faculty
School of Business
Southeast University
Banani, 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 ID
1.Md.Saddam Hossain 2011010000375
2.Tanzil Tonim 2011010000354
3.Rawshanara Akter 2011010000364
4.Sameer Siddique 2011010000349
5.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. programs 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
Cte 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 Country
123















Saint Vincent and
the Grenadines
Samoa
Sao Tom 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 Tom 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
Cte 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 Balance
2014 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 per f or mance of Bangl ades h s expor t s ect or i n r ecent year s i s qui t e i m
pr es s i veespecially in the 1990s when we compare it with that of world and SAARC
Countries. 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 year s ) . Over t he per i od of 1980- 2003 Bangl ades h s expor t s
as a per cent age of t he worlds 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%.
Bangladeshs exports as a percentage of SAARC countries exports show slightly increased
trend especially in 2000and 2001.For these two years Bangladeshs exports are 11% and
12% of the SAARC countries exports respectively. Bangladeshs share of SAARC
countrys exports was the lowest, 7.72%, in 1983. Bangladeshs exports share in the Asian
developing countries, however, shows a decreasing trend in the 1990s compared to
the1980s though the ratio is slightly hi gher i n 1998 and 1999 compar ed t o
i mmedi at e ear l i er year s . The r at i o dr opped t o0.59% 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&docT
ype=main&languageId=EN
3.GSP :
http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-
system-preference-gsp