Frankfurt September 23 2021: Countries that lose GSP benefits will suffer a deterioration in the terms of trade, which will see a fall in GDP; the largest fall is predicted for Pakistan (-3%), followed by Bangladesh (-2.1%) and Indonesia (-0.7%), as per study published by European Union.
EU27 (and Turkey due to the Customs Union with the EU) and UK tariff revenues rise by 0.5% and 0.7% respectively. However, the increase in revenues is offset by trade diversion to countries with tariff-free access to the EU market.
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At the sector level, amending the three-tier structure of the GSP by removing Standard GSP and/or GSP+ would significantly reduce total exports, indicating a limited capacity to adjust at sector level in these countries.
Total clothing exports are expected to be up to 42% lower in Tajikistan (albeit from a relatively small basis); others with large declines in total exports in this sector are Pakistan (-20%), Mongolia (-18%), and Bolivia (-10%).
Other sectors with a total export contraction of around 10% or more are textiles, leather, agri-food, and chemicals, rubber, and plastics.
Total EU imports of textiles and apparel, leather and footwear, and food products are expected to decrease by about 1% compared to the baseline. Imports of other sectors will hardly change.
Generally, GSP+ countries are more negatively affected than Standard GSP countries. In relative terms, the largest negative impacts under this option are expected in Tajikistan (presumed GSP+), particularly in textiles, apparel, and footwear.
Negative Impacts Are
estimated also for Pakistan (GSP+), with job reductions for skilled workers of 3.1% in apparel, 5.3% in textiles,67 and 0.4% in leather; there are, however, limited job increases in other sectors.
In the EU, effects are marginally negative stemming from the efficiency losses associated with the increased level of protection in this scenario compared to the baseline.