1. Introduction
The Generalized System of Preferences (GSP) concept, which consists essentially of
non-reciprocal tariff preferences being given by all developed countries to products of
all developing countries, has been controversial from the time that its concept was first introduced and discussed internationally in 1964. To its proponents, the GSP promised
through “trade rather than aid” to increase the exports and purchasing power
of developing countries in the short run and to diversify least development country
(LDC) economies in the longer run by encouraging the exports of manufactured and
semi-manufactured products (Graham, 1978). However, many scholars argued that the
GSP proposal threatened the delicately constructed GATT international trading
system by undermining its cornerstone “the most-favored-nation (MFN) principle of
nondiscrimination” (Whalley, 1990) and that it was economically ineffectual.
In 1968, the United Nations Conference on Trade and Development (UNCTAD)
favorably advised for the creation of the GSP[1]. These preferences were to be generalized,
i.e. available to all developing countries and no longer restricted to countries having
privileged relationships with certain industrialized countries. Following this understanding
the European Union[2] was the first to implement a “Generalised System of Tariff
Preferences” in 1971 as recommended by the UNCTAD. Since then, around a dozen other
industrialized countries have also introduced GSP schemes, all differing in the scope of
products that are covered and the depth of the preferences that are offered, depending on
particular sensitivities to the preference-granting country. The EU’s GSP as a trade policy
instrument provides the most beneficial market access to the developing countries.