Assessing the Effectiveness of European Union Generalised System of Preferences: Framework Development and Empirical Analysis.

Abstract

This study developed a multi-dimensional framework to examine the effectiveness of the EU Generalised System of Preferences (GSP). The EU GSP scheme is designed to address a range of developmental challenges, foremost being poverty reduction and the integration of developing nations into the global trading system. Despite prolonged participation, numerous countries continue to experience persistent poverty and face significant barriers to global market integration. This necessitates a critical evaluation of the GSP’s effectiveness, highlighting both the developmental challenges in beneficiary countries and the optimisation status from the EU as the donor country. Existing research on GSP effectiveness is fragmented and varies widely in conceptual focus, complicating the monitoring and prediction of outcomes. To address this, this thesis constructs a comprehensive framework to objectively evaluate GSP efficiency, poverty reduction, and integration into Global Value Chains (GVCs). The framework is empirically tested across three chapters using Fixed Effect estimation (FE), Structural Equation Modelling (SEM), and Generalised Least Squares (GLS) with datasets spanning from 2010 to 2019. The first key finding reveals that the EU GSP scheme has been largely inefficient for beneficiary countries, with an average utility rate of 23.73% among effective beneficiaries. These finding challenges previous studies that equate high preference utilisation with GSP efficiency, which often overlook the scheme’s procedural limitations that are reflected in the utility rate. The second finding, derived through SEM and non-linear estimations, indicates that the GSP is ineffective in reducing poverty within beneficiary countries, with the overall impact on poverty being positive and significant. Finally, the study finds that increased restrictiveness in rules of origin (RoO) exacerbates difficulties in GVC integration. However, incorporating cumulation provisions mitigates this adverse impact, reducing the negative effect to 12%. The significant positive coefficient of the cumulation variable highlights its vital role in facilitating GVC integration. The study also notes significant variability among GSP beneficiary countries in accessing the cumulation provisions influenced their potential for GVC integration. While the continuation of the GSP is recommended, this study underscores the need for substantial equitable improvements to ensure that market access conditions for developing economies align with and support the scheme’s developmental objectives.