Background Paper No 4
targets (South Korea and other emerging countries are more likely). On this analysis, selective action would benefit Hong Kong in saving her from general controls aimed at others.
GENERALISED SYSTEM OF PREFERENCES
1 The EEC's GSP allows entry under tariff preference for imports from developing countries. All industrial products enter duty-free, though for "sensitive" products (e.g. footwear, chemicals, leather goods) there are limits on the quantities qualifying for preference. In the agricultural sector, a range of products are eligible for preference without quantitative limit, though entry is often at reduced rather than zero rates of duty..
2 The limits applied in the industrial sector bite, depending on their nature, either on developing countries as a whole or on individual suppliers which are judged particularly competitive for any particular product. Their rationale is two- fold. The erga omnes limits are designed to safeguard Community industries from an excessive inflow of preferential imports from low-cost suppliers. The country- specific limits, on the other hand, are intended to prevent the more advanced countries from pre-empting the benefits of the scheme at the expense of the poorer and less competitive countries.
3 Hong Kong is amongst the most competitive of the scheme's beneficiaries: in recent years she has been the third largest user, with digital watches, electronic calculators and cutlery amongst her main exports to the Community. As such, she has fairly frequently hit up against the GSP limits.
In the revised GSP arrangements for textiles introduced on 1 January this year, Hong Kong will for the first time be eligible for preference on the full range of products. The proportion of her exports on which she will receive preference is admittedly small (2%) reflecting her relative wealth and competitiveness. But we successfully resisted strong pressure in the Community to discriminate against her by excluding her from benefit on the most sensitive goods.
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This year China has been included in GSP for the first time. To protect Community industries and to safeguard the position of other poor beneficiaries of the scheme, she has been excluded wholly or partially from benefit on a relatively limited range of industrial and agricultural products.