Non-discrimination and Conditionality in Trade Preferences for Developing Countries: an analysis of the EC-Tariff Preferences case

Abstract: One of the current challenges within the field of international trade law is how to meet the special needs of developing countries and how to a greater extent include these countries in the world trading system. This thesis examines a particular set of exception rules that exist on behalf of developing countries. Developing countries are, in accordance with WTO law, granted different tariff preferences, often through so-called GSP programmes. When observing how developed countries design these GSP programmes, there seem to be a tendency to favour particular beneficiaries and to combine trade preferences with various conditions. Since it is questionable whether these observed designs are consistent with WTO law, this thesis investigates; (1) the scope of the principle of non-discrimination, and (2) the limits of conditionality, in the context of trade preferences for developing countries. This study focuses on the GSP scheme of the EU and offers mainly an analysis of a well-known WTO case, the EC-Tariff Preferences case, which interestingly illustrates the concepts of non-discrimination and conditionality in the context of tariff preferences. After analyzing the EC-Tariff Preferences case, this thesis concludes that developed countries are allowed to differentiate between developing countries as long as all similarly-situated beneficiaries are treated identically. Further, to fulfil the principle of non-discrimination, developed countries must: (1) base differentiation on needs that are related to “development, financial or trade” according to an objective standard, and (2) ascertain a sufficient nexus between the preferential treatment and the need, in order for the former to effectively improve the latter. Moreover, the limits of using conditionality are not entirely clear. However, the EC-Tariff Preferences case seems to indicate that conditionality in trade preferences is allowed. The conditions must nevertheless fulfil the requirements of the principle of non-discrimination. It also seems like positive conditionality has a greater chance at surviving WTO scrutiny than negative conditionality.