Chinese exporters will no longer enjoy preferential tariff treatment in most European countries when they remove its Generalized System of Preferences (GSP) privileges on December 1, 2021.

Economists and analysts predict that the removal is expected to accelerate the trend of labor-intensive manufacturers including apparel makers moving out of China and to cheaper destination countries like Vietnam and Bangladesh.

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The impact on China’s exporters would be limited but slammed those seeking China’s removal from the USA’ list of Permanent Normal Trade Relations (PNTR), a designation that guarantees equal trade treatment including low tariffs of any other nation given the same preferential status?

The Chinese state media reports said China was still a developing country with a GDP per capita of about one-sixth of that of the USA. In 1971, the European Community was the first to implement a GSP scheme.

In 1968, the United Nations Conference on Trade and Development (UNCTAD) recommended the creation of a GSP under which industrialized countries would grant autonomous trade preferences to all developing countries.

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Since China announced its plan to transform itself from a planned to a market economy in 1978, the country has been given duty-free treatment on certain exports by 40 countries under the GSP.

In 2000, it was also given PNTR status by the US. In 2001, China entered the World Trade Organization and has since then seen enormous growth in its external trade.

After the changes, only Norway, New Zealand and Australia will continue to provide preferential tariff treatment to China. Since 2014, Switzerland, Japan, Russia, Kazakhstan and Belarus have removed China from their GSP lists.

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The EU, which imports many Chinese goods, had seen a slowing demand after the Eurozone Manufacturing PMI peaked in mid-2021.

According to the WTO, China remained the largest apparel exporter in the world with a market share of 31.6%, although its clothing exports fell 7% to US$142 billion last year from 2019 due to the pandemic.

Vietnam also reported a 7% year-on-year drop in its clothing exports to US$29 billion in 2020, but it still overtook Bangladesh to become the world’s second-largest apparel exporter. Bangladesh’s clothing exports decreased by 15% to $28 billion last year.

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In March this year, US Senators Tom Cotton, Jim Inhofe and Rick Scott introduced the China Trade Relations Act in a punitive bid to strip China of its PNTR status.

If passed, the legislation would require China to obtain MFN status through annual presidential approval, per the requirements of the Jackson-Vanik Amendment, which was passed in 1974 to affect US trade relations with countries with non-market economies.

On October 4, US Trade Representative Katherine Tai announced the Biden administration’s new approach to the US-China trade relationship. Tai said the US continued to have serious concerns with China’s state-centered and non-market trade practices that were not addressed in the Phase One trade deal signed in January 2020.

Asia Times / ABC Flash Point News 2021.

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