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Preferential Agreement

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A preferential agreement consists of a mutual tariff reduction pact between two or more countries. That is, a country reduces one or more tariffs to another country, which in turn also reduces one or more tariffs.

Preferential agreements don't have to affect all products. The objective of this type of agreement is to promote bilateral trade between those who sign the treaty.

They aren't considered regional integration agreements because they don't involve the elimination of all trade barriers and because they don't imply the adoption of a single trade policy. The problem with these agreements is that they oppose the most favored nation principle of the GATT / WTO frontally, given that they materialize in privileges that can't be extended to third countries.

The exception is found in the preferences granted to developing countries, as they would be subject to the enabling clause.

The Generalized System of Preferences

The Generalized System of Preferences is set out in 1968 in Resolution 21 II), adopted at the United Nations Conference on Trade and Development (UNCTAD), which proclaims: " the objectives of the generalized system of preferences without reciprocity or discrimination in favor of developing countries, including special measures for the benefit of the least developed among them, should be: increase the export earnings of these countries; promote its industrialization; and accelerate its pace of economic growth. "

In this way, certain developing countries will be favored by lower tariff rates that may even be nil.

Preferential agreements in the European Union

The European Union was one of the pioneers in establishing these preferential agreements in 1971. Up to 178 countries have been incorporated into the Generalized System of Preferences of the European Union. In this sense, the European Union is responsible for developing programs with a periodicity of 10 years that'll affect those products that are subject to the payment of tariffs.

The Generalized System of Preferences of the European Union is characterized by the following aspects:

- New products that were not previously covered are included and the number of products that enter with tariff 0 in the European market (known as "non-sensitive products") is expanded, and preferential margins are improved.
- Special attention to less developed countries: Treatment differs depending on the level of income of the beneficiary countries, being more advantageous for the poorest.
- The system has been simplified, currently only three regimes operate: the general one, the special one for less developed states and the special regime to promote development and governance.
- Increase of transparency and improvement of the rules of origin: It affects the graduation of the most competitive products and establishes a unique and simple criterion for graduation, which simplifies the treatment of the System of Generalized G Preferences. The rules of origin are acted on three fronts: formal, substantive and procedural, making their treatment more flexible and achieving greater regional cooperation between beneficiary countries

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