The EU’s GSP functions as a unilateral trade preference scheme that offers reduced or zero customs duties on imports from developing and least-developed nations. This scheme is non-reciprocal and serves as an exception to the WTO’s Most-Favoured-Nation (MFN) principle. Its permanent legal basis under WTO law is established by the 1979 Enabling Clause, enabling developed countries to provide differential and more favorable treatment to developing countries.
Tiers under the GSP scheme
The EU’s GSP framework consists of three tiers:
- Standard GSP: Applicable for low and lower-middle-income developing countries that satisfy specific requirements. India currently benefits from the Standard GSP.
- GSP+: An enhanced incentive scheme requiring countries to ratify and implement various international conventions on labor rights, human rights, environmental standards, and governance.
- Everything But Arms (EBA): This tier grants duty-free, quota-free access to all goods from least-developed countries, with the exception of arms.
EU’s latest GSP regulation
The European Commission has enacted Implementing Regulation (EU) 2025/1909, which specifies the guidelines for suspending certain tariff preferences for specific GSP beneficiary nations, including India, during the 2026–2028 period. This regulation will take effect on January 1, 2026, and will be in force until December 31, 2028.
Under the new GSP conditions, agricultural tariff lines will not be graduated. In the non-agricultural sector, only leather has been reintroduced.
The suspension affects thirteen GSP sectors, including: mineral products; inorganic and organic chemicals; plastics and related articles; rubber and its products; textiles; articles made of stone, plaster, cement, asbestos, mica, or similar materials; ceramics; glass and glassware; pearls and precious metals; iron and steel and related articles; base metals (excluding iron and steel) and their products; machinery and mechanical appliances; electrical machinery and equipment along with their parts; railway or tramway locomotives and rolling stock; motor vehicles, bicycles, aircraft and spacecraft; and ships and boats.
In 2023, total EU imports from India reached approximately €62.2 billion, with only €12.9 billion qualifying under the EU’s Standard GSP framework. India has graduated from 12 major product categories. According to the new regulation, the Commerce Ministry anticipates that €1.66 billion of trade will graduate from the GSP regime, resulting in eligible GSP trade of €11.24 billion, based on 2023 figures.
The Commerce Ministry stated that the graduation process hinges on the competitiveness of a country’s exports, which the EU reviews periodically, attributing India’s incremental graduation to the increasing competitiveness of its exports.
