What is the Global System of Trade Preferences (GSTP)?

The Global System of Trade Preferences or GSTP is a trade agreement developed by the United Nations. It was signed and consented to by developing countries under the aegis of the United Nations on 13th April, 1988.

How does the Global System of Trade Preferences Work?

This trade agreement is referred to as the Global System of Trade Preferences (GSTP). GSTP as initiated by the UN is targeted at enhancing profitable and efficient trade between diverse economies within the edifice of the United Nations. GSTP is not just a mere agreement, rather, it is strategically designed to uphold and elevate trade between emerging countries. 

Also, the preferential trade agreement has provision for tariff concessions in order to reduce the costs, taxes and levies paid for imported goods. This will in turn aid a smooth business transaction between these developing countries. However, this preferential trade agreement cannot be well executed without the involvement of WTO, World Trade Organisation. Hence, the UN saw the necessity to notify WTO of this signed trade agreement. 

Although, GSTP agreement came into came into force on 19th April 1989, WTO was notified on 25th September 1989. Nine developing countries consented to the preferential tragedy agreement at the initial stage. These countries are regarded to as initial members or beneficiaries of GSTP, they are; Zimbabwe, Cuba, Tanzania, Sri Lanka, Nigeria, Singapore, India, Ghana and Bangladesh. However, after GSTP came into force in 1989, many other countries both developing and less-developed showed interest to be members of GSTP. 

In accordance to the United Nations Conference on Trade and Development, the promotion of intra-developing-country trade is crucial to GSTP. This refers to a sustainable mutual trade or business transactions between evolving countries. The promotion of intra-developing-country trade would also help to stimulate development of countries across boarders. With an increase in the membership of GSTP in 1989, where countries like Uruguay, Uganda and many others joined, there are seven notable members of GSTP that are Less Developed Countries, otherwise known as LDCs. 

Countries of the world are categorized under three economies, these are; advanced economies, emerging or developing economies and the less developed countries or economies. LDCs are countries characterised with minimal industrial activities, low incomes for citizens and well as low standards of living. Tanzania, Sudan, Myanmar, Mozambique, Guinea, Benin, and Bangladesh are members of GSTP that are LDCs. Also, Romania and Yugoslavia were one members before their memberships were withdrawn after they joined the European Union. 

GSTP is sensitive to the needs of the members, especially that of the LDCs. To cater for the specific needs of the LDCs, preferential measures in favor of LDCs was incorporated into GSTP. With these preferential measures, LDCa are expected to upgrade from their current status to become developing economies. Other members of GSTP are also expected to uphold these preferential measures while trading with LDCs. That is, developing countries should offer favorable and preferential terms when dealing with LDCs and expect nothing in return from them. This means that LDCs do not need to return the favor or preferential treatments they receive from other countries while transacting with them. This also entails that if a nation like India allows importation of good from Guinea without any importation tariff or levy, Guinea as a LDC should not be expected to do the same considering their status.