European Union Trade Policy and the Poor: Towards Improving the Poverty Impact of the GSP in Latin America

Abstract

The purpose of this policy paper is to analyse and propose ideas about how the European Union could have a greater impact on reducing poverty in Latin America through its trade policy, in conjunction with other policy instruments. To do this, the authors analyze the experience of the EU’s Generalized System of Preference (GSP), a scheme aimed to help poor countries adapt to the international trading system. Overall, this regime has not proven effective for this purpose nor is there any evidence that it has had a significantly positive impact on reducing poverty in developing countries in general or in Latin America. This paper starts with an overview of the context affecting this issue, including a review of the literature on the link between trade and poverty, an analysis of the contemporary situation in Latin America, focusing on poverty and inequality, reasons why it is important to look at the GSP presently, this region’s trade and development experience and overall ties between the EU and Latin America. The second section of the paper begins with a review of EU trade policy towards developing countries, stressing the GSP. Following that, it analyzes how the Latin American countries have used the GSP, with what results and what obstacles. This general treatment is complemented by two case studies, Bolivia and Costa Rica, which illustrate the problems more specifically. The final chapter provides conclusions and policy recommendations that should be taken into consideration in the current process of reform of the GSP.