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TRADE SYSTEM OF EU COMES UNDER FIRE

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The European Commission called Thursday for a total overhaul of the European Union's preferential trade offer for Asian and Latin American nations, saying the new system must focus on the development needs of the regions' poorest states.

The commission said it planned to become more restrictive in granting tariff concessions under the EU's Generalized System of Preferences to "competitive" developing nations, focusing instead on giving larger tariff benefits to poorer countries."We are drawing up a system which will be easier to manage," said Pierre Defraigne, head of the European Commission's North-South division.

Officials said the commission wasn't suggesting the total exclusion from the program of Asia's most competitive nations. But "top performing" nations would see their GSP benefits curtailed for specific sectors in which they had become very competitive, De-fraigne said.

The commission's proposals contain a series of new ideas that officials say will need the backing of EU member states before they can be applied.

The commission wants to get rid of all earlier "protectionist" tools such as GSP quotas and ceilings. Instead, tariff concessions will now be "modulated" according to the level of development and competitiveness of nations.

Under the new system, exports from poorer countries will be subject to lower duties than products sold by the more competitive nations.

The commission also is suggesting that countries such as Hong Kong, Singapore and South Korea should remain in the GSP for now but with access to fewer benefits.

The problem, officials said, is that GSP benefits now are "hogged" by a small list of highly competitive nations. Advanced nations don't need GSP tariff benefits, the commission argues.

According to EU statistics, Asian nations have been the most avid users of the preferential trade system. In 1992, Asian states accounted for almost 70 percent of nations using the GSP.

"This is reflection of Asia's swift industrialization and the improvement in the terms of trade for manufactured goods," said a commission trade expert.

In another controversial innovation, the commission also suggested that additional tariff benefits should be earmarked for nations that promise to abide by international labor standards and clean up their environmental policies.

"This is in recognition of our belief that development also means environmental and social progress," Defraigne stressed.

The "special incentive arrangements," which some say could be a precursor to the introduction of a "social clause" in world trade relations, will provide for extra tariff benefits for countries that recognize trade union rights and the right to collective bargaining.