Generalised System of Agreements (GSPs)
The Generalized System of Preferences (GSP) is a trade program offered by developed countries to eligible developing countries, allowing duty-free access for certain products. The primary objective of GSP schemes is to promote economic growth and sustainable development in beneficiary countries by providing preferential market access, thereby increasing their export earnings, encouraging diversification, and stimulating industrialization.
The projected impact of GSP schemes is to enhance the competitiveness of beneficiary countries’ exports in donor markets, stimulate investment in export-oriented industries, and foster job creation. By reducing or eliminating tariffs on a wide range of products, GSP programs aim to integrate developing countries more fully into the global trading system.
For Lesotho-based investors, GSP schemes offer significant market opportunities through preferential access to major global economies.
GSPs that Lesotho Qualifies For:
The United States’ Generalized System of Preferences (GSP)
Lesotho is a beneficiary of the U.S. GSP program, which provides duty-free access to the U.S. market for a wide range of eligible products. This program is distinct from the African Growth and Opportunity Act (AGOA) but can complement it by offering preferences for products not covered by AGOA or for countries that may not qualify for AGOA.
- Market Opportunity for Lesotho Investors: The U.S. GSP provides an avenue for Lesotho businesses to export various goods beyond the textile and apparel sector (which is primarily covered by AGOA) into the large U.S. consumer market. This allows for diversification of export products and reduces reliance on a single sector or trade agreement.
- Current Market Size (2024 Estimates):
- Population: Over 330 million people [Source: U.S. Census Bureau]
- Combined GDP: Approximately $28 trillion [Source: World Bank Data, IMF World Economic Outlook]
- Projected Market Size (2030 Estimates):
- Population: Around 340 million people [Source: U.S. Census Bureau Projections]
- Combined GDP: Exceeding $35 trillion [Source: IMF World Economic Outlook Projections, OECD Economic Outlook]
The European Union’s Generalised Scheme of Preferences (GSP)
Lesotho benefits from the most generous arrangement under the EU GSP, known as “Everything But Arms” (EBA). This grants duty-free and quota-free access to the EU market for all products originating from LDCs, except for arms and ammunition.
- Market Opportunity for Lesotho Investors: The EU’s EBA scheme offers extensive duty-free, quota-free access to one of the world’s largest consumer markets. This enables Lesotho businesses to export virtually any product, including agricultural goods, processed foods, and other manufactured items, without facing tariff barriers. This broad access encourages diversification and provides significant growth potential for a wide array of industries.
- Current Market Size (2024 Estimates):
- Population: Over 450 million people [Source: Eurostat]
- Combined GDP: Approximately $17 trillion [Source: World Bank Data, IMF World Economic Outlook]
- Projected Market Size (2030 Estimates):
- Population: Around 440 million people [Source: Eurostat Projections]
- Combined GDP: Exceeding $20 trillion [Source: IMF World Economic Outlook Projections, OECD Economic Outlook]
Other GSP Schemes (e.g., China, Japan, Canada, Australia)
Lesotho also qualifies for GSP schemes offered by other developed nations such as Japan, Canada, and Australia. These programs similarly aim to support economic development through preferential market access. While the specifics of product coverage and rules of origin vary, they generally provide duty and quota reductions or eliminations for eligible goods.
- Market Opportunity for Lesotho Investors: Access to these additional GSP markets further broadens Lesotho’s export potential, allowing investors to tap into diverse consumer bases in East Asia, North America, and Oceania. This multi-market access strategy can enhance resilience against economic fluctuations in any single market and promote global integration.
- Current Market Size (2024 Estimates – Combined for Japan, Canada, Australia):
- Population: Approximately 170 million people [Source: World Bank Data, National Statistical Offices]
- Combined GDP: Approximately $7.5 trillion [Source: World Bank Data, IMF World Economic Outlook]
- Projected Market Size (2030 Estimates – Combined for Japan, Canada, Australia):
- Population: Around 165 million people [Source: UN Population Projections, National Statistical Offices]
- Combined GDP: Exceeding $9 trillion [Source: IMF World Economic Outlook Projections, OECD Economic Outlook]
African Growth and Opportunity Act (AGOA)
The African Growth and Opportunity Act (AGOA), a United States trade programme enacted in 2000, provides duty-free access to the U.S. market, encompassing a population of 330 million and a Gross Domestic Product (GDP) of $28 trillion, for over 6,500 products originating from eligible sub-Saharan African countries.
In Lesotho, AGOA has demonstrably stimulated the textile and apparel sector, attracting foreign direct investment (FDI), generating substantial employment opportunities (particularly for women), and contributing to export diversification. Nevertheless, this has also resulted in an excessive reliance on this singular sector, limited domestic value addition, and challenges stemming from heightened competition and non-tariff barriers. The long-term sustainability of the industry beyond the current AGOA framework remains a significant concern.
Employment opportunities directly attributable to AGOA are primarily concentrated within the textile and apparel manufacturing industry, encompassing roles for factory workers, supervisory personnel, logistics staff, and supporting service functions. This sector has consequently emerged as Lesotho’s largest private employer.
AGOA today:
AGOA has been renewed several times since its inception, with the last renewal occurring in 2015. 32 countries are eligible for AGOA benefits in 2024.
AGOA is set to expire again on September 30, 2025. In anticipation of the expiry of the act, on April 11, 2024, US Senators Christopher Coons and James Risch introduced the AGOA Renewal and Improvement Act 2024. The future of AGOA is uncertain, pending a decision from the present (2025) US administration.