A number of trade reforms being proposed by the European Union could shift the benefit balance from large countries such as China and India and instead favour the poorest and smaller developing nations such as Laos and Bangladesh.

The changes were unveiled yesterday when the EU outlined GSP guidelines for 2006-2015 and confirmed it would focus on the poorest and most vulnerable developing countries who most need trade preferences to access the EU market.

The Generalised System of Preferences currently grants zero or discounted import duties to 178 developing countries, with the same preferences given to both struggling and thriving nations.

Under the revamped system, the EU would take account of market share in particular exports, such as textiles, when determining which countries should be eligible for the tariff reductions.

"When they have a pretty good market share, we deem they no longer need these preferences and therefore we can reallocate them to poorer countries," said EU Trade Commissioner Pascal Lamy.

What this means - in theory at least - is that large countries like China and India could lose some of their current benefits.

The EU is already the world largest provider of trade preferences in favour of developing countries, representing more than all other developed countries taken together.

But Lamy said: "We want to do even better, by focusing on the poorest and most vulnerable developing countries who most need trade preferences to access the EU market."

The Generalised System of Preferences gets updated every 10 years, and the Commission plans to have a blueprint ready by 31 December 2004. The new system of preferences would run from 2006-2015 once approved by EU governments and the European Parliament.

Lamy said he hoped to introduce a regulation by October, following consultations with governments and the Parliament.