1,835 tons of oilcake from Papua New Guinea
540 tons of Fijian ginger (candied and sushi-grade)
312 tons of Solomon Islands canned tuna
292 tons of Tonga yams
133 tons of Samoan taro root from Samoa
3 tons of Fijian incense
* Last year GSP benefits were in effect
A case study in one approach to U.S. government policymaking: Here is PPI Vice President Ed Gresser, testifying on Pacific Islands policy yesterday at the U.S. International Trade Commission (ITC):
“A next-generation approach to GSP, or more broadly to trade preferences, could set goals including: help Pacific Island countries diversify their economies and attract investment in labor-intensive industries through more extensive or better use of preferences; support regional economic integration, intra-Pacific Island trade flows and joint trade policy development; encourage sustainable forestry, mining, and fisheries; work closely with U.S. allies such as Australia and New Zealand; and address logistical costs and marketing opportunities as well as tariff policy.”
By way of background: (1) The Biden administration’s “Pacific Strategy” document, released after the U.S.-Pacific Islands summit last September, notes that the U.S. devoted less than sufficient attention to this part of the world in recent decades and promises a battery of climate and sustainable fisheries programs, newly opened embassies in Tonga and the Solomon Islands, aid and technical support, and new trade and financial policy ideas. (2) Following up on this a week later, U.S. Trade Representative Ambassador Katherine Tai asked the ITC for an in-depth look at “potential impediments to and opportunities for increased trade flows between the United States and the Pacific Islands, with an emphasis on barriers Pacific Islands may face exporting to the United States,” and in particular, whether the 49-year-old Generalized System of Preferences (“GSP” for short) could provide more help or whether some other approach might be preferable. The ITC then (3) solicits comments and holds a public hearing, and will report back to her this fall.
Four months into this, PPI’s contribution to this focuses on GSP, a tariff waiver program Gresser oversaw as a government official from 2015 to 2021. Dating to 1974, GSP is the largest and oldest U.S. “trade preference” program, removing tariffs on about 3,500 of the U.S.’ 11,000 “tariff lines” for 119 eligible low- and middle-income countries and territories. These include 13 Pacific Island states, in the range from large and low-income Papua New Guinea through small and middle-class Fiji, to very small islands such as Tonga, Samoa, Cook Islands, and Tuvalu. The idea is that the tariff waivers can help such countries offset the scale and speed larger producers offer, and so encourage their economic and trade diversification and development. Participating countries need to meet 15 eligibility criteria, on cooperation against terrorism, labor standards, intellectual property, expropriation, reasonable access to markets for U.S. exporters, and other issues.
The largest GSP imports are things like jewelry, electrical equipment, luggage, and other mid-range manufactures from middle-income countries such as Lebanon, Georgia, Thailand, or the Philippines; the Pacific Island states, though, mainly use it for farm products and food. The normal tariff rate for ginger, for example, is 2.4%, and the American groceries and restaurants buying the stuff have six significant overseas suppliers: Thailand at the top, along with China, Australia, South Korea, and Indonesia. Despite a much smaller population and logistical disadvantages, Fiji ranked third in the world as a ginger supplier to the U.S. in 2020. Other examples include waivers of tariffs set at 2.3% and 6.4% for the Samoan and Tongan taro and yams, 0.45 cents/ kilo for the Papuan oilcake, and (in a special benefit available only to “least-developed” countries) 12.5% for the Solomon Islands canned tuna.
Ambassador Tai’s question is whether this system can serve the very small, and geographically distant, Pacific Island countries better than it now does. Gresser’s testimony offers five ideas, plus a sixth option of an alternative system (noted below). Ideas #2 to #5:
(2) Avoid adding too many new eligibility criteria to the system, but do add an environmental clause (must be done by Congress);
(3) Allow Pacific islands to ‘cumulate’ inputs to meet the “rules of origin” that define what it means to be ‘made in’ a GSP country (can be done by the USTR personally);
(4) More frequent visits and webinars from U.S. government personnel to explain the benefits island producers can use (an interagency option); and
(5) Provide complementary assistance, working with the existing Australia/New Zealand “PACER+” (“Pacific Agreement on Closer Economic Relations Plus”) programs to improve island logistics efficiency and reduce their high communications and financial transfer costs. (USTR, State Department, Treasury, USAID, MCC).
(6) Develop a regional preference program comparable to those created for sub-Saharan Africa in 2000 and the Caribbean Basin (in various stages) from 1983 through 2007. This is more challenging as it would require legislation, Congressional debates, and so on. On the other hand, it has the potential for more impact, as it could give Pacific Island states some tariff waivers currently unavailable in GSP (for example clothing and canned tuna), and also be a “convening” device for more regular top-tier meetings and events.
Recommendation #1 from Gresser, however, sticks out as extremely simple, more important than options #2 to #5, and frustratingly not yet done. This is that GSP is not now providing any benefits to the Pacific Islands (or other low- and middle-income countries) at all, since the law authorizing the tariff waivers lapsed at the end of 2020 and (despite a possibly overly-large set of ideas for improving and complicating it) has been out of commission for over two years. This leaves the U.S. alone among major economies in not having such a program, not only for the Pacific Island countries but also Pakistan, Lebanon, Ecuador, Armenia, Georgia, ASEAN members Thailand, the Philippines, Indonesia, Cambodia, and so on. During this lapse, for example, while Fiji has held its third-place position as a ginger supplier since 2020, its share of U.S. imports has fallen from 29% to 21% while those of Australia, Thailand, and China have bumped up; likewise, the Tongan and Samoan taro root exports appear to have fallen by about half. So: U.S. government development of new and more effective policies sometimes involves complex questions and requires detail work, but also sometimes involves quite simple and important first steps.
PPI’s Gresser at the ITC on Pacific Island trade and the GSP system.
And a 2022 look at the GSP system — benefits and eligibility rules, successes and limits, next steps — with some concern about over-enthusiasm for adding new eligibility rules in the 2021/22 Congressional proposals for revisions and reforms.
Case study in policy development:
The Biden Administration’s September Pacific Partnership Strategy document.
ITC outlines its study.
… or direct to Ambassador Tai’s request letter.
More perspectives:
The Pacific Islands Forum.
And the Australia/New Zealand/Pacific Islands PACER Plus agreement.
More on GSP, with some comparisons:
The U.S. Trade Representative’s GSP Guidebook explains GSP program goals, product coverage, eligibility rules, and country participation.
The Obama administration (2016) evaluates U.S. trade preference programs (including GSP and also the African Growth and Opportunity Act and the Caribbean Basin Economic Recovery Act) and their records on poverty alleviation.
And some international comparisons:
Japan’s Ministry of Foreign Affairs on the Japanese GSP.
The European Union’s more complex program involving three tiers of beneficiaries, more expansive but less frequently invoked eligibility rules, and a somewhat different list of eligible products.
Australia’s “ASTP” (Australian System of Trade Preferences).
And China’s “least-developed country” tariff waiver system.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
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