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PPI’s Trade Fact of the Week: The U.S. Generalized System of Preferences program has been expired for nearly three years

• September 20, 2023
• Ed Gresser

FACT: The U.S. Generalized System of Preferences program has been expired for nearly three years.

THE NUMBERS: Random sample of GSP imports, 2020 –

WHAT THEY MEAN:

Live now at 2 p.m. EST: PPI’s Ed Gresser is testifying at the House Ways and Means Trade Subcommittee. Watch the live stream.

Background: The Subcommittee’s hearing is on the revival of Generalized System of Preferences, or GSP, a program Gresser oversaw as a civil servant from 2015 to 2021.  This is a 50-year-old set of tariff waivers for 119 low- and middle-income countries, from small Pacific and Caribbean islands to big Brazil and Pakistan, for which Congress’ authorization lapsed at the end of 2020. The U.S. for the moment is the only developed country without such a system.

Some specifics: GSP tariff waivers apply to 3,616 of the U.S.’ 11,414 tariff “lines”* for all the countries on the list, and 5,138 “lines” for the 42 least-developed countries in the group.  Real-world cases, noted above, range from Ukrainian paint and Armenian jewelry, to Haitian mangoes, Thai orchids and mirrors, Fijian ginger candy, Mongolian pine nuts, South African citrus, Cambodian backpacks, and South Pacific yams and taro root. The tariff rates on these lines average about 4.8%, and peak at above 20% for backpacks and luggage. Balancing the additional bit of opportunity are 15 eligibility criteria — providing “reasonable assurance of access to markets” and “adequate and effective protection of intellectual property,” “taking steps to afford internationally recognized labor rights” — which Congress asks participating countries to meet.

During its last year in effect, depending on one’s point of view GSP trade made up (a) an impressive $17 billion in imports, or (b) a modest 11% of imports from the relevant countries (given some exclusions of products, the permanently duty-free status of most energy and resources, and some other factors ) or (c) a modest-almost-to-the-point-of-chastity 0.8% of that year’s $2.35 trillion in U.S. imports.  Two policy points for the Committee as Congress considers re-upping and revising it this fall:

1. Set clear priorities: If Congress’ main goals are encouraging supply-chain diversification and alternatives to Chinese sourcing, the GSP program’s benefits probably should be more significant and need to be pretty stable.  So: long new authorization; consider upgrading benefits either by adding products, revising the arcane ‘Competitive Need Limit’ system, or other options; and make sure removals of benefits on eligibility grounds are last resorts for severe non-compliance.  Alternatively, if the top goals are encouraging countries to work on particular policies through the eligibility criteria, think also about adding some value, and about limiting the number of new eligibility criteria and keeping them specific so that administration officials and GSP country governments can focus on the relevant topics.

2. Act with some urgency: GSP’s Congressional ‘authorization’ lapsed at the end of December 2020, and so the program has not provided benefits for three years. As we noted a couple of weeks ago with respect to the Solomon Islands and canned tuna, this means countries in the program, especially smaller and poorer ones, risk losing exports and employment as trade shifts back to larger and often non-GSP sources. At the same time, U.S. government hopes to use the program for particular policy goals, or to encourage diversification of sourcing and reduce China-reliance, remain on hold. So, act expeditiously.

* See the tweet below for an especially kooky real-life example of these “lines,” with a screenshot of the Borges-like list of wild animal tariffs on HTS pg. 12.

FURTHER READING

Live now, the Ways and Means Committee hearing page.

Gresser’s testimony.

And from 2022, Gresser on GSP Renewal: “Trade, the Poor, and America is Back”

Background:

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, the African Growth and Opportunity Act, and the Caribbean Basin Economic Recovery Act) and their records on development, poverty alleviation, and policy.

And some international comparisons:  

Japan’s Ministry of Foreign Affairs explains the Japanese GSP.

The European Union

Australia

China’s “least-developed country” tariff waiver.

ABOUT ED

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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