GSP Coalition Argues That Using Program as Leverage Against Thailand Misguided

Eliminating Thailand's eligibility for the Generalized System of Preferences program, because of a complaint from pork producers, would hurt U.S. importers more than Thai businesses, one witness said, and would be unlikely to convince the country to allow pigs fed with ractopamine to be imported. China and the European Union also ban meat that was fed the growth-enhancing drug. Dan Anthony, testifying on behalf of the GSP Action Committee, told the panel of government officials that they should put great weight on the potential harm to U.S. importers as they make their decision. He gave the example of a 25-person company that imports from Thailand, and had to pay $60,000 to $70,000 a month in tariffs during the two years GSP was not in force. Once it was renewed, the North Carolina company hired 17 full-time employees, and today, employs 70 people.

Thailand was one of six countries undergoing review during the GSP hearing Jan. 30, and is by far the largest exporter on the agenda. Reviews of South Africa and Indonesia are scheduled for the second day of hearings. Thailand is the largest exporter currently in the program, and Anthony said importers saved $170 million in tariffs last year through Thailand's GSP participation.

Anthony said putting conditions on countries' participation in GSP is seen as a carrot and stick approach. He said that given that a third of Thai products are going to be removed from GSP in April due to labor complaints, the remaining goods represent only 10 percent of Thai exports to the U.S. -- and 1 percent of all Thai exports. “When you view it through that lens,” Anthony said, “It's a pretty small carrot.”

He also argued that removing GSP from Thai products runs counter to another U.S. policy objective -- to get importers to diversify out of China. He noted that the imported volume is up for 17 of Thai products that compete with Chinese products covered by 25 percent Section 301 tariffs. He said Thai products that are covered by GSP but do not compete with Chinese goods under Section 301 are down 20 percent.

Nate Herman, senior vice president at the American Apparel and Footwear Association, spoke on behalf of travel goods importers, and made the same point. He said that since travel goods were added to the GSP benefits program, the Chinese market share in those exports has gone from 85 percent to 68 percent, and the share from GSP countries went from 5 percent to almost 14 percent.

When Thai officials testified at the hearing, they argued that Thai consumption patterns -- they eat offal, where ractopamine can be concentrated -- means that importing pork that was fed the drug is risky. Anthony said he is encouraging Thailand to open their market to American pork that is ractopamine-free -- and noted that major American companies like Tyson and JBS are eliminating the drug from the hogs they raise or buy, so that they can export to China or the European Union. He said that when Tyson finishes its switchover next month, 75 percent of U.S. pork will be free of the drug.

Maria Zieba, director of international affairs for the National Pork Producers Council, told International Trade Today that such a move by the Thai government would not lead her organization to drop its complaint. The pork producers are asking USTR to “withdraw or significantly reduce Thailand's eligibility for GSP benefits,” she testified.

A representative from the Agriculture Department asked Zieba why the government should affect many importers for the sake of market access for a single product.

Zieba replied that it's necessary to maintain the integrity of the program and to make sure that countries whose goods are entering duty free under GSP “aren't just taking advantage of the United States.”

After the hearing, Anthony said he was encouraged by the tone of some of the questions, like that one. He is also cautious about the possibility that India could return to the GSP program, even though there are reports that the U.S. trade representative is headed to India, and that the president will also make a trip there next month, to seal a mini-trade deal expected to restore, at least in part, GSP.

But even if Thailand's eligibility is preserved, and India is restored, Anthony is looking ahead to another challenge -- getting the GSP benefits program renewed for 2021 and beyond. “It's always a challenged getting anything passed,” he said, and the days in session this year will be reduced because of the presidential election season. If Thailand is out, and India is only partially restored or stays out, his group will be trying to figure out which companies are still benefiting and are willing to share their stories with their local Congress member. “If the constituents have lost interest,” he said, it makes lobbying for GSP harder.