Former USTR Staffer Says Renewal of GSP Should Have Fewer Criteria, Offer New Benefits

Both the bipartisan Senate and the Democratic versions of a Generalized System of Preferences benefits program renewal try to make the program do too much, says a think tank author who helped to administer GSP when he was assistant U.S. trade representative for trade policy and economics. GSP covers 3,500 of 6,900 tariff lines that are above 0, he noted, but it still covers only 11% of exports to the U.S. from GSP countries because of the categories that are excluded.

Ed Gresser, who now works for the center-left Progressive Policy Institute, wrote in a recent white paper from the think tank that while some of the new criteria are good ideas, "overly long lists of new criteria are likely to create confusion as U.S. policy priorities clash, and could force wholesale expulsion of poorer countries whose capacity to implement policy is lower than that of middle-income countries. This latter risk is particularly troubling, since some new proposals appear so strict that few if any low-income countries could meet them."

But he acknowledged it may be hard to make these changes in a timely manner, considering the Senate bill has already passed, and GSP is already in its third-longest lapse since it began nearly 50 years ago. Getting GSP renewed matters because the longer the lapse, "the more buyers simply drift away from the beneficiary countries to buy from larger partners." He said the tariffs waived by GSP average 4.4%.

Gresser said the bills could be improved by saying the criteria should be considered, but are not requirements to participate in the program, "and clarifying that to the extent possible, enforcement of criteria should not endanger the interests of the people the criteria aim to support."

He gave an example of how enforcement can be counterproductive from the African Growth and Opportunity Act, a similar trade preferences program but a more generous one, where Eswatini (then known as Swaziland) was removed in 2014 over labor standards. "An attempt to 'enforce' labor standards through withdrawal of Eswatini’s AGOA tariff benefit brought the collapse of the garment industry it was supposed to reform," he said.

He noted that there were seven GSP reviews ongoing at the time the program lapsed in December 2020, for Kazakhstan, Azerbaijan, Eritrea and Zimbabwe over labor issues, South Africa and Indonesia over intellectual property rights, and Ecuador over arbitral awards.

"Such 'enforcement' efforts at times succeed," Gresser wrote, giving examples of a reduction of barriers to U.S. agricultural exports in Indonesia, child labor law reform in Bolivia, a revised copyright law in Ukraine. "On the other hand, they sometimes fail, as in the Bangladesh, India, and Thailand cases," he said.

Gresser praised the bill introduced by Rep. Stephanie Murphy, D-Fla., and Rep. Jackie Walorski, R-Ind., which would change the competitive need limitations rules and would specify that any enforcement should not hurt the workers it is aiming to help (see 2112100058).

He also said policymakers should consider adding more categories to GSP, as a counterweight to the stricter criteria being considered, as well as making the Competitive Need Limitation system more generous for exporting countries. "GSP excludes many high-tariff products, including most clothing, textiles, shoes, and glassware; and second, GSP countries lose benefits for particular products through 'Competitive Need Limitations' when they become especially good at producing those products," he wrote. He said that by 2020, the $8.1 billion in otherwise eligible products not allowed because of CNLs was almost half the $16.8 billion in imports covered by GSP.

"The exclusions of clothing, shoes, and glassware ... may have made political sense in the 1970s," when GSP first passed, he wrote, "but now has little if any impact on U.S. employment. Apparel has a stronger case for some sensitivity, since Haiti and Central American countries rely heavily on exports of clothing to the United States, are politically unstable, and fear erosion of benefits. Removing the exclusion of shoes would not threaten them, however; nor should lines of clothing not made in Africa or the Western Hemisphere."