Division Over TAA Continues to Block GSP Progress, May Threaten AGOA

Although Sen. John Cornyn, R-Texas, happily described a trade preferences hearing as a "pro-trade love fest," comments from the panel's top Republican and its chair revealed why the Generalized System of Preferences benefits program, which has broad support, has spent years stalled in Congress.

Sen. Mike Crapo, R-Idaho, said in his opening statement, "GSP’s passage has been stalled by attempts to achieve unrelated partisan items, with the most recent demand being reauthorization of Trade Adjustment Assistance, or TAA, a program that has never been tied to GSP or any other preference program. As many of my colleagues know, TAA is traditionally a tradeoff for Trade Promotion Authority.

“If folks support preference programs, then they should let them move forward as soon as possible and without any unnecessary linkages."

Democrats' insistence that GSP travel with TAA -- and Republicans' insistence that TAA not be renewed unless TPA moved -- was what prevented a GSP renewal at the end of 2022 (see 2211160068).

During the hearing, Sen. Sherrod Brown of Ohio, the most imperiled Democratic incumbent on the ballot this year, Sen. Elizabeth Warren, D-Mass., and Sen. Sheldon Whitehouse, D-R.I., all said they would not vote for trade preferences programs unless TAA is part of the package.

Brown said 115,000 workers around the country have asked the Labor Department to certify that their jobs were lost either from import competition or because their employer moved the work to another country, but their petitions are in limbo because the program has been lapsed in full since 2021. He noted 5,700 of those workers are in Oregon, and 800 in Idaho.

"So-called free trade agreements crafted by corporate lobbyists and Washington insiders and presidents of both parties have sold out workers time and time again," he said.

"Our country owes these workers who Washington and corporate America has cast aside," he said. Brown sponsored a TAA renewal bill that would renew the program through 2030.

Immediately after Brown spoke, Sen. Ron Wyden, D-Ore., said Brown's work is important, and he is coming up with ideas to get those folks back in the winner's circle.

In a later hallway interview, when asked if GSP will continue to be stalled over the disagreement between Republicans and Democrats on TAA, Wyden said, "I'm going to do everything I can to find common ground. But as I said [in the hearing], when workers are laid off through no fault of their own, I think it's important to find a way to get them back in the winner's circle. And that's what Sen. Brown is committed to, and that's what I'm committed to."

Witnesses at the hearing represented an importer who used to rely on GSP for backpacks and who imports apparel from African countries; a nonprofit that advocates for investment in Africa; a nonprofit that advocates for workers' rights abroad and asks the government to threaten the withdrawal of GSP in countries where it identified violations; and a think tank advocate for free trade.

Scott Lincicome, a vice president at the Cato Institute's trade policy center, cited the Coalition for GSP's estimate that, between the beginning of 2021 and the end of 2023, importers who sourced goods that had been eligible for GSP benefits before the program ended paid $3.4 billion in tariffs. He said that the African Growth and Opportunity Act, or AGOA, saves importers about $300 million in tariffs. He said that while that's a rounding error for the U.S. economy as a whole, it's important to the small businesses that use GSP. He said the typical GSP importer only employs about 20 people, and for a company that size, saving $150,000 a year in tariffs is significant.

SanMar Corporation, which imports blank T-shirts, polos, backpacks and other items that are screen printed or embroidered in the U.S., is much larger -- it employs 5,000 people in nine states, and nearly 1,300 of the jobs are professional positions such as logistics, product design, marketing and IT.

SanMar General Counsel Melissa Nelson testified that a manufacturer the company had worked with in Asia said it was going to start operations in Tanzania and Madagascar, and asked if SanMar would like to purchase from those locations. At the time, Madagascar had lost AGOA eligibility, so SanMar only chose Tanzania. She said the workers in Tanzania had never worked in factories before, and needed a lot of training, but over years, were able to progress from polyester T-shirts to sweatshirts and polos.

"The process has been longer and more difficult than we anticipated. And that’s why AGOA needs a long renewal period right now," she said. She later said that her company's top sourcing officials were visiting Africa now, and were talking to companies considering additional investments in producing fabric in Africa. (Clothing imported under AGOA can use third party fabric; Nelson said that's critical, as Africa doesn't produce synthetic blends). "But they are waiting to give it the green light until AGOA is renewed," she said.

AGOA expires at the end of September 2025, and apparel importers are already planning for products that would enter the U.S. after that date. Crapo said in his opening statement he wants to renew AGOA in the next six weeks.

Corporate Council on Africa CEO Florizelle Liser talked about changes to the AGOA text that would be welcome -- accumulation permitted between Morocco, which has an FTA with the U.S., and AGOA countries; a modification to graduation criteria; and country reviews every three years, instead of annually, so businesses can have more certainty that a country will still be covered.

But the most important priority her group has is swift renewal for at least 10 years.

She said after the hearing that she was struck by the fact that several senators said they wouldn't support renewal of AGOA or GSP without the passage of TAA.

She said that concerns her, and makes her question if AGOA could lapse. However, she noted that, even though GSP has lapsed before, AGOA never has. "Prayerfully, hopefully, members of Congress will do what they've done before and they will support renewal of AGOA."

In Nelson's written testimony, she said SanMar imported more than 58 million pieces of apparel from sub-Saharan Africa, including Ethiopia, which has been suspended from the program over human rights concerns during the government's response to a violent uprising. The company buys from factories in Tanzania, Madagascar and Ghana, and intends to buy more from Kenya if AGOA is renewed.

Sen. Michael Bennet, D-Colo., told Nelson that he and Sen. Bill Cassidy, R-La., introduced the Americas Act, which would give Ecuador trade preferences that are available to Caribbean countries while it negotiated a full free trade agreement, and asked Nelson if that would lead her company to buy clothing from Ecuador.

"SanMar follows where the government tells us to go" through its elimination of tariffs on either apparel or travel goods that SanMar imports, she said. (In her written testimony, she said because of the violence in Haiti, it stopped sourcing under those trade preferences). While she said she doesn't know if Ecuador has the capacity to make backpacks, baseball hats or shirts, she added: "Would we be happy to have additional options? Absolutely."

In 2010, 40% of SanMar's imports were from China, and now it's 6%, she said, and it's because of the addition of travel goods to GSP, and trade preferences and FTAs that cover apparel.

After the hearing, Nelson said SanMar has not left Ethiopia, and hopes that it returns to AGOA eligibility. If Ethiopia was still in the program, the company would have expanded its sourcing there. She said that if Ethiopia is still not back in AGOA in five years, SanMar would "absolutely" think about leaving, but for now, "we're trying not to."

Sen. Todd Young, R-Ind., asked Nelson about Competitive Need Limitations, a feature of the GSP. He said he was glad that the House Ways and Means GSP renewal made some changes to CNLs, but said he'd like to see even more loosening. He asked Nelson if higher limits in CNL would help her business.

"The main issue is speed of renewal," she said. She said SanMar moved backpack production to the Philippines, Myanmar and Indonesia because of the tariff breaks. "Just renew it, please," she said.

Lincicome said he wishes there was no CNL at all. "A CNL limit effectively says to a country: you’ve gotten too good at making stuff, so we’re going to cut you off. It makes no sense."