Former Ways and Means Chair: GSP 'Difficult' in Lame Duck

Former House Ways and Means Committee Chairman Dave Camp, who was a Republican representative from Michigan, told a think tank audience that the lame duck session of the current Congress is likely to be consumed with government funding negotiations, and that leadership is unlikely to put a vote on the Generalized System of Preferences benefits program on the calendar, no matter its logic, unless members of both legislative bodies actively lobby the leaders of his former committee and the Senate Finance Committee.

Camp, who was speaking at the Center for Strategic and International Studies, said the fact that Congress is always going from crisis to crisis "makes it harder for Congress to address things like this."

"It’s going to be difficult in the lame duck but I think there’s an opportunity there," he added.

The fact that the U.S. has not been negotiating free trade agreements makes GSP "even more important," Camp said, but ironically, it also makes it more difficult to pass. He noted that Democrats have said they don't want to vote for GSP unless Trade Adjustment Assistance is attached to it. That retraining program is usually linked to trade promotion authority, but since there are no tariff liberalizing FTAs in motion, there is no TPA, and therefore, no TAA.

"A lot of issues travel in tandem … but there has to be some parity with the issues," Camp said. "TAA is kind of a big ask to put on that. That’s why you’re seeing that resistance to having it applied."

The forgone revenue from GSP, when importers are claiming it, is approximately $1 billion annually, according to the Coalition to Renew GSP. Before it expired, appropriations for TAA were $597 million in fiscal year 2021, according to the Congressional Research Service.

The panel also included Crayola CEO Pete Ruggiero, who said that GSP is a linchpin of Crayola's global sourcing strategy. Crayola buys all its colored pencils from Brazil, and those pencils used to qualify for GSP. Colored pencils are 20% of Crayola's annual sales, and Ruggiero said the hit to profits from the extra tariffs means Crayola can't invest in expanding marker, paint and crayon manufacturing in Pennsylvania, and the company has had to cut back on advertising and product development that Crayola believes could grow its sales. It also has shaved profit-sharing payments to U.S. workers.

Because GSP has been expired for nearly four years, the price tag for tariff refunds for qualifying products is getting larger, and Sen. Elizabeth Warren, D-Mass., has questioned the need for the refunds to be part of a renewal.

Ruggiero said that receiving a refund for those tariffs is very important to Crayola, and it would use it for manufacturing expansion. If there is no retroactivity, or if GSP never returns, it would "significantly impact our global competitiveness," he said.

Crayola is one of the largest companies to take advantage of GSP; the Coalition to Renew GSP says some companies have closed because of the end of the program.

Camp noted that the sentiment in Congress has shifted from lowering tariffs to raising them, and that makes a program like GSP a little out of step with the times. Perhaps as a result, the renewal legislation that passed the House Ways and Means Committee hikes the rule of origin from 35% to 50%.

Jose Manuel Romualdez, the ambassador from the Philippines, said that change would make it difficult for travel goods manufacturers in his country. He said an increase needs to be gradual.

Romualdez also said Congress needs to consider that rural manufacturing workers in his country cannot have the same labor standards as U.S. workers and still sell products at prices importers are willing to pay, and he asked Congress to be careful not to impose so many conditions on GSP participation that no developing country can qualify.

"These are things we need to thrash out," he said.