Many people think imports are bad because they take business away from U.S. producers. Yet the reality is that many goods imported into the United States are used by American companies to manufacture, grow, or otherwise “make stuff” in the United States. This is certainly true for products imported duty-free under the Generalized System of Preferences (GSP) program.
Had GSP been in effect for all of 2013, it would have eliminated more than $430 million in import taxes on industrial supplies, capital goods, and automotive parts used by American companies to produce other goods. That represents about 63 percent of the total tariff savings that GSP would have provided last year and makes GSP imports different from the basket of goods imported to the United States, where only 35 percent of tariffs collected were on industrial supplies, capital goods, and automotive products. In this sense, GSP disproportionately helps American producers.
Put differently, America’s goods-producing industries would have captured more than 60 percent of GSP benefits. If you think the national average sounds impressive, it pales in comparison to the gains received by manufacturers and producers in states like West Virginia and Louisiana, where more than 97 percent of GSP tariff savings claimed were on raw materials and supplies! In many states, GSP benefits production industries almost exclusively.
For West Virginia, the leading imports under GSP were chemicals such as heterocyclic compounds, primary form polysulfides, and nucleic acids. In total, chemicals accounted for more than half of West Virginia’s $1.4 million in potential tariff savings from GSP in 2013. Auto parts and ceramic insulators – used by the electric utility industry – accounted for another 30 percent of West Virginia’s potential GSP benefits.
For Louisiana, the leading imports under GSP were ferroalloys including ferrosilicon chromium, ferrosilicon manganese, and ferrochromium. Ferroalloys are used to strengthen steel, and American steel manufacturers rely on programs such as GSP to keep costs low on these vital inputs. Lumber and plywood, such as that imported by GSP supporter list-company Argo Fine Imports in Metarie, accounted for 22 percent of Louisiana’s potential GSP savings in 2013.
For Alaska, chemicals and metal grinding balls were the leading GSP imports in 2013. While not manufacturers per se, the grinding balls are parts for machinery used in Alaska’s (very large) mining and energy industries. For Wyoming? The top import was Conveyer belts. Not surprisingly, the top imports for Michigan were auto parts, led by wheels, locks, transmission shafts, wiring sets, and engine parts. Eliminating tariffs for each of these products help keep Michigan’s auto manufacturers competitive.
The list could go on, but the point is clear: American manufacturers are some of the top beneficiaries of the GSP program because eliminating tariffs on key inputs reduces production costs. Without GSP, American manufacturers are less competitive in the global marketplace. Just one more reason that Congress should pass an immediate, retroactive GSP renewal.