After Congress voted nearly unanimously to renew GSP last year, American small businesses ask Congress to examine whether kicking countries that provide a third of the duty-free benefits out of the program reflects Congressional intent
American businesses: “By lowering tariffs for American companies that import under GSP, it supports jobs and investments in the United States.”
(WASHINGTON) – Over 430 American businesses and associations from across the country that currently use the Generalized Systems of Preferences (GSP) program to help sustain and grow their businesses today wrote to Congressional leaders asking their help in delaying a recent decision to terminate the program for India and Turkey. In their letter, the American businesses pointed out that just last year, Congress voted nearly unanimously to renew the GSP program for all eligible countries and that their help is needed in ensuring that the recent termination decisions reflect Congressional intent in overwhelmingly agreeing to continue the program.
“As representatives of American companies that would pay higher tariffs as a result of these decisions – and similar ones that could come in the future – we urge you to request a delay beyond May. This would provide Congress time to work with the Administration and ensure the decisions match both the letter and the spirit of the GSP law.” the letter states. By lowering tariffs for American companies that import under GSP, it supports jobs and investments in the United States, particularly at U.S. small businesses. Congress showed the strong bipartisan support for GSP when it reauthorized the program for three years in 2018.”
The GSP programs was established in 1974 to both promote economic development and provide duty-free imports to help American small businesses compete. As the U.S Trade Representative’s office website states, GSP: “Supports tens of thousands of jobs in the United States. GSP also boosts American competitiveness by reducing costs of imported inputs used by U.S. companies to manufacture goods in the United States. GSP is especially important to U.S. small businesses, many of which rely on the programs’ duty savings to stay competitive.” India and Turkey currently provide roughly a third of total GSP imports.
The businesses that sent the letter to Congress represent the profile of the average American business that benefits from the program which tend to have 20 or fewer employees and depend greatly on duty-free imports to support those employees and their overall business. The Coalition for GSP, a group of American companies, small businesses and trade associations organized to educate policy makers and others about the important benefits to American companies, workers, and consumers of the Generalized System of Preferences (GSP) program helped organize today’s letter.
The full text of the letter:
Dear Chairmen Grassley and Neal and Ranking Members Wyden and Brady:
We are writing to express our grave concerns with the Administration’s recent announcement of intent to terminate Generalized System of Preferences (GSP) program for India and Turkey. The decisions could take effect as soon as May 4, 2019. As representatives of American companies that would pay higher tariffs as a result of these decisions – and similar ones that could come in the future – we urge you to request a delay beyond May. This would provide Congress time to work with the Administration and ensure the decisions match both the letter and the spirit of the GSP law.
GSP is a 45-year old program created to promote economic development. By lowering tariffs for American companies that import under GSP, it also supports jobs and investments in the United States. Congress showed strong bipartisan support for GSP when it reauthorized the program for three years in 2018. The House of Representatives voted 400-2 in favor of GSP renewal legislation, which was then enacted into law as part of the Consolidated Appropriations Act, 2018. Congress has not just reauthorized the program in recent years but expanded it significantly in 2015 by removing the statutory prohibition on eligibility for travel goods.
Multi-year reauthorizations and expansions have had a positive impact on American companies and workers, which saved a record $1.03 billion in eliminated tariffs in 2018. Yet the Administration’s use of country practice reviews threatens to undermine Congress’ intent in reauthorizing GSP and the benefits to program users like us. About one-third of GSP savings for American importers result from the inclusion of India and Turkey in the program. Another third result from eligibility for other countries under review, such as Indonesia and Thailand.
The India decision was based on failure to resolve market access issues. The GSP statute does not require a perfect trading relationship, just assurances of reasonable and equitable treatment. There are reports that India offered significant proposals that would improve US market access for a range of products and industries. By terminating GSP, the Administration has chosen higher barriers for US imports and exports instead of more-open markets for two-way trade. This does not match the intent of the GSP program or its eligibility criteria.
The Turkey decision was based on sufficient economic development, including “rising Gross National Income (GNI) per capita.” Yet the facts do not support this decision. While Turkey has made significant strides to diversify its exports and reduce levels of poverty, according to the World Bank, Turkey’s GNI per capita declined each year from 2014 to 2017. Further declines are expected as Turkey entered recession in 2018 for the first time since the global financial crisis. This action is diametrically opposed to GSP’s original intent. Preference programs were created to promote development by giving countries a hand up, not imposing new barriers when they are down.
The decisions even are worrying to GSP program users that do not import from India or Turkey. Eight other countries are subject to pending country practice reviews, and those decisions could be announced at any time. USTR also will announce soon whether any new country practice reviews will be self-initiated for GSP beneficiaries in Europe and the Western Hemisphere soon. If the Administration chooses to terminate GSP benefits despite efforts from beneficiary countries to address U.S. concerns, and can graduate countries based on positive economic development when data suggest otherwise, what countries’ benefits are not at risk?
It is not an exaggeration to suggest that when GSP comes up for reauthorization in next year, it could be a shell of the program that so many Members of Congress supported just a year ago. The India and Turkey announcements raise serious questions about whether the Administration is enforcing congressional intent, or misusing its discretion to eliminate tariff benefits that Congress has expressly granted.
We urge you to ensure that GSP decisions follow both the letter and the spirit of the law. Jobs at our companies depend on it.