According to new research from the Coalition for GSP, the Generalized System of Preferences (GSP) program saved American companies $407 million from January to June 2020. Total imports under GSP were about $7.6 billion. Though figures were down sharply from the first half of 2019, when GSP eliminated about $555 million in tariffs on $11.7 billion in imports, congressional reauthorization remains critical for program users that are simultaneously trying to deal with the COVID-19 pandemic and related economic fallout.
While the COVID-19 pandemic has led to large import declines from many countries, the GSP slide started in mid-2019. For example, GSP eliminated $886 million in the year ending in June 2020, down from $1.125 billion in the year ending in May 2019.
The declines are primarily associated with a series of Administration actions to terminate or suspend GSP benefits:
- Turkey’s eligibility was terminated in May 2019. Through June 2020, American companies paid up to $96 million in extra tariffs as a result of lost GSP for Turkey.
- India’s eligibility was terminated in June 2019. Through June 2020, American companies paid up to $320 million in extra tariffs as a result of lost GSP for India.
- Thailand’s eligibility was partially suspended in April 2020. Through June 2020, American companies paid up to $11 million in extra tariffs as a result of lost GSP for Thailand.
The graph below shows just how much program benefits have been eliminated. From January-June 2020, companies paid up to $183 million in new tariffs due to GSP country terminations. That’s more than would’ve been paid if recently announced Section 232 tariffs on Canadian aluminum had been in effect. Letting the overall program lapse would lead to several times more new taxes on U.S. companies than tariffs on Canadian aluminum.
Without country terminations, GSP savings would have continued shattering old records through February 2020. Instead, the extra costs have made a bad situation worse for companies navigating the COVID-19 fallout – sometimes even raising taxes on specific products needed for pandemic response.
Congress must act quickly to renew GSP and ensure that more companies don’t face new taxes at the worst possible time.