On September 21, 308 American companies and associations sent a letter to Senate Finance and House Ways and Means Committee Chairmen Ron Wyden and Richard Neal and Ranking Members Mike Crapo and Kevin Brady urging retroactive renewal of the Generalized System of Preferences (GSP).
Companies are headquartered in 40 states and about 175 different Congressional Districts. They operate in every state and congressional district. The vast majority are small businesses but signers also include some of the largest U.S. corporations.
GSP expired on December 31, 2020 and American companies have paid about $750 million in extra tariffs as a result. This includes about $250 million in estimated tariffs since the Senate included a 6-year, retroactive GSP reauthorization as part of the “United States Innovation and Competition Act of 2021” (S.1260). Congress must reach a bipartisan, bicameral compromise to renew GSP as soon as possible.
The letter also raises concerns about the “sticks only” approach in both the Senate and House bills that add many new eligibility criteria but no new incentives or assistance to help countries actually meet the updated criteria. Already, GSP’s share of U.S. imports has declined from 1.8% in 2006 to less than 0.7% in 2021. If GSP covers less trade each year, it cannot meet its original development goals, let alone create new leverage in areas such as rule of law, the environment, and women’s rights.
To address these concerns, Congress should consider broader changes to improve the GSP program as part of renewal. It has been decades since Congress updated program rules such as “competitive need limitations” (CNLs) that now exclude up to one-third of all potential GSP imports. Similarly, eligibility criteria aim to raise standards, but there are no processes to exempt good actors in the event of punitive tariffs. Commonsense changes in areas such as these would benefit workers in the United States and GSP countries and increase the effectiveness of any new eligibility criteria.