I received an email yesterday from the owner of a company in Portland, Oregon that imports under both GSP and the Andean preferences. I’ve worked with this person on GSP issues for several years, but when I asked to add his name to the GSP Supporter List, the response caught me off-guard, to say the least:
“We are, at best, ambivalent about renewal at this point. What we need is certainty. These temporary renewals are worse than anything.”
This is a shocking statement from someone that has supported and benefited from preference programs for many years. Past research shows that when Congress fails to renew GSP, or renews it in fits and starts after allowing it to expire, American companies lose interest in the program.
We need to be clear about something here: companies don’t stop importing under GSP because they want to pay higher tariffs or arbitrarily change suppliers. Companies stop using GSP because:
- they can’t be sure that duty savings promised will remain in place by the time a shipment reaches the United States
- the fear of losing money on each shipment when GSP expires resonates much more than the prospect of slightly higher profits when GSP is in place
- they realize that after being caught flat-footed by GSP expiration once, they don’t want to put themselves in that situation again.
In short, companies stop using GSP because Congress’ practice of renewing GSP at the very last minute (or at all) creates too much uncertainly for American business to thrive.