May is World Trade Month. For most people, that means a chance to talk up the benefits of exports for American jobs. Yet for many American companies – and users of the U.S. Generalized System of Preferences (GSP) program in particular – access to imports has an important, positive, U.S. job impact that is too often ignored. One study showed that imports alone support more than 16 million jobs.
While created as a development program in the 1970s, GSP has become a vital jobs program for American businesses that use it to reduce costs (U.S. tariffs) and increase sourcing options. Sadly, this is clearest when Congress fails to renew GSP and companies face higher taxes on their imports, as has been the case since last August. Making it more expensive to import hurts American workers.
In a March 2014 survey of more than 200 companies, 10 percent reported worker layoffs because of the higher costs associated with GSP expiration. A California sporting goods wholesaler had to lay off 8 employees – more than 10 percent of its workforce – and cut benefits for existing employees because import taxes increased by tens of thousands of dollars every month.
Similarly, a small business in Texas had to stop importing from Brazil after GSP expired because the products were no longer competitive. Sales of this product dropped from more than $1 million annually to zero and the company was forced to let people go due to the loss of sales and revenue.
Layoffs are not the only – or even most common – job impact from GSP expiration: more than 30 percent of companies reported hiring freezes for specific positions in that same survey. A small business in Florida planned to roll out an e-commerce platform in early 2014. However, the $1.6 million in taxes paid (in just seven months) put that plan on hold until the company knows whether Congress will renew the program retroactively. The jobs not created? 3 warehouse/fulfillment positions, 2 customer support roles, 1 digital marketing person, 1 manager, and some outside contract work.
A Colorado manufacturer that imports specialty materials has seen sales drop by an average of $100,000 per month, forcing it to suspend plans to hire 3 new employees to support business segment associated with its GSP imports.
The American job losses from resulting from higher import costs for GSP-eligible products are real – but they don’t have to continue. If Congress passes a retroactive GSP renewal that refunds tariffs paid, many of these impacts could even be undone. A Minnesota company that has paid $800,000 in unexpected taxes plans to open three new regional sales locations if those taxes are refunded, while an Ohio company would use the refunds to increase its warehouse size and add up to 15 new workers.
This growth would have positive impacts throughout the economy: a study for the U.S. Chamber of Commerce estimated that moving “GSP imports from the docks to the retail shelves” alone supported 82,000 jobs – a figure that did not count any jobs at companies using the program!
So as we kick off World Trade Month, policymakers should remember: American jobs depend on access to low-cost imports and access to foreign markets for exports. If they want to take a tangible step to promote trade and American jobs, retroactively renewing the GSP program would be a good place to start.
This post is part of the 3rd Annual “Imports Work for America Week.“ For more information visit the Imports Work website.