Like the jobs debate, many people assume that if exports are goods for US manufacturers, imports must be bad. When it comes to GSP, nothing could further from the truth.
Raw materials, components, and parts have accounted for more than 70 percent of GSP imports since the program expired. Though industrial tariffs tend to be low, these products accounted for about 64 percent of the tariffs paid since GSP expired. Nationally, only a third of US tariffs collected during that period were on raw materials, components, and parts. Put differently, the burden of GSP expiration falls disproportionately on American producers.
Fortunately, policymakers get this. Before yesterday’s Senate vote on legislation that would renew GSP, Senate Finance Chairman Orrin Hatch noted that:
manufacturers and importers benefit by receiving inputs and raw materials at a lower cost. Approximately three-quarters of U.S. imports under GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods here at home. Unfortunately, because the program expired in 2013, these U.S. businesses have had to deal with high tariffs on these imports for the last two years.
If the national numbers sound impressive, then you’ll want to take a look at the chart below. In a few states, GSP importers use the program exclusively for raw materials and parts. In West Virginia, more than 99 percent of tariffs paid to date were on industrial supplies. In Louisiana and Alaska, it is more than 97 percent.
In value terms, Texas ranks first (or last, since additional taxes are bad) in tariffs paid for raw materials and parts because of GSP expiration. This is despite having paid significantly less tariffs than California or New Jersey on imports of all products. From August 2013 to March 2015, Texas companies paid an estimated $76 million in extra tariffs on raw materials and parts alone.
Fortunately for American manufacturers, the Senate took an important first step yesterday by overwhelmingly passing legislation that would renew GSP through December 2017 and refund most tariffs paid to date. The House of Representatives must pass identical legislation before American producers can once again enjoy duty-free benefits for key components. For manufacturers in many states, House action cannot come soon enough.
This post is part of the 4th Annual “Imports Work for America Week.“ For more information visit the Imports Work website.