On November 19, 75 Members of the House of Representatives sent a letter to U.S. Trade Representative Katherine Tai supporting U.S.-India negotiations, including a “framework for a deal that could be implemented soon after Congress reauthorizes the GSP program.”
The letter was led by House Ways and Means Committee Members Suzan DelBene (D-WA) and Brad Wenstrup (R-OH) and letter signers include:
- 43 Democrats and 32 Republicans in 34 different states
- 19 Ways and Means Members (10 Democrats and 9 Republicans)
- 7 of 11 Democrats and 5 of 8 Republicans on the Ways and Means Trade Subcommittee
“The letter shows that strong, bipartisan support remains for win-win outcomes on trade, such as restored GSP for India” said Dan Anthony, Executive Director of the Coalition for GSP. “Program users are hopeful the letter will help advance U.S.-India discussions as well as refocus attention on the need for Congress to renew GSP.”
The letter supports a framework to restore GSP soon after Congress renews the program if there can be tangible progress on resolving market access issues that led India to lose its GSP back in 2019.
But the facts show that restored GSP for India would help American workers, manufacturers, farmers, etc. in its own right:
- Americans have paid up to $800 million in extra tariffs due to lost GSP for India. For example, one of the categories facing the most tariffs are agricultural chemicals, hurting both the manufacturers that turn bulk products into retail forms and the farmers that must pay more for the end product. One repeated refrain from companies: tariffs didn’t move sourcing out of India, but higher costs led importers to scale back expansions or other domestic manufacturing plans. In part because…
- Tariffs from lost GSP for India disproportionately harms American manufacturers. Over 75% of (previously) GSP-eligible imports from India are raw materials, components, and parts used to produce other things in the United States. For the current GSP countries, the figure is closer to 50%. The imports-as-inputs shares are even higher in big manufacturing states such as Texas (83%), Ohio (84%), Pennsylvania (89%), and Michigan (95%). Lost GSP for India make American manufacturers less competitive in the US and export markets.
- The pain appears very one-sided – on the wrong side – as imports from India are rising (likely due to China tariffs). Americans are paying more and scaling back investments, but imports of (previously) GSP-eligible imports from India are up 20%+ compared to before GSP was terminated. Why? Probably because 92% of those imports would face Section 301 if imported from China. New 4% tariffs on India don’t seem so bad compared to 25% tariffs on China for similar products. Imports from India of products facing 25% when imported from China have driven recent import growth.
- India is still very much a developing country, and Covid has made the situation worse. According to the World Bank, in 2019 India’s per capita income was just $2,120 – about the same as Ghana, Nigeria, and East-Timor. According to Pew Research, the number of people in India with incomes of $2 or less a day increased by 75 million, with a total of 134 million now living on less than $2 a day. Another 1.162 billion people in India – 3.5 times the entire US population – live on between $2-10 per day.
Some facts on GSP expiration:
- American companies paid at least $760 million in extra taxes from January to September 2021 due to GSP expiration. The breakdown of tariffs paid by state is available here.
- Tariffs due to GSP expiration primarily affect small businesses. Past research has shown the typical GSP importer has 10-15 employees and saves $100,000-$200,000 annually as a result of the GSP program. Small businesses – often supplying niche products – dominate the over 300 American organizations that sent a letter to Congressional trade leaders urging retroactive GSP renewal in late September.
- Retroactive GSP renewal would provide meaning relief to companies dealing with supply chain disruptions, higher freight costs, and other inflationary pressures. While tariffs are not the driver of these issues, refunding tariffs paid would help small businesses in particular that do not have the resources to pay tariffs without passing the costs along in the form of higher prices.