Yesterday, Democrats in the House of Representatives introduced its China competitiveness package, the “America COMPETES Act” (H.R.4251). The text is available here. House Democrats hope to pass the bill as soon as next week so they can enter conference negotiations with the Senate, which passed its bipartisan version of a competitive package (known as “USICA”) last June.
While is it positive that both the America COMPETES Act and the USICA bill contain provisions that would renew GSP and refund tariffs paid to date, the GSP Coalition has serious concerns about how some of those provisions may effect the long-term viability of the GSP program, both for workers and companies in developing countries and the United States.
There are several apolitical areas where the USICA language is clearly preferable to the America COMPETES Act language:
- The America COMPETES Act reauthorizes GSP for two years less (December 31, 2024 vs January 1, 2027) than USICA, creating more uncertainty for program users in GSP countries and the United States.
- The America COMPETES Act lacks new provisions in the USICA language requiring public review and comment before punitive actions against countries can be taken, a basic good governance issue to prevent abuse of the (current and proposed) eligibility criteria by some unknown future Administration.
The are several areas where the America COMPETES Act language, no matter how well-intentioned, presents greater risks of lost GSP (and AGOA) even if countries make good-faith efforts to comply:
- A recent Progressive Policy Institute (PPI) report notes that, under proposed criteria to “effectively afford” labor rights and/or “effectively enforce” environmental obligations found in the America COMPETES Act, program administrators “may find it necessary to remove most beneficiary countries from the system (or at least most of the low-income and least-developed countries unable to fully implement standards which lack provisions for good-faith but only partially successful efforts).” (emphasis added)
- Policy impacts may not be limited to GSP benefits: the PPI report notes widespread GSP loss “would also depopulate AGOA, since a core AGOA eligibility rule is qualification for GSP.“ Other U.S. programs, such as the Development Finance Corporation, currently require GSP eligibility for funding too. From the development perspective, it would be a truly perverse outcome if countries making good-faith efforts lose GSP anyways over a lack of resources, which in turn results in even less resources for trying to raise standards.
- The PPI report includes several useful examples of how enforcement can harm those that criteria are meant to help, such as when Madagascar lost AGOA under a “rule of law” provision that may be added to GSP, “effectively punished the young women in the garment industry benefiting from AGOA for the irresponsibility of national political leaders, but had little effect on the coup-makers.“
The America COMPETES Act missed an opportunity to incorporate bipartisan GSP changes such as the “CNL Update Act” introduced by Ways & Means Members Stephanie Murphy (D-FL) and Jackie Walorski (R-IN):
- The CNL Update Act would help promote a race-to-the-top on trade by clearing stating the Sense of Congress that administrators should seek to preserve GSP benefits for “good actors” and trade clearly furthering GSP’s development goals even if some punitive actions are deemed warranted under the eligibility criteria.
- The CNL Update Act would better-incentivize countries to meet eligibility criteria by raising the threshold at which non-sensitive products may lose GSP benefits (even if there is no U.S. production) and stating that administrators “should” restore GSP benefits for non-sensitive products below the new thresholds (an action that is allowed but almost never taken under the current statute).
Fortunately, none of these issues are insurmountable:
- The GSP provisions in USICA, which were included in an amendment that passed 91-4 last year, shows the opportunity for bipartisan compromise in areas such as adding environmental and women’s economic empowerment issues to GSP.
- The PPI report suggests some tweaks – not wholesale revisions – that could help ensure the likely outcomes of GSP changes match the stated goals of those changes (and that criteria don’t harm those they are meant to help).
- The Murphy-Walorski bill provides useful additions to both the USICA and America COMPETES provisions that would improve GSP for workers and companies in GSP countries and the United States.
The Coalition will continue working with Democrats and Republicans in both the House and Senate on compromise GSP reauthorization legislation that promotes a race-to-the-top on trade.