House China Select Committee: renew GSP with changes to “accelerate supply chain shifts out of the PRC market”

Today, the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, led by Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL), adopted nearly 150 policy recommendations in a bipartisan report that “outlines a strategy to fundamentally reset the United States’ economic and technological competition with the People’s Republic of China.” Among its recommendations (page 43):

Reauthorize the Generalized System of Preferences (GSP) program, which expired at the end of 2020, to promote economic development in the roughly 120 developing countries covered by GSP. In the reauthorization, Congress should modernize the program to accelerate supply chain shifts out of the PRC market, enhance rules of origin to limit PRC transshipment, and provide certainty for industry as they contemplate supply chain investment decisions outside of the PRC.

Since GSP expired, American companies have paid over $3.2 billion in extra tariffs on products that often compete directly with imports from China, which has never qualified for GSP treatment. In July, a majority of China Select Committee members, including Gallagher and Krishnamoorthi, signed a letter supporting GSP renewal with “smart changes” to make GSP countries a more viable alternative to China.

While the new report did not provide specific examples of policy changes, the new “CNL Update Act” from Reps. Blake Moore (R-UT) and Suzan DelBene (D-WA) is one such change. It would help preserve duty-free treatment for key products that have left China in recent years for GSP countries, such as travel goods. It also would help restore restore duty-free treatment for many products that lost GSP in the past under CNL rules. In many cases, those losses were followed by sharp increases in imports from China and declines from the GSP country — yet those products remain excluded from GSP many years later. Adopting the CNL Update Act provisions as part of GSP renewal is a critical step Congress can take to help provide certainty for American companies seeking new suppliers outside of China.