GSP expiration in 2013 had a snowball effect familiar to many small business users of the program: raising prices to cover the new tariffs led to lower sales. Lower sales resulted in less money available to purchase new inventory, which in turn led to even lower sales. Eventually, Aid Through Trade was forced to freeze hiring and delay necessary equipment updates.

All for what many might consider to be modest tariffs of $30,000 extra over two years. Yet seemingly modest amounts can make a huge difference for small businesses like Aid Through Trade.

With GSP back in place, Aid Through Trade was able to hire a new worker in Maryland and give thousands of dollars in bonuses to its staff. It also invested in new technologies as sales have returned to pre-2013 levels.

Like many GSP program users, Aid Through Trade is both importer and exporter. (About 45% of GSP Supporter List companies export.) Aid Through Trade exports products that enter duty-free under GSP to Europe.

“Job creation is a top priority for the Trump administration. As we kick off World Trade Week, it is a pleasure to honor these companies who increase our domestic exports and create good paying jobs for the American people.”

The recognition is well-deserved. The organizations show the benefits of engaging in the global economy as opposed to shrinking from it. Yet this is World Trade Week – not just World Export Week – and imports support millions of American jobs too. So we propose the creation of a President’s “I” Award to honor companies whose imports create good paying, American jobs.

Who should be honored with an inaugural President’s “I” Award? We humbly submit the following companies using the GSP program for consideration:

• MS International in Orange, California: The family-owned business doubled its domestic capex and created 280 new jobs (+30%) between August 2015 and December 2016. Like the GSP benefits, the hiring spree has continued in 2017.

• Xpres LLC in Winston-Salem, North Carolina: When import tariffs went up, this small business had to delay key investments and rely upon temporary workers. Since GSP was renewed and tariffs reduced, it has hired 17 full-time employees (+64%) and started providing employees with new benefits.

• Thompson Traders in Greensboro, North Carolina: After seven years of hard work to “break even” in 2013, this start-up had to lay off 8 of 20 employees because GSP expired and tariffs went up. With GSP back in place, it has hired 13 new workers (+108%) and initiated a program to try to manufacture in the United States.

• Univeral Arquati in Santa Clarita, California: The small business froze hiring and investments when U.S. tariffs increased and its products became lost competitiveness to similar Chinese imports. With GSP renewed, it has created 12 new jobs (+19%) and made additional investments to increase future growth opportunities.

• Kona Bicycle in Ferndale, Washington: The small business put development of new models – and their associated jobs – on hold when U.S. tariffs on its imports increased. Since duty-free benefits resumed, Kona has hired 9 new workers (+33%): 5 in product development and sales (reported at the link) and 4 more at a new showroom in Bellingham, Washington (not reported previously).

• PolySource LLC in Independence, Missouri: A supplier of thermoplastic resins and compounds to American manufacturers of global consumer goods (e.g., autos, aerospace products), the small business delayed 2 new hires as a result of new tariffs. PolySource created 5 new jobs (+45%) in the year after GSP renewal eliminated tariffs.

• B&C Technologies in Panama City Beach, Florida: The small business is in its fifth facility – each bigger than the last – in the last 14 years. Yet GSP expiration prevented it from completing required renovations. Since GSP renewal, B&C has hired 3 new workers (+11%) and hopes to hire at least 5 more soon.

If your company has a similar story, leave it in the comment section below or contact Dan Anthony from the Coalition for GSP.

New tariffs from GSP expiration in 2013 put the company’s products at a disadvantage to Chinese mouldings, which typically account for 70+ percent of US imports. In total, Universal Arquati paid about $185,000 in extra taxes because of GSP expiration. The uncertainty regarding when, or even if, those taxes might be refunded led Universal Arquati to freeze all hiring and investments.

Yesterday, we demonstrated why a focus on bilateral trade deficits will provide misguided (at best) or counterproductive and harmful (at worst) lessons to policymakers. In short, companies contribute to bilateral trade deficits with some countries and bilateral surpluses with other – but a report on bilateral deficits will almost never capture those surpluses. It’s even more complex than that – anyone who says the global trade is simple is tricking you or themselves – and today we’ll use the example of Xpres LLC in Winston-Salem, North Carolina (who we wrote about a few weeks back).

To recap our original post: Xpres imports blank ceramic mugs (e.g., coffee mugs) from Thailand under GSP. Mugs are then customized at its North Carolina headquarters and sold throughout the United States and exported to the United Kingdom. Xpres competes primarily against finished mugs (i.e., they require no further customization) imported from China. Refunds and lower tariffs associated with GSP renewal in 2015 have allowed Xpres to invest in its N.C. facility and hire 17 new workers – or about 60 percent employment growth – over the course of a year and a half.

Back to the misguided focus on bilateral trade deficits: what if the United States decided it must cut the trade deficit with Thailand? Furthermore, what if it decided that banning coffee mug imports was the best policy to achieve that goal? What sort of unintended consequences might play out and would anyone be happy with the results?

Banning coffee mug imports from Thailand presumably would shrink the bilateral deficit, but at what cost? It would likely increase the trade deficit with China as more finished mugs are imported instead, and shrink the trade surplus with the UK as Xpres no longer has products to export there. Much more importantly, such a policy would pose real risks to the North Carolina jobs that depend on customizing and selling those Thai mugs.

In a vacuum, it’s easy to see how policies to shrink bilateral trade deficits could be viewed positively. Yet even successful efforts to reduce bilateral deficits may have no effect on overall trade balances. And as the Xpres example clearly shows, pursuing such policies puts American jobs at risk.

In March, President Trump signed an Executive Order (EO) calling for a report on the causes of “Significant Trade Deficits.” Economists generally agree that macroeconomic factors related to national savings and investment rates drive trade balances, and we subscribe to that view as well. The EO and forthcoming report ensures that much ink will be spilled on both the causes of trade deficits and whether or not those deficits matter. Instead of rehashing the arguments that others likely will make, we want to drive home one key point:

The report’s focus on bilateral trade deficits will provide misguided (at best) or counterproductive and harmful (at worst) lessons to policymakers.

Is that based on theory? No. On ideology? Nope. Then what? Actual import and export patterns provided by companies while signing up for the GSP Supporter List. Specifically, we looked at companies sourcing from three countries named in the Commerce Department’s request for comments (India, Indonesia, and Thailand) and found that many export goods (or derivative products) from the United States to third countries, but almost none export back to the GSP supplier country.

In short, companies contribute to bilateral trade deficits with some countries and bilateral surpluses with other – but a report on bilateral deficits will almost never capture those surpluses.

Take India. More than 60 companies on the GSP Supporter List report importing under GSP from India in 2016. Of those, nearly half (29) reported exporting those same goods or products made from them. Yet just one company reported exporting back to India. The rest export to third-countries and have a positive effect on those other bilateral U.S. trade balances.

Based on the Supporter List sign-up data as well as U.S. trade data, GSP imports from India by Supporter List companies helped:

• boost U.S. trade surpluses in goods with Argentina, Australia, the Bahamas, Belgium, Bermuda, Brazil, Cuba, Dominican Republic, El Salvador, Guyana, Haiti, Hong Kong, Jamaica, Peru, Saudi Arabia, Singapore, United Arab Emirates, and the United Kingdom, and
• reduce the trade deficits in goods with Canada, China, France, Germany, Italy, Japan, Malaysia, Mexico, New Zealand, Sri Lanka, Sweden, Trinidad, and Vietnam.

The story is similar for companies importing under GSP from Indonesia and Thailand, and therein lies the risk of policy recommendations based on bilateral trade deficits. Any import-reducing steps taken to address the trade deficit with India could negatively impact trade balances with other countries.

Increasing the U.S. trade deficit with China – or reducing the surplus with Australia – certainly is not the goal of the Executive Order, but it may well be the result if too much stock is placed on bilateral trade flows.

As B&C President Bengt Bruce noted at the time:

“We made a commitment to manufacture in America, but right now distributors are turning away from us in favor of suppliers from China and the Czech Republic that are not impacted by GSP expiration. Retroactive GSP renewal would help us finish the new plant and expand our American workforce.”

NOTE: Tariffs on GSP-eligible may increase on January 1. Show Congress that GSP renewal is important to your organization by joining the GSP Supporter List here today. Sign up is free.

The companies reported importing from 7 GSP countries and exporting to at least 18 countries around the world. (Some reported whole regions such as “Asia” as opposed to individual countries.) About half of the companies export some of their GSP-eligible products.

For example, GSP saved Labo America in Fremont, California about $100,000 in 2016. The 10-person company not only imports microscopes from India, it exports to GSP beneficiary countries such as Brazil and Sri Lanka, FTA partners including Mexico and Peru, and other countries including Japan, Malaysia, and Vietnam.

GSP saved Samick Music Corporation in Gallatin, Tennessee (just outside of Nashville) about $130,000 in 2016. The company’s 14,000-square foot headquarters and 200,000-square foot warehouse are used for piano manufacturing as well as piano and guitar warehousing and servicing. Samick imports guitars and pianos from Indonesia under GSP and exports pianos from Tennessee to China, Germany, Indonesia, and Japan.

GSP expiration is exactly 8 months away. If you import under GSP, please join our GSP Supporter List and help us build the case for GSP renewal. There are no costs associated with joining the list.

GSP Supporter List companies added the week of April 24, 2017:

• American Omni Trading in Houston, Texas
• Bakner Manufacturing in Canton, Georgia
• Best Flowers in San Bruno, California
• BTR International, Inc. in New York, New York
• Charming Shark in Osprey, Florida
• Colony Brands in Monroe, Wisconsin
• Continental Foods Inc. in Cerritos, California
• Decotone Surfaces LLC in Garwood, New Jersey
• Eucatex North America in Alpharetta, Georgia
• Fusion Gourmet, Inc. in Rancho Dominguez, California
• International Dunnage in Thunderbolt, Georgia
• JBH Intertrade in Garden City, New York
• JSA, Inc. in Aventura, Florida
• Kirkland Associates, Ltd. in McMinnville, Oregon
• KOUBOO LLC in Laguna Beach, California
• Labo America inc. in Fremont, California
• Marta Howell Inc. in Las Vegas, Nevada
• Metal Marketplace International in Philadelphia, Pennsylvania
• Novita in Monrovia, California
• Samick Music Corp. in Gallatin, Tennessee
• South Florida Gold in Miami, Florida
• Summit Specialty International in Alpharetta, Georgia
• Venture Lighting International, Inc. in Twinsburg, Ohio

Today, we want to highlight the responses to another question that had not been asked in the past, namely whether or not the products receiving duty-free benefits under GSP were later exported from the United States. Once again, the findings might surprise readers: more than half of respondents said their GSP imports are incorporated into U.S. exports.

While past reports have focused on the positive domestic impacts of GSP on American businesses and workers, this is a very important finding from a trade policy perspective. In short, renewing GSP makes U.S. exports more competitive.

Among the respondents naming specific countries, the top destinations include Canada, Mexico, Japan, and the United Kingdom. Among those naming regions, the top destinations include Europe (or EU) and Central and South America.

The preliminary results are useful, but more responses are necessary to make compelling arguments about GSP promoting U.S. exports. If you haven’t answered already, please take a moment to answer the survey here.