Due to GSP country terminations of Turkey (May 2019) and India (June 2019) and partial suspensions of Thailand (April 2020, December 2020), American companies have paid about $800 million in extra tariffs. Despite costs to American companies and workers rapidly approaching $1 billion, there has been no progress on any of the issues raised in those country reviews.

With GSP expired for six months, why are we worried about old country reviews? Because the Senate-passed GSP renewal legislation, the House Republican companion bill, and a separate House Democratic bill, all add numerous criteria that could be justified to revoke a country’s GSP status but nothing providing direct help or indirect incentives for countries to comply. If history is a guide, new tariffs on Americans are much more likely than U.S. policy “wins” in GSP countries. Congress should do everything in its power to avoid setting up such lose-lose situations as part of its GSP renewal bill.

Tariff trends make the (lack of) outcomes look even worse. If exporters in India/Turkey/Thailand were suffering, you’d expect to see U.S. tariffs faced falling over time as American companies cut back orders and found alternative sources in other countries. The opposite has happened, with tariffs paid on (previously GSP-eligible) imports from all three countries hitting new highs in April and/or May 2021. While American companies pay $50+ million per month in extra tariffs, the exporters in India, Turkey, and Thailand are thriving. American companies and workers clearly have borne the brunt of GSP terminations.

It’s worth reiterating: there has been no resolution of – or even tangible improvements on – any of the issues raised during the country reviews. There have been no “victories” for American companies or interests, only losses. That includes export losses given that India stopped delaying imposition of Section 232 steel/aluminum retaliatory tariffs immediately after GSP talks collapsed.

This is not to suggest that eligibility criteria can’t or shouldn’t be added. But if policymakers want to create an environment where new criteria are more likely to raise standards – and avoid lose-lose outcomes like these recent cases – Congress should incorporate other changes into GSP renewal legislation to:

• make countries care more about keeping GSP benefits
• help countries make progress on the new criteria
• prevent abuse/misapplication of the new criteria
• minimize collateral damage when actions are necessary

To be clear: they’re not paid by the countries and haven’t achieved any other U.S. policy goals and won’t be refunded if benefits are reinstated. They’re just $500 million in new taxes on U.S. companies at a time of unprecedented economic collapse and job losses.

Above is the breakdown of estimated tariffs paid by state. Imports into California and New Jersey have faced about $50 million in new tariffs each. Companies in traditional – or newfound – election battleground states Texas, Georgia, Florida, Pennsylvania, Michigan, and Ohio were all in the top 10 of tariffs paid, collectively paying up to $168 million in extra taxes.

And the taxes paid continue to climb.

The bulk of taxes – up to $366 million from June 2019 to August 2020 – have been paid on imports from India. The typical GSP importer from India had 14 employees and saved $100,000 per year. The burden falls overwhelmingly on small businesses struggling to make it through the pandemic, not the large multinational that can rapidly shift sourcing to suppliers in other countries. A report from April 2019 profiled many U.S. companies that would be hurt by termination for India (and others).

Up to $111 million in tariffs have been paid on imports from Turkey from May 2019 to August 2020. In similar comments submitted as part of the Turkey review, we noted the typical GSP importer from Turkey had 14 employees and saved about $150,000 annually. The Turkey review was launched over “market access” issues, but there were no known discussions about resolving issues. Instead, Turkey was “graduated” for sufficient economic development despite just entered a recession and having a GDP per capita that has now fallen in 5 consecutive years (the metric used to determine if countries should be graduated from GSP automatically).

Up to $23 million in tariffs have been paid on imports from Thailand from May 2020 to August 2020. Importers from Thailand tend to be a little bigger – but far from large! – with the typical importer having 28 employees and savings $183,000 annually under GSP. Most unhelpfully, the product facing the most tariffs appear to be face masks. Higher tariffs on face masks may not have seemed like a big deal when Thailand’s partial suspension was announced in October 2019, but we’re in a very different world with mask imports surging due Covid-19.

Potential GSP renewal legislation is highly unlikely to address country-specific issues, but the impacts from terminations are no less real for American companies than the prospects of expiration. If Congress considers changes to the GSP programs in the future, ensuring importers interests are not ignored in the country review processes should be a top priority.

For many years, TRI’s GSP savings funded multiple full-time salaries. Despite loss of GSP for products imported from India and Turkey, GSP “still saves our company the equivalent of more than a full-time employee’s annual salary.”

Watch TRI Executive Vice President and CFO Jeff Wright explain how “maintaining full employment, full wages, and employee benefits is our top priority as is supporting our US customers who are trying to do the same for their American workers” – and how GSP renewal would help them do it.

If you’re a GSP importer, submit your own video testimonial here.

While California is far-and-away the #1 state for GSP savings, Texas edges it out for most tariffs paid this year due to country suspensions – companies in each state have paid up to $18.6 million in extra taxes. Companies in New Jersey are not far behind, having paid up to $18.2 million in extra taxes due to country suspensions.

The costs are driven by different Trump administration actions. Texas is the top state in tariffs paid due to India’s suspension, New Jersey has paid the most due to Turkey’s suspension, and California has paid the most due to Thailand’s partial suspension. The table at the very bottom shows tariffs paid, by country suspension and total, for all states.

Including the tariffs paid due to suspensions, both in 2019 and 2020, drastically changes the state savings trends. Instead of the sea of dark red states with declines of over 20% shown yesterday (and below, right), only a 5 states are likely to have seen such declines without country suspensions. Similarly, there would be savings growth for states in every region of the country instead of limited to the Mountain West.

Swings states, including big states not traditionally in play in Presidential or Senate elections, account for some of the biggest dollar swings. Without country suspensions:

• Texas companies’ savings would’ve increased up to $2.4 million instead of declining by $12.7 million, a $15+ million swing
• Georgia companies’ savings would’ve increased up to $3.1 million instead of declining by $5.8 million, nearly a $9 million swing

In more traditional swings states, maintaining full GSP eligibility for all countries would have mitigated declines likely associated with the Covid-19 pandemic. For example:

• Florida companies’ savings would’ve declined by $4.3 million instead of $12.6 million, an $8+ million swing
• Pennsylvania companies’ savings would’ve declined by $350,000 instead of $8.2 million, nearly an $8 million swing
• Michigan companies’ savings would’ve declined by $3.2 million instead of $8.2 million, an $5+ million swing

Swings were even bigger on a percentage basis in states where GSP savings are traditionally lower:

• Instead of declining by 47%, New Mexico companies’ savings would’ve increased by up to 161%, a 200+ percentage point swing
• Instead of declining by 60%, Minnesota companies’ savings would’ve increased by up to 17%, nearly an 80 percentage point swing

These are real costs to real American companies and workers – many in places that will be hotly contested in the 2020 elections – on top of the challenges related to the Covid-19 pandemic and economic fallout. In addition to congressional reauthorization of GSP, administration decisions to restore lost GSP eligibility would provide significant benefits to struggling American companies.

The estimate is based on an analysis of GSP imports and tariff savings for products flagged in the USITC’s recent report COVID-19 Related Goods: U.S. Imports and Tariffs, which was requested by House Ways and Means Chairman Richard Neal and Senate Finance Committee Chairman Chuck Grassley. This is a narrow definition that likely discounts savings on a wide range of indirectly-related products, as made clear by responses to the Coalition for GSP’s Covid-19 survey (take the survey here, see results to date here).

Tim Smith, President of HIBLOW USA in Saline, Michigan, reported “98% of the air pumps we sell to American OEM’s for medical devices come from the Philippines.” Specific medical applications for HIBLOW’s pumps include respiratory devices, bariatric air mattresses, and immunity/ blood examination equipment. GSP eliminated several million in tariffs on air pumps in 2019, but the pumps themselves are not considered medical products in the USITC report.

Another respondent expects increases in their imports of acrylic plastics from Indonesia and Thailand in 2020. The plastics are used to make sneeze guards for supermarkets and retail locations, which are in high demand due to Covid-19. But again, acrylics are not really “medical” products and do not appear on the USITC list. GSP eliminated several million in tariffs on acrylic plastics in 2019.

The Covid-related product list also shows the harm from seemingly unrelated GSP decisions by the Administration.

GSP would have eliminated $31 million in tariffs in 2019 on the Covid-19 products if the Administration had not terminated eligibility for India and Turkey. Due to the decisions, American companies paid those $7 million in tariffs.

More recently, the Administration suspended GSP benefits for about 1/3 of imports from Thailand, including products on the USITC list such as safety goggles and textile articles. The decision went ahead despite warnings that the suspension list contained products related to Covid-19 response.

That’s right: in the middle of a pandemic the Administration chose to impose new tariffs on products deemed necessary to fight the pandemic.

Looking only at products still eligible for GSP today (i.e., no savings for products from India, Turkey, or on the Thailand partial suspension list), GSP savings for Covid-19 related products in drops to $17 million. Obviously the Administration did not eliminate GSP benefits with the intent of adding $14 million in tariffs annually to Covid-19 related products, but that is the practical impact of their actions.

If Congress wants to promote a cost-effective response to Covid-19, it should immediately extend GSP’s authorization and push to restore benefits that have been lost over the last year.

Lost GSP for India and Turkey cost American companies as much as $33 million in extra tariffs in July, including up to $26.5 million in new taxes on imports from India and $6.5 million on imports from Turkey. The impacts of the decisions are clear, as shown in the graph below. Before June 2019, year-over-year GSP rose in 37 straight months.

GSP savings from other countries continued to grow, increasing $18.4 million (30%) from September 2018 to September 2019. Savings on imports from Cambodia grew by $10.9 million, from Indonesia by $4.1 million, from Burma by $2.1 million, and from the Philippines by $1.6 million.

By value, the states with the largest year-over-year savings declines were Florida (-$2.1 million), New Jersey (-$2.1 million), Texas (-$2.1 million), Pennsylvania (-$1.1 million), New York (-$984,000), Michigan (-$955,000), North Carolina (-$878,000), Louisiana (-$605,000), Iowa (-$545,000), and Massachusetts (-$490,000).

Savings for companies in Delaware declined over 90%, driven by lost GSP for India. Savings for companies in Maine declined by 84%, resulting from broader-based declines in imports from Brazil, India, Thailand, etc.

Fifteen states saw GSP savings increase in September. Among those, California (+$3.4 million) accounted for 60% of GSP savings increases.

Lost GSP for India cost American companies an estimated $30.4 million in July, while lost GSP for Turkey cost them another $6.4 million. The impacts of the decisions are clear, as shown in the graph below. Before June, year-over-year GSP rose in 37 straight months.

GSP savings from other countries continued to grow, increasing $11.1 million (18%) from July 2018 to July 2019. Savings on imports from Cambodia grew by $8.1 million, from the Philippines by $2.7 million, and from Indonesia by $1.7 million

But growth from other countries was not able to offset the loss of GSP ineligibility for India and Turkey throughout the country: 41 states plus DC and Puerto Rico saw GSP savings decline from July 2018 to July 2019.

By value, the states with the largest year-over-year savings declines were New Jersey (-$3.4 million), New York (-$3.3 million), Florida (-$2.5 million), Texas (-$2.1 million), Michigan (-$1.3 million), South Carolina (-$1.1 million), Maryland (-$1.0 million), Kentucky (-$976,000), North Carolina (-$858,000), and Pennsylvania (-$852,000).

By percent, the states with the largest year-over-year savings declines were New Mexico (-87%), Louisiana (-78%), Vermont (-75%), Iowa (-72%), and West Virginia (-54%).

Impacts from the Turkey decision were felt throughout the country, as shown by the map below.

Among states hit the hardest were Missouri ($682,000 in tariffs paid) and Kentucky ($484,000), despite not generally being among the top states in overall GSP usage. In Missouri, new tariffs paid were almost exclusively on auto parts such as stampings, brakes, and motor vehicle locks. In Kentucky, the biggest impacts were on food products, followed by gaskets/mechanical seals.

Our April report – How GSP Termination would Hurt American Businesses & Workers – profiled numerous companies that expected (then-potential) GSP termination to hurt their American jobs and investment plans. If your company has been impacted by GSP termination for Turkey (or India), please use the button above to answer our impact survey.

The impacts of the India and Turkey decisions are clear, as shown in the graph below. Year-over-year GSP savings regularly were growing by $10+ million per month. In fact, June marked the first time since April 2016 (37 months) that year-over-year GSP savings declined. The $15 million year-over-year drop was the largest decline in GSP savings since the 2008-2009 financial crisis.

GSP savings from other countries continued to grow, increasing $12.5 million (23%) from June 2018 to June 2019. Savings on imports from Cambodia grew by $7.3 million, from Indonesia by $3.0 million, from Thailand by $1.6 million, and from Burma by $1.3 million.

But growth from other countries was not able to offset the loss of GSP ineligibility for India and Turkey throughout the country: 39 states plus DC and Puerto saw GSP savings decline from June 2018 to June 2018.

By value, the states with the largest year-over-year savings declines were New Jersey (-$4.1 million), Florida (-$3.6 million), Texas (-$2.0 million), New York (-$1.2 million), Illinois (-$1.1 million), Louisiana (-$1.0 million), Michigan (-$942,000), North Carolina (-$882,000), Georgia (-$716,000), and South Carolina (-$512,000).

By percent, the states with the largest year-over-year savings declines were Louisiana (-88%), Nebraska (-82%), Vermont (-76%), Wyoming (-71%), Minnesota (-71%), Mississippi (-68%), New Mexico (-65%), Iowa (-62%), Arkansas (-60%), and Idaho (-54%).

In many of these states, declines were wholly attributable to lost GSP for India and Turkey, leaving little chance that savings will bounce back in July.

The map below shows the overall value of 2018 GSP imports (in blue) and tax savings (in red) by state.

Increased GSP savings were both large and widespread:

• California saw savings increase by over $50 million (+36%), while New Jersey saw GSP savings jump by about $27 million (+42%).
• Maine‘s savings more than tripled – from about $500,000 in 2017 to nearly $1.6 million in 2018. Savings growth also was very high in Missouri (+59%), North Dakota (+54%), Kentucky (+34%), Delaware (+33%), and South Carolina (+30%).

However, recent decisions to terminate GSP eligibility for Turkey and India mean many of the American companies previously saving money due to GSP now face extra import taxes. Several dozen companies impacted by the decisions were profiled in the Coalition for GSP’s April report: How GSP Termination Would Hurt American Businesses & Workers.