The House and Senate must negotiate a compromise GSP reauthorization after passing different GSP renewal provisions. This will take place as part of the House-Senate conference on a China competitiveness package. The Coalition for GSP is seeking company/association signatures for the letter below to Congressional leaders outlining GSP users’ priorities (e.g., longer length, attainable eligibility criteria). The deadline to sign has been extended to 6pm EST on Monday, May 2.
Only company name and location will be published, for example: Coalition for GSP (Washington, DC)
If you have multiple locations, tell us in the provided box and we’ll contact congressional offices for each listed location despite only listing your headquarters location.
If you have questions, please contact Dan Anthony.
On behalf of the undersigned companies and trade associations, we write to express our views on reauthorization of the Generalized System of Preferences (GSP) program as part of the Congressional conference negotiations on a compromise measure to align the U.S. Innovation and Competition Act and the America COMPETES Act, a measure referred to as the Bipartisan Innovation Act. As the oldest and largest U.S. preference program – and one that Congress largely has not updated in many years – it is critical that changes adopted do not undermine GSP’s development goals or its viability to program users.
GSP supports development by eliminating tariffs and opening the U.S. market to qualifying exports from 119 developing countries. At the same time, GSP supports American workers and manufacturers by reducing costs of imported inputs and equipment and helps American families make ends meet by lowering the costs of consumer goods imported duty free.
Yet Congressional authorization of GSP expired on December 31, 2020. American companies have paid at least $1.4 billion in extra taxes due to the GSP lapse while also dealing with COVID-19 impacts, high freight costs, and supply chain disruptions in both the United States and beneficiary countries. All of these issues have contributed to the highest U.S. inflation rate recorded in 40 years.
There are several areas where the House and Senate language are identical and that program users strongly support, such as retroactivity and full refunds for all tariffs paid during the lapse. The following recommendations cover areas with differences, ambiguity, or omissions from the House and Senate proposals:
- Congress should extend GSP through January 1, 2027, as proposed in the Senate bill, or beyond. GSP has a long history of expirations and retroactive renewals. Higher costs, lower trade, and unnecessary uncertainty all hurt program users. American companies are working to diversify suppliers and build more resilient supply chains. It requires significant time and financial investments. GSP can help spur these changes – but only if companies have confidence that tariff benefits will remain in place. Similarly, the confidence in continued duty-free access to the U.S. market provides an important incentive for countries to meet GSP’s current and proposed criteria. The current GSP lapse of 17 months is already over one-third of the way into the 4-year extension proposed in the House bill. Congress should extend GSP beyond 2027 if possible.
- Congress should proceed cautiously with eligibility criteria changes that could have unintended consequences. The House and Senate each proposed a large number of changes to the country eligibility criteria. A recent Progressive Policy Institute (PPI) report – by a former Office of the U.S. Trade Representative (USTR) official that oversaw the GSP program in both Democratic and Republican administrations – raised concerns with proposed requirements to “effectively afford” or “effectively enforce” certain criteria. The report noted 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).” Congress should ensure that all eligibility criteria allow USTR to distinguish between willful non-compliance and good-faith efforts when determining appropriate actions as part of country eligibility reviews.
- Congress should ensure that GSP enforcement actions do not cause undue harm to the people that eligibility criteria are meant to help. The PPI report cites the removal of Eswatini from the African Growth and Opportunity Act (AGOA) in 2014 over labor rights concerns, which “brought the collapse of the garment industry it was supposed to reform. All the workers (principally young women) lost their jobs. Eswatini regained AGOA eligibility in 2017, but the garment industry has not recovered…[and] left the actual Swazi workers it was supposed to help unambiguously worse off than they would have been without the help.” Bipartisan legislation (H.R. 6171) includes “Sense of Congress” language that the President should “take all available steps to facilitate continued duty-free treatment for products where the imposition of duties is likely to slow or reverse progress” in areas covered by GSP current or proposed criteria such as labor rights, environmental practices, or women’s economic empowerment. Congress should adopt or strengthen the H.R. 6171 language to ensure the GSP rules recognize progress and reward good actors promoting GSP’s development objectives, even (or especially) when country-specific punitive actions are deemed warranted.
- Congress should update GSP’s Competitive Need Limitation (CNL) rules. GSP cannot meet its development goals – or provide USTR with leverage to incentivize a race-to-the-top – if too many products lose GSP due to arbitrary CNL import caps. In 2021, as much as $10 billion in trade was excluded from claiming GSP under product-specific exclusions such as CNLs. That is over half the value of the $19 billion that claimed GSP treatment, and much of the currently eligible trade is at risk of exceeding CNL thresholds in the near future. It is clear that CNL rules last updated by Congress in 1997 undermine GSP’s policy objectives in 2022. H.R. 6171 proposed modest CNL changes to ensure thresholds grow at a sufficient rate and to encourage restored GSP for products whose imports fall below the CNL caps after GSP loss (i.e., that cannot remain competitive without it). CNL changes are particularly relevant in the China context, as current rules limit the amount of trade that can move from China to GSP countries and many alternatives to China are excluded by decisions from 5, 10, or even 25 years ago. Congress should adopt H.R. 6171’s CNL provisions to ensure GSP remains a viable tool to promote development.
GSP has a nearly 50-year history of bipartisan support in Congress due to its track record of creating jobs in developing countries and the United States. As the House-Senate conference considers the biggest GSP changes in decades, it must ensure the final bill preserves and grows GSP’s relevance in the 2020s and beyond. We look forward to working with you to incorporate these recommendations as part of GSP reauthorization in the Bipartisan Innovation Act.