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.

“By helping restore GSP for non-sensitive imports, these commonsense changes will further GSP’s development goals, lower costs for American manufacturers and families, and increase the Administration’s leverage as it implements new GSP eligibility criteria,” said Coalition for GSP Executive Director Dan Anthony. “GSP can be a powerful economic development tool, both in GSP countries and at home. The CNL Update Act complements bipartisan efforts to reauthorize GSP in a manner that better promotes a race-to-the-top in trade. We urge Congress to include it any GSP renewal bill.”

CNLs are statutory thresholds that can trigger lost duty-free treatment under GSP even if there is no domestic production or concerns that imports harm U.S. industry. Congress has not updated the CNL thresholds since 1997, and the growth rate for CNLs has declined every year since. Furthermore, while the GSP statute says the benefits “may” be restored if trade levels fall below the CNL thresholds in the future. In recent years, over 95% of affected products were below CNL thresholds, but restoration almost never happens (e.g., less than 10 products since 2007). As a result, product-specific exclusions such as CNLs now eliminate as much as 1/3 of all potential GSP benefits annually (e.g., more trade from Brazil is excluded by these rules than still covered by GSP).

The CNL Update Act would make several changes to CNL rules, including setting a fixed rate for CNL thresholds to grow each year and establishing that the President “should” restore duty-free treatment for products that fall below the CNL thresholds. Changes would not impact products removed from GSP following a country practice review or a petition alleging harm to the domestic industry, which are covered by different sections of the GSP statute. The Administration would retain final discretion in all review decisions.

Additionally, the CNL Update Act includes the Sense of Congress that the Administration 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 made toward meeting the [various GSP eligibility criteria]…or result in severe economic harm to United States entities, particularly small businesses.” It also says the Administration should create a process to mitigate potential harm, including “exploring the feasibility of preserving duty-free eligibility on a case by case basis for qualifying companies” if punitive action is deemed warranted. Again, the Administration would retain final discretion in all review decisions.

Authorization for the GSP program expired on December 31, 2020, and Congress is considering changes to GSP eligibility criteria and others provisions as part of reauthorization. GSP expiration cost American companies at least $873 million in extra tariffs through October 2021 and costs continue to grow by nearly $3 million per day. In September, over 300 American organizations sent a letter to Congress urging swift GSP renewal, including changes such as those proposed in the CNL Update Act.

“Earlier this year, Ambassador Tai said creating a race-to-the-top in trade would require ‘taking a look at rules that were devised when our world, frankly, looked and operated differently, and maybe think about where those rules need to be tightened or loosened,’ added Anthony. “That characterization could apply to many aspects of the GSP program. We thank Representatives Murphy and Walorski for their leadership on this important issue that impacts so many workers and communities around the world.”