USTR - Administration to Review Whether to Continue Trade Benefits under the GSP Program
Office of the United States Trade Representative

 

Administration to Review Whether to Continue Trade Benefits under the GSP Program
08/07/2006


WASHINGTON – U.S. Trade Representative Susan C. Schwab today announced that the Bush Administration will begin the second phase of its review of the Generalized System of Preferences (GSP) program, which provides duty-free treatment for goods from 133 beneficiary developing countries.

Based on information obtained since the review began in October 2005, the Administration is seeking public input to determine whether the eligibility of certain beneficiaries should be changed consistent with the statutory criteria.

"For over 30 years, Congress has given the GSP program broad bipartisan support. We believe this program serves as an important bridge for developing countries to facilitate their transition from unilateral preferences to full economic partnership," said Ambassador Schwab. "Both the United States and participating countries benefit from expanded trade under GSP, and it is important that this program be reauthorized when it expires at the end of the year."

"One of the concerns that Congress has raised is that GSP benefits go largely to a few countries, while many developing countries are not trading much under the program. We want to ensure that we are operating the program as Congress intended. The review I am announcing today, the first in twenty years, will help make certain that we are administering the program consistent with statutory criteria. Our goal is for more countries to benefit from the program and use trade in support of their economic development."

The relevant statutory criteria include: 1) certain beneficiaries’ level of economic development; 2) the extent to which they have expanded exports under the program; and 3) their competitiveness both globally and relative to GSP-eligible imports.

The Administration is also conducting a review of the current waivers to the GSP program’s competitive need limitations. These waivers allow certain products from specific countries to enter duty-free into the United States, without being subject to GSP statutory market share and annual import caps.

The GSP program allows a wide range of products from 133 beneficiary developing countries, including 42 least-developed countries, to enter the United States duty-free. The United States imported $26.7 billion under the GSP program in 2005, an 18 percent increase over 2004. Current Congressional authorization of the GSP program expires on December 31, 2006.

Comments are being sought on the following issues:

1) Whether to limit, suspend, or withdraw the eligibility of those GSP beneficiaries for which the total value of U.S. imports under GSP exceeded $100 million in 2005, and a) which the World Bank classified as an upper-middle-income economy in 2005; or b) that accounted for more than 0.25 percent of world goods exports in 2005, as reported by the World Trade Organization. The GSP beneficiaries that meet the criteria are Argentina, Brazil, Croatia, India, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey, and Venezuela.

2) Whether any of the 83 existing competitive need limitation (CNL) waivers are no longer warranted due to changed circumstances. (For a complete list, See "CNL Waivers," http://www.ustr.gov/Trade_Development/Preference_Programs/GSP/Section_Index.html).

Comments are due to USTR by Tuesday, September 5, 2006.

Background

Congress created the U.S. GSP program as part of the Trade Act of 1974 to create economic opportunities in developing countries while expanding the choices of American industry and consumers. The GSP program provides duty-free treatment for 3,400 products from 133 designated beneficiary developing countries and territories. In 1996, Congress authorized least developed beneficiary developing countries (currently 42 beneficiaries) to export duty-free to the United States an additional 1,400 articles.

Country Graduation

The GSP statute authorizes the President to withdraw, suspend, or limit the application of duty-free treatment with respect to any country based on statutory eligibility criteria. President Reagan graduated Hong Kong, Singapore, South Korea, and Taiwan in 1989, and President Clinton graduated Malaysia in 1997, based on statutory criteria. Another 17 countries graduated from the GSP program when their gross national income per capita exceeded the statutory ceiling.

Review of CNL waivers

Under the GSP statute, imports of a specific product from a beneficiary country are limited by either a market share cap or annual import level, unless the President grants a waiver. The statute also authorizes the President to terminate a CNL waiver if there is a determination that the waiver is no longer warranted due to changed circumstances. Nineteen GSP beneficiaries (Argentina, Bosnia-Herzegovina, Brazil, Colombia, Croatia, India, Indonesia, Ivory Coast, Kazakhstan, Macedonia, Peru, the Philippines, Romania, Russia, South Africa, Thailand, Turkey, Venezuela, and Zimbabwe) currently have CNL waivers. Since CNL waivers were first authorized by Congress in 1984, the President has exercised his authority twice before under the statute to terminate waivers: for frozen berries from Chile in 2003 and for wrought titanium from Russia in 2004.

Additional information about the reviews is available on the USTR website: http://www.ustr.gov/Trade_Development/Preference_Programs/GSP/Section_Index.html

 
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