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GSP: Critical to the United States and Developing Countries

The U.S. Generalized System of Preferences (GSP) is a program designed to promote economic growth in the developing world by providing preferential duty-free entry for about 4,800 products from 131 designated beneficiary countries and territories. GSP was instituted on January 1, 1976 by the Trade Act of 1974. Unless extended by Congress, GSP will expire on December 31, 2009.

GSP Creates American Jobs and Keeps U.S. Companies Competitive

GSP imports support U.S. jobs. Direct and indirect jobs associated with moving aggregate GSP imports from the docks to farmers, manufacturers and ultimately to retail shelves totaled nearly 82,000 in 2005.

GSP keeps U.S. companies competitive. Especially in today's economy, any program that saves U.S. farmers, manufacturers, retailers and other importers money - even pennies - can be highly attractive. GSP alone saved U.S. importers nearly $850 million in duties in 2008.

GSP imports are critical to U.S. producers of manufactured goods. In 2005, three quarters of U.S. imports using GSP were raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods in the United States for domestic consumption or for export. Electrical equipment and parts, and transportation vehicle parts are significant imports under GSP.

GSP helps American families on a budget. GSP duty free imports mean lower prices for consumer goods. Finished consumer goods typically sold by retailers accounted for 25 percent of GSP imports in 2005. Jewelry sold at lower price points was the most significant item.

GSP helps small businesses compete. GSP is particularly important to U.S. small businesses, many of which rely on the program's duty savings to compete with much larger companies.

GSP Has Helped the World's Poorest Countries for Over Three Decades

Today, more than two-thirds of all countries participate in GSP. The GSP program currently benefits 131 developing countries. The basic program provides duty free entry for about 3,400 products from these countries. In 1996, Congress created an additional category of beneficiaries - least developed beneficiary countries - helping the poorest of the poor. The GSP program provides duty free entry for about 4,800 products from 44 currently eligible least developed beneficiary countries.

GSP helps developing countries compete against China. GSP imports in 2008 were $31.6 billion. For many beneficiary countries, preference programs allow them to compete in the U.S. market against China, which is not a beneficiary of U.S. preference programs.

GSP helps a diverse group of developing countries. For 2008, the top five GSP (non-oil exporting) countries were India, Thailand, Brazil, Indonesia, and South Africa. The top three least developed (non-oil exporting) countries were Bangladesh, Zambia, and Ethiopia. GSP imports from Zambia, Bhutan, Lesotho and Afghanistan grew significantly in 2008.

GSP accounts for a large share of developing country exports. While the share that a developing country's GSP exports comprise of its total exports varies by country, the percentages can be quite high. For example: Paraguay (76 percent of total exports to the U.S.), Georgia (62 percent), Lebanon (49 percent), Macedonia (47 percent), Fiji (44 percent), Serbia (42 percent), Armenia (39 percent), Somalia and Malawi (36 percent), Tunisia, Argentina, and the West Bank (each 24 percent), Tokelau Islands and Zambia (each 22 percent), and Sao Tome and Principe, Uruguay, Turkey, and Kazakhstan (each 20 percent).

GSP benefits women and the rural poor. Although coverage of textile and apparel products is limited, GSP covers a number of handmade folkloric products. These products are usually produced by women and the poorest, often rural, residents of supplying countries. The United States has entered into agreements providing for certification and GSP eligibility of handmade, folkloric products with 15 countries: Afghanistan, Argentina, Botswana, Cambodia, Colombia, Egypt, Jordan, Mongolia, Nepal, Pakistan, Paraguay, Thailand, Tunisia, Turkey, and Uruguay.