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GSP program should continue after overhaul, says USTR

WASHINGTON, DC - 08/11/06 - The Bush Administration is going ahead with a major review of trade benefits as it considers shifting preferential treatment from more advanced developing countries to a larger number of less-developed countries.

US Trade Representative Susan Schwab, who announced the decision said the Administration-mandated review will determine whether certain countries have increased their competitiveness or developed beyond the threshold for participating in the Generalized System of Preferences (GSP). 

"The review I am announcing today…will help make certain that we are administering the program consistent with statutory criteria," she said.

Under the GSP, a trade scheme established in 1968 by a UN conference, developed countries grant reduced or zero tariff rates to selected imports from developing countries.

The least developed countries receive trade benefits for more products and deeper tariff cuts.

The US' GSP program was established in 1976 and has been renewed eight times, most recently in 2002.  It expires at the end of 2006, and Congress must renew it for benefits to continue.

The Bush Administration's review is part of a broader examination ordered in 2005 in preparation for a possible renewal with a view of distributing benefits more equally.
 
"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," Schwab said in a news release.

The program, she said, "should be continued and broadened even if benefits for some of the more-developed countries are limited or withdrawn."

The criteria for review balances on the classification of a country as an upper-middle-income economy by the World Bank in 2005, or that its total exports equaled at least one quarter of 1% of all global exports in the same year.

The countries that meet those criteria are Argentina, Brazil, Croatia, India, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey, and Venezuela.

The review also will examine whether to withdraw presidential waivers that give those 13 countries and six others unlimited duty-free access for certain products.
 
A coalition of business groups and developmental organizations has been pressing for the extension of the GSP. 

But some legislators have complained that certain countries that benefit most from the US program have not been helpful in the World Trade Organization (WTO) talks and therefore should not receive the GSP benefits in the future.

"Countries that don't want to give us access to their markets in the WTO negotiations, why should we continue to give them preferential treatment?" asked Senate Finance Committee Chairman Charles Grassley (R-Iowa) in July after the WTO negotiations collapsed.

Grassley's committee would have jurisdiction over any legislation to extend the GSP program.

But Schwab did not link the review to the failure of the WTO negotiations and said instead that the program needs an overhaul because, despite accelerated development driven by globalization, the GSP has not been significantly revised in two decades.
 
Altogether, the 133 countries covered by the program exported $26.7 billion worth of goods to the US market duty free in 2005 under the GSP, with India ($4.2 billion), Brazil ($3.6 billion), Thailand ($3.6 billion), and Indonesia ($1.6 billion) among its top beneficiaries, according to figures supplied by the Office of the USTR.

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