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Estimated Impacts of the U.S. Generalized System of Preferences to U.S. Industry and Consumers

October 2006

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Executive Summary

The U.S. Generalized System of Preferences (GSP) program is a trade preference program that extends duty-free treatment to selected goods imported from specified developing countries. Its purpose is to promote economic development in developing countries by expanding their trade with the United States. Congress established GSP in 1974 and legislation authorizing the program has been in effect for the last 32 years. By 2005, U.S. imports under GSP totaled $27 billion.

Over its 30 years of operation, GSP has become an important component of the competitiveness of American manufacturers and an integral part of sourcing for those who sell a range of consumer goods to American families. This study examines the impacts of GSP from the U.S. perspective. It finds:

  • GSP keeps American manufacturers and their suppliers competitive. 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.
  • American families also benefit from GSP. 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 is particularly important to U.S. small businesses, many of whom rely on the program's duty savings to compete with much larger companies.
  • We estimate that annual sectoral benefits to consumers of GSP products range up to $273 million.
  • GSP imports support U.S. jobs. We estimate that direct and indirect jobs associated with moving aggregate GSP imports from the docks to the retail shelves totaled nearly 82,000 in 2005.