Apr 07, 2015 - 9:00am

Trade's Unfinished Business: The Generalized System of Preferences

Senior Vice President for International Policy

As Washington debates a bill to renew Trade Promotion Authority (TPA), several other pieces of pending trade legislation also are calling out for attention. One of these is the Generalized System of Preferences, which lapsed on July 31, 2013.

For four decades, GSP has promoted economic growth in developing countries by providing duty-free access to the U.S. market for select goods. Before it lapsed, the program suspended tariffs on nearly 5,000 products from 122 developing countries. This helps developing countries create formal sector jobs, and products imported under GSP generally do not compete with U.S.-made goods.

GSP also boosts the competitiveness of American manufacturers by lowering their costs. Approximately three-quarters of U.S. imports under GSP are 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.

It also provides real savings for U.S. consumers. GSP helps American families stretch their budgets by eliminating duties on a variety of usually inexpensive consumer goods.

These benefits are tangible. U.S. importers enjoyed nearly $750 million in savings on import duties under the GSP program in 2012, the last full year the program was in effect. A 2006 study commissioned by the U.S. Chamber found that more than 80,000 American jobs are associated with moving GSP imports from the docks to farmers, manufacturers and retail shelves.

GSP’s eligibility criteria provide the U.S. government with leverage to encourage beneficiary countries to protect intellectual property, treat U.S. investors fairly and improve labor practices, among other reforms. These standards have contributed to the strong bipartisan support GSP has enjoyed over the years.

It isn’t clear whether TPA be will renewed as part of an omnibus trade bill that could include GSP or if these other trade bills might advance in parallel. In any event, GSP must not be left behind. It’s been an effective tool promoting market-based economic growth in developing countries, bolstering U.S. manufacturing and expanding consumer choice. It should be renewed swiftly.

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.