Senior Vice President for International Policy, U.S. Chamber of Commerce
November 18, 2022
With end-of-year legislation to fund the government and address other priorities under debate in Congress, it’s critical that legislation to renew the Miscellaneous Tariff Bill (MTB) and the Generalized System of Preferences (GSP) not get lost in the shuffle.
The MTB and GSP have been renewed by Congress repeatedly over the past several decades — and always with nearly unanimous, bipartisan votes. This shouldn’t be hard.
And in both instances, failure to act this year will add to lost sales and lost jobs for Americans at a time when we can’t afford it.
A helping hand for manufacturers: The MTB temporarily suspends tariffs on a carefully vetted list of imported goods, most of which are inputs used by U.S. manufacturers. Fundamentally, it helps U.S. companies maintain their competitive edge — but its last iteration lapsed nearly two years ago.
The MTB is meticulously constructed. The U.S. International Trade Commission leads a rigorous vetting process established by Congress to confirm that products proposed for tariff relief are not made in the United States or are unavailable in sufficient quantities to meet U.S. businesses’ needs. In this way, the program enhances the competitiveness of American companies by sparing them needless extra costs.
Since the previous MTB expired on December 31, 2020, manufacturers and other businesses have paid nearly $1 billion in tariffs, or $1.3 million per day, on goods that are not available in the United States. As several hundred companies and business associations recently wrote to Congress on the issue:
These added, anti-competitive costs are stifling manufacturers and other businesses in the United States, especially small- and medium-sized companies, at a time when they are already working through a slew of challenges to produce and provide the essential goods that our country needs every day.
Where’s the controversy? The last MTB (in 2018) passed Congress without a single vote in opposition. This is a bill that should absolutely be included in the expected end-of-year legislative package. As part of this process, Congress must also reauthorize the American Manufacturing Competitiveness Act, which established the transparent and accountable process by which MTBs are prepared and vetted.
Some members of Congress have opposed the inclusion of finished goods in future MTBs and have sought to bar tariff relief for goods generally not available from domestic sources even when no U.S. firm has objected. Given that no tariff relief petition can be included in the MTB that implies a revenue loss in excess of $500,000 annually — a fairly severe limit — the possibility of including finished goods in future MTBs should continue.
Helping developing countries, small business: Renewal of GSP is also imperative. For nearly five decades, GSP has promoted economic growth in developing countries by providing duty-free access to the U.S. market for nearly 5,000 products from about 120 developing countries. This helps spur economic growth and job creation in developing countries.
American businesses also benefit from GSP. Those doing so tend to be small but dynamic, according to the Coalition for GSP. The typical beneficiary company employs about 20 people, and GSP saves them between $100,000 and $200,000 in duties—big money for many small businesses.
The program’s nearly two-year lapse has been costly: American families and companies have paid more than $2 billion in extra tariffs over the 22 months since the program lapsed.
The China angle: As with many trade issues these days, China plays a role. The United States imposed tariffs on more than $350 billion of imports from China in 2017-2018, which created an incentive for U.S. importers to source more from developing countries benefitting from GSP.
But the lapse in GSP has been pushing U.S. companies to go back to sourcing from China. Certainly, Congress didn’t set out to confer this trade advantage on China — but that’s exactly what the Congress’s inaction on GSP is doing.
A balanced approach: With the year winding down, Congress should take a pragmatic approach to the debate over GSP’s eligibility criteria. These 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. Members have been exploring refinements to these criteria for nearly two years.
However, setting overly strict criteria could lead foreign governments to conclude that GSP’s compliance burdens outweigh its economic benefits. This would undermine the program’s viability as a tool to foster trade-based economic development while also failing to advance the new criteria’s goals. The Chamber encourages lawmakers to work together on any new GSP eligibility criteria under consideration and reach a balanced approach that will allow the program to be reauthorized this year.
Finally, if Congress cannot pass a full GSP reauthorization, it should consider bipartisan legislation to refund most of the tariffs paid due to GSP lapse. Doing so would provide a critical lifeline to U.S. small businesses, many of which are owed hundreds of thousands or even millions of dollars, that have waited nearly two years for Congress to act on GSP.