As much of Washington focuses on negotiations to update the North American Free Trade Agreement (NAFTA) and the U.S. trade and investment relationship with China, it is encouraging to see strong bipartisan support for another important trade program: the Generalized System of Preferences (GSP). Thirty-eight House members from across the political spectrum — led by Republican Ralph Norman (SC) and Democrat Jim Himes (CT) — sent a letter urging Ways and Means Committee Chairman Kevin Brady (R-TX) and Ranking Member Richard Neal (D-MA) to advance a bill providing a long–term extension of GSP. The current GSP authorization expires on December 31.
For four decades, GSP has promoted economic growth in developing countries by providing duty-free access to the U.S. market for select goods. The program suspends tariffs on nearly 5,000 products from about 120 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 two-thirds 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 $730 million in savings on import duties under the GSP program in 2016 — and are on track to save at least $100 million more in 2017. 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.
As the letter highlights, “failure to reauthorize GSP before it expires could cause U.S. companies to lay off workers, reduce wages and benefits, and reduce investment.” That is exactly what happened when the program’s authorization lapsed from August 2013 to July 2015. Only after Congress passed a 2.5 year GSP extension (that also refunded taxes) could many American businesses that rely on the program start hiring and investing again.
It isn’t clear when or how Congress might advance GSP renewal legislation, but it may be coupled with Miscellaneous Tariff Bill legislation. In any event, Congress must not let GSP benefits lapse again. It’s been an effective tool promoting market-based economic growth in developing countries while also creating jobs in the United States. It should be renewed swiftly.