House Approves US Generalized System Of Preferences

by Mike Godfrey, Tax-News.com, Washington

12 September 2011

The Republican Party has, with a bipartisan vote in the House of Representatives, introduced and passed a renewal of the United States’ Generalized System of Preferences (GSP), and hope that it will prompt some action from President Barack Obama and the Democrat Party to present the pending free trade agreements (FTAs) to Congress.

Instituted at the beginning of 1976, GSP is a programme designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories. US imports under GSP in 2010 amounted to approximately USD23bn.

However, as the Senate failed to pass the Omnibus Trade Act of 2010 last year, authorization from Congress for the GSP programme ended on December 31, 2010. As a result, since then, US importers have had to pay Most Favored Nation duties on GSP-eligible goods arriving from GSP beneficiary countries.

It has been said that GSP, in addition to its assistance for some of the poorest economies in the world, had benefited US businesses and consumers through cost savings on imports. Nearly three quarters of all GSP eligible imports are raw materials, components, parts, or machinery and equipment used by American workers to manufacture goods in the United States both for consumption at home and for export.

It has been calculated that around 82,000 jobs are either directly or indirectly associated with the importation and use of GSP-eligible imports, which have also meant lower prices for consumer goods in the US. GSP has also helped small businesses to compete, as many rely on the program's import duty savings to compete with larger companies.

The new legislation renews the programme until July 30, 2013, and permits importers to apply for duty refunds for eligible products imported since the program’s expiration on December 31, 2010. It is hoped that the retroactive renewal will provide additional capital to US manufacturers that have faced higher duties and therefore higher production costs since the programme expired.

Dave Camp, the Republican Chairman of the House Committee on Ways and Means, in his floor statement introducing the bill, thanked the Ranking Member of the Committee, Democrat Sander Levin, for working with him to find a rapid path forward for the legislation after the recess, and hoped that the Senate could act as quickly.

The Republican Party also means, however, to use the GSP renewal as a lever to move President Obama and the Democrats into introducing the pending FTAs with South Korea, Panama and Colombia as soon as possible.

Following its passage, the House Speaker, John Boehner (R-OH), said that said: “By making American manufacturers more competitive with their overseas rivals, this bill removes another obstacle to private-sector job growth and can provide a much needed boost for our economy. I hope the Senate will take it up and pass it promptly.”

“I also hope the White House will take the opportunity to build on this success and help open new markets for American-made goods by submitting all three job-creating FTAs with Colombia, Panama, and South Korea to Congress,” he added. “According to Obama Administration estimates, these agreements could create 250,000 new American jobs. With the unemployment rate at 9.1% and zero net jobs created in August, further delays are unacceptable.”

However, the FTAs have been further delayed by President Obama's insistence on their linkage to an extension of the elapsed Trade Adjustment Assistance (TAA), which provides benefits to US workers who lose their jobs as a result of freer trade.

The Republicans originally proposed to take the FTAs through Congress first, to be followed by TAA, but the Democrats wanted to have all the bills introduced and passed together. An agreement on the sequencing of the bills appears to be near, but has yet to be finally agreed.

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