GAO Reports to Congress on Trade Preference Programs
The U.S. Government Accountability Office has released its report to Congressional requesters entitled, "International Trade: An Overview of Use of U.S. Trade Preference Programs by Beneficiaries and U.S. Administrative Reviews."
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Among other things, the report identifies and compares key features of U.S. preference programs, analyzes the use of U.S. preference programs by beneficiaries, and examines U.S. agency administrative reviews of preference programs.
(The U.S. offers one general trade preference program, the Generalized System of Preferences (GSP), and three regional programs: the Caribbean Basin Initiative (CBI)1, the Andean Trade Preference Act (ATPA)2, and the African Growth and Opportunity Act (AGOA).)
Overview of Trade Preference Programs
According to the GAO, trade preference programs offer duty-free access to the U.S. market, with the goal of increasing developing countries' export earnings, development, and growth rates without harming U.S. producers.
130 countries benefit. Under its trade preference programs, the U.S. extends unilateral tariff reductions to over 130 developing countries.
5% of total U.S. imports. Goods imported into the U.S. under trade preference programs totaled approximately $92 billion in 2006-about 5% of total U.S. goods imports.
Fuel, machinery, electronics, jewelry, ag imports. Although they represent a small share of total U.S. imports, imports under U.S. preference programs have grown sharply since 2002 and constitute a significant share of many beneficiary countries' exports to the U.S. Fuel imports under preference programs have grown rapidly and, by 2006, accounted for over half of preference imports in terms of value. Other growing sectors include machinery, electronics, jewelry, and agriculture.
Ten countries account for 75% of preference imports. About 10 countries accounted for over 75% of preference imports in 2006. The largest suppliers are Nigeria and Angola, primarily because of fuel imports; India, Thailand, and Brazil are the three largest non-fuel suppliers.
GSP vs. Regional Trade Preference Programs
The GAO states that U.S. trade preference programs have the following features (partial list):
GSP. GSP establishes a basic level of product coverage available to all beneficiaries, with added products for least-developed beneficiaries. There are 132 countries and territories designated, including 42 least-developed countries (LDCs). There are about 3,400 products eligible, plus 1,400 for LDCs.
The GSP review cycle includes annual review of eligible products, competitive need limitation waivers, and certain country practices based on petitions or U.S. government initiation.
Regional programs. The regional programs expand on GSP to cover additional products, including most apparel, footwear, and certain leather-related products. The result of various expansions of the programs over time is that, with the exception of "basic GSP," their product coverage is fairly similar.
The regional programs generally have more liberal conditions for product entry than GSP, with AGOA and HOPE being the most liberal by allowing imports of apparel made from third-country fabric. However, rules of origin for textile and apparel in regional programs vary and are complex.
Beneficiary countries in regional programs are subject to more extensive eligibility criteria than GSP beneficiary countries.
Trends in Use of U.S. Preference Programs by Beneficiaries
The GAO noted the following trends in use of U.S. preference programs by beneficiaries (partial list):
imports are rising rapidly for AGOA and GSP;
program imports increase after programs expanded;
GSP affected by length and continuity of authorization;
small number of countries dominate preference imports overall; and
low-income countries have highest shares of preference imports.
Upcoming Congressional Decisions on Trade Preference Programs
The GAO states that as most U.S. trade preference programs will need to be renewed over the next several years, Congress will need to reexamine the programs and explore options for improvement.
1Together, the Caribbean Basin Economic Recovery Act (CBERA), as amended by the Caribbean Basin Trade Partnership Act (CBTPA), is commonly referred to as the CBI. In addition, the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act is an amendment to CBI.
2ATPA was amended and expanded by the Andean Trade Promotion and Drug Eradication Act (ATPDEA).
GAO contact - Loren Yager (202) 512-4347
GAO report (GAO-07-1209, dated September 2007) available at http://www.gao.gov/new.items/d071209.pdf