GAO Reports on U.S. Trade Preference Programs

The report found that these programs provide important benefits, but called for a more integrated approach to ensure that the programs meet shared goals.

(Currently, the U.S. offers one general trade preference program, the Generalized System of Preferences (GSP)¹ and three regional programs, the Caribbean Basin Initiative (CBI)², the Andean Trade Preference Act (ATPA)³, and the African Growth and Opportunity Act (AGOA).)

Effect of Preference Programs

The GAO found that preference imports across all programs accounted for about 5% of total U.S. imports in 2006 and that they have grown faster than overall U.S. imports.

The report clarifies that U.S. industries and individual businesses are affected differently by trade preferences, as some have shared-production arrangements with foreign producers that depend heavily on duty-free preference benefits, some rely on and benefit from intermediate goods imported from beneficiary countries, while others compete with imports benefiting from preferences.

GSP. GSP imports accounted for 1.8% of all 2006 U.S. imports, or $33 billion. Citing a January 2008 Congressional Research Service (CRS) report, the GAO adds that the rate of increase of imports entering the U.S. under the GSP over the past 10 years has been relatively flat.

AGOA, ATPA, CBI. In 2006, imports under AGOA accounted for 2% of U.S. imports or $36 billion; imports under the ATPA accounted for .7% of U.S. imports or $13 billion; and imports under CBI accounted for .5% or $10 billion.

Beneficiary Countries are Still Concentrated, Focused on Certain Products

The GAO states that preference exports remain concentrated in a few countries and products, but trends indicate greater diversification and increased use by the poorest countries.

Concentration of countries. The top 5 suppliers under preference programs in 2006 accounted for 58% of preference imports. These suppliers were: Nigeria (with 28% of total preference imports, representing $25.8 billion in value), Angola (12%), India (6%), Ecuador (6%), and Colombia (5%). The top 25 preference beneficiaries accounted for over 95% of U.S. preference imports.

Dominance of fuel. The GAO states that the rapid rise in fuel imports since 1996 is the defining feature of U.S. imports under preference programs. Fuels were less than 1% of U.S. imports from preference countries in 1996 but, in 2006, accounted for nearly 60%. In 2006, fuels comprised 94% of all imports under AGOA, nearly 70% of ATPA/ATPDEA imports, but only 27% each of GSP and CBI/CBTPA imports.

Apparel. Apparel imports under preference programs now represent about 6% of total preference imports. The GAO explains that apparel imports declined somewhat after the phase out of global quotas on textiles and apparel in 2005 and the entry into force of the Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA) for several CBI nations in 2006.

GAO Recommendations

The GAO made the following recommendations (partial list):

Consider programs as a whole. The GAO states that trade preference programs have proliferated over time and become more complex, with many countries participating in more than one of these programs, but neither Congress nor the interagency Trade Policy Staff Committee (TPSC) that manages the programs has formally considered them as a whole. A more integrated approach is needed to ensure these programs meet shared goals.

Congressional action. As Congress deliberates on whether to renew the ATPA, CBTPA, and GSP, it should consider whether a more integrated approach would better ensure programs meet shared goals. Congress should also consider streamlining various program reporting requirements to facilitate evaluating the programs' progress in meeting their shared economic development goal.

(Two preference programs are scheduled to expire partially or in full this year: GSP on December 31, 2008; and ATPA on December 31, 2008. The U.S.-Caribbean Basin Trade Partnership Act (CBTPA) was recently renewed through September 30, 2010.)

¹GSP provides preferential duty-free treatment for 3,400 products from 131 designated beneficiary countries and territories, 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.

²Together, the Caribbean Basin Economic Recovery Act (CBERA), as amended by the Caribbean Basin Trade Partnership Act (CBTPA), is referred to by the GAO as the CBI. GAO also states that the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act is an amendment to CBI.

³ATPA was amended and expanded by the Andean Trade Promotion and Drug Eradication Act (ATPDEA).

(See ITT's Online Archives or 11/16/07 news, 07111630, for BP summary of a previous GAO report to Congress on trade preference programs.

See ITT's Online Archives or 08/03/01 news, 01080340, for BP summary of a GAO report comparing U.S. and EU trade preference programs.)

GAO report, "International Trade: Trade Preference Programs Provide Important Benefits, but a More Integrated Approach Would Better Ensure Programs Meet Shared Goals" (GAO-08-443, dated March 2008) available at http://www.gao.gov/new.items/d08443.pdf