GAO Testifies on U.S. Trade Preference Programs

(The GAO's testimony is based on reports it issued in May 2008 and September 2007. See ITT's Online Archives or 05/27/08 and 11/16/07 news, 08052723 and 07111630, for BP summaries of those GAO reports.)

Congress Exploring Program Options as it Considers Renewals

Currently, the U.S. offers one general trade preference program, the Generalized System of Preferences (GSP) and three regional programs:

Caribbean Basin Economic Recovery Act (CBERA)/Caribbean Basin Trade Partnership Act (CBTPA)

Andean Trade Preference Act (ATPA)/Andean Trade Promotion and Drug Eradication Act (ATPDEA), and

African Growth and Opportunity Act (AGOA).

GSP, the longest standing U.S. preference program, expires December 31, 2008, as do ATPA/ATPDEA benefits. At the same time, legislative proposals to provide additional, targeted benefits for the poorest countries are pending. The GAO states that Congress is exploring options as it considers renewal, etc.

Effect of Policy Tradeoffs Associated with Preference Programs

The GAO describes three critical policy trade-offs associated with trade preference programs and their effect:

U.S. interests vs. beneficiary interests. In balancing opportunities for beneficiaries against U.S. interests, some products of importance to developing countries, notably agriculture and apparel, are ineligible by statute. GAO states that for 48 GSP-eligible countries, more than three-fourths of the value of U.S. imports that are subject to duties (i.e. are dutiable) are left out of the programs. For example, just 1% of Bangladesh's dutiable exports to the U.S. and 4% of Pakistan's are eligible for GSP.

Determining which countries should benefit. Certain developing countries have been given additional preferential benefits for import-sensitive products under regional programs, but some of the poorest countries, outside targeted regions, do not qualify. For example, Bangladesh and Cambodia are not included in the U.S. regional preference programs, although they are eligible for GSP-Least Developed Country (LDC) benefits.

In addition, there is some evidence that certain beneficiaries of U.S. preference programs have "arrived" as global exporters. For example, GSP beneficiary countries India, Thailand, and Brazil, the three leading non-fuel suppliers of U.S. preferential imports, were among the top 20 world exporters and U.S. import suppliers in 2007.

Longer vs. shorter renewals. Congress faces a trade-off between longer program renewals, which may encourage investment and shorter renewals, which may provide opportunities to leverage the programs to meet evolving priorities.

U.S. Approach Has Resulted in Many Programs, Lack of Coordination

Trade preference programs have proliferated over time and become more complex, with many countries participating in more than one of these programs.

In addition, due to differing statutory requirements, agencies pursue different approaches to monitoring the programs. The result is a lack of systematic review and little to no reporting on impact. Finally, neither Congress nor the administration formally considers them as a whole.

GAO's Recommendations and USTR's Response

In its March 2008 report, GAO recommended that the U.S. Trade Representative periodically review beneficiary countries that have not been considered under the GSP or regional programs and periodically convene relevant agencies to discuss the programs jointly.

(See ITT's Online Archives or 06/11/08 news, 08061115, for BP summary of the Senate Finance Committee announcing this hearing.)

GAO testimony, "International Trade: The United States Needs an Integrated Approach to Trade Preference Programs" (GAO-08-907T, dated 06/12/08) available at http://www.gao.gov/new.items/d08907t.pdf

Statements by Senators Grassley and Baucus (dated 06/12/08) available at http://finance.senate.gov/sitepages/hearing061208.htm