Administration Expresses Support for Renewal of GSP and ATPA at House Trade Preferences Hearing

The hearing also focused on the December 31, 2009 expiration¹ of the GSP program for most beneficiary countries, and the ATPA/APTDEA, unless a law extending these programs is enacted.

Trade Subcommittee Members, USTR Advocate Extension of GSP, ATPA/ATPDEA

Highlight of the written statements from various members of the Trade Subcommittee and the Office of the U.S. Trade Representative include:

Short term extensions result in instability. Trade Subcommittee member McDermott (D) testified that stability of the trade preference programs is essential to them being effective, noting that the recent extensions of preference programs has been for only a few months or a year, and needs to be long term. Representative McDermott stated that GSP and the ATPA/ATPDEA expire in December 2009 and need to be extended, and in the coming year, need to be pushed forward.

GSP. U.S. Trade Representative General Counsel Reif testified that the Administration is aware that there may be differences of view on the most appropriate length of a possible extension of GSP, but that it favors an extension at this time that is consistent with the sound, efficient and predictable operation of the GSP program. Reif noted that the Administration stands ready to work with Congress to secure an extension of the GSP program as soon as possible. The Administration also urges Congress to extend the ATPA/ATPDEA when it expires at the end of 2009.

ATPDEA. Representative Engel (D) testified that ATPDEA has too often been extended for short time periods, creating uncertainty and an unstable investment climate in the beneficiary countries. Representative Engel states that to make a real impact, the U.S. must immediately extend ATPDEA for at least two years. Representative Engel also urged the addition of Paraguay as an ATPDEA beneficiary, noting that he has introduced a bill (H.R. 1837) to accomplish that.

GAO Says Preference Programs Give Rise to Three Critical Policy Trade Offs

According to the Government Accountability Office, preference programs give rise to three critical policy trade-offs:

First, opportunities for beneficiary countries to export products duty free must be balanced against U.S. industry interests. Some products of importance to developing countries, notably agriculture and apparel, are often ineligible by statute as a result.

Second, some developing countries, such as Bangladesh and Cambodia, are not included in U.S. regional preference programs; however, there is concern that they are already competitive in marketing apparel to the U.S. and that giving them greater duty-free access could harm the apparel industry in Africa and elsewhere.

Third, Congress faces a trade-off between longer preference program renewals, which may encourage investment, and shorter renewals, which may provide leverage to encourage countries to act in accordance with U.S. interests such as trade liberalization.

(See today's ITT, 09111845, for BP summary of a letter from forty-five trade associations from twenty-nine preference and free trade area countries expressing opposition to proposals to grant Bangladesh and Cambodia duty-free entry for textiles and apparel.)

Witnesses Discuss Possible Changes to the Trade Preference Programs

During the hearing, government and private sector witnesses discussed possible changes to the existing U.S. trade preference programs. Examples suggested included changing the rules of origin, moving toward a unified set of preferences, decreasing the uncertainty toward renewal, extending product coverage to benefit the world's poorest countries (for example allowing duty-free entry for textiles and apparel from countries such as Bangladesh and Cambodia), reforming investor provisions, linking preference programs to foreign assistance, etc.

Senate Finance Hearing on Preference Programs Scheduled for November 19th

The Senate Finance Committee will hold its own hearing on the options for reforming U.S. preference programs on November 19, 2009. In a November 10, 2009 speech, Senate Finance Committee Chairman Baucus predicted that GSP and the Andean trade preference programs would be extended before they expire on December 31, 2009. He expects the extensions to be short-term, but longer than six months. (See ITT's Online Archives or 11/13/09 news, 09111315, for BP summary.)

¹The Generalized System of Preferences program (i.e., A, A*, and A) for most beneficiary countries, i.e., other than those listed as African Growth and Opportunity Act (AGOA) beneficiary countries, will expire on December 31, 2009, unless a law extending it is enacted. The Andean Trade Preference Act/Andean Trade Promotion and Drug Eradication Act (ATPA/ATPDEA) is also scheduled to expire on December 31, 2009 (for Colombia, Peru, and Ecuador), unless similarly extended by law.

Witness testimony available at http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=696.