Generalized System of Preferences (GSP)

China's lack of worker rights, weak environmental standards "and anticompetitive subsidies are the hallmarks of China’s artificial comparative advantage. It is an advantage that puts others out of business and violates any notion of fair competition," the annual trade policy agenda from the Office of the U.S. Trade Representative said, and the administration is looking to advance fair competition "through all available avenues," including coordinating with other countries, using existing trade agreements, or new tools, it said.

Meetings between Deputy U.S. Trade Representative Jayme White and Ecuador's trade minister, Julio Jose Prado, focused on the U.S. desire for Ecuador to improve its agricultural import licensing system, and Ecuador's concern that the Generalized System of Preferences benefits program has lapsed. A joint statement from the two countries released Feb. 18 said they recognized Ecuador is improving efforts to battle illegal fishing, preserve forests and wildlife, fight climate change and marine debris, and end child labor. It said the U.S. discussed next steps to renew the GSP.

House Majority Leader Steny Hoyer, D-Md., argues that the America Competes Act and the U.S. Innovation and Competition Act, the House and Senate legislation to confront economic competition with China, differ in significant ways but have the "same core principles."

The House passed its China package, the America Competes Act, on a nearly party-line vote, with one Democrat dissenting and one Republican voting for it. The America Competes Act and the Senate's U.S. Innovation and Competition Act both propose subsidizing American semiconductor manufacturing and both propose investing in science research to better counter China's play for technological dominance, but the House version spends far more money and includes some priorities that the Senate did not, such as $2 billion annually for climate change foreign assistance and a generous reauthorization of Trade Adjustment Assistance. The vote was 221-210.

Although it's not clear whether a full conference committee will be convened, or there will be an informal conference to reconcile the House and Senate packages, some Republicans are leaving the door open to incorporating the antidumping duty and countervailing duty law changes that only appear in the House's America Competes Act. Leading voices on trade in both the House and Senate, however, said the Senate version of renewing the Generalized System of Preferences benefits program and the Miscellaneous Tariff Bill should take precedence over those put forward in the Competes Act, since the Senate trade title had strong bipartisan support.

Rep. Adrian Smith of Nebraska, the new ranking Republican on the House Ways and Means Trade Subcommittee, testified to the Rules Committee that the trade section of the America Competes Act of 2022 contains items that could have a "significant negative impact on our economy," and that Republicans didn't see anything about it until last week. He noted that his amendment that would have renewed trade promotion authority, which gives Congress a say in new free trade negotiations, was ruled out of order, so it will not get a vote.

Mandating a broad exclusion process for importers of goods subject to Section 301 tariffs, extending the period of the Generalized System of Preferences benefits program renewal, reforming the GSP competitive needs limitations, a ban on importing sodium cyanide briquettes, and changes to the Lacey Act are all among hundreds of amendments to the America Competes Act that have been submitted to the Rules Committee, which has the responsibility for shaping the bill that will get a vote on the House floor (see 2201310033).

The House Majority Leader Steny Hoyer, D-Md., said he will bring the massive America COMPETES bill up for a vote soon. While it may not need to attract any Republican votes to pass there, a bipartisan compromise will be necessary in conference. House Ways and Means Committee Chairman Richard Neal, D-Mass., said that the Senate's U.S. Innovation and Competition Act (USICA) was not adequate, aside from the issue that revenue measures, such as the Miscellaneous Tariff Bill, must start in the House. "This legislation is the boldest, best option we have to stand up to China’s harmful actions and support American workers, and I look forward to discussing these proposals further during our conference on the package with the Senate," he said.

The Coalition for a Prosperous America is asking the House Ways and Means Committee to move Democratic bills to curtail the use of de minimis and the Miscellaneous Tariff Bill and to pass the Democratic version of a Generalized System of Preferences benefits program bill. Whatever the committee recommends will be subject to a cross-Capitol compromise, as part of a larger China package called the U.S. Innovation and Competition Act. The Senate’s Trade Act of 2021, part of that package, also included requirements to reopen a broad exclusion process for Section 301 tariffs on China.

Both the bipartisan Senate and the Democratic versions of a Generalized System of Preferences benefits program renewal try to make the program do too much, says a think tank author who helped to administer GSP when he was assistant U.S. trade representative for trade policy and economics. GSP covers 3,500 of 6,900 tariff lines that are above 0, he noted, but it still covers only 11% of exports to the U.S. from GSP countries because of the categories that are excluded.