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RAPAPORT... President George W. Bush ended some trade benefits for Brazil and India and other countries under the generalized system of preferences. India would now pay a 5.5 percent import duty on gold jewelry. (Update: The GSP office confirmed at 5:05 p.m. that the rate is 5.5 percent and not 4 percent or 6.5 percent as reported by the Wall Street Journal and other media outlets this morning.)
As a result of this year's review, President Bush will continue eligibility for 115 exports from specific countries whose trade exceeded statutory limits in 2006 and terminate eligibility for 21 products from specific beneficiary countries in order to advance a more targeted and effective program to promote economic development.
The United States is revoking duty-free status for gold jewelry and brass lamps from India, methanol from Venezuela, wiring harnesses from the Philippines, gold jewelry from Thailand, and kola nuts from Cote d'Ivoire.
India shipped more than $1.6 billion in gold jewelry to the United States under the program during 2006. India exported $3.18 billion in diamonds and jewelry during April and May 2007 alone -- a 32 percent increase from 2006. Diamond exports rose 8 percent to $1.74 billion.
The United States and Panama however signed a free trade agreement that eliminates tariffs on some 90 percent of consumer exports to the nation. The Panama Diamond Exchange Project has applied for acceptance into the World Federation of Diamond Bourses.
The generalized system of preferences was created in 1974 to provide duty-free treatment to nearly 5,000 products exported to the United States from 131 beneficiary developing countries.
"Congress created the GSP program to serve as a bridge for developing countries as they increase their participation in the global trading system," said Susan Schwab, trade representative from the United States.
"It also helps to expand choices for U.S. consumers and industry. The GSP program has proven to be very successful in expanding U.S. trade with developing countries. In part due to the GSP program, the United States is one of the world's most open economies to products of developing countries."
Schwab had foreshadowed the decision when she stated one week ago that the program was meant to ensure only poorer countries benefit. House Ways and Means Committee chairman Charles Rangel (Democrat from New York) warned that he would not accept the White House's decision to revoke the competitive needs limit waivers waivers saying his goal was to expand opportunities for developing nations not restrict agreements.
Rangel may introduce legislation requiring that trade representatives must perform a certain analysis before revoking competitive needs limit waivers (CNL.)
Rangel told Schwab in a letter dated May 15, 2007, "We are particularly concerned that for a number of the CNL product waivers you are considering, including jewelry from India and Thailand, China is expected to benefit if revocation occurs."
"In light of this purpose, absent an affirmative finding that the affected beneficiary countries will remain competitive and that another lesser developed GSP country will benefit, the CNL waivers should not be revoked," the letter read.
In 2006, imports from beneficiary developing countries under the program totaled $32.6 billion, a 22 percent increase from 2005. United States imports under program constituted a significant share of total imports from several beneficiary countries, including Fiji, Kazakhstan, Paraguay, Tunisia, and Yemen.
The program's annual review focused upon several key areas, including consideration of:
1) Whether to continue eligibility for products from specific countries that exceeded statutory competitiveness limitations;
2) Whether to terminate eligibility for products that could be found competitive or meet other pertinent statutory criteria;
3) Petitions challenging the continued eligibility of certain beneficiary countries for the program.
In this year's review, the White House granted waivers of the competitive need limitations to ensure continued duty-free benefits to 115 products from 19 beneficiary countries, with an approximate import value of $618 million in 2006.
Schwab said, "The eligibility determinations made in this year's review fulfill the intent of the recent Congressional amendment that GSP continue to serve as a powerful development tool, particularly for the world's poorest countries. The statute indicates that well-established, globally competitive industries based in developing countries should compete on a level playing field with their counterparts. This will preserve GSP tariff advantages for nascent sectors that are intended to be the focus of the GSP program. Indeed, the ability of these industries to compete in global markets is testament to the success of the GSP program in helping to cultivate competitive industries in a number of developing countries."
Petitions involving the following program beneficiaries remain under review: Lebanon, Uzbekistan, and Russia regarding intellectual property concerns, and Niger regarding worker rights. With respect to the Russia's petition, the Bush Administration continues to monitor closely the Russian government's progress in meeting the commitments it undertook in the November 2006 agreement on concerns and to seek further progress in the context of ongoing World Trade Organization accession discussions.
Backgrounder on Generalized System of Preferences (GSP)
The Trade Act of 1974 created the GSP program. Under the program, 131 beneficiary developing countries, including 42 least-developed beneficiary developing countries, currently export approximately 5,000 products duty-free to the United States.
In 2006, the United States extended duty-free treatment under the GSP program to imports worth $32.6 billion from eligible beneficiary countries, an increase of 22 percent over 2005. The majority of products imported from beneficiary countries are eligible for GSP benefits, with a significant exception being textile and apparel products.
Each year, the United States conducts an annual review under the GSP program to determine if there are certain imports currently eligible for benefits that could compete effectively in the market if imported at normal tariff rates. In making decisions on product eligibility, the Administration considers petitions to continue duty-free treatment, holds public hearings, and reviews analyses prepared by the International Trade Commission of the economic impact of eligibility decisions on domestic industries.
The GSP statute includes two "competitive need limitations" (CNLs) on the eligibility of a product for benefits under GSP: (i) if the annual trade of a product from a specific country exceeds a value-based threshold ($125 million in 2006); or (ii) if the annual trade of a product from a specific country exceeds 50 percent of total imports of that product. The statute also authorizes the president to waive the application of these limitations if certain statutory conditions are met.
Any CNL waiver granted remains in effect until the president determines that such waiver is no longer warranted due to changed circumstances. In December 2006, Congress amended the GSP statute to provide that the president should revoke any existing CNL waiver that has been in effect for five years or more if a GSP-eligible product from a specific country has an annual trade level in the previous calendar year that exceeds 150 percent of the annual trade cap or 75 percent of all imports of that product.
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