Legislative Update: Congress Eyes Reform of Trade Preference Programs

May 13, 2009

Congressional leaders in both the House and Senate have recently made clear their intensions to reform unilateral US trade preference programs, such as the Generalized System of Preferences (GSP). The  USuses GSP and other preference programs, such as the Andean Trade Preference Drug Eradication Act (ATPDEA) and African Growth and Opportunity Act (AGOA), to grant duty free access to goods from developing countries.

Ideally, congressional leaders would like to complete legislation reforming the programs before GSP and ATPDEA expire at the end of 2009. However, administration officials and private sector groups have suggested that process may spill into next year and are suggesting an early extension of the programs so that the House and Senate committees can work on more substantial reforms into next year.

During Demetrious Marantis’s nomination hearing to become Deputy U.S. Trade Representative (USTR) on May 5th, both Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IW) indicated their intentions to introduce reform legislation in the coming months. Ideas being developed by Grassley’s staff include new approaches to graduating countries and products from GSP and better distribution of benefits among the most under developed countries. However, Marantis cautioned against eliminating preferences for current beneficiaries that are not least-developed countries (LDS), because they still have high poverty levels and their trade benefits  U.S.companies.

On the House side, Ways and Means Committee member Jim McDermott (D-WA) recently announced plans to introduce legislation that would provide duty free, quota free (DFQF) access to goods from the world’s poorest countries. However, McDermott acknowledged that he still needs to overcome opposition from AGOA beneficiaries who are concerned that DFQF access to other LDCs, such as  Bangladesh, will erode their market access.

McDermott also indicated that he would work to reform GSP, which could be updated in terms of product coverage. Many of the product restrictions, deemed import sensitive in 1979 when GSP was first designed, need to be reevaluated and could include many products no longer made in the US.

Private sector groups have also begun to weigh in on GSP reform. In late April, a group of twenty-nine trade associations and humanitarian groups sent a letter to USTRurging reform of US preference programs. In the letter, the signatories proposed creating a simple unified trade preference program which would not favor one region over another and would provide more substantial benefits for LDCs.