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• National Agricultural Law Center

Summary

The Generalized System of Preferences (GSP) provides duty-free tariff treatment to certain products imported from designated developing countries. The United States, the European Union, and other developed countries implemented such programs in the 1970s in order to promote economic growth in developing countries by stimulating their exports. The U.S. program (as established by Title V of the Trade Act of 1974) was extended until December 31, 2008, in section 8002 of P.L. 109-432 for all GSP beneficiary countries not covered by the African Growth and Opportunity Acceleration Act of 2004 (P.L.108-274, extended GSP benefits for AGOA beneficiary countries through September 30, 2015). In the 109th Congress, renewal of the preference was somewhat controversial, owing, in part, to concerns of some that some of the more advanced beneficiary developing countries (such as India and Brazil) were contributing to the impasse in multilateral trade talks in the World Trade Organization (WTO) Doha Development Agenda (DDA). Compromise language worked out between the House and Senate extended the GSP for two years for all countries, while directing that the President "should" revoke "competitive need limitation" waivers for products from certain countries, based on the criteria specified. Because Congress extended the GSP until December 2008, its further extension will continue to be a legislative issue in the second session 110th Congress. In addition, the House Ways and Means Committee and the Senate Finance Committee have each expressed interest in examining the effectiveness of the GSP and other trade preference programs. The Bush Administration favored GSP renewal, but also appeared willing to continue to review and modify the program in response to congressional concerns. To that end, during the process of the 2006 annual review, the USTR and other administration officials examined whether to limit, suspend, or withdraw the eligibility of 13 major GSP beneficiaries based on certain criteria. No countries lost overall GSP eligibility as a result of the review, but, as recommended in the legislation that reauthorized GSP, officials examined all 83 previously granted waivers of competitive need limits (triggered by import volumes) and withdrew several of them -- including those granting duty-free imports of jewelry from India and Thailand, and brake parts from Brazil. New waivers granted included one for hooked rugs from India and one for radial tires from Thailand. This report presents, first, a brief history, economic rationale, and legal background leading to the establishment of the Generalized System of Preferences. A brief comparison of GSP programs worldwide, especially as they compare to the U.S. system, is also presented. Second, the U.S. implementation of the GSP is discussed, along with the present debate surrounding its renewal and legislative developments to date. Third, an analysis of the U.S. program's effectiveness and the positions of various stakeholders are presented. Fourth, possible implications of the expiration of the U.S. program and other possible options for Congress are discussed. This report will be updated as events warrant.

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