Since its inception in 1976, the Generalized System of Preferences (GSP) has provided US importers with access to competitively-priced products, supported U.S. jobs, promoted economic growth in the developing world and supported favorable labor practices by offering a competitive advantage to companies from applicable countries.
As of 2012, the number of beneficiary countries and territories came to 126 (43 of which are “least developed countries”), the number of tariff lines eligible for GSP was 4,980 and the dollar value of imports cleared under GSP reached $19.9 B. A total of $742 M were saved on products ranging from ferroalloys, fiber optic wires, jewelry and petroleum oil.
Regretfully, the U.S. government failed to reinstate GSP in August of this year and since that time, companies small and large are paying significantly more for their imports (lest anyone feel this program only benefits the “big guys”, see the Coalition for GSP’s website which advises 78% of their members are business with less than 100 employees and that the “typical” company has just 15 employees).
The GSP system does have its limitations (not all developing countries receive assistance and due to concerns about the relative competitiveness of domestic producers, the U.S. program doesn’t cover products of greatest export interest to low income developing countries without natural resources); however, the benefits to both the US and developing regions, including maintaining the ability of the U.S. to remain competitive against other countries that continue to participate in the program, certainly justify the prompt review of GSP for reinstatement.
Reinstating GSP is a ‘no brainer’
In my opinion, renewal of the GSP is the ultimate proverbial ‘no brainer’. Without the GSP in place, American’s pay higher costs and suffer increased import tax/duties. It is estimated that tens of thousands of jobs could be lost due to increased costs on American industry.
Small businesses, many of which rely on GSP to compete with larger
companies, are hurt the most from expiration. The uncertainty of not knowing how long the increased import duties will be in effect (and if the lower rates will ever be renewed) can be devastating. For example, when should a small business raise prices to cover their increased costs?
Does the continued GSP expiration effect your business? If so, how are you planning the future around it? Why are lawmakers so reticent to reinstate the GSP?
- GSP Expiration Cost American Importers Another $56 Million in September (renewgsptoday.com)
- NAM Says It’s Time to Renew GSP (renewgsptoday.com)