U.S. Orders Review of Trade Preferences to Benefit More Countries

By Andrzej Zwaniecki
Washington File Staff Writer

Washington - The Bush administration has initiated a major review of trade benefits as it considers shifting preferential treatment from more advanced developing countries to a larger number of less-developed countries.

U.S. Trade Representative Susan Schwab, who announced the decision August 7, said the administration intends to determine whether certain countries have increased their competitiveness or developed beyond the threshold for participating in the Generalized System of Preferences (GSP).

Under the GSP, a trade scheme established in 1968 by a U.N. conference, developed countries grant reduced or zero tariff rates to selected imports from developing countries. The least developed countries receive trade benefits for more products and deeper tariff cuts.

The U.S. GSP program was established in 1976 and has been renewed eight times, most recently in 2002.  It expires at the end of 2006, and Congress must renew it for benefits to continue.

The Bush administration'sreview is part of a broader examination ordered in 2005 in preparation for a possible renewal with a view of distributing benefits more equally.

"One of the concerns that Congress has raised is that GSP benefits go largely to a few countries, while many developing countries are not trading much under the program," Schwab said in a news release.

She said the program should be continued and broadened even if benefits for some of the more-developed countries are limited or withdrawn.

"Our goal is for more countries to benefit from the program and use trade in support of their economic development," Schwab said.

In an August 8 Federal Register notice, the Office of the U.S. Trade Representative (USTR) asked for public comments on whether to limit, suspend or withdraw the eligibility of countries whose exports to the United States covered by the program exceeded $100 million in 2005 and met one of the two additional criteria: that the country was classified as an upper-middle-income economy by the World Bank in 2005, or that its total exports equaled at least one quarter of 1 percent of all global exports in the same year.

The countries that meet those criteria are Argentina, Brazil, Croatia, India, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey and Venezuela, according to the notice.

The review also will examine whether to withdraw presidential waivers that give those 13 countries and six others unlimited duty-free access for certain products.

A coalition of business groups and developmental organizations has been pressing for the extension of the GSP.  But some legislators have complained that certain countries that benefit most from the U.S. program have not been helpful in the World Trade Organization (WTO) talks and therefore should not receive the GSP benefits in the future.

"Countries that don't want to give us access to their markets in the WTO negotiations, why should we continue to give them preferential treatment?" asked Senate Finance Committee Chairman Charles Grassley in July after the WTO negotiations collapsed. His committee would have jurisdiction over any legislation to extend the GSP program.

But Schwab did not link the review to the failure of the WTO negotiations and said instead that the program needs an overhaul because, despite accelerated development driven by globalization, the GSP has not been significantly revised in 20 years.

Altogether, the 133 countries covered by the program exported $26.7 billion worth of goods to the U.S. market duty free in 2005 under the GSP, with India ($4.2 billion), Brazil ($3.6 billion), Thailand ($3.6 billion) and Indonesia ($1.6 billion) among its top beneficiaries, according to USTR.

The USTR press release and the Federal Register notice can be viewed on the USTR Web site.