Manufacturers Welcome USTR’s Review of GSP Eligibility

By July 2, 2013Trade

Stability and certainty are critical to ensuring U.S. trade preferences deliver on their promise to promote economic development abroad and provide access to manufacturing inputs lower prices here at home. So when the U.S. Administration decides to review a country’s eligibility for benefits under a trade preference program, it’s based on serious and longstanding concerns – not a temporary diplomatic dust-up.

The NAM welcomed last week’s announcement by the Office of the U.S. Trade Representative (USTR) regarding its 2012 Annual Review under the Generalized System of Preferences (GSP).  GSP is a trade preference program that has been in place since 1976. It allows duty-free imports from 127 developing countries.  The NAM supports GSP as a means to further international development, to bring developing countries in compliance with basic standards of the rule of law, and to reduce the cost of manufacturing inputs imported from those countries.

As part of the annual review, USTR considered petitions to suspend or withdraw GSP benefits from certain countries — including from Ecuador, which shipped products worth $107 million to the United States under the program last year. There are a number of criteria considered when determining eligibility for GSP, including the extent to which a country provides adequate and effective protection for intellectual property rights and whether it acts in good faith to enforce arbitral awards in favor of the United States.  USTR has accepted a petition for review against Ecuador related to serious concerns about its enforcement of arbitral wards. According to USTR, next steps in reviewing Ecuador’s eligibility will be announced by a Federal Register Notice.

The NAM strongly urges USTR to examine carefully whether Ecuador has lived up to its GSP eligibility requirements, including as they relate to the recognition and enforcement of arbitral awards. The NAM has long been concerned with Ecuador’s repudiation of its legal obligations and its breaches of the basic rule of law.

U.S. preference programs should not be treated as entitlements, but rather as partnerships between the United States and nations willing to live up to strong eligibility criteria that are fully implemented. Ecuador’s eligibility must be reviewed thoroughly and rigorously based on statutory eligibility criteria to ensure that it is meeting these standards.

The next steps in the GSP review process present an opportunity for Ecuador to demonstrate its capacity to abide by the rule of law and become a role model for other developing nations. If Ecuador can sufficiently prove its willingness to meet the high-standards of the GSP program and its other international obligations, that nation and its many small businesses that gain from GSP will continue to enjoy the benefits of the program.

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