Taking Steps to Improve GSP

By September 20, 2013Economy, Trade

House Commerce, Manufacturing and Trade Subcommittee Chairman Lee Terry (R-NE) introduced important legislation earlier today that would give a long overdue update to a nearly 40-year old U.S. trade preference program.

Designed to ensure countries that benefit from U.S. trade preferences provide a fair and level playing field for American manufacturing exports, the bill would prevent the President from granting Generalized System of Preferences (GSP) benefits to countries that maintain forced localization policies or fail to protect intellectual property rights.

Over the years, GSP has helped drive growth and development in the world’s poorest economies. It provides unilateral duty free treatment for up to 5,000 products from 127 countries, while reducing U.S. producer and consumer prices. But GSP isn’t an entitlement. To get benefits, countries have to meet certain mandatory eligibility criteria.

Yet some of those criteria increasingly look like relics of a bygone era – barring certain communist regimes and cartel members. To remain relevant, GSP’s eligibility provisions need to reflect the growing commercial and national security challenges of the 21st Century – including forced localization barriers, counterfeiting and piracy.

Terry’s bill does just that, giving the United States a critical new tool to combat discriminatory trade practices and intellectual property (IP) theft in overseas markets. “[T]oday, some countries are taking advantage of American generosity,” Terry said in a statement. “Eligibility should be reviewed regularly and rigorously.”

Combatting discriminatory trade practices and IP theft is nowhere more critical than in India, which is engaged in a growing pattern of unfair treatment designed to benefit a few domestic firms at the expense of manufacturing, innovation and jobs in the United States and other countries around the world.

India is the world’s third largest economy, according to the World Bank. And it is by far the largest beneficiary of GSP – exporting goods worth more than $4.5 billion to the United States under the program last year alone. That’s nearly twice as much as Brazil exports under GSP and more than eight times what Russia ships.

GSP Infographic

While the U.S. market is open to Indian products, goods made in America face steep barriers entering one of the world’s most protected economies. India’s average applied tariff is more than five times higher than ours. In recent months, India has announced policies requiring local production of information technology and clean energy equipment. It has denied or revoked patents on well over a dozen innovative medicines.

Chairman Terry’s bill sends a clear message that discriminatory actions like these are unacceptable. “Particularly at a time when unemployment in this country remains unacceptably high,” Terry said, “we can’t afford to let America’s trade policy become a one-way street.”

Chris Moore is Senior Director, National Association of Manufacturers

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