It’s Time to Renew the Generalized System of Preferences

By December 9, 2013Economy, Trade

The Generalized System of Preferences (GSP) expired on July 31 of this year and an act of Congress is required to restore these trade benefits. GSP is a tremendously important U.S. trade preference program created to promote economic growth in developing countries through trade. Because of the duty-savings on imports from GSP beneficiaries, many manufacturers in the United States have an incentive to purchase raw materials and inputs from these developing countries. Without GSP, many manufacturers’ costs are higher and their competitiveness undermined. It is due time that Congress move forward on this bipartisan initiative.

GSP is particularly important for manufacturers who cannot source inputs domestically.  Over the years, GSP has helped promote growth and development in the world’s poorest economies by providing unilateral duty-free treatment for up to 5,000 products from 126 countries, while also reducing prices for U.S. producers and consumers. In exchange for receiving GSP benefits, participating countries must meet certain mandatory eligibility criteria.

Manufacturers have been operating without GSP for nearly five months, resulting in significantly higher production costs. Momentive, for example, is a $7.5 billion American manufacturer of specialty chemicals and performance materials with business evenly divided among the U.S., Europe, and Asia.  Momentive develops and produces high-performance resins, silicones and other advanced materials and has a presence in 21 states and in 28 countries worldwide.  Their products are manufactured in New York, Ohio, West Virginia, Florida, North Carolina, Oregon, Indiana and California, and they employ 4,000 people in R&D, manufacturing, marketing, sales and administration in the United States.

“The GSP program helps us remain competitive by lowering the costs of raw materials,” said Roger McCrary, Vice President for Global Trade Management at Momentive. “Our ability to remain an innovative, cutting-edge American company requires access to affordable raw materials. With the increase in tariffs resulting from GSP’s expiration, we need to cut from other parts of our budget, such as R&D. That has an impact on our bottom line and future products. We hope that Congress will resolve the political fight on funding offsets so this tax on raw materials can be removed.”

With the manufacturing sector facing ongoing economic challenges, passing GSP is one small step Congress can take to improve manufacturers’ competitiveness and cut their production costs.  We strongly urge the Senate and House to work collaboratively to identify an offset for GSP that allows its bipartisan passage through Congress as expeditiously as possible.

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