June 12th Senate Hearings on U.S. Trade Preference Programs

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Several important U.S. trade programs are set to expire partially or fully by the end of this year. The programs involved are the GSP (Generalized System of Preferences), CBI (Caribbean Basin Initiative), ATPA (Andean Trade Preference Act), and AGOA (African Growth and Opportunity Act). In general, these programs aim to promote economic development in developing countries by allowing preferential treatment to products imported from these countries. Out of all of these the GSP is probably the most widely used by U.S. importers as it includes a long list of beneficiary countries and some rather large trading partners, such as India and Indonesia.

Last week the Senate held a hearing on the Oversight of U.S. Trade Preference Programs and received testimony from the GAO (Government Accountability Office), a global trade consulting firm called Split Rock International, the Progressive Policy Institute, and the U.S. Conference of Catholic Bishops. Here is a link to the Senate web page on the oversight with links to PDF files of all the witness statements. Here are excerpts from each report:

The GAO report:

To address the concerns I have summarized today, in our March 2008 report, GAO recommended that USTR periodically review beneficiary countries that have not been considered under the GSP or regional programs. Additionally, we recommended that USTR should periodically convene relevant agencies to discuss the programs jointly.
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We also suggested that Congress should consider whether trade preference programs’ review and reporting requirements may be better integrated to facilitate evaluating progress in meeting shared economic development goals.

Grant Aldonas/Split Rock International:

First, I would recommend that the Committee expressly limit the
availability of our preferences to the least developed countries in the world. That
would enhance the benefit of the preferences as a tool for attracting investment
to the poorest countries in the world (i.e., those that lack access to global flows of
private investment capital). Limiting our preferences would also limit the “free
rider” problem we face where developed countries lack any incentive to negotiate
further liberalization, whether within the framework of WTO, regionally or
bilaterally.

Edward Gresser/Progressive Policy Institute:

…U.S. trade policy can continue to make good use of trade preferences
during the next decade. They have been an important part of our policies since the 1970s,
and have made significant contributions to development and poverty reduction, to the
creation of a fairer U.S. trade regime, and to some of our major foreign policy goals.
With attention and careful reform, they can do the same in the decade to come.

Fr. Andrew Small/U.S. Conference of Catholic Bishops:

In 1999, Pope John Paul II addressed the theme of globalization and equitable economic
integration in the context of this hemisphere. He warned: “If globalization is ruled merely by the
laws of the market applied to suit the powerful, the consequences cannot but be negative.”17
Preference programs offer a unique way for countries with tremendous economic advantages, like
the United States, to reach out in solidarity to least developed countries and to establish trade
laws that suit not just the powerful, but also the weak.

Again you can read the entire testimonies of each of the witnesses in PDF format from the links at the Senate website.

In 2006, I believe, Congress extended such programs on a short-term basis, extending them to the end of this year while they figured out what they wanted to do about them. This being an election year, I have my doubts that Congress will take any firm action on what to do with these trade preference programs and may simply defer them to later by extending them yet again by 1-2 years. So hopefully importers who benefit from these trade programs won’t have to worry, at least that’s my guess.

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