GSP Renewal Would Strengthen the US at Home and Abroad

        It has been almost three years since Congress allowed the Generalized System of Preferences (GSP) to expire.^[1]  This program provides nonreciprocal, duty-free treatment for goods from qualifying beneficiary developing countries (BDCs), which lowers the price of imports from those countries and promotes their economic development.^[2] Recently, the US has grappled with inflation and rising prices, which have hit low and middle-income households the hardest.^[3]. The US is also faced with renewed economic challenges from China and threats to our national security from Russia. GSP renewal could provide a tool to help address each of these concerns at the margins.

Renewing the GSP would help relieve some of the pressures of high prices and inflation on low and middle-income households. House Ways & Means trade subcommittee Chairman Adrian Smith has noted that tariffs raise costs for imported consumer goods and materials needed for domestic production, like fertilizer.^[4]  GSP elimination of tariffs from developing countries can help ease the effects of inflation on the US economy.^[5] When asked by Congressman Smith about the costs of GSP’s nonrenewal for the US economy, Fred Ferguson, vice president of public affairs at Vista Outdoor, a manufacturer of sports and recreation products, attested that, “congressional inaction has contributed to inflation costing U.S. companies over $2.5 billion and consumers even more at the retail level.”^[6] These comments reveal open international trade often helps consumers. It’s important to recall that tariffs and other trade barriers were a contributing factor in the worsening of the Great Depression.^[7] Data from US Customs and Border Protection reveal that in 2021, several billion dollars in goods could have benefited from GSP had it not expired, including $663.3 in non-medical rubber gloves, $252.1 million in plywood, $258.2 million in electric conductors, and $293.1 million in parts for air conditioning machines.^[8] These are just a few examples of the consumer goods and materials which benefit under GSP. GSP renewal would remove some of these barriers and could be a tool to mitigate the economic pressures many Americans face.

The GSP program could also support US foreign policy. With India tightening restrictions on its rice exports^[9]and Russia preventing Ukraine from exporting its grain via the Black Sea,^[10] the revenue from increased trade with the US could help people in BDCs afford food and other necessities. Before expiration, GSP imports accounted for up to 15% of some countries exports, or several billion dollars in revenue.^[11] Furthermore, advocates have noted that the GSP program can help US businesses diversify their supply chains to countries other than China, stimulating economic growth while reducing overall risk.^[12] This would facilitate the Biden administration’s nearshoring objectives and help the US leverage market access when competing with China for support from various developing countries.^[13] It would be a valuable negotiating tool as the US tries to secure its supply chains and navigate global tensions.

In summary, GSP renewal could help advance US interests at home and abroad. It would help consumers afford basic necessities and provide the US with a tool to use in foreign policy to help counter Russian and Chinese influence. A recent letter from two dozen countries to the US Congress highlights that GSP is not just useful in international trade and economic development but also a tool to, “diversify supplier sources to limit vulnerability, strengthen the U.S. supply chain resilience, and ensure economic stability.”^[14]