CPA Supports Bipartisan Congressional Reform Efforts for Generalized System of Preferences (GSP) Program

December 08, 2020

More work needed to fix failed trade-aid program

Washington. The Coalition for a Prosperous America (CPA) today recognized two separate pieces of legislation introduced in Congress to correct longstanding flaws in America’s Generalized System of Preferences (GSP) tariff program. Legislation introduced by House Ways & Means trade subcommittee Chairman Earl Blumenauer (D-OR) would add new criteria intended to strengthen the program’s effectiveness. And a separate bill introduced by Sen. Josh Hawley (R-MO) would halt GSP trade benefits until the U.S. unemployment rate falls below four percent; it would also cancel benefits for countries associated with forced or child labor.

CPA sees the two bills as a helpful start, though more work is needed to fix the overall program.

Said CPA Chair Dan DiMicco, “The GSP program has been a failure for decades. It hasn’t led to widely shared economic gains or improved working conditions in many participating countries. Instead, it has simply allowed multinational corporations to exploit poor labor standards overseas. America’s manufacturers and their workers have watched as other countries have enjoyed tariff-free access to the U.S. market. We commend the Members of Congress who are working to finally address these longstanding problems.”

The Generalized System of Preferences (GSP) tariff program was established by the Trade Act of 1974 to aid many of the world’s poorest countries. Its main objective was to eliminate duties on thousands of products imported from any of 119 designated beneficiary nations. In actual practice, however, the GSP has simply increased low-wage labor competition for U.S. workers. 

In October, CPA sent a letter to Congress expressing serious concerns about the effectiveness of the GSP program. As CPA noted, a wide array of multinational enterprises have used the GSP to exploit cheap overseas labor platforms, and use them to sell more profitably in the U.S. market. Since many of the participating nations have failed to address domestic labor concerns, the GSP has never actually fostered the democratic progress or middle-class growth originally envisioned. 

While CPA sees both bills as helpful, it urges Congress to incorporate stronger provisions. For example, the Blumenauer bill should include mandatory triggers which would exclude countries from the GSP, as opposed to relying entirely on presidential discretion

This is because the executive branch has a poor record of enforcing GSP provisions. Rep. Blumenauer’s legislation should also be revised to exclude goods where U.S. producers need incentives to boost domestic production.

However, CPA commends Sen. Hawley’s bill for automatically disqualifying countries included on the Department of Labor, “List of Goods Produced by Child Labor or Forced Labor.”

Said Michael Stumo, CEO of the CPA, “The United States has reached a pivotal point where we must prioritize America’s workers and companies. We believe Sen. Hawley’s bill is a good start, since it includes domestic economic considerations—and would suspend the GSP when our economy is not at full employment. We also appreciate Rep. Blumenauer’s consideration of this important issue. Going forward, Washington must set policy that seeks a U.S. economy at full capacity before doling out industrial production to other nations.”

Media Contact: 
Melissa Tallman, Marketing and Communications Director
202.688.5145 ext 3

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