More than three years after its expiration, the Generalized System of Preferences (GSP)—America’s largest and oldest trade preference program—is up for discussion again.
Rep. Adrian Smith (R-Ne.) introduced the GSP Reform Act in Congress on Monday in the hope of reviving the long-lapsed program, which is designed to promote economic development in 119 underserved countries across the globe. GSP provides beneficiaries with duty-free access to the U.S. market on thousands of products not generally produced stateside, while supporting worker rights and intellectual property protections.
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Smith’s bill would reauthorize GSP through Dec. 31, 2030, and it also proposes “the largest reforms to the GSP program since inception.”
No. 1 on that list would be permanently banning China from utilization. The reform bill sets new country eligibility criteria mostly centered on ensuring that beneficiary developing countries (BDCs), and the U.S., are aligned in values and see mutual advantages. In order to qualify for GSP benefits moving forward, BDCs must exhibit fair treatment for American agricultural exports as well as fair digital and tax treatment of U.S. companies and workers. They must also be democratic and exhibit satisfactory governance and anti-corruption standards.
Traditionally, BDCs are selected by the president on the basis of established eligibility criteria, and the Commander in Chief can terminate, suspend or limit a BDC’s GSP status at any time if they notify Congress two months in advance of the action, making it a point of leverage in trade relationships.
The newly proposed revision of GSP also contains provisions that speak to America’s national security and foreign policy interests. It removes countries that demonstrate growing economic or military ties with China, and when it comes to qualifying product, amendments would increase the rule of origin from 35 percent to 50 percent over time. It also incentivizes BDCs to use more U.S.-grown or derived content in their GSP-eligible products. This would ensure that GSP beneficiaries see the upsides of the program—not third countries.
Rep. Smith’s bill updates GSP’s competitive needs limitations (CNLs), which are “quantitative ceilings” for imports accepted under the GSP program. The GSP Reform Act increases the dollar threshold from $215 million to $500 million and indexes it to inflation in order to improve usefulness and utilization—and encourage more supply chain shifts out of China.