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International Trade Reporter on Trade Preference Programs PDF Print E-mail
International Trade Reporter | Volume 24, Number 21 | Thursday, May 24, 2007

World News | Trade Policy

Baucus Calls for Reevaluation of Trade Preference Programs
By Rossella Brevetti

While Senate Finance Committee Chairman Max Baucus (D-Mont.) May 16 said that U.S. unilateral trade preference programs must be reexamined to see if they reflect the world of 2007, ranking Republican Charles Grassley (R-Iowa) said that the Generalized System of Preferences (GSP) is not promoting development and the Andean Trade Preference Act (ATPA) should not be renewed.

Baucus and Grassley, who issued a written statement, made their comments in the context of a Finance Committee hearing on trade preference programs such as the ATPA, the GSP, and the African Growth and Opportunity Act (AGOA). Congress extended both the GSP and ATPA last year on a short-term basis.

The ATPA was the most urgent issue facing the committee since it has a June 30 expiration date. The ATPA, as amended by the Andean Trade Promotion and Drug Eradication Act, provides duty-free benefits to the Andean countries of Peru, Colombia, Ecuador, and Bolivia.

Both Peru and Colombia have concluded free trade agreements with the United States but the timing for congressional consideration of those agreements is unclear.

Grassley’s written statement said that he had supported preference programs throughout most of his career in Congress but had recently begun to question their worth. While the GSP program was enacted in 1974 as a temporary incentive for developing countries to become more active in the global trading system, “this program is anything but temporary.” He pointed out that some of 143 developing countries and territories are eligible to receive duty-free treatment under the program and charged that some countries now view the program as an entitlement. “For example, Brazil and India have highly competitive economies. They impose high tariffs on U.S. imports. They also contributed to the failure of the Cancun Ministerial of the Doha negotiations in the World Trade Organization. Yet, at the same time, they seem to feel they’re entitled to continued benefits under the program,” Grassley stated.

Additional action should be taken to graduate products and countries from eligibility for GSP benefits such as retargeting the program away from advanced developing countries to those countries that are truly impoverished, Grassley urged. He also said the merits of eliminating the program and taking a fresh approach to trade liberalization should be explored.

Grassley said that he saw now reason to extend the ATPA, noting that Peru and Colombia have negotiated FTAs providing for the eventual elimination of tariffs. Turning to Bolivia and Ecuador, Grassley said that he saw no reason to extend this program. “In fact, it boggles my mind that the governments of Ecuador and Bolivia would even ask us for extensions of these trade preferences. After all, the current leaders of those two countries have based their careers on attacking U.S. policies—our trade policies in particular,” he said.

Seamless Extension

Assistant  U.S. Trade Representative for Industry, Market Access, and Telecommunications Meredith Broadbent told the panel that the most recent extension of the GSP program—to Dec. 31, 2008—represents the first time Congress has re-extended the program without a lapse. “A seamless extension has created greater certainty for developing country producers and exporters, as well as for U.S. importers and businesses,” she said. The administration agrees with Congress that the purposes of the program are best fulfilled when benefits are targeted to countries and products not yet competitive in world markets, she added.

In other testimony, Emory Associate Professor of Political Science Eric Reinhardt argued that unilateral trade preference programs are ineffective. The programs “institutionalize perverse incentives that inhibit the growth of trade on the part of beneficiary countries,” he said.
Last Updated ( Tuesday, 10 November 2009 )
 
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