GSP Could Aid China De-Risking Strategy, Lawmakers Say

More than two years after import duty breaks under the Generalized System of Preferences expired, a bipartisan group of dozens of lawmakers are again pushing congressional leaders to advance a reauthorization of the program.

GSP, which provides duty-free treatment for imports of thousands of products from more than 100 developing nations, expired Dec. 31, 2020, meaning GSP-eligible goods have been subject to U.S. tariffs since then. Congress must act for the program to be reauthorized, but lawmakers have failed to do so amid disagreements on whether and how much to reform GSP. While the program generally enjoys bipartisan support, some have pushed for changes such as revising eligibility requirements to reflect human rights, environmental, or other considerations; adding or removing beneficiary countries; and altering the list of covered products.

In a July 11 letter to the majority and minority leaders of the House Ways and Means Committee, dozens of House members emphasized that renewing GSP could help reduce U.S. reliance on China by facilitating supply chain shifts out of that country, “a policy goal shared by many across the political spectrum.”

“China has never qualified for GSP benefits, but many of its competitors do,” the letter explained. “GSP can result in tariff savings averaging 5 percent on all products, and frequently rising to 20 percent. Nearly all GSP-eligible products also are subject to Section 301 tariffs when imported from China, so GSP can provide tariff advantages as high as 45 percent for key products compared to China.”

By contrast, the letter said, GSP’s continued lapse advantages China at the expense of beneficiary countries, which have seen $2.5 billion in extra tariffs on $45 billion in exports to the U.S. in recent years. As a result, U.S. companies that reduced imports from China in response to the Section 301 tariffs – “the very action Congress seeks to encourage” – are having to consider a return to that country due to the higher costs of importing goods from China’s competitors associated with the expiration of GSP.

The lawmakers therefore called on congressional leaders to act “as quickly as possible” to pass legislation to renew GSP, asserting that a measure that includes “smart changes to make GSP countries more viable alternatives to China” would enjoy broad, bipartisan support.