International Trade:

Assessment of the Generalized System of Preferences Program

GGD-95-9: Published: Nov 9, 1994. Publicly Released: Nov 9, 1994.

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Pursuant to a congressional request, GAO reviewed the effectiveness of the U.S. Generalized System of Preferences Program (GSP), focusing on: (1) the benefits provided to beneficiary developing countries (BDC); (2) the limitations on GSP imports; (3) how products are removed from or added to GSP coverage; and (4) whether program provisions requiring that countries follow certain intellectual property and worker rights practices are enforced.

GAO found that: (1) only a few of the more advanced or larger developing countries receive GSP benefits; (2) although imports from BDC have increased annually, overall imports from several GSP countries have decreased because of their economic graduation; (3) new General Agreement on Tariffs and Trade tariff reductions have reduced the value of GSP duty-free benefits and U.S. leverage to demand compliance with GSP requirements; (4) BDC believe that the GSP program has helped their economic development; (5) in 1992, GSP benefits totalled $16.7 billion and the United States lost nearly $900 million in foregone duties; (6) over the last few years, Mexico has received the most GSP benefits; (7) several GSP program provisions limit duty-free entry in specific cases; (8) administrative exclusions under GSP should diminish, since Mexico has graduated from the GSP program and competitive need limit exclusions have been increasing for other beneficiary countries; (9) although the administrative process for considering petitions to add or remove products from GSP coverage is generally effective and well-structured, opportunities exist to improve program administration through better information dissemination and strengthened product petition acceptance requirements; and (10) adding new provisions to strengthen intellectual property and worker rights during program renewal may place too many conditions on beneficiary countries for their continued program participation.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Matters for Congressional Consideration

    Matter: Congress may also wish to consider whether to alter the GSP rules so that items are not penalized for having U.S. content. For example, any U.S.-origin value of a shipped item could be subtracted from the total value of the item before the 35-percent BDC origin value added is calculated.

    Status: Closed - Not Implemented

    Comments: GSP reauthorization legislation was passed in August 1996 without action on this item.

    Matter: If Congress considers whether or not to incorporate the 3-year rule, and a provision disallowing its waiver, in the GSP statute, it should recognize that the Trade Policy Staff Committee regulatory authority to self-initiate cases can have the same effect. Congress may wish to consider stipulating whether or not self-initiation of cases should be allowed where it would have the effect of waiving the 3-year rule.

    Status: Closed - Implemented

    Comments: GSP reauthorization legislation, passed in August 1996, codifies the 3-year rule and is written to cover the issue addressed by the matter for consideration.

    Matter: In considering whether to reauthorize the GSP Program, Congress may wish to consider altering the competitive need limit process in order to allow for a more thorough assessment of the competitiveness of the affected imports by, for example, extending the amount of time before exclusions under competitive need limits are implemented. This would allow for a thorough assessment of the competitiveness of the affected imports and allow affected industries more time to adjust.

    Status: Closed - Not Implemented

    Comments: GSP reauthorization legislation was passed in August 1996 without action on this item.

    Recommendations for Executive Action

    Recommendation: In order to provide greater transparency to the GSP decisionmaking process and the GSP petition process, the U.S. Trade Representative should make public the guidelines the GSP Subcommittee uses in analyzing product petitions, with the stipulation that the guidelines provide a framework for, but do not limit the extent of, the Subcommittee's analysis.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Not Implemented

    Comments: USTR does not think it is necessary, that the GSP Program is already sufficiently transparent.

    Recommendation: In order to provide greater transparency to the GSP decisionmaking process and the GSP petition process, the U.S. Trade Representative should indicate clearly in Federal Register notices of final decisions on GSP petitions that petitioners can write to request a written explanation of any decision.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Not Implemented

    Comments: USTR does not intend to modify GSP regulations until the program is on a firm footing. There has also been no completed review cycle as yet.

    Recommendation: In order to provide greater transparency to the GSP decisionmaking process and the GSP petition process, the U.S. Trade Representative should modify GSP regulations to specify a mandatory core of information required for acceptance of product petitions.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Not Implemented

    Comments: USTR does not intend to modify GSP regulations until the program is on a firm footing. USTR has also not been able to start a new product review cycle in which it could do this.

    Recommendation: In order to improve the administration of country practice petitions, the U.S. Trade Representative should review country practice petitions on a separate and more flexible time frame from product petitions that better fits their different dynamics.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Implemented

    Comments: USTR has delinked product and country practice reviews.

    Recommendation: In order to improve the administration of country practice petitions, the U.S. Trade Representative should accept emergency petitions for expedited review out of cycle, when warranted by events.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Implemented

    Comments: USTR said that it would be willing to self-initiate a case in a major emergency or heinous situation, and that filing a petition would not be necessary.

    Recommendation: In order to improve the administration of country practice petitions, the U.S. Trade Representative should make public the guidelines used in deciding whether or not to accept country practice petitions for full review.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Implemented

    Comments: USTR says that guidelines are already know. It has to be new information, the facts have to be accurate, and the allegations have to be serious.

    Recommendation: In order to improve the administration of country practice petitions, the U.S. Trade Representative should clarify the "new information" standard in the GSP regulations to indicate that failure of BDC to fulfill the promises of progress that were instrumental in the decision to deny a petition would constitute substantial new information that could be the basis for acceptance of a petition.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Not Implemented

    Comments: USTR does not intend to modify GSP regulations until the program is on a firm footing. However, it agrees with the substance of the recommendation.

    Recommendation: In order to improve the administration of country practice petitions, the U.S. Trade Representative should take all steps necessary to expand the range of sanctions that can be taken when BDC have not met GSP country practice standards to include partial sanctions when appropriate.

    Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative

    Status: Closed - Implemented

    Comments: USTR has imposed partial sanctions on Pakistan for worker rights violations.

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