Trade Preference Program Decisions Could Be More Fully Explained

ID-81-10: Published: Nov 6, 1980. Publicly Released: Nov 6, 1980.

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The Generalized System of Preference (GSP) Program permits duty-free entry of selected products from 140 developing countries and territories. In the past, GSP has been administered according to an equal application principle, which meant that decisions to add or remove products from preference eligibility were applicable to all rather than some beneficiaries. In a Presidential report on the first 5 years of operation of GSP, it was announced that the equal application principle will be modified to allow for selective designation; product eligibility decisions may now take into consideration a beneficiary's economic development level, its competitive position in that product, and the overall economic interests of the United States.

GAO found that not all eligible imports may receive duty-free treatment. Products from a beneficiary are ineligible if, in the previous calendar year, they equaled 50 percent of more of total U.S. imports of that article or exceeded $41.9 million for 1979. Products need not be entirely manufactured in beneficiary countries to be eligible for trade preference treatment. GAO found that no significant increase in preference benefits would accrue to mid-level and less developed countries if the competitve need exclusion and rules of origin were less stringently applied to them. The President decides the eligibility of products for preference treatment upon the recommendation of the interagency Trade Policy Staff Committee (TRSC), which is chaired by the Office of the U.S. Trade Representative (USTR). Domestic and foreign parties or individuals may annually petition TRSC to change product eligibility. Aside from the possible effect of preference treatment on domestic industry, it was found that two of the factors influencing product eligibility decisions are: (1) the constraining effect of the initial product list of over 2,700 tariff lines, and (2) the interaction of several agencies with differing role preceptions. USTR does not fully explain to the petitioners the basis of the product eligibility decisions. Petition-related recordkeeping at USTR is too informal. Regulations do not clearly state the kind of information beneficiaries need to provide in support of their petitions.

Recommendations for Executive Action

  1. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should as part of the "Annual Report of the President of the United States on the Trade Agreements Program," include an analysis of how the changes announced in the President's April 1980 GSP Report are, on a product-by-product basis, (1) graduating advanced beneficiaries from the GSP program and (2) redistributing benefits to mid-level and less develped developing countries.

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

  2. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should give a fuller explanation to petitioners why their requests are denied. Petitioners should be informed not only of which factors influenced the President's decision but also how each factor was weighed in relation to the information received. The explanation should also address the rationale for findings reached; for example, relating each significant factor to the determination that an article is import sensitive or nonsensitive..

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

  3. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should clarify the GSP regulations by explicitly stating that only domestic petitioners need to evaluate the impact that proposed additions would have on the domestic industry producing like or directly competitive articles in the United States.

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

  4. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should include in the Federal Register notice announcing product eligibility decisions a brief explanation of the rationale used for making all such decisions.

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

  5. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should prepare for public use a collection of his interpretations of GSP law and the law's relationship to past product eligibility decisions.

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

  6. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should direct the Chairperson of the GSP Subcommittee to ensure that minutes of all Subcommittee meetings are kept.

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

  7. Status: Closed

    Comments: GAO has no information on the actions taken by the agency.

    Recommendation: The United States Trade Representative should establish a records management system which preserves the complete documentary history of each GSP-related petition.

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

 

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