Countries benefiting from the Generalized System of Preferences will soon face heightened scrutiny under a new compliance and enforcement initiative announced last week by the Office of the U.S. Trade Representative.
In addition to a heightened focus on concluding outstanding GSP cases, the new initiative calls for the USTR and other relevant federal agencies to review each beneficiary developing country every three years to determine its compliance with the statutory eligibility criteria of the program. If the assessment raises concerns about a country’s compliance, the administration may self-initiate a more thorough examination of its continued GSP eligibility.
The first assessment period will focus on developing countries in Asia, with beneficiaries in other parts of the world to be evaluated in the second and third years of the initiative.
According to USTR Robert Lighthizer, this “more proactive process” should help “ensure that countries that are not playing by the rules do not receive U.S. trade preferences,” and moreover, “sets the correct balance for a system that helps incentivize economic reform in developing countries and achieve a level playing field for American businesses.”
GSP provides duty-free treatment to thousands of products from 120 beneficiary countries, and in 2016 the total value of imports that entered the U.S. under GSP was $18.9 billion.
To qualify for GSP preferences developing countries must meet statutorily-established eligibility criteria, including enforcing arbitral awards in favour of U.S. citizens or corporations, combating child labor, respecting internationally recognized worker rights, providing adequate and effective intellectual property rights protection, and providing U.S. exporters with equitable and reasonable market access.
The USTR says the new enforcement scheme will complement the existing petition receipt and public input process for country practice reviews, which will remain unchanged.
With the GSP set to expire at the end of the year, a group of nearly 40 lawmakers have called on leaders in Congress to quickly move forward with legislation to extend it. Given the program remained unauthorized for two years after the GSP’s last expiration in 2013, there has been some understandable concern that a similar costly lapse could occur if immediate action isn’t taken to renew it.