GSP Trade Renewal Held Up In Senate Finance Committee

GSP Trade Renewal Held Up In Senate Finance Committee

The renewal of the Generalized System of Preferences (GSP) is stuck in limbo in the Senate Finance Committee for now as leading Democrats don’t want to pass it without Trade Adjustment Assistance (TAA).

“I want to be clear that this committee, this body should not move forward any deal that doesn’t make the trade protection program its priority,” said Sen. Sherrod Brown (D-OH)in a committee hearing about renewing GSP on June 5. TAA provides critical assistance to workers who have been harmed by foreign trade through no fault of their own. It lapsed in 2021. GSP lapsed in 2020.

Sen. Elizabeth Warren (D-MA) agreed with Brown, essentially calling the GSP “a global race to the bottom.”

“Corporate lobbyists and trade negotiators worked in back rooms to ink deals that lower labor and environmental standards and made it easier to offshore jobs. American workers have had enough. And, finally, some politicians in Washington are starting to listen to those workers. But not everyone. House Republicans just advanced a bill to extend the Generalized System of Preferences, a program that lowered U.S. tariffs on goods imported from certain countries without requiring those countries to cut tariffs on our exports as well. We need to invest in American competitiveness like we have with our domestic semiconductor industry and clean energy manufacturing. But even with all that, some workers will lose their jobs due to trade.”

Despite the opposition to GSP renewal without TAA attached, Committee leaders want it renewed. This seems to be the consensus in that Committee.

“These programs are an important but forgotten piece of the U.S. trade agenda puzzle. They are win-win, promoting economic growth in developing countries while supporting manufacturing and 

small business jobs here at home,” said Chairman Ron Wyden (D-OR) [Opening remarks

Wyden said GSP countries “play an important role in countering Chinese economic dominance.” Even though the evidence suggests otherwise. With the GSP in full effect in 2018, the U.S. recorded its greatest-ever goods deficit with China at more than $538 billion, based on Census data.

Wyden said that since GSP lapsed, companies are paying more in tariffs and investing less in their businesses. He suggested that companies want to leave mainland China but can’t because of GSP’s limbo status.

“If our country is serious about moving away from Chinese-manufactured goods and creating good-paying jobs, renewing GSP is a good place to start. And I believe Democrats and Republicans on this committee share that view,” Wyden said.

In the House in 2018, GSP renewal passed by a vote of 400 to 2.

Ranking Member Mike Crapo (R-ID) said GSP was “good for women and reducing poverty.”

He seems to have relied on data from the Cato Institute’s Scott Lincicome [Testimony], citing the same data points Lincicome used in his opening remarks. 

“Because of this lapse, Americans paid an extra $3 billion in tariffs and companies are moving production from developing countries into China,” Crapo said. This is a very different narrative than what has been said over the last several years; that companies have been leaving mainland China to avoid tariffs and geopolitical risks with auto industry giants like Ford and Tesla even recommending their China partners relocate to Mexico to remain as parts suppliers for them.

Crapo said GSP was never tied to TAA renewal and that TAA is traditionally a tradeoff for actual trade promotion, such as new free trade deals.

Even Allison Gill, legal director for Global Labor Justice [Testimony] was all for GSP renewal, providing it protected workers in the Philippines.

“Workers and their advocates have not been able to leverage the program to incentivize labor rights compliance or impose accountability for violations,” she told the Committee.

Sen. John Cornyn (R-TX), who could be next in line to replace Mitch McConnel (R-KY) as the Republican leader in the Senate, called Wednesday’s hearing a “pro trade love fest.”

“This is a refreshing development,” Cornyn said.

Sen. Michael Bennet (D-CO) wanted to know if GSP for Latin America would help the U.S. against China.

Lincicome said it would, but more needed to be done. Here, he was advocating for long term trade deals. “When you increase market access, when you reduce trade barriers to GSP beneficiary countries like Ecuador, you can make them more competitive vis-a-vis China or other large, developed manufacturing nations,” he said. “And I would add that the certainty of GSP is a critical aspect here. I think that’s one reason why trade agreements are preferred over preferential packages and preference programs because they provide long term certainty for American investors.”


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