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Why Congress Needs to Renew Caribbean, GSP Trade Programs Now

Caribbean Trade

Washington is no stranger to “must pass” legislation, and the end of the fiscal year on September 30 and the recent lapse in several pandemic response measures rightly command congressional attention.

But lawmakers should not overlook the need to renew two soon-to-lapse trade programs that support American jobs: The Caribbean Basin Trade Partnership Act (CBTPA) and the Generalized System of Preferences (GSP).

In a letter sent to U.S. Trade Representative Robert Lighthizer in late August, the Chamber and a dozen other trade associations urged him to confirm his support to Congress for renewal of CBTPA, which expires on September 30. In the letter organized by the American Apparel & Footwear Association, the groups wrote:

Since its inception in 2000, CBTPA has become an important element of the effort to develop and facilitate trade within the Caribbean Basin region, most notably with Haiti… The CBTPA requires the use of U.S. or CBTPA-regional yarns and fabrics, which means Haiti, as the main country still participating in the CBTPA, has become an important export market for U.S. textiles…

Not only have these programs supported numerous U.S. textile, apparel, and footwear jobs, but they have also supported economic development in the region, advancing key U.S. foreign, security, and immigration policy goals.

U.S. cotton growers and the U.S. textile industry are also calling for CBTPA renewal. In a recent letter, the National Council of Textile Organizations and National Cotton Council wrote that:

this trade program benefits the U.S. textile industry by providing a reliable, and growing export market, for U.S.-grown cotton, U.S.-spun yarn, and other textile materials of U.S. origin… It’s important to renew this program in a timely fashion to help ensure that we do not disrupt U.S. yarn spinning operations that supply CBTPA partners, especially in an economic environment that has been challenged as a result of COVID-19.

Renewing the program is important not just for U.S. jobs, but for jobs in struggling Haiti as well. In a September 10 hearing before the House Ways and Means Trade Subcommittee, Haitian Ambassador to the United States Hervé H. Denis said renewal of CBTPA is crucial to Haiti’s recovery from the coronavirus pandemic. As Politico reported:

Haiti’s apparel industry employed almost 60,000 workers early this year. But it was already beginning to suffer before the coronavirus outbreak from the delay in the CBTPA’s renewal, Denis said.

“Buyers and investors were hesitant to make new commitments while the program’s future remained uncertain. The country was already losing jobs at the end of 2019, well before buyers and retailers began canceling orders in response to the pandemic,” he said.

CBTPA enjoys bipartisan support, as noted by Ways and Means Trade Subcommittee Chairman Earl Blumenauer and Ranking Member Vern Buchanan. What’s needed is congressional action, which a clear expression of administration support would help achieve.

Much the same dynamic is on display with the Generalized System of Preferences (GSP), which expires at the end of the year. For nearly five decades, GSP has promoted economic growth in developing countries by providing duty-free access to the U.S. market for nearly 5,000 products from about 120 developing countries. This helps developing countries create formal sector jobs, and products imported under GSP generally do not compete with U.S.-made goods.

American businesses that benefit from GSP tend to be small but dynamic, according to the Coalition for GSP. These firms typically employ about 20 people, and GSP saves them between $100,000 and $200,000 in duties—big money for many small businesses. More than half of U.S. imports under GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture goods in the United States for domestic consumption or for export.

Americans enjoyed about $1 billion in savings under the GSP program in 2019. The program also helps American families stretch their budgets by eliminating duties on a variety of usually inexpensive consumer goods.

It’s worth noting that GSP’s eligibility criteria provide the U.S. government with leverage to encourage beneficiary countries to protect intellectual property, treat U.S. investors fairly, and improve labor practices, among other reforms. It also provides leverage for U.S. trade negotiators. For example, officials discussing a U.S.-India trade “mini-deal” are deliberating over the possible restoration of India’s GSP benefits, but any leverage this possibility affords will be lost if the program simply lapses.

In a letter to the House Ways and Means and Senate Finance Committees in July, 250 U.S. companies and associations urged swift GSP reauthorization, noting:

Many U.S. companies are experiencing severe harm from the COVID-19 pandemic and the related economic downturn and are struggling to overcome these challenges, recover losses, and start growing again. Further uncertainty about whether companies will have to pay millions of dollars a day in new taxes in January 2021 is the last thing the American business community needs.

Failure to reauthorize CBTPA and GSP before they expire could cause U.S. companies to lay off workers, reduce wages and benefits, and reduce investment. That is exactly what happened when GSP’s authorization lapsed in 2013-2015. Only after Congress extended the program could many American businesses that rely on the program start hiring and investing again.

Renewal of the two programs enjoys bipartisan support. House Ways and Means Committee Ranking Member Kevin Brady and Trade Subcommittee Ranking Member Buchanan endorsed renewing them together in letter released at the aforementioned hearing, and Democratic trade leaders in the House have also supported the two programs for years. The Chamber will continue to push for swift action on these two important programs.

This post was originally published on this site

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