On Wednesday, September 20, the House Ways and Means Subcommittee on Trade held a long-anticipated hearing titled "Reforming the Generalized System of Preferences (GSP) to Safeguard U.S. Supply Chains and Combat China." In their separate opening statements, both Subcommittee Chairman Adrian Smith (R-NE) and Subcommittee Ranking Member Earl Blumenauer (D-OR) highlighted the evolving landscape of international trade policy since the inception of the Generalized System of Preferences (GSP) in 1974 and stressed the ongoing strategic and economic concerns related to China. Chairman Smith underscored the importance of preserving U.S. production through the exclusion of import-sensitive products within GSP but expressed interest in evaluating the effectiveness of the exclusion process. He criticized the Biden administration for not reducing tariffs to enhance access for U.S. agricultural producers and expressed interest in exploring new criteria for digital trade. Ranking Member Blumenauer (D-OR) specifically called for updates to labor, environmental, and human rights criteria within GSP, as well as addressing rules of origin. Blumenauer also emphasized the need to reauthorize the Trade Adjustment Assistance (TAA) program.
Throughout the hearing, Republicans and Democrats alike concurred on the overall importance of reauthorizing GSP and sought to understand from witnesses the negative effects of constant expirations and short-term extensions. Republicans in particular expressed interest in including eligibility criteria related to discriminatory digital trade practices, citing data localization restrictions and violations of intellectual property rights, particularly in China. Democrats urged for stronger environmental, labor, and human rights standards under GSP.
While the hearing showed broad support in Congress for reauthorizing GSP, the questions of how and when remain. There is still no consensus on eligibility criteria, nor on whether GSP legislation should move on its own or be packaged with other trade bills. Complicating matters is the prospect of a government shutdown, which could absorb many of the few legislative days remaining in this Congress. Since the program elapsed in 2020 importers paid over $2.6 billion in new tariffs that would have been GSP eligible. Without a significant breakthrough soon, it is likely these tariffs will continue for a long time to come.
To learn more about how Congress may approach renewal of GSP this Congress, please download our recent Law360 publication "Trade Preference Program Revival: Is the Past Prologue?" in which we discuss the prospects for GSP renewal this Congress and options for GSP reform.
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