GSP Expansion: A Big Win for China

Just when you thought growing good paying U.S. manufacturing jobs and reining in China was the focus in Washington, along comes a harmful proposal being pushed by apparel importers that would do the exact opposite.

Incredibly, importers are pressing Congress to consider a massive expansion of a program known as the Generalized System of Preferences (GSP). GSP gives lucrative and non-reciprocal U.S. tariff-free access to 119 different countries and territories. The proposal in question would, for the first time, allow exporters in GSP countries — many of which are widely cited for weak labor, environmental and human rights standards — to ship finished textile, apparel and footwear products to the United States duty free. U.S. manufacturers would receive nothing in return but rather would continue facing prohibitory trade barriers and tariffs on U.S. exports to these countries.

Further, this proposal would jeopardize the U.S. textile and apparel industry and its $77 billion in annual output, $30 billion in annual exports and $20 billion in investment over the last decade. More importantly, this ill-conceived expansion of GSP would undermine the nearly 600,000 jobs directly tied to U.S. textile and apparel production and jeopardize the entire Western Hemisphere supply chain. It would exacerbate the record $891 billion U.S. trade deficit, incentivize Chinese industry and lead to further offshoring.

GSP was created by Congress over 40 years ago to help foster economic growth and stability among poorer, developing countries, including Pakistan, Cambodia and the Philippines, among many others. As the program secures no overseas market access for U.S. exports, it is wisely restricted in two important ways. First, no duty-free benefits are afforded in manufacturing sectors where GSP countries already enjoy substantial U.S. market share. Second, import-sensitive industries, such as textiles and apparel, are statutorily excluded so that domestic producers and component suppliers are not harmed.

This aggressive proposal blatantly violates both critical prohibitions within the current GSP program. Countries that traditionally participate in GSP already supply 32 percent of total apparel exports to the U.S. and are clearly significant suppliers to our market already. In fact, over the past 15 years U.S. imports of apparel from the leading GSP exporters have grown by an astounding 63 percent.

U.S. fiber, yarn and fabric producers and our Western Hemisphere trade partners would also suffer should this proposal go forward.  Expanding GSP benefits to apparel will severely damage developing countries in our own backyard, such as El Salvador, Haiti and the Dominican Republic, as well as countries in sub-Saharan Africa that benefit from the African Growth and Opportunity Act. These economies are heavily dependent on apparel manufacturing and their preferred access to the U.S. market —a benefit that is not offered to lower-cost producers in Asia.

Furthermore, expanding GSP to include apparel would be seen as an act of bad faith by our existing free trade agreement (FTA) partners. Mexico, Central America, Peru and a number of other nations receive duty-free access to the U.S. market because of carefully negotiated trade agreements. Their access to our market is tied to a reasonable set of origin rules built around the use of U.S. and regional components as well as other key trade commitments on labor, environmental and reciprocal market access.

Western Hemisphere trading relationships are responsible for 70 percent of U.S. textile and apparel exports and account for $35 billion in annual two-way trade between textile manufacturers and apparel producers in the region. Therefore, by undermining our free trade agreements and our trade preference programs, this proposal hurts both the region and U.S. textile manufacturing.

Finally, the greatest beneficiary of this proposal would be China. While not GSP-eligible, China would indirectly benefit from a GSP expansion as a supplier of component parts to numerous nations that do qualify under the program. China is already a massive supplier of fiber, yarn and fabric to GSP countries. In fact, more than 36 percent of China’s global textile exports are shipped to GSP nations, and that will grow exponentially should this expansion be adopted.

Misguided trade programs that unilaterally concede valuable U.S. markets to overseas producers, underpinned by Chinese fiber, yarns and fabrics, is the last thing U.S. manufacturers and our preference partners need. This proposal directly conflicts with the labor, environmental and human rights commitments in our free trade agreements and hurts our trade partners, U.S. manufacturers and workers.

The Congressional intent 45 years ago that no duty-free benefits be afforded in import-sensitive manufacturing sectors where GSP countries already enjoy substantial U.S. market share is still relevant. For these reasons, Congress should reject any effort to expand GSP.

Kimberly Glas is President & CEO of the National Council of Textile Organizations.

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