Summary
U.S. trade preference programs promote economic development in poorer nations by providing export opportunities. The Generalized System of Preferences, Caribbean Basin Initiative, Andean Trade Preference Act, and African Growth and Opportunity Act unilaterally reduce U.S. tariffs for many products from over 130 countries. However, three of these programs expire partially or in full this year, and Congress is exploring options as it considers renewal. GAO was asked to review the programs' effects on the United States and on foreign beneficiaries' exports and development, identify policy trade-offs concerning these programs, and evaluate the overall U.S. approach to preference programs. To address these objectives, we analyzed trade data, reviewed trade literature and program documents, interviewed U.S. officials, and did fieldwork in six countries.
Overall, trade preference programs have a small effect on the U.S. economy. Some U.S. industries have shared-production arrangements with foreign producers that depend on preference benefits, while others compete with preference imports. Preference programs are used to advance U.S. goals, such as intellectual property rights protection. Developing countries extensively use preferential access to boost exports to the United States. Preference imports have grown faster than overall U.S. imports, and recent changes in product coverage have expanded beneficiaries' export opportunities. Gaps in duty-free access continue for sectors such as agriculture and apparel. Preference exports remain concentrated in a few countries and products, but trends indicate greater diversification and increased use by the poorest countries. Those GAO interviewed in beneficiary countries also stressed the benefits derived from preferences. Preference programs balance two key policy trade-offs. First, programs offer duty-free access to the U.S. market to increase beneficiaries' trade, while attempting not to harm U.S. industries. Second, Congress faces a trade-off between longer program renewals, which may encourage investment, and shorter renewals, which may provide more opportunities to change the programs to meet evolving priorities. Finally, some beneficiary countries' concerns over the eroding value of preferences must be weighed against the likely greater economic benefits of broader trade liberalization. Trade preference programs have proliferated over time, becoming more complex, but neither Congress nor the interagency Trade Policy Staff Committee that manages the programs has formally considered them as a whole. Responsive to their legal mandates, the Office of the U.S. Trade Representative (USTR) and other agencies use different approaches to monitor compliance with program criteria, resulting in disconnected review processes and gaps in reporting on some countries and issues. Separate reporting and examination also hinder measuring programs' contribution to economic development.
Recommendations
Our recommendations from this work are listed below with a Contact for more information. Status will change
from "In process" to "Implemented" or "Not implemented" based on our follow up work.
Director:
Team:
Phone:
Loren Yager
Government Accountability Office: International Affairs and Trade
(202) 512-4347
Matters for Congressional Consideration
Recommendation: As Congress deliberates on whether to renew the Andrean Trade Preference Act (ATPA), Caribbean Basin Trade Partnership Act (CBTPA), and Generalized System of Preferences (GSP) programs this calendar year, it may wish to consider whether a more integrated approach would better ensure programs meet shared goals.
Status: In process
Comments: When we determine what steps the Congress has taken, we will provide updated information.
Recommendation: Specifically, Congress may wish to consider which elements of the approaches used by agencies to administer these programs, such as petition-initiated compliance reviews or periodic assessment of all countries under certain programs, have benefits that may be applied more broadly to trade preference programs in general.
Status: In process
Comments: When we determine what steps the Congress has taken, we will provide updated information.
Recommendation: Congress may wish to also consider streamlining various program reporting requirements to facilitate evaluating the programs' progress in meeting their shared economic development goal.
Status: In process
Comments: When we determine what steps the Congress has taken, we will provide updated information.
Recommendations for Executive Action
Recommendation: To ensure that these programs, as a whole, meet their shared goals, Office of the U.S. Trade Representative (USTR) should work through the Trade Policy Staff Committee (TPSC) and its associated agencies to consider ways to administer, evaluate, and report on preference programs in a more integrated manner.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To ensure that these programs, as a whole, meet their shared goals, USTR should periodically convene the TPSC to discuss the programs jointly to determine what lessons can be learned from the various provisions concerning matters such as linkages to trade capacity building.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Recommendation: To ensure that beneficiary countries are in compliance with program criteria, the USTR should also periodically review preference beneficiaries that have not otherwise been reviewed by virtue of their membership in the regional programs.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: In process
Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
