Senators look to revive trade preference program with eye on China

Members of Congress are looking to revive trade preferences for developing nations after the U.S.’s flagship program expired in 2020, warning that foreign adversaries including China have filled the void left behind by American businesses.

The Generalized System of Preferences (GSP) applied to some 119 countries or territories, giving duty-free access to U.S. markets for manufacturers abroad, and sending cheaper goods to U.S. businesses and consumers.

“If the United States is serious about moving away from Chinese manufactured goods and creating good-paying red, white, and blue jobs, renewing GSP is a good place to start,” Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee, said at a Wednesday hearing. 

The committee convened to evaluate reinstating the GSP and renewing other preference programs, particularly the African Growth and Opportunity Act (AGOA), which is set to expire in 2025.

“U.S. preference programs, in particular the GSP and AGOA, have long been so uncontroversial and universally accepted in Congress that committee hearings like today’s were unnecessary,” Scott Lincicome, vice president of General Economics and the Stiefel Trade Policy Center at the Cato Institute, told the committee in his testimony. 

“That the program has now sat expired for more than three years, and that we’re here today as trade-watchers openly contemplate AGOA’s expiration too, is an unfortunate testament to the state of U.S. trade policy in 2024,” he added.

In previous years, the GSP has cruised through congressional renewal, securing a landslide 400-2 vote from the House in 2018. However, it expired at the end of 2020 and has not been renewed.

Experts in favor of the program report that American companies have lost $3.36 billion to tariffs since its expiration — a cost they say is passed on to American consumers.

Florizelle Liser, president and CEO of the Corporate Council on Africa, said the preferential access to U.S. markets has an economic impact that ripples across the continent. 

“If you want to attain a resilient supply chain, China is not it,” Wyden said.

Both Wyden and the Finance Committee’s ranking member, Sen. Mike Crapo (R-Idaho), said the program would provide an “alternative” to the supply chains China has created with African countries.

“We are losing in competition to China in Africa,” Crapo said.

Members on both sides of the aisle in the Senate are broadly in favor of the legislation to reinstate the GSP. An amendment containing a renewal provision saw overwhelming support during the last Congress, passing through the Senate by a 91-4 vote. 

Yet, it hit a roadblock in the House as Democrats sought to add provisions and eligibility requirements related to human rights, gender protections, and the environment.

Partisan conflict could again throw preference programs into gridlock this year, as Democrats look to tack on the Trade Adjustment Assistance (TAA) program, which would commit millions to a fund that assists workers who lost their jobs to overseas competition.

“If we’re going to renew a tariff cut program like GSP, we should also renew TAA,” Sen. Elizabeth Warren (D-Mass.) told the committee.

Sens. Sherrod Brown (D-Ohio) and Sheldon Whitehouse (D-R.I.) joined Warren, with Whitehouse saying, “We do not intend to extend preferences without Trade Adjustment Assistance being a part of the equation.”

But Crapo cautioned his colleagues against that. 

“If folks support preference programs, then they should let them move forward as soon as possible and without any unnecessary linkages,” he said in his opening statement. 

Crapo noted the House is also ready to move on restoring trade preference programs, assuming separate programs aren’t folded in.

The House Ways and Means Committee passed the Generalized System of Preferences Reform Act in April by a 25-17 vote.