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Thursday, February 17, 2011

Trade Preferences for Developing Countries and the World Trade Organization (WTO)

Jeanne J. Grimmett
Legislative Attorney

Article I:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) requires World Trade Organization (WTO) Members to grant most-favored-nation (MFN) treatment “immediately and unconditionally” to the like products of other Members with respect to tariffs and other trade-related measures. Programs such as the Generalized System of Preferences (GSP), under which developed countries grant preferential tariff rates to developing country goods, are facially inconsistent with this obligation because they accord goods of some countries more favorable tariff treatment than that accorded to like goods of other WTO Members. Because such programs have been viewed as trade-expanding, however, parties to the GATT provided a legal basis for one-way tariff preferences in a 1979 decision known as the Enabling Clause. The Enabling Clause was formally incorporated into the GATT 1994 upon the entry into force of the GATT Uruguay Round agreements on January 1, 1995. In 2004, the WTO Appellate Body ruled that the Clause allows developed countries to offer differing treatment to developing countries in a GSP program, but only if identical treatment is available to all similarly situated beneficiaries.

In addition to GSP programs, some WTO Members may also grant preferences to products of particular groups of countries that are more generous than GSP benefits. In such cases, Members have generally obtained time-limited WTO waivers of GATT Article I:l and, if needed, other GATT obligations. The United States holds temporary WTO waivers for tariff preferences granted to the former Trust Territory of the Pacific Islands and for three regional preference schemes: (1) the Caribbean Basin Economic Recovery Act (CBERA), as amended; (2) the Andean Trade Preference Act (ATPA), as amended, and (3) the African Growth and Opportunity Act (AGOA). Congress has made the CBERA program permanent and has authorized through September 30, 2020, the expanded tariff benefits contained in the Caribbean Basin Trade Partnership Act and subsequent legislation particular to Haiti. The AGOA program is authorized through September 30, 2015. While the U.S. GSP program expired on December 31, 2010, Congress extended the Andean preference program through February 12, 2011.

In the 111
th Congress, H.R. 1318 (Van Hollen) would have extended duty-free treatment for certain textile and apparel products and other goods from designated Reconstruction Opportunity Zones (ROZs) in Afghanistan and Pakistan until September 30, 2024, conditioning continued benefits on governmental compliance with various labor requirements. S. 496 (Cantwell) would have authorized the same through September 30, 2023, without added labor conditions. The House legislation was added to H.R. 1886, the Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009, which passed the House June 11, 2009. H.R. 1886 was later appended to H.R. 2410, the Foreign Relations Authorization Act, FYs 2010 and 2011, which passed the House June 10, 2009. Assistance to Pakistan was later enacted into law without ROZ provisions.

Other 111
th Congress trade preference legislation included H.R. 1837 (Engel) and S. 780 (Bill Nelson), which would have made Paraguay eligible for the ATPA program; H.R. 2702 (C. Smith), which would have limited GSP benefits for Brazil; H.R. 3039 (McDermott), which would have provided preferential tariff treatment to certain apparel from the Philippines; H.R. 4101 (McDermott), which would have expanded preferential trade benefits for least-developed countries (LDCs) and authorized the GSP program through December 31, 2019; S. 1141 (Feinstein), which would have granted duty-free treatment to textiles and apparel from 14 LDCs; and S. 1665 (Lugar), which would have made Paraguay and Uruguay eligible for ATPA benefits, expanded certain textile-related benefits under the program, and extended the program through December 31, 2012. No action was taken on any of these bills.

Date of Report: January 21, 2011
Number of Pages: 11
Order Number: RS22183
Price: $29.95

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