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Monday, October 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. In December 2009, Congress extended the GSP and Andean trade preference programs to December 31, 2010, continuing an existing denial of benefits to Bolivia. While Congress did not renew the GSP program, it enacted legislation in December 2010 extending Andean trade preferences, as accorded to Colombia and Ecuador, through February 12, 2011. Andean benefits for Peru, which has been a party to a free trade agreement with the United States since February 2009, were terminated as of December 31, 2010, in the same enactment.

In the 112th Congress, H.R. 2832 (Camp), as passed the House and Senate, would extend the GSP program through July 31, 2013, and authorize the retroactive application of duty-free rates and other GSP benefits to entries of goods made after December 31, 2010. H.R. 3078 (Cantor) and S. 1641 (Baucus), bills to implement the U.S-Colombia Trade Promotion Agreement, would extend ATPA benefits to Colombia and Ecuador through July 31, 2013, with retroactive application to February 12, 2011. H.R. 913 (Aderholt), and S. 433 (Sessions) would extend the GSP program through June 30, 2012, with retroactive application to entries made after December 31, 2010; make certain sleeping bags ineligible for GSP benefits; and extend ATPA benefits to Colombia and Ecuador through June 30, 2012, with the extension effective as of February 12, 2011. S. 308 (Casey) would extend the GSP and ATPA programs to June 30, 2012, with retroactive application to their current expiration dates, and make certain sleeping bags ineligible for GSP benefits, with exceptions for higher-value bags and certain kits. S. 380 (McCain) would extend ATPA benefits to Colombia and Ecuador through November 30, 2012, with retroactive application to entries made after February 12, 2011.

Date of Report: October 5, 2011
Number of Pages: 12
Order Number: RS22183
Price: $29.95

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