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Thursday, November 3, 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. In December 2010, Congress extended Andean trade preferences, as accorded to Colombia and Ecuador, through February 12, 2011, and terminated Andean benefits for Peru, which has been a party to a free trade agreement with the United States since February 2009. While Congress did not reauthorize the GSP program upon its December 2010 expiration, it has since extended the program through July 31, 2013, and authorized the retroactive application of duty-free rates and other GSP benefits to entries of goods made after December 31, 2010, in P.L. 112-40. The U.S-Colombia Trade Promotion Agreement Implementation Act, P.L. 112-42, extends ATPA benefits to Colombia and Ecuador through July 31, 2013, with retroactive application to February 12, 2011, and directs the President to remove Colombia from the GSP and ATPA programs once the U.S-Colombia Trade Promotion Agreement enters into force. 

H.R. 2387
(McDermott), S. 105 (Ensign), and S. 1244 (Inouye) would extend duty-free benefits to certain apparel items from the Philippines subject to the President’s certification that the Philippines is meeting enumerated trade and customs-related conditions. Under H.R. 2387 and S. 1244, benefits would remain in effect for seven years after they were proclaimed by the President and would terminate were the Philippines to become ineligible for GSP treatment. S. 105 would extent benefits for 10 years after proclamation, subject to GSP eligibility. S. 1443 (Feinstein) would authorize through December 31, 2022, duty-free treatment for certain items deemed import-sensitive under the GSP as well as extend certain AGOA textile benefits for certain leastdeveloped countries in Asia and the South Pacific.

Date of Report: October 2
6, 2011
Number of Pages:
Order Number: R
Price: $29.95

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