Jones Specialist in International Trade and Finance
Generalized System of Preferences (GSP) program provides non-reciprocal,
duty-free tariff treatment to certain products imported from designated
beneficiary developing countries (BDCs). The United States, the European
Union, and other developed countries have implemented similar programs
since the 1970s in order to promote economic growth in developing
countries by stimulating their exports. The U.S. program was first authorized
in Title V of the Trade Act of 1974, and was most recently extended until
July 31, 2013, in Section 1 of P.L. 112-40. The President signed the
legislation extending the GSP on October 21, 2011, and GSP trade benefits
became effective 15 days after that date, or on November 5, 2011. The GSP program
was also retroactively extended to eligible merchandise that entered the United
States between the expiration date, December 31, 2010, and the date that
the GSP renewal entered into force. Therefore, importers of GSP-eligible
products may seek reimbursement for tariffs paid during the lapse of GSP
On March 26, 2012, President Obama suspended GSP benefits for Argentina because
“it has not acted in good faith in enforcing arbitral awards in favor of
United States citizens or a corporation, partnership, or association that
is 50 percent or more beneficially owned by United States citizens.” In
the same proclamation, the President also designated the Republic of South
Sudan as a least-developed beneficiary developing country under the GSP.
The GSP is one of several trade preference programs that provide similar trade
benefits to goods from developing and least-developed beneficiary
countries. Other U.S. trade preference programs include the African Growth
and Opportunity Act (AGOA), the Andean Trade Preference Act (ATPA), and
the Caribbean Basin Initiative (CBI). The GSP program, as well as other trade preference
programs, was established based on an economic theory that preferential tariff
rates in developed country markets could promote export-driven industry
growth in developing countries. It was believed that this, in turn, would
help to free beneficiaries from heavy dependence on trade in primary
products, whose slow long-term growth and price instability contributed to
chronic trade deficits. In 2010, the GSP provided preferential duty-free
entry for about 3,400 products from 129 designated beneficiaries, and an
additional 1,400 products from those beneficiaries designated as
least-developed beneficiary developing countries.
In recent years, renewal of trade preferences programs in general, and of the
GSP program in particular, has been somewhat controversial in Congress.
Some Members have reportedly expressed the view that some of the more
“advanced” BDCs, such as Brazil and India, should not be receiving
benefits under unilateral preference programs, and propose ending or limiting
their benefits in favor of providing a greater share of benefits to
least-developed countries (LDCs). Other Members have proposed granting
duty-free, quota-free access (DFQF) to developing countries under the
African Growth and Opportunity Act (who are also GSP beneficiaries), or to all
This report presents, first, a brief history, economic rationale, and legal
background leading to the establishment of the GSP. Second, the report
presents a discussion of U.S. implementation of the GSP, along with the
present debate surrounding its renewal and legislative developments to date. Third,
an analysis of the U.S. program’s effectiveness and the positions of various
stakeholders is presented. Fourth, implications of the expiration of the
U.S. program and possible options for Congress are discussed.
Document available via e-mail as a pdf file or in paper form.
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