In a speech recently, at a Washington conference on the future of international trade, the House Ways and Means Committee Chairman Bill Thomas gave his views on pending trade issues, including the future of the Doha round of talks on international trade liberalization and renewal of the GSP (Generalized System of Preferences) program. In his view, there is likely to be no agreement in the Doha round, and the U.S. should turn its attention to bilateral and regional agreements, where it has been far more successful. As part of this refocusing of efforts, he expressed his view that the GSP program, which allows duty free entry into the U.S. of products from over 120 countries, should be allowed to expire at the end of the year – it officially expires on Dec. 31 - without being renewed in its present form. Chairman Thomas suggested that the program is dampening the enthusiasm of beneficiary countries for trade liberalization in the Doha Round. In place of GSP, the Ways and Means Chairman proposed that the US negotiate a special "duty-free, quota-free" program with the least developed countries only. This would not include India, Brazil, Indonesia, Philippines, Argentina, Uruguay, Pakistan, Sri Lanka, Thailand and other countries of interest to importers. In fact, Thomas' plan would eliminate 60 countries from the duty-free benefits, with benefits being extended basically only to those countries now listed as the least developed developing countries (LDDC).

Since GSP renewal in the House must originate in Chairman Thomas' committee, his opinion in this matter carries a great deal of significance. At the same time the ranking Democrat on the House Ways and Means Committee, Charlie Rangel (D-NY) introduced legislation (HR 5070) to renew the GSP program, along with Representatives Jim McDermott (D-WA) and William Jefferson (D-LA) joined him. However, introduction of this Democratic-only bill may present political and strategic problems and any meaningful progress will be unlikely. Meanwhile, the Senate Finance Committee Chairman Charles Grassley (R-IA) has voiced similar opinions. He warned that the reauthorization of the GSP program should not be taken for granted. Grassley recently told the Administration that he does not intend to act on renewal legislation until late in the year and hopes to achieve some success on greater market access in the Doha Round before he commits to the program’s extension.

Both Congress and the Bush Administration are likely to take a close look at the program this year to determine whether changes to beneficiary countries or products are needed. Taken together, the opinions of these two political leaders do not paint an optimistic picture for the continuation of the present GSP program into 2007 and beyond. There seems to be substantial sentiment within Congress that the larger developing countries, especially ones such as Brazil and India, no longer need this economic help. So, if GSP is a significant part of your international trade strategy, it’s not too early to start contacting your Congressional representatives on this issue. At the same time, it would be useful to begin looking at alternative sourcing or pricing strategies, as a future without GSP seems very possible, if not probable.