GSP Questions and Answers
What is GSP?
The Generalized System of Preferences is a program under which developing countries can receive preferential treatment for exports. Countries with GSP status receive tariff exemption on certain goods. GSP was started in 1974 under the Trade Act. It was originally intended as a development program, to encourage capital investment and labor-intensive export production in beneficiary countries. The thought was that this would in turn promote economic growth.
Which countries have GSP status? Which are eligible?
GSP eligibility is based loosely on GNP. A developing country can qualify provided it:
1) Has a market economy
2) Is not a member of OPEC
3) Has not harbored terrorists
4) Maintains a generally good trade relationship with the US
5) Respects US property laws including those related to patents and copyrights
6) Upholds internationally recognized workers’ rights standards
Which goods are tariff free under GSP?
There is a list of over 4,000 items that are duty-free for various participating countries. Generally speaking, products that qualify are those not considered to be competitive with US domestic goods. Products like garments and textiles have generally been considered competitive, so they have not qualified for tariff-free status.
How do workers’ rights relate to GSP?
A country is eligible for GSP only if it shows a commitment to workers’ rights, including:
1) Freedom of association
2) The right to organize and bargain collectively
3) Freedom from forced labor
4) A minimum age for employment
5) Acceptable working conditions related to hours, wages, safety and health.
How can a country lose GSP status?
GSP benefits can be suspended by the US government if a beneficiary country fails to meet the eligibility requirements. This means that a country can lose GSP status if it doesn’t maintain a strong commitment to upholding workers’ rights.
Who is in charge of GSP suspension?
The US president has the final authority to withdraw or continue a country’s GSP benefits. A subcommittee of the Trade Practices Staff Committee (TPSC) determines country eligibility. The TPSC is made up of trade practices experts from 19 different government agencies, including the Trade Representative; the Departments of Labor, State, Commerce, Customs, and Justice; the Council of Economic Advisors; the National Security Council; and others. The subcommittee meets when trade legislation is reauthorized, or if there is a petition for a country’s benefits to be suspended.
Who can submit a petition to suspend a country’s GSP status? On what basis will the TPSC accept a petition and hold a hearing?
A hearing can be initiated by the TPSC itself, or by a petitioning third party. Any person can petition to have a country’s GSP status suspended: there are no standing requirements. In the past, NGOs and labor unions have submitted petitions. The TPSC will accept a petition only if it shows strong evidence of systematic workers’ rights violations. Examples of such evidence are findings by the International Labor Organization (ILO), the UN, national commissions on human rights, and in some cases NGOs or other bodies.
What kinds of labor rights violations is the committee looking for?
The committee is looking at the government’s implementation of labor rights policies. It is not interested in individual cases, but rather how government policies as a whole protect laborers.
If the TPSC accepts a petition, what happens next?
The TPSC will go through a systematic process of investigating claims. First, sometime around June, a call for information regarding the labor violations will be issued. The TPSC will review the State Department’s Country Reports on Human Rights Practices, and gather information from organizations such as the International Labor Organization (ILO), the International Confederation of Free Trade Unions (ICFTU), the UN, and in some cases NGOs or other bodies. The committee often turns to informal sources as well, such as contacts at the AFL-CIO.
The involved foreign government will be notified, and a hearing will be set for sometime around October. Often, the US government will send representatives to the specified country to meet with officials and to review allegations. The government will have an opportunity to respond to the petition.
How does the hearing function?
It is not a court hearing, but a quasi-judicial process. The final decision regarding a country’s GSP status is made by the US President, and cannot be appealed. At the hearing, the subcommittee will hear testimony regarding the government’s policies toward workers’ rights. Often, the subcommittee will question representatives from the country.
A record of the hearing and all submissions will be made publicly available. After the hearing, the committee may have follow up questions for the petitioning party or foreign government.
What type of decision can be expected?
One of the following three decisions will be reached:
1) The country will be granted continuing GSP status
2) The country’s GSP status will be revoked
3) The country will be given a temporary GSP extension, but subject to continuing review