International Trade
U.S. Trade Preference Programs Provide Important Benefits, but a More Integrated Approach Would Better Ensure Programs Meet Shared Goals
GAO-08-443, Mar 7, 2008
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U.S. trade preference programs promote economic development in poorer nations by providing export opportunities. The Generalized System of Preferences, Caribbean Basin Initiative, Andean Trade Preference Act, and African Growth and Opportunity Act unilaterally reduce U.S. tariffs for many products from over 130 countries. However, three of these programs expire partially or in full this year, and Congress is exploring options as it considers renewal. GAO was asked to review the programs' effects on the United States and on foreign beneficiaries' exports and development, identify policy trade-offs concerning these programs, and evaluate the overall U.S. approach to preference programs. To address these objectives, we analyzed trade data, reviewed trade literature and program documents, interviewed U.S. officials, and did fieldwork in six countries.
Overall, trade preference programs have a small effect on the U.S. economy. Some U.S. industries have shared-production arrangements with foreign producers that depend on preference benefits, while others compete with preference imports. Preference programs are used to advance U.S. goals, such as intellectual property rights protection. Developing countries extensively use preferential access to boost exports to the United States. Preference imports have grown faster than overall U.S. imports, and recent changes in product coverage have expanded beneficiaries' export opportunities. Gaps in duty-free access continue for sectors such as agriculture and apparel. Preference exports remain concentrated in a few countries and products, but trends indicate greater diversification and increased use by the poorest countries. Those GAO interviewed in beneficiary countries also stressed the benefits derived from preferences. Preference programs balance two key policy trade-offs. First, programs offer duty-free access to the U.S. market to increase beneficiaries' trade, while attempting not to harm U.S. industries. Second, Congress faces a trade-off between longer program renewals, which may encourage investment, and shorter renewals, which may provide more opportunities to change the programs to meet evolving priorities. Finally, some beneficiary countries' concerns over the eroding value of preferences must be weighed against the likely greater economic benefits of broader trade liberalization. Trade preference programs have proliferated over time, becoming more complex, but neither Congress nor the interagency Trade Policy Staff Committee that manages the programs has formally considered them as a whole. Responsive to their legal mandates, the Office of the U.S. Trade Representative (USTR) and other agencies use different approaches to monitor compliance with program criteria, resulting in disconnected review processes and gaps in reporting on some countries and issues. Separate reporting and examination also hinder measuring programs' contribution to economic development.
Status Legend:
Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
- In Process
- Open
- Closed - implemented
- Closed - not implemented
Recommendations for Executive Action
Recommendation: To ensure that these programs, as a whole, meet their shared goals, Office of the U.S. Trade Representative (USTR) should work through the Trade Policy Staff Committee (TPSC) and its associated agencies to consider ways to administer, evaluate, and report on preference programs in a more integrated manner.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: Open
Comments: The agency indicated in its agency comments or letter to relevant Congressional committees, 60 days after report issuance, that it concurred with the recommendation and planned to take action to implement it. USTR has taken several actions in response to this recommendation. For example, the agency has changed the format of its annual report to discuss the preference programs in one place. However, GAO does not regard these actions as fully responsive and continues to monitor agency actions to implement the recommendation.
Recommendation: To ensure that these programs, as a whole, meet their shared goals, USTR should periodically convene the TPSC to discuss the programs jointly to determine what lessons can be learned from the various provisions concerning matters such as linkages to trade capacity building.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: Open
Comments: The agency indicated in its agency comments or letter to relevant Congressional committees, 60 days after report issuance, that it concurred with the recommendation and planned to take action to implement it. The agency took certain actions, but GAO does not regard these as fully responsive. USTR officials told us that the TPSC will meet at least annually to consider ways to improve program administration, to evaluate the programs' effectiveness jointly, and to identify any lessons learned.
Recommendation: To ensure that beneficiary countries are in compliance with program criteria, the USTR should also periodically review preference beneficiaries that have not otherwise been reviewed by virtue of their membership in the regional programs.
Agency Affected: Executive Office of the President: Office of the U.S. Trade Representative
Status: Open
Comments: The agency's plans with regard to the recommendation are unclear. GAO is monitoring or reviewing agency actions to implement the recommendation. USTR and the other TPSC agencies are currently deliberating on how best to review preference beneficiaries not otherwise reviewed under regional programs. Presently, it does not plan to initiate a process to periodically review all such countries. GAO has ongoing work in this area.
Recommendations for Congressional Consideration
Recommendation: As Congress deliberates on whether to renew the ATPA, CBTPA, and GSP programs this calendar year, it should consider whether a more integrated approach would better ensure programs meet shared goals. Specifically, Congress should consider which elements of the approaches used by agencies to administer these programs, such as petition-initiated compliance reviews or periodic assessment of all countries under certain programs, have benefits that may be applied more broadly to trade preference programs in general. Congress should also consider streamlining various program reporting requirements to facilitate evaluating the programs' progress in meeting their shared economic development goal.
Agency Affected: Congress
Status: Open
Comments: GAO is monitoring Congressional actions. On June 12, 2008, the Senate Finance Committee held a hearing entitled "Oversight of U.S. Trade Preference Programs". At that hearing members deliberated on options to improve trade preference programs.