In addition to examining the benefits trade  preference programs provide, Congress will need to consider concerns by  beneficiary and other developing countries, industry groups, and economic  experts surrounding these programs. Preference Programs Have Some Economic Effects on the United States and Provide an Opportunity to Advance U.S. Foreign Policy

The overall effects of trade preference programs on the U.S. economy are  small, but preference programs have direct effects on U.S. businesses,  consumers, and the federal budget. Effects on U.S. industries and  individual businesses vary; some have shared-production arrangements  with preference beneficiaries, while a few U.S. industries compete with  imports benefiting from preferences. To shed light on the question of whether U.S. trade preference  programs are helping countries develop, we look at the fundamental link  between the programs and the trade activity of beneficiary countries,  focusing on three key elements: (1) the extent and nature of the new  opportunities provided under U.S. preference programs, (2) whether  countries are fully using the available opportunities, and (3) whether U.S.  imports from beneficiaries have grown and diversified. But, as figure 1 shows, notable gaps  remain in tariff lines available for duty-free import under preference  programs, particularly in agricultural and textile and apparel products. Turkey also has been buffeted by rising commodity prices in sectors  such as jewelry. First, programs offer  duty-free access to the U.S. market to increase beneficiary trade, to the  extent that it does not harm U.S. industries. Second,  policymakers face a trade-off between longer or permanent program  duration, which may encourage investment, and shorter renewal periods,  which may provide leverage to achieve other policy goals. Finally, the  preference programs balance these trade-offs against a backdrop of  increasing global trade liberalization. Separate Approaches to Preference Programs Impede Assessing Whether They Are Meeting Shared Goals

Trade preference programs have proliferated over time, but Congress has  not considered U.S. trade preferences as a whole. Different Approaches Agencies Use to Monitor Compliance with Program Criteria Result in Disconnected Reviews

Two different approaches—a petition process and periodic reviews—have  evolved to monitor compliance with criteria set for various trade  preference programs. trade preference programs in a manner that contributes to economic  development in beneficiary countries.” However, there is no formal cross- programmatic examination of the preference programs collectively. Conclusions

Congress created these programs over the years to address compelling  trade and foreign policy objectives. Scope and Methodology

In this report, we (1) describe how U.S. preference programs affect the  United States, (2) review the effects of the programs on exports and  development of foreign beneficiaries, (3) identify trade-offs facing the  programs, and (4) evaluate the overall approach to preference programs. More complex rules apply to some products, notably  apparel.
Why GAO Did This Study

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.

What GAO Found

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.