U.S. and EU Nonreciprocal Preference Programs

Both the United States and the European Union established GSP programs in the early 1970s, each offering trade preferences to more than 100 developing countries around the world. However, a smaller percentage of imports from these beneficiary countries actually received preferential treatment—2 percent ($18 billion) of total U.S. imports and 6 percent ($45 billion) of total EU imports in 1999. U.S. and EU Approaches to Nonreciprocal Trade Have Evolved in Similar Ways

The United States and the European Union have offered greater tariff preferences over time, both in terms of product coverage and reduced restrictions. II for further details on the U.S. and EU programs.) U.S. and EU Programs Offer Relatively Similar Tariff Rates on Average and Exclude Some Sensitive Products

Despite some differences in how they structure their tariff preferences, U.S. and EU nonreciprocal trade preference programs offer beneficiary countries similar overall simple average tariff reductions. Although the United States covers a smaller share of its dutiable imports with its preference programs, U.S. beneficiaries use more of their available preferences than do EU beneficiaries. Appendix I: Objectives, Scope, and Methodology

In conducting our analysis, we compared (1) the volume of U.S. and EU nonreciprocal preferential trade, (2) the evolution of U.S. and EU approaches to nonreciprocal trade preferences, (3) the tariff preferences offered by the U.S. and EU nonreciprocal trade programs, and (4) the extent to which U.S. and EU program beneficiaries take advantage of the tariff preferences offered under the programs. EU preferential trade data have some limitations.
Why GAO Did This Study

Both the United States and the European Union (EU) began providing trade preferences to eligible developing countries in the early 1970s. These trade preferences, which reduced tariffs and product quotas, are "nonreciprocal," meaning that beneficiaries need not reciprocate with lower tariffs for donor export countries. This report discusses (1) the volume of U.S. and EU nonreciprocal preferential trade, (2) the U.S. and EU approaches to nonreciprocal trade preferences, (3) the tariff preferences offered by the U.S. and EU nonreciprocal trade programs, and (4) the extent to which U.S. and EU program beneficiaries take advantage of the tariff preferences offered under the programs.

What GAO Found

GAO found that the volume of imports receiving preferential tariff rates under U.S. and EU nonreciprocal trade preference programs in 1999 represented a relatively small share of total U.S. and EU imports, at two percent ($18 billion) and six percent ($45 billion), respectively. The U.S. and EU approaches to nonreciprocal preferential trade have evolved in similar ways since their inception in the early 1970s. U.S. and EU programs have included increasingly more products, particularly to the poorest countries, and have, over time, relaxed customs requirements that specify where and how products can be made. Despite some program differences, the U.S. and EU nonreciprocal preference arrangements offer relatively similar tariff preferences on average. On the whole, EU programs cover more products than do U.S. programs, but U.S. beneficiary countries use more of their available tariff preferences than do EU beneficiaries.