Because these preferences are applied only to developing countries, however, GSP is inconsistent with article I of the General Agreement on Tariffs and Trade (GATT). Objectives, Scope, and Methodology

At the request of Senators Harris Wofford and Byron Dorgan and Representatives Steve Gunderson, William Hughes, Collin Peterson, and David Obey, we analyzed (1) benefits provided to beneficiary developing countries, (2) limitations on GSP imports, (3) administration of the program for adding or removing products from GSP coverage, and (4) administration of program provisions requiring that countries follow certain intellectual property and worker rights practices. U.S. import duties forgone on GSP imports were almost $900 million in 1992. These imports received GSP duty-free entry on $3.7 billion in shipments. Alternative Duty Preference Options That Complement GSP Benefits

Other duty preference options exist for GSP beneficiaries that replace some duty-free benefits that could have been realized under the GSP Program: many items that are eligible under the GSP Program instead receive tariff preferences through alternative means. Only a few countries have been graduated for specific products. This type of exclusion is referred to as a competitive need limit. Administrative Process for Product Cases

The GSP Program has a generally well-structured administrative process for consideration of petitions to add or remove products from GSP coverage. 5). GSP’s graduation policy considers: (1)the BDC’s developmental level; (2)the BDC’s competitive position in the product concerned; (3)the BDC’s practices relating to trade, investment, and worker rights; and (4)the overall economic interests of the United States, including the effect continued GSP treatment would have on the relevant U.S. producers, workers, and consumers. Most GSP benefits go to the relatively small number of more advanced or larger developing countries that can better meet U.S. market demands. Adding new provisions would further reduce the leverage to achieve the objectives of existing provisions.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the effectiveness of the U.S. Generalized System of Preferences Program (GSP), focusing on: (1) the benefits provided to beneficiary developing countries (BDC); (2) the limitations on GSP imports; (3) how products are removed from or added to GSP coverage; and (4) whether program provisions requiring that countries follow certain intellectual property and worker rights practices are enforced.

What GAO Found

GAO found that: (1) only a few of the more advanced or larger developing countries receive GSP benefits; (2) although imports from BDC have increased annually, overall imports from several GSP countries have decreased because of their economic graduation; (3) new General Agreement on Tariffs and Trade tariff reductions have reduced the value of GSP duty-free benefits and U.S. leverage to demand compliance with GSP requirements; (4) BDC believe that the GSP program has helped their economic development; (5) in 1992, GSP benefits totalled $16.7 billion and the United States lost nearly $900 million in foregone duties; (6) over the last few years, Mexico has received the most GSP benefits; (7) several GSP program provisions limit duty-free entry in specific cases; (8) administrative exclusions under GSP should diminish, since Mexico has graduated from the GSP program and competitive need limit exclusions have been increasing for other beneficiary countries; (9) although the administrative process for considering petitions to add or remove products from GSP coverage is generally effective and well-structured, opportunities exist to improve program administration through better information dissemination and strengthened product petition acceptance requirements; and (10) adding new provisions to strengthen intellectual property and worker rights during program renewal may place too many conditions on beneficiary countries for their continued program participation.