The National Retail Federation asked Congress to renew and expand trade preference programs that allow developing nations to provide U.S. retailers with billions of dollars worth of duty-free merchandise each year, saying demand for affordable goods has increased during the current recession.
“Retailers are experiencing the most challenging time for their businesses in decades as U.S. consumers become increasingly price-conscious due to the adverse impact the current economic climate has had on jobs, housing prices and incomes,” NRF Vice President and International Trade Counsel Erik Autor said.
“While cost is not usually the only factor driving sourcing decisions, it is an increasingly important consideration as competition for the consumer dollar among retailers has become more intense,” Autor said. “Preference programs can contribute significantly to lowering some portion of the overall cost by eliminating the tariffs, particularly as many high-tariff consumer goods are typically those that developing countries are most able to produce.”
Autor's comments came in a letter to members of the House Ways and Means Committee's Trade Subcommittee. The panel held a hearing this morning on the operation, impact and future of U.S. trade preference programs.
The United States has six trade preference programs that offer duty-free treatment or reduced duties on specified lists of imports from developing countries in Central America, the Caribbean, Africa and Asia. The Generalized System of Preferences program, which covers a variety of countries, and the Andean Trade Preferences and Drug Eradication Act are both scheduled to expire at the end of 2009, while the Caribbean Basin Initiative/Caribbean Basin Trade Preferences Act and Haitian Hemispheric Opportunity through Partnership Encouragement Act are set to expire at the end of 2010.
Autor said the programs need to be consolidated into a single program, with product coverage expanded to include apparel and footwear, two categories that developing countries are easily capable of producing and which are in high demand in the United States, but which are either not eligible for preferences or are significantly restricted. Doing so would help reduce U.S. retailers' reliance on China as the largest supplier of many apparel and footwear products while providing a development base allowing beneficiary countries to complete globally, he said.
NRF earlier this year called for consolidation of the six programs into one, with a single, simplified rule of origin governing what processes must be done to a product for it to become eligible for duty-free treatment. GSP does not cover textiles and apparel, and the other programs subject them to restrictive eligibility requirements such as the “yarn forward” rule of origin requiring the yarn and fabrics for qualifying apparel to come from the exporting country or the United States. Many developing countries havetrouble meeting that standard. Autor said the simpler, more flexible GSP standard of manufacturing or processing that results in “substantial transformation” of inputs into a new product plus 35 percent value added in the beneficiary country should be adopted instead.
Trade preferences for more advanced developing countries such as Brazil or India should not be eliminated or reduced because doing so would shift trade to China or other advanced developing countries rather than to least-developed countries, Autor said.
Autor also urged that preference programs be given permanent or extended authorization in order to make long-term planning easier. The programs have frequently been renewed for as little as a year or two at a time.
National Retail Federation
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