On June 2, Americans for Free Trade (AFT) sent a letter to the House Select Committee on the Chinese Communist Party (CCP) signed by IHA and 145 other organizations for the May 17 hearing Leveling the Playing Field: How to Counter the Chinese Communist Party’s Economic Aggression. Despite the enmity between Capitol Hill Republicans and Democrats, the Select Committee on the CCP headed by Chairman Mike Gallagher (R-WI) and Ranking Member Rep. Raja Krishnamoorthi (D-IL) was created with a strong bipartisan vote, reflecting growing congressional concerns about China’s intentions.
These concerns and statements from U.S. Trade Representative (USTR) Katherine Tai make it clear the Sec. 301 tariffs on Chinese products won’t be lifted anytime soon, even with USTR’s four-year tariff necessity review that began last year. As such, AFT’s letter, which was put in the hearing record by Rep. Michelle Steel (R-CA), explains the punitive impact of the 301 tariffs on U.S. businesses, workers and consumers, and suggests realigning them away from consumer goods and manufacturing inputs and equipment that are currently unavailable in sufficient quantities from sources other than China.
In addition, AFT urges utilizing targeted tools other than tariffs to hold bad actors accountable, and more support for U.S. supply chain resiliency and competitiveness by partnering with allies. AFT’s letter explains that “Congress and the Administration should support the U.S. business community’s efforts to further diversify supply chains,” including retroactively renewing expired trade preference programs like the Generalized System of Preferences (GSP) which provide sourcing alternatives to China.
The GSP is a nearly 50-year-old program that slashes tariffs on thousands of products from dozens of developing countries. Though comprising a small portion of total U.S. imports, the GSP is critical for a wide range of domestic industries. Businesses that are most affected by the GSP are those that rely on products from countries such as Indonesia, Thailand, Cambodia and Brazil. For example, 15 percent of Crayola LLC’s annual sales are from colored pencils produced in Brazil, but a 2½-year lapse in the GSP program has caused substantial challenges for them and similarly positioned companies.
When the GSP expired on Dec. 31, 2020, its non-controversial history suggested it would be easily renewed by Congress. However, renewal stalled in the last Congress due to House Democrats wanting more stringent labor and governance requirements for participating countries. Democrats also wanted to renew Trade Adjustment Assistance (TAA), which provides support for those who lose their jobs due to outsourcing, in tandem with renewing the GSP.
House and Senate Republicans argued that TAA is typically paired with new trade agreements and that the GSP already exists and simply needs to be renewed. In fact, a majority in the Senate supported a less prescriptive version of GSP renewal than the House version, and differences couldn’t be reconciled before the last Congress ended.
Small businesses across the country, as well as larger companies such as Target, Home Depot and Samsonite, are continuing to fight for GSP renewal in this Congress. Without the program, domestic industries face tariffs as high as 17.5%. Advocacy efforts to renew the GSP also include a request for refunds of duties collected since the GSP lapsed, which now are close to $3 billion in the aggregate.