Apr 6, 1985
GRADUATION AND RECIPROCITY THRUSTS IN U.S. GSP SCHEMES.
GENEVA, APRIL 2 (IFDA/CHAKRAVARTHI RAGHAVAN) – Product specific graduation of countries and use of GSP benefits to obtain reciprocal concessions for the U.S., are the main thrusts of the renewed U.S. schemes of Generalised System of Preferences, according to the UNCTAD secretariat.-The secretariat’s assessments are in a report (TD/B/C.5/96) to the UNCTAD Committee on Preferences.- In view of its importance, the report has analysed in greater detail the changes introduced in the U.S. scheme through the U.S. trade and tariff act of 1984.- While country graduation has been averted for the time being in the U.S., the report notes that the new conditions surrounding country eligibility, and the income level set for denial of such eligibility, constitute a threat to a number of beneficiaries. While product graduation remains a dominant feature, new provisions have been added to speed up its application.- 'Those beneficiaries that can really take advantage of the scheme will thus see their benefits continuously reduced'.- Though it is argued that graduation enables spread of benefits more broadly among beneficiaries, there is still no conclusive evidence that this has taken place, UNCTAD points out.- The evidence that exists points in the other direction.- The U.S. International Trade Commission (ITC) has itself concluded that countries benefiting most from invocation of the competitive need limitations with respect to an advanced Third World country in respect of particular products are other advanced Third World countries or industrialised countries - not the less advanced Third World countries.- 'A more effective way to bring about wider distribution of benefits would be to extend the product coverage in the fields of agriculture, textiles and footwear of export interest to the wide majority of the developing countries, and in particular the least developed among them'.- The waiver provision that enables continuance of GSP benefits, if the beneficiaries open up their markets in favour of the U.S., threatens the very basis of the GSP, namely its principle of non-reciprocity.- At the same time, because of the limits on the value of trade that could benefit from such waiver, 'there is no guarantee that the beneficiaries would acquire unlimited preferential access to the U.S. market, even after agreeing to open up their own markets’.- As a result of the product specific graduation of countries and other discretionary exclusions in the U.S. scheme, 'the trend has been towards contraction of the product coverage'.- The provision for an accelerated graduation mechanism under the new scheme may affect the coverage even further.- In effect the President will have the authority to lower the Competitive Need Formula (CNF) limits by half, if the products are deemed to be sufficiently competitive.- This accelerated graduation is subject to waiver if the beneficiary concerned tigress to provide 'equitable and reasonable access to its markets and basic commodity resources and, if it cooperates in anti-counterfeiting efforts'.- Thus, 'an element of reciprocity is introduced into the operation of the waiver'.- The law has, however, set a limit on the amount of trade that could benefit from the waiver.- Under the new law, the U.S. will be able to negotiate concessions from Third World countries in exchange for continued favoured access under the scheme.- ‘This has set a precedent which is at variance with the GPS’s basic principle of non-reciprocity’, UNCTAD points out.- Provision has also been made under the scheme to graduate beneficiaries out of the scheme altogether once they have attained a per capita income of 8.500 dollars.- 'Besides being a moot indicator of development, the per capita income level is contrary to the principle of self-election'.- Another important provision in the scheme requires that beneficiary countries comply with certain labour standards before acquiring eligibility for preferences.- ‘It is to be noted', UNCTAD adds, 'that there is no international agreement on what constitutes minimum acceptable conditions of work with respect to wages, hours of work and occupational safety and health'.- However, the new scheme incorporates some positive elements, namely, the full exemption of Least Developed Countries (LDCs) from the application of competitive need limitations.- This, in the long run, may encourage export-oriented investment in these countries.- The U.S. scheme also increases the de minimis provision from one million dollars to five million dollars (indexed to growth in nominal GNP since 1979), which will mitigate the effects of product graduation and the extended period of notice given to exporters before the annual changes in the scheme are implemented.- On the basis of simulations, UNCTAD estimates that if the U.S. President were to grant waiver for all countries and on some 100 products that attract the CNF limitations, the trade that could benefit from the waiver would amount to 7.3 billion.- This exceeds the total waiver limit set of 3.24 billion by over four billions.- Thus the President’s authority to grant waivers regarding application of the normal CNF is significantly limited.- The waiver provisions also set a limit of 1.62 billion on beneficiaries whose per capita GNP exceeds 5.000 dollars (Hong Kong, Israel and Singapore, with Venezuela near this limit), or whose GSP duty-free trade amounts to ten percent or more of total U.S. GSP duty-free trade (Taiwan, South Korea and Hong Kong, with Brazil and Mexico near this limit).- These countries account for 6.7 billion in trade that could benefit from the waiver.- The other beneficiaries could be granted complete waiver on all of their exports that would be affected by the CNF, as their total trade that would benefit from the waiver would by only 551 million, well below the limit of 1.62 billion reserved for those beneficiaries.- Under the accelerated product graduation, the eight beneficiaries (Brazil, Hong Kong, Israel, South Korea, Mexico, Singapore, Taiwan and Venezuela) would account for 12.1 billion of trade, of which four billion would have entered duty-free in 1983. If these beneficiaries were to be determined competitive in the context of GSP and identified for accelerated production graduation, and if a blanket waiver were considered for these countries and the products, a total of 7.5 billion would involve trade that could benefit from the waiver.- This would be 5.9 billion in excess of the 1.62 billion waiver limit for these countries.- Thus, in these cases, the President's waiver authority is even more significantly reduced.- The U.S. law also provides for administrative procedures for review, whose cumulative effect would be to afford domestic interests frequent occasions to challenge beneficiaries over the advantages they have gained under the GSP schemes.- At the same time, the beneficiaries would have to meet strict standards if their petitions are to be considered.-