GSP: Sleeping Bags and Tropical Fruit
Although
it may sound like the shopping list for the next season of Survivor,
GSP is serious business. The Generalized System of Preferences (GSP)
provides for an exemption to import duties for almost every product iTi
Tropicals imports for its customers. This exemption lapsed on December
31, 2010 and unless it is reinstated, the resulting duties will have far
reaching impacts, from reduced income for farmers in Ecuador to higher
food prices for American consumers.
The GSP concept was adopted by the United Nations in 1968. The UN resolution stated:
"...
the objectives of the generalized, non-reciprocal, non-discriminatory
system of preferences in favour of the developing countries, including
special measures in favour of the least advanced among the developing
countries, should be:
(a) to increase their export earnings;
(b) to promote their industrialization; and
(c) to accelerate their rates of economic growth."
Currently,
13 nations have adopted GSP schemes to advance this purpose. According
to the Office of the US Trade Representative, the US version exempts
4,800 products from 131 countries.
Unfortunately
for farmers and processors in developing countries and for American
consumers, the US plan expired on December 31, 2010 and duties have
therefore been reinstated on all these products. This has significantly
increased the cost of almost every product iTi Tropicals imports.
GSP
expiration not only hurts American importers and consumers, but also
developing countries like Thailand and Indonesia. The increase in
duties also helps manufacturers in China by making their exports
artificially more competitive by raising prices from developing
countries.
In Feburary, President
Obama's US Trade Representative Ron Kirk, released a statement urging
Congress to reinstate the program stating:
"I
am disappointed that Congress has not acted to extend Trade Adjustment
Assistant (TAA), the Andean Trade Preference Act (ATPA), and the
Generalized System of Preferences (GSP). These are important programs
that support workers and help U.S. businesses compete in the global
marketplace. As a result of this inaction, 155,000 Americans will go
without the assistance they were promised under TAA to help retrain for a
new job,"
"Farmers and workers in
Colombia will lose access to the U.S. market just as they are recovering
from severe floods. At the same time, the continuing absence of ATPA
and GSP benefits raises costs for American consumers and businesses as
well as farmers in some of the world's poorer countries."
In
the Fall of 2010, the US Congress failed to reinstate GSP. The Senate
bill was effectively held up by Sen. Jeff Sessions, R-Ala., to stifle
competition for a sleeping bag manufacturer in his State. According to
the Cato Institute, the saving of 20 jobs will cost the American
consumer $580 Million.
The good news
is that as of this writing, there are bills in congress to reinstate the
GSP exemptions. Except on sleeping bags. Stay tuned.
Up
to this point iTi Tropicals has not increased pricing as we fully
expect that GSP will be reinstated and that it will be done so
retroactively. If this is not the case, inevitably we will have to
increase pricing.
For more information:
http://www.unctad.org/Templates/Page.asp?intItemID=2309&lang=1
http://www.ustr.gov/trade-topics/trade-development/preference-programs/generalized-system-preference-gsp
http://www.cato-at-liberty.org/congress-where-20-jobs-580m/
http://www.tradepartnership.com/site/gsp.html
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