The United States and twenty-six other industrialized countries adopted unilateral programs known as the Generalized System of Preferences in the 1970s, each of which varies in terms of the beneficiaries, products covered, and type of preference granted.
The GSP program was designed to further the economic development of developing countries through the expansion of their exports, especially in industries that cannot compete with producers in more developed countries. Companies and consumers in the United States also benefit, since the elimination of duties lowers the overall price of products imported into the United States under the GSP program.
The Enabling Clause, officially called the “Decision on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries,” was adopted under the General Agreement on Tariffs and Trade (GATT) in 1979 and allows developed country members to give differential and more favorable treatment to developing countries.
The Enabling Clause is the legal basis under the World Trade Organization (WTO) for GSP. Under the GSP program, developed countries offer non-reciprocal preferential treatment (such as zero or low duties on imports) to qualifying imports from developing countries. Preference-giving countries unilaterally determine which countries and which products are included in their schemes.
The U.S. GSP program, which began in 1976 and was last reauthorized through December 31, 2010,, grants duty free treatment to more than 4,800 tariff lines (defined at the eight digit level in the Harmonized Tariff Schedule of the United States) that are imported from 131 designated developing countries and territories.
Top U.S. GSP beneficiary countries include India, Brazil, Thailand, Indonesia, Turkey, Philippines, South Africa, Argentina, and Russia. Approximately 1,400 tariff lines have been exclusively dedicated to the least developed (LDBDCs) and African Growth and Opportunity Act (AGOA) countries. In 2008, GSP eligible beneficiary countries shipped goods worth more than $31 billion to the United States duty free under this program.
MAS analysts review product petitions each year during the U.S. GSP Annual Review, in which interested parties can petition the U.S. Government to modify the list of products eligible to receive duty free GSP treatment. This annual review allows for the public to submit comments in writing, as well as to appear in person to testify about possible effects GSP petitions could have on U.S. industry, if they were granted. MAS’s Office of Trade Policy Analysis leads this review with analytical input from MAS industry offices.