Eat More Chicken
By Nate Herman
Like a friendly cow telling you to “EAT MORE CHICKEN,” Congress seems to be saying “BUY MORE FROM CHINA!”
Why? Because over two years after the U.S. Generalized System of Preferences (GSP) expired, Congress has failed to renew it.
GSP, when it isn’t expired, provides duty-free access for most U.S. imports, including travel goods, from developing countries. Thanks to TGA successfully lobbying Congress to add travel goods to the GSP program in late 2015, U.S. travel goods imports from GSP countries, like Cambodia, Indonesia, the Philippines, Thailand, Myanmar, Sri Lanka, and Pakistan, surged from a mere 3.1% of total U.S. travel goods imports in 2016 to 17.8% of total U.S. travel goods imports today. During the same period, U.S. travel goods imports from China fell by almost half, from 84.7% in 2016 to 48.4% today.
Why? Under GSP, when it isn’t expired, instead of paying the normal 17.6%-20% tariffs on their imports, U.S. travel goods companies pay NO TARIFFS (aka duty-free) when they import travel goods from GSP countries. For comparison, when U.S. travel goods companies import from China, they pay a whopping 42.6%-45% tariff, because U.S. travel goods imports from China must also pay a punitive 25% Section 301 tariff on top off the normal 17.6%-20% tariffs. As a result, GSP, when not expired, provides a powerful incentive for U.S. travel goods companies to leave China.
With everything happening with China, isn’t that a good thing? Apparently, Congress doesn’t think so. Don’t get me wrong. With the rhetoric coming out of both Congress and the Biden administration, the message to American companies is clear, “Get out of China.” But, as with everything, actions speak louder than words.
Since its inception in 1974, Congress has repeatedly renewed the GSP program with overwhelming bi-partisan support. When Congress added travel goods to the program in 2015, virtually every member of Congress approved the change.
When travel goods were formally added to GSP, which coincided with the U.S. trade war with China, the message from Congress was clear – “We will help you get out of China by incentivizing you to go to GSP countries.”
But Congress allowed GSP to expire on January 1, 2020. Despite claims from all sides that they want to renew GSP, Congress has spent over two years failing to do so. And people are getting tired of waiting. After 5 years of steep declines in U.S. travel goods imports from China and 5 years of steep growth in U.S. travel goods imports from GSP countries, the tide is starting to turn.
Despite all of the rhetoric from Congress about getting out of China and about renewing GSP, the real message from Congress seems to be to “Eat more chicken, aka go back to China.”
TGA will continue to push Congress to renew GSP as soon as possible so Congress’ actions support their words.