A lesser-know trade program is hampering US exporters

A lesser-know trade program is hampering US exporters
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U.S. political leaders from both parties have consistently supported the U.S. Generalized System of Preferences (GSP), a preferential program that gives duty-free treatment to certain goods entering the United States.

Even members of Congress who never would vote for a free-trade agreement because it isn’t a “good enough” deal for their constituents will routinely vote for GSP. But while those trade agreements require concessions from U.S. trading partners, virtually nothing is expected from GSP countries in return for their preferential access to the huge U.S. market.

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In fact, it is well known that U.S. companies often face prohibitive barriers to getting their products into the markets of many GSP countries. So, do the Trump administration’s trade reciprocity concerns in trade deals also apply to GSP countries?

 

A good case study to consider is Thailand.

The Treaty of Amity and Commerce between His Majesty the Magnificent King of Siam and the United States of America, establishing peaceful and friendly relations and trade between the countries, was signed in March 1833.

Since then, Thailand and the United States have strengthened their ties, signing, for example, the Treaty of Amity and Economic Relations in 1966 and concluding a bilateral Trade and Investment Framework Agreement in 2002.

The commerce part, however, has been a little skewed.

The United States runs a substantial trade deficit in goods with Thailand every year. In 2017, it reached more than $20 billion. In other forums, the administration has asserted that bilateral trade deficits are a sign of unfair trade practices by our trading partner. In Thailand’s case, it may have a point.

The United States is Thailand’s No. 1 export market, and many of the Asian nation’s products — over $4 billion worth — are sent here using GSP. But U.S. products exported to Thailand face high tariffs.

The country’s 2015 average applied Most Favored Nation rate on all imports was 11 percent. It was almost 31 percent for agricultural products, and its ad valorem tariffs ranged from 50 to 80 percent. Of course, most of the highest rates apply to agricultural imports that compete with its domestic goods, including beef, pork and poultry.

Thailand also has several non-tariff barriers that limit some U.S. products and act as a de facto ban on others. These unjustified restrictions and high tariffs have severely limited U.S. agricultural exports to Thailand.

Using pork as an example, although its 69 million people eat about 1 million metric tons of pork a year — nearly equal to the average per person for the No. 1 volume market for U.S. pork (Mexico) — the United States in 2017 shipped just 31 metric tons to Thailand. By way of comparison, last year it exported twice as much pork to the tiny island nation of Tonga (population 107,000).

The United States has raised the issue of trade restrictions with Thailand for several years but has seen little movement from Bangkok to resolve it. U.S. exporters now have had enough and are urging Washington to take action.

Congressional lawmakers recently reauthorized the GSP program — it expired Dec. 31 — and strengthened it to require the U.S. Trade representative to report annually on the extent to which a country provides “equitable and reasonable access to its markets” for U.S. exports before renewing its GSP eligibility.

Effectively, Congress empowered the White House to go after unfair barriers to American exports that are causing U.S. trade deficits with GSP countries.

This should be a welcome tool for the Trump administration to address its trade concerns, and how it uses its power will be watched closely by all GSP beneficiaries and, no doubt, will determine how those countries treat U.S. goods.

Given the restrictions it has on U.S. imports, the trade surplus it has with the United States and the administration’s focus on fair trade, Thailand has good reason to be concerned that it will be President TrumpDonald TrumpYoungkin ad features mother who pushed to have 'Beloved' banned from son's curriculum White House rejects latest Trump claim of executive privilege Democrats say GOP lawmakers implicated in Jan. 6 should be expelled MORE’s first “beneficiary” of that new GSP tool.

Ambassador Allen Johnson is president of Allen F. Johnson & Associates, which provide business and policy consulting related to international economics. He served as an ambassador at the Office of the United States Trade Representative (USTR) in the executive office of the president from April 2001 until September of 2005.