GSP and MTB: More than Just Lower Tariffs
A scan of recent headlines would tell any thoughtful importer that they shouldn’t put all their supply-chain eggs in one basket. With two near-peer world powers rapidly expanding their nuclear arsenals and an international landscape frayed by Russia’s invasion into Ukraine, securing alternate and new sources for critical imports may be more important than ever. Unfortunately, Congress and the Biden administration are falling short in their support of critical trade programs that would smooth the path for businesses trying to broaden their import supply chains.
For decades, free-trade policies like the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) have kept costs low and increased U.S. businesses’ access to many products. This includes chemicals that can’t be sourced in the U.S. and others in short supply that are key ingredients to many industrial products that are essential to the health and safety of Americans, like medical devices, food safety, electronics, water treatment, and more.
Unfortunately, these beneficial trade programs have expired, adversely impacting the ability of U.S. companies to compete globally, supply the nation with critical materials, and contribute to the economy.
The GSP, one of the most effective trade preference programs, is designed both to reduce prices for American importers and promote economic development in developing nations. Under the program, the Office of the United States Trade Representative provides non-reciprocal, duty-free tariff treatment on certain imported components, parts, or materials from developing nations. But with the expiration of the program in 2020, nearly 5,000 products that were eligible for duty-free importation into the U.S. from countries such as Cambodia, the Philippines, Indonesia, and more than 100 other developing economies became subject to duties upon entry. As a result, GSP importers have paid over $2 billion in extra tariffs, according to the Coalition for GSP.
Many of those countries are reliable trading partners that can supply high-quality, reasonably-priced manufacturing inputs, while helping to grow their economies — but not without the tariff-free treatment provided under the GSP.
Another trade program that has lapsed and remains a concern to chemical distributors, the broader chemical industry, and other importers is MTB. Like GSP, this program offers a temporary reduction or suspension of duties on certain U.S. imports that are not competitive with domestically manufactured products. Since many chemicals have had their production shift offshore or have never been produced domestically, MTB has been an important tool in keeping essential chemicals from being needlessly expensive.
Because of Congress’ failure to renew the program after its expiration in 2020, many products are now subject to a significant increase in tariffs. These higher prices will, again, inevitably be passed on to manufacturers, distributors, and finally consumers.
Chemical distribution is a global business. Free-trade policies and programs facilitate access to and lower costs for many chemical products that are not manufactured domestically in sufficient quantities but are essential to the U.S. economy and the health and well-being of Americans. They also help businesses still reeling from supply chain challenges diversify their supply chains and business plans.
These programs have garnered bipartisan support in Congress for decades. U.S. Trade Representative Ambassador Tai has signaled her support. We urge Congress and the administration to reauthorize these two key trade programs immediately. By doing so, we can enhance American companies’ ability to grow their businesses and their workforce while ensuring our competitiveness in an ever-increasingly global economy.
Eric R. Byer is president and CEO of the National Association of Chemical Distributors. Follow him at @EByerNACD.
