International Trade: Comparison of U.S. and European Union	 
Preference Programs (08-JUN-01, GAO-01-647).			 
								 
Both the United States and the European Union (EU) began	 
providing trade preferences to eligible developing countries in  
the early 1970s. These trade preferences, which reduced tariffs  
and product quotas, are "nonreciprocal", meaning that		 
beneficiaries are not required to reciprocate with lower tariffs 
for donor export countries. This report discusses (1) the volume 
of U.S. and EU nonreciprocal preferential trade, (2) the U.S. and
EU approaches to nonreciprocal trade preferences, (3) the tariff 
preferences offered by the U.S. and EU nonreciprocal trade	 
programs, and (4) the extent to which U.S. and EU program	 
beneficiaries take advantage of the tariff preferences offered	 
under the programs. GAO found that the volume of imports	 
receiving preferential tariff rates under U.S. and EU		 
nonreciprocal trade preference programs in 1999 represented a	 
relatively small share of total U.S. and EU imports, at two	 
percent ($18 billion), and six percent ($45 billion),		 
respectively. The U.S. and EU approaches to nonreciprocal	 
preferential trade have evolved in similar ways since their	 
inception in the early 1970s. U.S. and EU programs have included 
increasingly more products, particularly to the poorest 	 
countries, and have over time relaxed customs requirements that  
specify where and how products can be made. Despite some program 
differences, the U.S. and EU nonreciprocal preference		 
arrangements offer relatively similar tariff preferences on	 
average. On the whole, EU programs cover more products than do	 
U.S. programs, but U.S. beneficiary countries use more of their  
available tariff preferences than do EU beneficiaries.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-647 					        
    ACCNO:   A01024						        
  TITLE:     International Trade: Comparison of U.S. and European     
             Union Preference Programs                                        
     DATE:   06/08/2001 
  SUBJECT:   Developing countries				 
	     Foreign trade policies				 
	     International economic relations			 
	     International trade				 
	     Tariffs						 
	     European Union					 
	     Generalized System of Preferences			 
	     Program						 
								 

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GAO-01-647
     
Report to the Chairman, Subcommittee on Trade, Committee on Ways and Means,
House of Representatives

United States General Accounting Office

GAO

June 2001 INTERNATIONAL TRADE

Comparison of U. S. and European Union Preference Programs

GAO- 01- 647

Page i GAO- 01- 647 U. S. and European Union Preference Programs Letter 1

Appendix I Objectives, Scope, and Methodology 33

Appendix II U. S. and EU Nonreciprocal Trade Preference Programs 35

Appendix III Additional Information on Beneficiary Country Trade, 1999 37

Appendix IV Products Receiving the Greatest Tariff Preferences 53

Appendix V U. S. and EU Tariffs That Are Greater Than 20 Percent, for
Products Excluded From the Non- LDC GSP Programs 55

Appendix VI GAO Contacts and Staff Acknowledgments 57

Tables

Table 1: U. S. and EU Average Tariff Rates, by Preference Program 18 Figure
5: Share of U. S. and EU Imports From Beneficiaries, by

Sector, 1999 19 Table 2: Percentage of Products Excluded From U. S. and EU

Nonreciprocal Preference Programs 21 Figure 8: U. S. and EU Preferential
Rules of Origin Key Features and

Limitations 27 Table 3: U. S. Nonreciprocal Trade Preference Programs 35
Table 4: EU Nonreciprocal Trade Preference Programs 36 Table 5: U. S. GSP
Beneficiary Country Trade, 1999 (Sorted by

Actual U. S. Imports Receiving GSP Rates) 37 Contents

Page ii GAO- 01- 647 U. S. and European Union Preference Programs

Table 6: U. S. CBERA Beneficiary Country Trade, 1999 (Sorted by Actual U. S.
imports Receiving CBERA Rates) 42 Table 7: U. S. Andean Trade Preference Act
(ATPA) Beneficiary

Country Trade, 1999 (Sorted by Actual U. S. Imports Receiving ATPA Rates) 44
Table 8: EU GSP Beneficiary Country Trade, 1999 (Sorted by

Actual EU Imports Receiving GSP Rates) 45 Table 9: EU African Caribbean and
Pacific (ACP) Beneficiary

Country Trade, 1999 (Sorted by Actual EU Imports Receiving ACP Rates) 50
Table 10: U. S. Imports for Which the Difference Between the MFN

and GSP Tariff Is at Least 15 Percent, 2000 53 Table 11: EU Imports for
Which the Difference Between the MFN

and GSP Tariff Is at Least 15 percent, 2000 54 Table 12: U. S. Tariffs That
Are Greater Than 20 Percent for

Products Excluded From Non- LDC GSP Program, 2000 55 Table 13: EU Tariffs
That Are Greater Than 20 Percent for Products

Excluded From the Non- LDC GSP Program, 2000 56

Figures

Figure 1: Total U. S. and EU Imports by Type of Trade Partner, 1999 8 Figure
2: Imports Receiving Preferences, U. S. Programs and EU

GSP Program, 1992- 2000 9 Figure 3: The Tariff Schedule for Beneficiaries of
the U. S. GSP

Program, 2000 16 Figure 4: The Tariff Schedule for Beneficiaries of the EU
GSP

Program, 2000 17 Figure 6: Share of U. S. and EU Beneficiaries? Dutiable
Imports

Eligible for Tariff Preferences, 1999 24 Figure 7: Share of U. S. and EU
Beneficiaries? Eligible Imports

Actually Receiving Tariff Preferences, 1999 25

Page iii GAO- 01- 647 U. S. and European Union Preference Programs
Abbreviations

ACP African, Caribbean, and Pacific AGOA African Growth and Opportunity Act
ATPA Andean Trade Preference Act AVE ad valorem equivalent CBERA Caribbean
Basin Economic Recovery Act CBTPA Caribbean Basin Trade Partnership Act EC
European Community EU European Union FTAA Free Trade Area of the Americas
GATT General Agreement on Tariffs and Trade GSP Generalized System of
Preferences LDC least developed country MFN most favored nation OECD
Organization for Economic Cooperation and Development UNCTAD United Nations
Conference on Trade and Development USTR U. S. Trade Representative

Page 1 GAO- 01- 647 U. S. and European Union Preference Programs

June 8, 2001 The Honorable Phillip M. Crane Chairman, Subcommittee on Trade
Committee on Ways and Means House of Representatives

Dear Mr. Chairman: Both the United States and the European Union (EU) began
providing trade preferences to eligible developing countries in the early
1970s and have expanded these preference programs over time. The purpose of
these programs is to foster economic development through increased trade.
These trade preferences, which reduce tariffs, or duties, and quotas for
many products from eligible countries, are ?nonreciprocal.? Nonreciprocal
preferences are granted unilaterally- that is, beneficiaries are not
required to reciprocate with lower tariffs for donor country exports.
Alternatively, all countries participating in free trade agreements must
lower their trade barriers. An example of a nonreciprocal preference program
is the U. S. Generalized System of Preferences program, which provides duty-
free access to the U. S. market for eligible products of qualified
developing countries.

As you requested, we compared (1) the volume of U. S. and EU nonreciprocal
preferential trade, (2) the U. S. and EU approaches to nonreciprocal trade
preferences, (3) the tariff preferences offered by the U. S. and EU
nonreciprocal trade programs, and (4) the extent to which U. S. and EU
program beneficiaries take advantage of the tariff preferences offered under
the programs. We recently briefed your staff on the results of this
analysis.

To accomplish our work, we examined relevant documents and spoke with U. S.
and EU officials about the programs. We also spoke with experts at the
Organization for Economic Cooperation and Development, 1

1 The Organization for Economic Cooperation and Development is a group of 30
member countries that provides governments with a venue in which to discuss,
develop, and improve economic and social policy. Its members are the richer
countries in that they produce two- thirds of the world?s goods and
services.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 647 U. S. and European Union Preference Programs

the United Nations Conference on Trade and Development, 2 and the World
Trade Organization. 3 We also collected and analyzed original trade data
from U. S. and EU sources. A full description of our scope and methodology
can be found in appendix I.

The volume of imports receiving preferential tariff rates under U. S. and EU
nonreciprocal trade preference programs in 1999 represented a relatively
small share of total U. S. and EU imports, at 2 percent ($ 18 billion) and 6
percent ($ 45 billion), respectively. 4 The U. S. and EU Generalized System
of Preferences (GSP) programs accounted for the majority of the preference
trade, with the U. S. program offering duty- free entry and the EU program
providing duty- free entry or reduced tariffs. Although U. S. imports under
some programs have increased, the total dollar value of imports under all U.
S. nonreciprocal programs remained generally flat from 1993 through 2000.
The dollar value of EU imports under its GSP program declined overall from
1995 to 1999. 5 However, the dollar value of yearly imports under the EU GSP
program was more than double that of the value of imports under all U. S.
programs over the same period, partly because the EU program covers more
countries. For example, the EU GSP program gave preferences to certain
imports from Malaysia and China. Imports from these two countries comprised
about 30 percent of EU imports under the GSP program in 1999. Although a
small share of U. S. and EU trade, exports under preference programs
accounted for a large share of some beneficiary countries? total exports.
For example, exports under the programs for Kazakhstan, Mauritius, Senegal,
and St. Kitts and Nevis made up over three- fourths of their total exports
to either the United States or the European Union.

2 The United Nations Conference on Trade and Development is a permanent
organization under the General Assembly of the United Nations. Its mandate
is to promote international trade, particularly that of developing
countries, with a view toward accelerating countries? economic development.

3 The World Trade Organization provides the institutional framework for the
multilateral trading system. It administers rules for international trade
and provides a forum for conducting trade negotiations.

4 These figures do not include recently enacted U. S. programs covering the
sub- Saharan African countries and the Caribbean Basin, and a new amendment
to the EU GSP program expanding benefits for the poorest countries.

5 Multiple- year data were only available for the EU GSP program. Results in
Brief

Page 3 GAO- 01- 647 U. S. and European Union Preference Programs

The U. S. and EU approaches to nonreciprocal preferential trade have evolved
in similar ways since their inception in the early 1970s. U. S. and EU
programs have included increasingly more products, particularly to the
poorest countries, and have over time relaxed customs requirements, known as
rules of origin, that specify where and how products can be made. For
example, the United States added more than 1, 700 new products to its GSP
program in 1997 for the least developed countries, 6 and expanded
preferences for sub- Saharan African and Caribbean Basin countries in 2000.
The European Union recently implemented a farreaching program offering these
same countries duty- free and quota- free treatment for all products, except
arms, by 2009. 7 In addition, U. S. and EU programs have given beneficiary
countries increasingly more leeway to use inputs from multiple countries to
produce their products. At the same time, the United States and the European
Union may both be moving away from purely nonreciprocal arrangements, though
in different ways. The European Union is explicitly phasing out one- way
preferences in favor of free trade arrangements in its ?Cotonou Agreement,?
8 while the United States is involved in negotiations to establish a Western
Hemisphere free trade area with several countries that currently are U. S.
program beneficiaries.

Despite some program differences, we found that U. S. and EU nonreciprocal
preference arrangements offer relatively similar tariff preferences on
average. For example, the U. S GSP program offers dutyfree access on all
eligible products, while the EU GSP program offers dutyfree access on some
products and reduced tariffs on other, more sensitive imports. Despite the
different approaches, in 2000, U. S. and EU GSP program beneficiaries faced
the same simple average tariff rate 9 of 3 percent. The other U. S. and EU
nonreciprocal preference programs we

6 The United Nations currently categorizes 49 countries as ?least developed
countries,? calling them ?particularly ill- equipped to develop their
domestic economies and to ensure an adequate standard of living for their
populations.? Presently, 42 of the 49 countries are eligible for the
expanded benefits under the U. S. GSP program.

7 The ?Everything But Arms? amendment to the EU GSP, effective March 5,
2001, provides duty- free and quota- free access to the EU market for all
but arms and ammunition. Full coverage of bananas will be phased in by 2006,
and for rice and sugar, by 2009.

8 The African, Caribbean, and Pacific- European Union Partnership Agreement
signed in Cotonou, Benin, on June 23, 2000, referred to as the ?Cotonou
Agreement,? is an agreement between 77 African, Caribbean, and Pacific (ACP)
states and the European Union. The Cotonou Agreement provides trade
preferences to the ACP countries.

9 Simple average tariff rates are the average of all tariff lines in the
tariff schedule.

Page 4 GAO- 01- 647 U. S. and European Union Preference Programs

examined all offered simple average tariff rates below 3 percent, with U. S.
programs close to 2 percent, and EU programs nearly at zero. Both the United
States and the European Union exclude some sensitive products from their
programs, including textiles and apparel for the United States and
agriculture products for the European Union.

On the whole, we found that EU programs cover more products than do U. S.
programs, but U. S. beneficiary countries use more of their available tariff
preferences than do EU beneficiaries. For example, in 1999, the European
Union?s African, Caribbean, and Pacific program offered reduced tariff rates
on more than 95 percent of the dutiable imports from beneficiary countries.
10 However, only about 68 percent of these imports actually received the
program?s lower tariff rates. In the same year, U. S. programs for Caribbean
and Andean countries offered reduced rates on less than 35 percent of
beneficiary imports facing duties. However, 72 percent and 92 percent of
those Caribbean and Andean imports, respectively, received the programs?
lower tariff rates. Ultimately, neither U. S. nor EU program beneficiaries
took full advantage of the lower tariff rates offered under the preference
programs. Experts have cited factors such as complex rules of origin as
reasons for the lack of use. In addition, poorer beneficiary countries may
lack the capacity in terms of economic development and expertise to comply
with program requirements.

Nonreciprocal preferential trade arrangements originated with the concept of
special and differential treatment for developing countries. This treatment
was meant to compensate for developing countries? unequal economic status
compared with the developed world. In the late 1960s, the United Nations
Conference on Trade and Development (UNCTAD) concluded that trade on a most-
favored- nation (MFN) 11 basis did not take into account developing
countries? inability to compete on an equal basis

10 Dutiable imports are products that, outside a preference program, would
normally face a tariff rate greater than zero. 11 Most- favored- nation
trade is a concept promulgated in Article I of the General Agreement on
Tariffs and Trade (GATT). The article provides that contracting parties to
GATT must grant each other treatment as favorable as they give to any
country in the application and administration of import duties. Background

Nature of Nonreciprocal Programs

Page 5 GAO- 01- 647 U. S. and European Union Preference Programs

with richer nations. UNCTAD also concluded that the objectives of
nonreciprocal preference programs should be to increase export earnings,
promote industrialization, and raise the economic growth rates of developing
countries. These objectives laid the foundation for the creation of the U.
S. and EU GSP programs.

Both the United States and the European Union established GSP programs in
the early 1970s, each offering trade preferences to more than 100 developing
countries around the world. The United States later established other
nonreciprocal trade preference programs through the Caribbean Basin Economic
Recovery Act (CBERA) in 1983; the Andean Trade Preference Act (ATPA) in
1991; and, most recently, through the Trade and Development Act of 2000,
which extended nonreciprocal preferences with the majority of the sub-
Saharan African countries as well as the Caribbean Basin region.
Specifically, Title I of the act is cited as the African Growth and
Opportunity Act (AGOA), while Title II is cited as the Caribbean Basin Trade
Partnership Act (CBTPA). Presently, the United States offers nonreciprocal
trade preferences to 151 countries and territories. 12 (See app. II for more
details on the U. S. programs.)

Similarly, the European Union has extended nonreciprocal trade preferences
to many countries in the African, Caribbean, and Pacific (ACP) regions since
1975 through its ACP- EC 13 Convention of Lomï¿½. The European Union will
continue to offer nonreciprocal preferences until 2008 through the Lomï¿½
Convention?s replacement agreement, known as the Contonou Agreement of 2000.
Like the United States, the European Union also expanded the number of
products receiving tariff preferences under its GSP program for the 49
nations designated by the United Nations as ?least developed countries?
(LDC). Recently, the European Union further expanded these GSP preferences
by adopting the ?Everything But Arms? amendments, which offer duty- free
access for all LDC products except arms by 2009. Presently, the European
Union offers nonreciprocal trade preferences to 171 countries and
territories under its GSP program

12 For details on the U. S. programs, see The Year in Trade: Operation of
the Trade Agreements Program During 1999, 51st Report, Investigation No.
332- 412, (United States International Trade Commission, Publication 3336,
Aug. 2000), pp. 92- 102. 13 EC refers to the European Community, which was
the predecessor to the European Union. U. S. and EU Nonreciprocal

Preference Programs

Page 6 GAO- 01- 647 U. S. and European Union Preference Programs

and its Cotonou Agreement. 14 (See app. II for more details on the EU
programs.)

EU and U. S. nonreciprocal trade preference programs share certain common
features and requirements. They offer reduced or duty- free access to
eligible products from beneficiary countries, with lesser preferences for
products deemed more sensitive or competitive with U. S. or EU domestic
producers. Sensitive products are either excluded completely from coverage
or provided access at a higher preferential duty than other covered
products. For example, while the U. S. GSP offers dutyfree treatment for all
eligible products, it excludes completely from coverage sensitive products
like textiles and apparel. 15 The EU GSP scheme, on the other hand, offers
incremental tariff reductions on the basis of a product?s sensitivity.

EU and U. S. programs also contain requirements regarding product origin,
which all beneficiary countries must meet to receive preferential tariff
rates on their products. ?Rules of origin? ensure that tariff advantages
apply only to products actually produced in beneficiary countries. Producers
in beneficiary countries may use imported materials to produce goods for
export, provided the inputs comply with specific criteria outlined in the
rules of origin for the preference program. For example, rules of origin may
specify a maximum percentage of imported materials that can be included in a
product or may require that specific amounts and types of processing be
carried out on imported inputs in order for the final product to qualify for
preferential treatment. Both the United States and the European Union allow,
to a varying extent, countries to comply with rules of origin by cumulating
inputs or sharing production processes with designated beneficiary countries
or groups of countries. For example, under the U. S. GSP program, Botswana
could use imported inputs from Tanzania in the production of a good for
export to the United States because both beneficiaries are eligible for
cumulation benefits as members of the Southern African Development
Community. In general, allowing broader cumulation provides producers in
beneficiary countries with greater flexibility in complying with rules of
origin requirements.

14 Additionally, the European Union has offered nonreciprocal trade
preferences to certain Mediterranean, central and eastern European, and
southeastern European countries. 15 The U. S. AGOA and CBTPA do cover some
textile and apparel products. Key U. S. and EU Program

Features

Page 7 GAO- 01- 647 U. S. and European Union Preference Programs

Finally, U. S. and EU trade preference programs contain eligibility
requirements in the form of certain country practices. For example,
receiving program tariff preferences may be dependent upon countries? having
policies in place to ensure worker rights, protect intellectual property, 16
or adequately control illegal drugs.

Thirteen percent ($ 133 billion) of total 1999 imports into the United
States came from beneficiaries of U. S. nonreciprocal programs, while 34
percent ($ 248 billion) of total 1999 imports into the European Union came
from beneficiaries of the EU GSP and ACP programs. However, a smaller
percentage of imports from these beneficiary countries actually received
preferential treatment- 2 percent ($ 18 billion) of total U. S. imports and
6 percent ($ 45 billion) of total EU imports in 1999. (See fig. 1.) The U.
S. and EU Generalized System of Preferences (GSP) programs accounted for the
majority of the preference trade, with the U. S. program offering duty- free
entry and the EU program providing duty- free entry or reduced tariffs.

Although imports from beneficiary countries comprised small portions of
total U. S. and EU imports in 1999, the United States and the European Union
are the primary export markets for many beneficiaries. For example, in 1999,
52 percent of Costa Rica?s total exports were destined for the United
States, and 58 percent of Ghana?s total exports went to the European Union
in the same year. (See app. III for the percentages of exports destined for
the U. S. and EU markets for each beneficiary country by program). In
addition, a large share of some countries? total exports to the United
States and the European Union enter at reduced tariff rates under one of the
U. S. or EU trade preference programs. For example, over 90 percent of St.
Lucia, St. Vincent and the Grenadines, Namibia, and Senegal?s dutiable
exports to the European Union received reduced tariff rate preferences in
1999. The same was true for the dutiable exports of Benin and Zaire.

Figure 1 also illustrates that, compared with the United States, imports
from beneficiaries of EU nonreciprocal programs comprised a larger portion
of total EU imports in 1999. One reason for this difference is that the
European Union extended preferences to 20 countries that were not covered by
the U. S. programs. For example, the EU GSP program gave preferences to
certain imports from Malaysia and China. Imports from

16 The protection of intellectual property refers to legal rights, and
enforcement of such rights, associated with patents, copyrights, and
trademarks. Share of U. S. and EU

Imports Receiving Preferential Tariff Rates Is Relatively Small

Page 8 GAO- 01- 647 U. S. and European Union Preference Programs

these two countries comprised about 30 percent of EU imports under the GSP
program in 1999. Appendix III also provides additional data on the share of
imports from beneficiaries of U. S. and EU nonreciprocal programs.

Figure 1: Total U. S. and EU Imports by Type of Trade Partner, 1999

Legend FTA = free trade agreement MFN = most favored nation

Note 1: U. S. trade data are imports for consumption at customs value. EU
trade data are normal imports. See appendix I for more information on the
data sources and methodology.

Note 2: U. S. preference program data include GSP, ATPA, and CBERA. EU
preference program data include GSP and ACP- EC Convention of Lomï¿½.

Note 3: Data do not include trade under the recently enacted U. S. AGOA and
CBTPA or the EU ?Everything But Arms? amendment.

Note 4: The term ?preference imports from beneficiaries? refers to the share
of imports from beneficiary countries that actually received tariff
preferences. The term ?nonpreference imports from beneficiaries? refers to
the share of imports from beneficiary countries that entered the United
States or the European Union but did not receive preferential tariff
treatment.

Sources: U. S. Department of Commerce official trade statistics, EU Eurostat
official trade statistics and preference imports, and GAO calculations.

Overall, the total value of imports under U. S. nonreciprocal programs and
the EU GSP program has remained generally flat or declined over time. (See
fig. 2.) Imports under the U. S. GSP, its largest program, peaked in 1993
and have generally declined since then. This is partly because some
significant countries, including Mexico and Malaysia, were removed from the
program in 1994 and 1998, respectively. Although the total value of imports
into the United States under all U. S. preference programs

Page 9 GAO- 01- 647 U. S. and European Union Preference Programs

remained generally flat since 1993, imports under the smaller U. S.
preference programs, including CBERA and ATPA, increased between 1992 and
2000. As for the EU GSP program, the value of imports declined overall
between 1995 and 1999. The European Union removed from GSP coverage a
significant share of products from large beneficiary countries such as
Malaysia and China, which contributed to this decline. However, the yearly
imports under the EU GSP were more than double that of imports under all U.
S. programs during the same period. 17 In addition, the value of imports
receiving preferences under U. S. and EU GSP programs may have been flat or
declining over time due to the elimination of tariffs on many products
through multilateral trade negotiations.

Figure 2: Imports Receiving Preferences, U. S. Programs and EU GSP Program,
1992- 2000

17 Data on the EU GSP program were available only for 1995- 99, and no data
were available for the ACP- EC Convention of Lomï¿½ program prior to 1999.

Page 10 GAO- 01- 647 U. S. and European Union Preference Programs

Note 1: U. S. trade data are imports for consumption at customs value. EU
trade data are normal imports.

Note 2: Data on the EU GSP program were available only for 1995- 99, and no
data were available for the ACP- EC Convention of Lomï¿½ prior to 1999.
Imports under the ACP- EC Convention of Lomï¿½ were $7,521 million in 1999.

Note 3: Trade data for the U. S. AGOA and CBTPA and the EU ?Everything But
Arms? amendment were not yet available.

Sources: U. S. Department of Commerce official trade statistics, EU Eurostat
preference imports, and GAO calculations.

The United States and the European Union have offered greater tariff
preferences over time, both in terms of product coverage and reduced
restrictions. At the same time, they have increased and refined country
eligibility requirements. In the future, the United States and the European
Union may be moving away from purely nonreciprocal arrangements, though in
different ways. (See app. II for further details on the U. S. and EU
programs.)

Since 1976, the U. S. GSP has offered duty- free treatment for eligible
products and completely excluded some sensitive products from coverage.
However, in 1983 and 1991, respectively, the CBERA and the ATPA extended
tariff rates below MFN treatment for several items completely excluded from
coverage under its GSP program, including luggage, handbags, and leather
apparel. In addition, neither CBERA nor ATPA is subject to GSP?s competitive
need and country income restrictions. 18 In 1997, the United States added
more than 1,700 new products to its dutyfree treatment under GSP for
eligible LDCs. Between 1996 and 1997, the value of nonpetroleum exports from
LDCs to the United States increased by 71 percent. Further, in 2000, the
United States, for the first time, offered duty- free and quota- free
treatment for certain qualified textile and apparel products that meet rule
of origin requirements, through (1) AGOA for certain sub- Saharan African
countries and (2) CBTPA for CBERA beneficiaries. AGOA also extended GSP-
type preferences to several new products. Finally, AGOA?s preferences are
more long term, compared with GSP. AGOA is effective through September 30,
2008, while GSP is effective through September 30, 2001.

18 Under the U. S. GSP program, products may be dropped from coverage if
they reach the

?competitive need limit?- a specified level of imports to the United States.
Countries may lose all of their GSP benefits if their national income is
higher than a specified threshold. U. S. and EU

Approaches to Nonreciprocal Trade Have Evolved in Similar Ways

The United States and the European Union Have Expanded Product Coverage

Page 11 GAO- 01- 647 U. S. and European Union Preference Programs

The EU?s series of ACP- EC Lomï¿½ Convention agreements offer expanded product
coverage compared with its GSP program. For example, in 2000, 89 percent of
the products from ACP countries faced zero duties versus only 48 percent
under the EU GSP. Like the United States, the European Union increased its
GSP product coverage and further reduced tariff rates for the poorest
countries in 1998, by offering those countries preferences equivalent to its
ACP- EC Lomï¿½ Convention. Also in 1995, the European Union eliminated all
quotas under its GSP program and implemented a graduated tariff reduction
system based upon the market sensitivity products. Finally, as of March
2001, the European Union adopted the

?Everything But Arms? amendment to its GSP program, which offers dutyfree
and quota- free treatment for all products from the poorest countries,
except armaments, by 2009.

Both U. S. and EU programs have liberalized their rules of origin
requirements in successive programs. For example, the CBERA qualifying rules
for individual products are more liberal than those of the U. S. GSP
program. GSP requires that at least 35 percent of the value of the product
be added in a single beneficiary country or in a specified group of eligible
GSP countries. CBERA allows beneficiaries to use inputs from all other CBERA
beneficiaries, and it also allows the use of U. S. inputs in meeting the 35
percent value- added threshold. AGOA, for the first time, allows the poorest
countries among its beneficiaries to use both non- U. S. and nonsub- Saharan
African fabric, up to a specified amount.

For the European Union, the ACP- EC Convention of Lomï¿½ rules of origin
allows wider cumulation among beneficiary countries than those of its GSP
program. For example, the Lomï¿½ Convention allows cumulation among all ACP
beneficiary countries, whereas GSP only allows cumulation within designated
groups of countries. The Lomï¿½ Convention has also liberalized its rules of
origin over time. The 1995 Revised ACP- EC Convention of Lomï¿½ expanded
allowable cumulation to include certain non- ACP developing countries, with
exceptions for certain products. It also made 15 percent the permissible
amount, by value, of materials from third countries that can be used in ACP-
manufactured products.

U. S. country eligibility requirements have evolved from requiring
beneficiary countries to institute basic worker rights to targeting
regionspecific issues and broader development themes. For example, to be
designated a GSP beneficiary, a country must be taking steps to provide
internationally recognized workers? rights, and the President must take The
United States and the

European Union Have Relaxed Rules of Origin Requirements

The United States and the European Union Have Expanded Country Practice
Requirements

Page 12 GAO- 01- 647 U. S. and European Union Preference Programs

into account the extent to which a country provides adequate and effective
intellectual property rights. Several countries have had their U. S. GSP
preferences suspended, including Liberia, Nicaragua, Sudan, and Syria, for
providing inadequate worker rights.

While retaining basic requirements such as core worker rights, trade
preference programs enacted since the GSP program have focused their country
eligibility criteria on new areas. Under ATPA, the President must also take
into account whether the country has met certain U. S. narcotics cooperation
criteria. Under CBTPA, the President must take into account, among other
eligibility criteria, whether the country has demonstrated a commitment to
participate in negotiations toward completing free trade agreements such as
the Free Trade Area of the Americas. AGOA further expanded country
eligibility criteria by requiring that the President, among other things,
determine whether the country is making continual progress toward
establishing a market- based economy that protects private property rights,
the rule of law, and economic policies to reduce poverty.

The European Union bases countries? eligibility for preferences under its
GSP program on criteria similar to those of the U. S. GSP program. Under the
EU program, preferences may be withdrawn on the basis of the countries?
practices, such as the use of forced labor or the shortcomings in Customs
controls on the export or transit of drugs. However, in its 1995 revision of
its GSP program, the European Union increased the emphasis on promoting
social and environmental policies in the beneficiary countries. In 1998, it
instituted special incentive arrangements that further reduced tariffs for
GSP beneficiaries that demonstrate compliance with certain requirements
related to labor and the environment. Thus far, the European Union has
granted one country, Moldova, additional preferences under this system.

In its 2000 Cotonou Agreement, which replaced the ACP- EC Convention of
Lomï¿½, the European Union indicated that it is moving away from providing
nonreciprocal preferential tariffs for all ACP countries to establishing new
reciprocal trade arrangements. During a preparatory period (2000- 08), the
Cotonou Agreement will maintain Lomï¿½ IV Convention nonreciprocal trade
preferences. It will also provide financial aid to improve ACP countries?
competitiveness, support their fiscal reform, upgrade their infrastructures,
and promote investment. By 2002, the EU and ACP countries have agreed to
negotiate ?economic partnership agreements? that establish timelines for
progressively removing their trade barriers. The new trading arrangements
will then enter into force by January 1, The United States and the

European Union Are Moving Toward Reciprocal Arrangements

Page 13 GAO- 01- 647 U. S. and European Union Preference Programs

2008, after which trade liberalization will be phased in during a period of
at least 12 years. Negotiations will take into account the level of economic
development and socioeconomic impact of the trade measures on the ACP
countries.

The European Union has identified several factors that motivated its
decision to change its approach. An EU Commission analysis states that the
results of 25 years of benefits under the ACP- EC Convention of Lomï¿½ have
been mixed and that the impact of nonreciprocal trade preferences has been
?disappointing.? The analysis cites the fact that the ACP countries? share
of the EU market declined from 6.7 percent in 1976 to 3 percent in 1998. The
rationale behind the EU?s new approach is that open trade combined with
social development policies will help the ACP economies grow and reduce
their poverty. The European Union also intends that the economic partnership
agreements will comply with World Trade Organization 19 rules, thereby
encouraging domestic and foreign investment in ACP countries and boosting
their competitiveness in the world economy. An EU official told us that the
ACP countries? ability to export must be strengthened through export-
oriented assistance and by increasing trade among the beneficiary countries.
As the ACP countries build their capacity to export and become more
competitive with each other, it is expected that they will be better
prepared to compete with other trading partners, according to the EU
official.

Not all ACP countries may be party to the economic partnership agreements.
The 39 of the 77 ACP countries that are designated as LDCs will remain under
the EU?s new, Everything But Arms amendment to GSP. An EU official told us
that he hoped that LDCs would choose to negotiate economic partnership
agreements under the Cotonou Agreement in addition to receiving benefits
under in the Everything But Arms amendment. He believed that the economic
partnership agreements held several advantages. While Everything But Arms
offered greater access to the EU market, the economic partnership agreements
encouraged ACP countries to open their own markets and attract long- term
foreign investment. He believed that, rather than relying on trade
preferences alone, the Cotonou Agreement used all means to increase trade,
including the previously described trade- related financial assistance. The
remaining

19 The World Trade Organization provides the institutional framework for the
multilateral trading system. It administers rules for international trade
and provides a forum for conducting trade negotiations.

Page 14 GAO- 01- 647 U. S. and European Union Preference Programs

38 non- LDC ACP countries will be free to decide whether they are ready to
negotiate these arrangements. In 2004, the European Union will evaluate the
non- LDCs that are not in a position to join an economic partnership
agreement and determine how to provide them with benefits tailored to their
existing situations.

While the United States is not phasing out its one- way preferences under
its trade preference programs, it is moving toward reciprocity with many
developing countries in its own hemisphere. Specifically, the United States
is involved in negotiations to establish a Western Hemisphere free trade
area known as the Free Trade Area of the Americas (FTAA). 20 The FTAA would
eliminate tariffs and create common trade and investment rules among the 34
democratic nations of the Western Hemisphere. Many of the 34 FTAA countries
are beneficiaries of U. S. trade preference programs, including Brazil under
GSP; Bolivia and Colombia under GSP and ATPA; and Costa Rica and El Salvador
under GSP, CBERA, and CBTPA. However, one U. S. official commented that the
extensive tariff preferences countries enjoy under nonreciprocal trade
preference programs could diminish their incentive to negotiate free trade
agreements. In fact, the CBTPA specifically states that it is the policy of
the United States to offer benefits under the act to Caribbean Basin
beneficiary countries willing to prepare for the FTAA or another free trade
agreement. Furthermore, CBTPA benefits are scheduled to end on the earlier
of September 30, 2008, or the date on which the FTAA, or any similar free
trade agreement between the United States and CBERA beneficiary countries,
enters into force. 21

20 For details on the Free Trade Area of the Americas, see Free Trade Area
of the Americas: Negotiations at Key Juncture on Eve of April Meetings (GAO-
01- 552, Mar. 30, 2001). 21 CBERA and CBTPA member countries are identical.
However, in practice, only 11 members of the 24 CBTPA countries have been
designated as eligible for CBTPA preferences.

Page 15 GAO- 01- 647 U. S. and European Union Preference Programs

Despite some differences in how they structure their tariff preferences, U.
S. and EU nonreciprocal trade preference programs offer beneficiary
countries similar overall simple average tariff reductions. 22 Normal
imports entering either the U. S. or the EU market faced an overall simple
average tariff of about 5 percent in 2000. 23 An examination of the largest
of the U. S. and EU preference programs- the GSP- shows that the simple
average tariff rates offered by the European Union and the United States are
both about 3 percent. Other preference programs, including the U. S. AGOA,
ATPA, CBERA, and the EU?s ACP program and Everything But Arms amendment,
reduce the average tariff further- to between 1 and 2 percent for U. S.
programs and nearly zero for EU programs.

Figures 3 and 4 provide a visual representation of the simple average tariff
rates faced by U. S. and EU GSP program beneficiaries, 2000. The shaded
areas in the two figures, moving left to right, group the products on the
schedule and their average tariff rates into three general categories:
products for which the MFN rate is already zero, products covered by GSP,
and products excluded from GSP coverage where the MFN rate is greater than
zero.

For the United States, 31 percent of the products on the U. S. tariff
schedule already have duty- free access to the U. S. market on an MFN basis,
as indicated by the lefthand segment of figure 3. The U. S. GSP program
provides duty- free access to an additional 35 percent of products on the
schedule. Therefore, about 66 percent of the products on the tariff schedule
have duty- free access if imported from a GSP beneficiary country. The
remaining 35 percent of the products are not covered by the GSP program and
face some duties.

22 The tariff schedules of the United States and the European Union list the
tariff rates applicable for imported products. The U. S. schedule includes
about 10,200 products, and the EU schedule includes about 13, 600 products.

23 This calculation does not include products that face ?specific? rates of
duty, which are specific fees per unit of a product (such as $5 per bushel).
Since these rates are not in ad valorem terms (percentages), they cannot be
averaged unless first converted into percentage terms for each product. U.
S. and EU Programs

Offer Relatively Similar Tariff Rates on Average and Exclude Some Sensitive
Products

U. S. and EU Programs Offer Similar Tariff Rate Reductions, on Average

Page 16 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 3: The Tariff Schedule for Beneficiaries of the U. S. GSP Program,
2000

Note 1: Averages do not include products that face ?specific? rates of duty.
See footnote 23. Note 2: Percentages do not add to 100 due to rounding.
Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

As for the EU GSP program, figure 4 shows that the EU provides duty- free
access on an MFN basis to 17 percent of the products on its schedule, a
smaller share compared with the United States. However, the EU GSP program
covers a larger share, 71 percent, of the remaining products, so that
approximately 88 percent of the products on the EU tariff schedule are
offered either MFN duty- free access or special rates under GSP. Finally,
figure 4 shows that 12 percent of the products on the EU tariff schedule are
completely excluded from GSP coverage, versus 35 percent for the United
States. However, although the European Union excludes fewer products from
its GSP program than does the United States from its GSP program, unlike the
United States, the EU GSP program does not provide duty- free access to all
products but rather provides a partial tariff reduction on more sensitive
products.

Page 17 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 4: The Tariff Schedule for Beneficiaries of the EU GSP Program, 2000

Note: Averages do not include products that face ?specific? rates of duty.
See footnote 23. Sources: UNCTAD Trade Analysis and Information System CD-
ROM and GAO calculations.

A close examination of these categories reveals that the United States and
the European Union structure their GSP programs differently. While the U. S.
and EU GSP programs structure their tariff preferences differently, their
overall average tariff rates fall from 5 percent on normal MFN imports to
about 3 percent for GSP beneficiaries. (See app. IV for U. S. and EU
products receiving the largest tariff reductions under GSP.) Average tariff
rates are further reduced for other U. S. and EU nonreciprocal programs.
Table 1 shows that other U. S. programs reduce this average to between 1 and
2 percent. The EU goes further by bringing the average down to nearly zero.
Although tariffs of 2 percent or below are generally considered to be very
low, these overall average rates can include some high tariff rates on
individual products, particularly on sensitive goods. 24

24 Regarding figure 4, an EU official noted that the EU found a slightly
different proportion of products on the EU tariff schedule were offered MFN
zero rates and GSP rates (23 percent versus our 17 percent, and 67 percent
rather than 71 percent, respectively). There are several reasons why these
values may vary, but we chose to report the UNCTAD values, the same source
used for the U. S. tariff schedule analysis.

Page 18 GAO- 01- 647 U. S. and European Union Preference Programs

Table 1: U. S. and EU Average Tariff Rates, by Preference Program Program

Average tariff on all products United States

GSP 3.0% GSP (LDC) a 2.0 AGOA 1.8 ATPA 1.8 CBERA 1.7

European Union

GSP 3.1% GSP (LDC) a 0.1 ACP- EC Convention 0. 1 Everything But Arms
Negligible

Note: Averages do not include products that face ?specific? rates of duty.
See footnote 18. a Both the United States and the European Union provide
tariff preferences on additional products for the least developed countries
under their GSP programs. Sources: UNCTAD Trade Analysis and Information
System CD- ROM and GAO calculations.

Both the United States and the European Union exclude some sensitive
products from coverage in their programs because of their potential negative
effect on a competing domestic industry. Many of these products are in areas
in which experts stress developing countries are particularly competitive,
such as agriculture and textiles and apparel, and could benefit from reduced
rates. 25 Figure 5 shows the share of U. S. and EU imports from
beneficiaries accounted for by agricultural products and textile, apparel,
leather, and footwear products. Combined, these products account for
approximately one- third of imports from beneficiaries of both the U. S. and
EU trade preference programs. Table 2 shows the percentage of tariff lines
excluded across all programs in the agriculture and textile and apparel
sectors (app. III compares the overall coverage of the various programs on
basis of the value of trade).

25 In addition to higher tariffs, imports of agricultural and textiles and
apparel products also may face quotas and other import restrictions.
However, we did not examine the prevalence or impact of these other measures
on developing countries? exports. U. S. and EU Programs

Exclude Products That Are Important to Developing Countries

Page 19 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 5: Share of U. S. and EU Imports From Beneficiaries, by Sector, 1999

Note: U. S. trade data are imports for consumption at customs value. EU
trade data are normal imports.

Sources: U. S. Department of Commerce official trade statistics, EU Eurostat
official trade statistics, and GAO calculations.

Overall, the European Union excludes fewer sensitive products from its
programs than does the United States. Table 2 shows that most EU exclusions
are in the agricultural sector. About half of agricultural products are
excluded from coverage under the EU GSP program, including sensitive
products such as rice, bananas, and sugar. Although the ACP- EC and GSP
programs reduce the number of exclusions, the new Everything But Arms
amendment to the GSP program, for the LDCs, is significant because it will
provide complete coverage by 2009 for all LDC products (except arms and
ammunitions). 26

Under U. S. trade preference programs, most textile and apparel products
have traditionally been excluded from coverage, as well as certain
agricultural products such as certain fruits and vegetables. For example,
about 90 percent of textile, apparel, leather, and footwear products are
excluded from the GSP program. More textile and apparel products were

26 Products from the LDCs also will need to meet rules of origin and other
requirements and will be subject to ?safeguard? provisions (which allow a
country to restrict imports if they increase significantly and may have a
negative impact on a domestic industry). Therefore, all imports from LDCs
may not be able to fully use the tariff benefits offered.

Page 20 GAO- 01- 647 U. S. and European Union Preference Programs

included in the CBERA and ATPA programs and in the GSP program for the LDCs,
but many of the most commercially important products of these countries were
still excluded. The United States did provide some CBERA beneficiary
countries with virtually unlimited access for certain apparel products that
met requirements on the use of U. S. textile inputs. This access was further
expanded under the new CBTPA program, which also included greater access for
footwear and other previous excluded products. Additionally, similar access
was provided under AGOA for eligible sub- Saharan African countries. CBTPA
also provides access for footwear, which was previously excluded from the
other U. S. programs. Program exclusions also exist in the agriculture
sector, with about 62 percent of products excluded under the GSP program and
between 15 and 20 percent of products excluded under other U. S. preference
programs. Some agricultural products are subject to tariff- rate quotas,
which offer reduced rates up to a certain quantity of imports of the product
and higher rates of duty on imports above that threshold. 27

27 Products subject to tariff- rate quotas are covered under preference
programs when the tariff rate on either the ?in- quota? portion (the initial
imports) or the ?out- of- quota? portion of imports is reduced or
eliminated. Since the U. S. tariff schedule lists in- quota and out- ofquota
imports as separate tariff lines, one or both tariff lines can be excluded
from preference benefits.

Page 21 GAO- 01- 647 U. S. and European Union Preference Programs

Table 2: Percentage of Products Excluded From U. S. and EU Nonreciprocal
Preference Programs

Industry Program Agriculture

Textile, apparel, etc. Other

Total percentage United States

GSP 62% 90% 29% 50% GSP (LDC) 18 89 3 26 CBERA 16 65 1 19 ATPA 17 75 1 22
AGOA 16 82 2 24

European Union

GSP 50% 1% 2% 15% GSP (LDC) 22 0 0 6 ACP 14 0 0 4 Everything But Arms 0 0 0
0

Note 1: As of March 2001, Everything But Arms replaces the preferences
offered to LDCs under the EU GSP program.

Note 2: The CBTPA program, not shown, further reduces the number of
exclusions faced by recipients of the CBERA program, particularly in the
areas of apparel and footwear.

Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

For both of the U. S. and EU programs, products that are excluded tend to
have high MFN tariffs. For example, the average tariff rate on products
excluded from the U. S. GSP program is about 10 percent; however, rates are
as high as 350 percent on certain tobacco products 28 and between 37 and 48
percent on certain footwear. For the EU GSP program, the average tariff of
excluded products is 12 percent, with rates as high as 32 percent (grape
must) and several rates are above 20 percent, such as apricots, jams,
sardines, and tunas. (See app. V for a list of products that face duties
greater than 20 percent and that are not covered by the U. S. and EU GSP
programs.)

28 This is the ?out- of- quota? duty on certain tobacco products that are
subject to tariff- rate quotas.

Page 22 GAO- 01- 647 U. S. and European Union Preference Programs

Although EU programs provide greater coverage compared with U. S. programs-
that is, a greater share of EU beneficiary imports is eligible for tariff
preferences, U. S. beneficiaries use more of their available preferences
than do EU beneficiaries. The effectiveness of nonreciprocal trade
preference programs is dependent upon a combination of the extent of product
coverage and beneficiaries? actual use of the preferences offered. Neither
U. S. nor EU beneficiaries were able to fully use the preferences offered in
1999. Experts have noted that program- related factors, such as rules of
origin, as well as other external factors have limited beneficiaries?
ability to use preferences.

Figure 6 shows the share of dutiable imports 29 from beneficiary countries
that were eligible for tariff reductions or elimination under each of the
programs in 1999. For example, the first bar on the left shows that 25
percent of the imports (in terms of value) that would normally face duties
were eligible to receive duty- free access under the U. S. GSP program. This
does not mean that the imports actually received duty- free access but
rather that they were eligible to receive such access, if requested, and the
products met the requirements of the programs (discussed below). Figure 6
also shows that U. S. programs covered a smaller share of beneficiaries?
trade than did EU programs in 1999. For example, in 1999, more than 90
percent of the value of dutiable imports from ACP and GSP LDC countries were
eligible for tariff reductions under EU programs. For U. S. beneficiaries of
the Caribbean, Andean, and GSP LDC programs, less than 50 percent of imports
was eligible for tariff preferences in 1999. 30

29 Dutiable imports are those imports that face normal tariff rates greater
than zero. Some imports enter both the U. S. and EU markets duty free,
meaning the tariff rate is zero. We focus on those products that face duties
because there is a potential to provide a preferential rate. If the tariff
is already zero, then no preference can be provided. However, the share of
duty- free imports is an indicator of how open the economy is to imports.

30 We did not analyze U. S. AGOA and CBTPA, or the EU Everything But Arms
amendment, because they were enacted after 1999. EU Programs Cover

More Products Than U. S. Programs, While U. S. Beneficiaries Use a Greater
Share of Available Tariff Preferences

Amount of U. S. and EU Trade Eligible for Preferences Versus Actual Use of
Preferences

Page 23 GAO- 01- 647 U. S. and European Union Preference Programs

However, it is important to note that the United States provides a larger
number of products with MFN duty- free access compared with the European
Union. About 65 percent of the U. S. tariff schedule for a GSP beneficiary
is duty free (either through MFN or GSP), while about 48 percent of the EU
tariff schedule for a GSP beneficiary is duty free (not all EU GSP tariffs
are zero). This report focuses on preferential access and therefore examines
the share of dutiable imports that benefit from reduced rates, rather than
rates already duty free, because a preference can actually be provided. We
did not analyze U. S. AGOA and CBTPA, or the EU Everything But Arms
amendment because they were enacted after 1999.

Page 24 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 6: Share of U. S. and EU Beneficiaries? Dutiable Imports Eligible for
Tariff Preferences, 1999

Note 1: U. S. trade data are imports for consumption at customs value. EU
trade data are normal imports.

Note 2: Figure does not include data for the U. S. AGOA and CBTPA programs,
nor for the EU?s Everything But Arms initiative, because the programs were
implemented after 1999.

Note 3: Some U. S. and EU beneficiary countries are eligible to receive
preferences under more than one program. For example, all ACP beneficiaries
are eligible for GSP trade preferences. Similarly, beneficiaries of the ATPA
program are eligible for preferences under the U. S. GSP program.

Sources: UNCTAD Trade Analysis and Information System CD- ROM, U. S.
Department of Commerce official trade statistics, EU Eurostat official trade
statistics, and GAO calculations.

Although the United States covers a smaller share of its dutiable imports
with its preference programs, U. S. beneficiaries use more of their
available preferences than do EU beneficiaries. Figure 7 shows the share of
eligible imports that actually received tariff preferences under each of the
programs in 1999. For example, the lefthand bar shows that 72 percent of the
dutiable imports eligible to receive U. S. GSP preferences actually received
them. Overall, U. S. programs had from more than 70 percent to over 90-
percent use of preferences offered. The EU programs? use rates were lower,
with utilization of the EU GSP and ACP programs at less than 70 percent.

Page 25 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 7: Share of U. S. and EU Beneficiaries? Eligible Imports Actually
Receiving Tariff Preferences, 1999

Note 1: U. S. trade data are imports for consumption at customs value. EU
trade data are normal imports.

Note 2: Figure does not include data for the U. S. AGOA and CBTPA programs,
nor for the EU?s Everything But Arms initiative, because the programs were
implemented after 1999.

Note 3: Some U. S. and EU beneficiary countries are eligible to receive
preferences under more than one program. For example, all ACP beneficiaries
are eligible for GSP trade preferences. Similarly, beneficiaries of the ATPA
program are eligible for preferences under the U. S. GSP program.

Sources: UNCTAD Trade Analysis and Information System CD- ROM, U. S.
Department of Commerce official trade statistics, EU Eurostat official trade
statistics, and GAO calculations.

Neither U. S. nor EU beneficiaries fully used the tariff preferences
offered. There are several reasons why this might be the case. First, some
imports are eligible for the same tariff reductions from more than one
program and importers are able to choose which program to use. For programs
not chosen, it would appear that tariff preferences went unused, although
the products received preferential tariff rates under another program.
Second, preferences must actually be requested and producers must meet
requirements on how and where the products are produced. In particular,
experts and officials cited complex and restrictive U. S. and EU rules of
Some Limitations May

Affect Program Use

Page 26 GAO- 01- 647 U. S. and European Union Preference Programs

origin requirements as a limitation on beneficiary countries? ability to
fully use tariff preferences offered under the programs. 31

U. S. and EU preference programs? rules of origin are mainly intended to
ensure that the tariff preferences are confined to the designated
beneficiary countries. To qualify for preferences, producers in beneficiary
countries must not only produce goods in accordance with rules of origin,
but they must also document that the final product complies with the
requirements. Although the U. S. and EU apply rules of origin differently,
experts have noted that complexities associated with both rules of origin
schemes limit beneficiary countries? ability to fully use the preferences.
Key features and limitations of U. S. and EU preferential rules of origin
are shown in figure 8.

31 None of the studies we examined provided an explanation for the
differences in utilization rates between the U. S. and EU trade preference
programs. Rules of Origin

Page 27 GAO- 01- 647 U. S. and European Union Preference Programs

Figure 8: U. S. and EU Preferential Rules of Origin Key Features and
Limitations

Source: GAO.

U. S. preferential rules of origin are based on minimum local content
percentage criteria that require that the sum of the cost or value of the
materials produced in the beneficiary country plus the direct costs of
processing equal at least 35 percent of the appraised value at the time the
product enters the United States. Imported materials may be used and counted
toward the local content percentage requirement provided the materials have
been ?substantially transformed? into new and different materials.
Additionally, cumulation provisions under U. S. rules of origin consider
certain regional groupings as one area for the purpose of complying with the
percentage criteria. 32 For example, a manufacturer in Colombia (an ATPA
beneficiary country) could use imported materials from Bolivia (another ATPA
beneficiary country), and the imported materials would be counted toward the
minimum 35- percent local content requirement.

32 Under the U. S. GSP program, eligible countries within the following five
regional associations may benefit from these cumulation provisions: the
Andean Community, the Association of Southeast Asian Nations; the Caribbean
Common Market; the Southern Africa Development Community; and the West
African Economic and Monetary Union. Beneficiaries of CBERA and CBTPA are
granted cumulation with other CBERA/ CBTPA beneficiaries. ATPA allows
cumulation among all ATPA beneficiaries as well as cumulation with CBERA/
CBTPA beneficiary countries. AGOA allows cumulation among AGOA beneficiaries
for all eligible products, including eligible textile and apparel products.
Additionally, ATPA, CBERA/ CBTPA, and AGOA provide for limited use of U. S.-
made inputs.

Page 28 GAO- 01- 647 U. S. and European Union Preference Programs

Experts have cited several ways in which U. S. rules of origin limit
beneficiaries? ability to use nonreciprocal preferences. First, UNCTAD and
Organization for Economic Cooperation and Development (OECD) officials said
that the administrative costs and accounting sophistication required to
calculate the percentage of local content create problems for producers in
beneficiary developing countries. For example, although the 35- percent
local content rule is simple in concept from a production standpoint,
accounting for and documenting diverse direct costs, such as labor, research
and design, fringe benefits, and blueprints, may require producers to
account for costs not normally tracked in the course of commercial
operations. Additionally, because the local content calculation is based on
the appraised value of the product at the time that it enters the United
States, exporters may not know the precise value and may miscalculate the
local content percentage. Second, experts and our previous work 33 have
noted that the lack of a clear definition of what constitutes ?substantial
transformation? makes it difficult for beneficiaries to accurately and
consistently comply with the requirement.

Rules of origin under the EU preferential trade programs are described in
what is commonly referred to as the ?Single List? and are based on product-
specific process criteria. EU rules of origin allow beneficiaries to use
imported inputs in the production of goods for export, provided the inputs
comply with the process criteria contained in the Single List. The process
criteria may require, among other things, that imported inputs (1) undergo a
change in tariff heading, 34 (2) undergo specific working and processing,
(3) not exceed a specified maximum percentage of the value of the final
product, or (4) comply with a combination of the above criteria.
Additionally, EU rules of origin under both the GSP and the ACP- EC

33 See International Trade: Assessment of the Generalized System of
Preferences Program (GAO/ GGD- 95- 9, Nov. 9, 1994). 34 In general, the
change in a tariff heading rule requires that imported inputs undergo
working or processing such that the final exported product has a four- digit
tariff heading that is different from all imported inputs, on the basis of
the Harmonized System of product classification.

Page 29 GAO- 01- 647 U. S. and European Union Preference Programs

agreements allow cumulation within specific regions, although the cumulation
provisions contained in the ACP- EC are less restrictive. 35

Experts have also noted problems with the EU scheme. UNCTAD and OECD
officials said that the extent or type of processing required for some
products can exceed producers? capacity or require producers to add an
exceptionally high value in order to comply with the rules of origin-
particularly for certain fish, processed food, and textile and apparel
products. In addition to process requirements, experts have noted that the
complexity and diversity of the rules contained in the Single List
complicate documenting compliance with the EU rules of origin.

Certain limitations on U. S. and EU GSP program tariff preferences are
related to the programs? temporary nature. These limitations present a
trade- off between reserving program preferences for beneficiary countries
most in need and providing program stability to attract long- term foreign
investment. For both the United States and the European Union, GSP program
?graduation? is meant to remove preferences when a country goes beyond a
certain level of development, while GSP products can be removed from
coverage if, among other reasons, they become sufficiently competitive in
the U. S. market. GSP preferences have also been interrupted during the
program authorization process. For example, since its implementation in
1976, the U. S. GSP program has been renewed seven times, with gaps in
program coverage of up to 15 months. Regarding GSP country graduation, one
U. S. official told us that it was politically difficult to retract GSP
preferences because developing countries strongly oppose losing their
preferences and are concerned that affected export industries might flee to
other countries where preferences are still in place. An EU official
believed that it should be easier to graduate more efficient, developed
countries from its GSP program to prevent them from dominating program
preferences. The EU official noted, however, that

35 Under the EU GSP, the following three regional associations may benefit
from cumulation provisions: the Association of Southeast Asian Nations, the
Central American Common Market, and the Andean Group. The EU GSP provisions
are based on partial cumulation, which require imported inputs to have
already acquired originating status in the exporting country. For example,
country A can use imported fabric from country B to produce a jacket,
provided the fabric has already complied with EU rules of origin in country
B. Cumulation provisions under the ACP- EC Convention of Lome are less
restrictive in that the territories of all ACP beneficiaries are considered
as being one territory. Additionally, working and processing carried out in
the EU is considered as having been carried out in the ACP beneficiary
country provided the materials undergo subsequent working or processing in
an ACP beneficiary country. Other Program- related Factors

Page 30 GAO- 01- 647 U. S. and European Union Preference Programs

products should be harder to remove from GSP coverage. He commented that
just as GSP beneficiary countries become competitive in exporting a product,
the entire sector might be removed from the program.

Experts and officials also identified external factors that may limit the
program use. As MFN rates decline in multilateral trade negotiations, the
value of preferential rates may be diluted. For example, the World Trade
Organization calculated that following the conclusion of the Uruguay Round
of multilateral negotiations in 1994, developed countries had committed to
reducing their tariffs on industrial goods from an average of 6.3 percent to
3.8 percent- a 40- percent reduction. 36 Tariffs on agricultural products
were scheduled to fall by 37 percent. On the other hand, tariff rates on
products that developing countries tend to export in greater quantities were
to remain higher and be reduced less. For example, the Uruguay Round reduced
the average tariffs weighted by developing country exports for textile and
apparel products from 14.6 percent to 11.3 percent- about a 23- percent
reduction.

Also, some poorer beneficiary countries may lack the capacity in terms of
economic development and expertise to comply with program requirements in
the first place. As mentioned in appendix IV, the EU?s Cotonou Agreement
provides trade- related assistance to help beneficiary countries improve
their infrastructures and develop trade policies to enhance their export
markets. Unlike the European Union, the United States has not incorporated
financial aid into its trade agreements. However, in a slight departure from
previous U. S. nonreciprocal trade programs, AGOA contains provisions for
providing technical assistance to help build sub- Saharan countries?
capacity to take advantage of program preferences. In addition, in July of
2000, the United States published a survey of the relevant U. S. government
programs and activities that promote trade- related capacity building. The
survey concluded that in the period covered (1999- 2000), the United States
government committed more than $600 million toward strengthening the trade-
related capacity of developing countries and transitional economies. Such
programs and activities include legal and regulatory reform, customs
processes, infrastructure, and foreign investment incentives.

36 These figures are based on trade- weighted average tariffs in which the
value of trade by product across all imports provides weights for the tariff
rates that are averaged together. External Factors

Page 31 GAO- 01- 647 U. S. and European Union Preference Programs

Although both U. S. and EU program preferences have been shared fairly
equally among upper- middle income to low- income countries, a small number
of large developing countries (based on overall size of the economy) have
tended to account for a greater portion of the trade preferences. For
example, in 1999, Angola, Thailand, Brazil, Indonesia, and India accounted
for 60 percent of the trade preferences under the U. S. GSP program.
Similarly, in the same year, China, India, Indonesia, South Africa, and
Thailand accounted for 57 percent of the trade preferences under the EU GSP
program.

Finally, program officials and some beneficiary countries contend that
preferences offered under new programs can undermine the preferences of
existing programs. For example, supporters of Colombia?s efforts to enhance
preferences offered by the ATPA program claim that Colombia has lost part of
its apparel industry to the beneficiaries of the new CBTPA program.

We obtained oral comments on a draft of this report from officials from the
Office of the U. S. Trade Representative, including the Assistant U. S.
Trade Representative for Trade and Development. USTR generally agreed with
the information presented and provided technical comments that we
incorporated as appropriate. Overall, USTR emphasized that our analysis
represented a snapshot in time, based upon 1999 trade and, thus, generally
did not address the impact of AGOA and CBTPA, U. S. trade preference
programs enacted in 2000. USTR also highlighted the fact that the U. S. GSP
program provides duty- free treatment to eligible products, while the EU GSP
program provides graduated duties that are based upon product sensitivity.
USTR disagreed with the characterization of U. S. rules of origin
requirements as complex, and maintained that importers can use brokers and
U. S. Customs binding rulings to clarify and interpret the rules. We did not
conduct an independent analysis of how rules of origin may affect program
beneficiaries? use of preferences, but cited the analyses of experts at
UNCTAD and the OECD. In addition to USTR, officials from the U. S.
International Trade Commission and the U. S. Department of Agriculture?s
Foreign Agricultural Service reviewed selected sections of the draft.

We also obtained informal comments from the Head of Unit, Trade and
Development, European Commission. The European Commission raised some
general issues and provided several technical comments that we incorporated
into the report as appropriate. Overall, the European Community believed
that our analysis implied too much similarity among Agency Comments

and Our Evaluation

Page 32 GAO- 01- 647 U. S. and European Union Preference Programs

U. S. and EU programs. The EU also maintained that the major reasons for its
program beneficiaries? lower use of program preferences compared with U. S.
beneficiaries?, was the EU GSP beneficiaries? ability to choose among
multiple programs. Regarding the similarity between U. S. and EU trade
preference programs, this report does not compare every aspect of the U. S.
and EU programs, but concludes that the programs have generally evolved in
similar ways, and that they offer similar tariff- rate reductions on
average. Regarding the effect of multiple program eligibility on program
use, we found that although EU beneficiaries utilize tariff preferences
under the EU?s other major program, ACP- EC Convention of Lome , to a
greater extent than its GSP program, even the utilization rate of this
program is less than 70 percent. We added language to the report emphasizing
that the effectiveness of trade preference programs is dependent upon a
combination of both the extent of product coverage, which is broader for EU
programs than for U. S. programs, and the beneficiaries? actual use of the
preferences offered.

We are sending copies of this report to the U. S. Trade Representative, the
Secretary of Commerce, the Secretary of State; the Chairman of the U. S.
International Trade Commission; and interested congressional committees. We
are also sending copies to the European Commissioner for Trade. Copies will
also be made available to other interested parties on request.

If you or your staff have any questions about this report, please contact me
on (202) 512- 4128. Other GAO contacts and staff acknowledgments are listed
in appendix VI.

Sincerely yours, Loren Yager Director, International Affairs and Trade

Appendix I: Objectives, Scope, and Methodology

Page 33 GAO- 01- 647 U. S. and European Union Preference Programs

In conducting our analysis, we compared (1) the volume of U. S. and EU
nonreciprocal preferential trade, (2) the evolution of U. S. and EU
approaches to nonreciprocal trade preferences, (3) the tariff preferences
offered by the U. S. and EU nonreciprocal trade programs, and (4) the extent
to which U. S. and EU program beneficiaries take advantage of the tariff
preferences offered under the programs. We recently briefed your staff on
the results of this analysis.

We reviewed U. S. and EU analyses of the trade preference programs, analyzed
the texts of the relevant trade agreements, and reviewed reports issued by
multilateral agencies that assessed the trade preference programs. We also
obtained the views of U. S. and EU trade officials on the goals, operation,
and effectiveness of the trade preference programs. To obtain the views of
U. S. officials regarding preference programs, we interviewed officials from
the U. S. Trade Representative in Washington, D. C.; at the U. S. Mission to
the European Union in Brussels, Belgium; and at the World Trade Organization
in Geneva. We also met with officials from the U. S. International Trade
Commission, the Department of Commerce, and the Department of State. To
obtain the views of the EU officials, we interviewed European Commission
officials from the Trade Directorate; the External Relations Directorate;
the Agriculture Directorate; the Taxation and Customs Directorate; and the
Development Directorate in Brussels. We also spoke with officials with the
EU Delegation to the United States in Washington, D. C. We obtained
thirdparty assessments of the U. S. and EU trade preference programs by
interviewing experts from the Organization for Economic Cooperation and
Development in Paris, France, and from the World Trade Organization; the
United Nations; and the International Trade Centre in Geneva, Switzerland.

To assess preferential tariff rates, we analyzed the tariff schedules of
both the United States and the European Union provided by the United Nations
Conference on Trade and Development, which were derived from official U. S.
and EU sources. Some tariff rates are given as specific rates of duty (i.
e., $5 per bushel) rather than ad valorem (percentage of value) rates. Ad
valorem equivalent (AVE) rates are conversions of specific rates to ad
valorem rates in order to allow average tariff rates to be calculated.
Although AVE rates are available for the United States, they are not
available for the European Union. Therefore, we did not use them in our
analysis, and products subject to specific rates of duty are excluded from
the tariff averages. Also, we did not assess the impact of nontariff trade
barriers, such as quotas, on trade flows. Appendix I: Objectives, Scope, and

Methodology

Page 34 GAO- 01- 647 U. S. and European Union Preference Programs

To assess U. S. trade flows, we analyzed data (imports for consumption) from
the official Commerce statistics at customs value. To assess EU trade flows,
we analyzed data on EU preferential trade provided by EUROSTAT, the official
EU statistical organization. Data were only available on the EU GSP program
from 1995 through 1999, and no data were available on the ACP program prior
to 1999. EU preferential trade data have some limitations. First, the data
are based on declarations by importers requesting preferential status and
not on whether actual preference was granted. Countries or products not
eligible for preference were screened out, but if the products were rejected
trade preference status for another reason, this would not be apparent from
the data. Second, the data may not capture all preferential trade since some
ports of entry did not provide EUROSTAT with complete information. Total EU
import data (normal imports) came from the EU?s official trade statistics,
COMEXT. Export data by country for all beneficiaries came from United
Nations International Trade Statistics. To calculate utilization rates for
each of the preference programs, we looked at the share of eligible trade
(actual imports of products included in the programs) that actually received
tariff benefits under the programs. Some countries were able to receive
benefits for the same products under multiple programs. These countries
tended to utilize regional programs rather than GSP when given the option.
However, even these regional programs were not fully utilized and we chose
to use all countries eligible for a program when reporting utilization
rates.

We performed our work from October 2000 through May 2001 in accordance with
generally accepted government auditing standards.

Appendix II: U. S. and EU Nonreciprocal Trade Preference Programs

Page 35 GAO- 01- 647 U. S. and European Union Preference Programs

This appendix contains tables that describe the U. S. and EU nonreciprocal
trade preference programs. Table 3 illustrates the U. S. programs, and table
4 depicts the European Union?s programs.

Table 3: U. S. Nonreciprocal Trade Preference Programs Program title Key
dates

Number of beneficiary countries and

territories Other

Generalized System of Preferences Authorized and enacted

in 1974; implemented in 1976; preferences expire Oct. 1, 2001, and are
subject to reauthorization.

146 Authorizes President to grant duty- free access to the U. S. market for
certain products that are imported from designated developing countries and
territories.

Caribbean Basin Economic Recovery Act (CBERA)

Enacted Aug. 5, 1983; extended and expanded through the Caribbean Basin
Economic Recovery Expansion Act of 1990; no statutory expiration date.

24 a Trade- related component of Caribbean Basin Initiative launched in 1982
to promote exportoriented growth in the Caribbean region. Offers duty- free
or reduced duties on most products from the region.

Andean Trade Preference Act Enacted Dec. 4, 1991;

preferences expire Dec. 3, 2001, and is subject to reauthorization.

4 Trade- related component of the Andean Trade Initiative launched in 1990
to combat production of illegal narcotics in Bolivia, Colombia, Ecuador, and
Peru. Offers duty- free entry or reduced duties on eligible products from
the region. United States Caribbean Basin Trade Partnership Act

Enacted May 18, 2000; preferences expire Sept. 30, 2008, or when the Free
Trade Area of the Americas goes into effect.

24 a Allows imports of qualifying apparel from CBERA countries to enter duty
free and quota free, and provides reduced duties for other products
previously excluded under CBERA.

African Growth and Opportunity Act Enacted May 18, 2000;

preferences expire Oct. 1, 2008.

35 Grants duty- free treatment under the Generalized System of Preferences
program to imports of qualifying apparel from eligible sub- Saharan African
countries. Also eliminates U. S. quotas on imports of textiles and apparel
from such countries.

a The 24 beneficiaries shown for the Caribbean Basin Economic Recovery Act
are the same as those noted for the United States - Caribbean Basin Trade
Partnership Act. Source: GAO.

Appendix II: U. S. and EU Nonreciprocal Trade Preference Programs

Appendix II: U. S. and EU Nonreciprocal Trade Preference Programs

Page 36 GAO- 01- 647 U. S. and European Union Preference Programs

Table 4: EU Nonreciprocal Trade Preference Programs Program title Key dates

Number of beneficiary countries

and territories Other

Generalized System of Preferences (GSP) Authorized 1971;

expires 2004, and is subject to reauthorization.

171 Offers lower customs duties to developing countries.

ACP- EC a Convention of Lomï¿½ I ACP- EC Convention of Lomï¿½ II ACP- EC
Convention of Lomï¿½ III ACP- EC Convention of Lomï¿½ IV Revised Convention of
Lomï¿½ IV

In force: 1975- 80 1980- 85 1985- 90 1990- 95 1995- 2000

46 58 65 68 70

Series of contractual agreements between the European Union and African,
Caribbean, and Pacific (ACP) states containing aid, trade, and political
components.

ACP- EU Partnership Agreement, ?Cotonou

Agreement? Signed June 23,

2000; duration 20 years.

77 ACP states

Maintains trade regime of Lomï¿½ Convention until 2008, then phases in
nonreciprocal arrangements with some ACP countries. Officially in force
after ratification by European Union and national parliaments.

?Everything But Arms? Council Regulation (European Union) Effective Mar. 5,

2001. 49 least developed

countries (LDC) Amends EU GSP to provide

duty- free/ quota- free access to EU market for all but arms and ammunition.
Full coverage of bananas will be phased in by 2006; for rice and sugar by
2009.

a EC refers to the European Community, which was the predecessor to the
European Union. Source: GAO.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 37 GAO- 01- 647 U. S. and European Union Preference Programs

In this appendix, tables 5 to 9 provide information on U. S. and EU
beneficiary country trade in 1999, according to trade program.

Table 5: U. S. GSP Beneficiary Country Trade, 1999 (Sorted by Actual U. S.
Imports Receiving GSP Rates)

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable U. S.

imports U. S. imports

covered by GSP

Share of dutiable U. S.

imports covered by

GSP Actual U. S.

imports receiving GSP rates

Share of covered U. S.

imports actually receiving GSP rates

Angola 2, 349 2,270 2,269 100% 2,009 89% Thailand 14,296 22% 6,850 2,416 35
1,953 81 Brazil 11,273 24 5, 924 2,330 39 1,894 81 Indonesia 9,389 14 5,563
1,544 28 1,276 83 India 9, 072 19 5,021 1,089 22 990 91 Philippines 12,379
34 4, 111 1,236 30 821 66 Venezuela 10,390 54 7, 870 549 7 529 96 South
Africa 3,193 13 1,132 506 45 448 89 Russia 5, 706 6 1, 694 475 28 416 88
Chile 2,823 18 1,235 498 40 337 68 Turkey 2,591 10 2,149 384 18 335 87
Hungary 1, 893 5 560 359 64 303 85 Poland 806 3 549 365 67 293 80 Czech
Republic 754 2 532 297 56 205 69 Kazakhstan 226 1 225 191 85 188 99
Argentina 2, 570 11 1,886 209 11 182 87 Zaire 232 * 122 121 100 114 94
Slovenia 276 3 181 117 65 97 83 Sri Lanka 1,744 41 1,613 98 6 86 88 Zimbabwe
135 * 121 76 63 75 99 Pakistan 1,742 1,662 70 4 64 91 Romania 432 4 367 77
21 63 81 Bahrain 227 181 58 32 58 100 Uruguay 193 7 148 58 39 57 97 Oman 219
1 209 57 27 55 96 Peru 1,871 30 1,226 275 22 52 19 Malta 325 23 80 54 67 50
92 Colombia 5,883 51 3,413 472 14 46 10 Slovakia 169 1 147 68 46 44 64
Dominican Republic 4,278 57 3,557 567 16 31 6 Bangladesh 1,922 38 1,794 32 2
30 92 Morocco 414 3 167 34 20 29 86 Ukraine 520 240 34 14 27 81 Egypt 703 15
630 27 4 25 92

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 38 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable U. S.

imports U. S. imports

covered by GSP

Share of dutiable U. S.

imports covered by

GSP Actual U. S.

imports receiving GSP rates

Share of covered U. S.

imports actually receiving GSP rates

Croatia 1092 4729 62 25 85 Costa Rica 3,954 52 1,670 457 27 25 5 Malawi 59
44 43 97 25 57 Bulgaria 201 3 128 34 26 24 70 Lebanon 58 36 23 65 22 95
Ecuador 1,853 39 926 134 14 19 14 Macedonia 134 13 108 20 18 17 83 Paraguay
47 8 23 18 79 16 91 Guatemala 2, 258 35 1,674 167 10 14 8 Tunisia 74 1 65 15
23 13 86 Fiji 101 89 13 14 13 99 Benin 18 12 12 99 12 100 Estonia 226 3 212
15 7 11 77 Belarus 92 1 80 11 14 11 95 Ghana 209 6 35 10 29 10 95 Ivory
Coast 343 44 10 23 9 90 Mauritius 258 245 10 4 9 94 Swaziland 38 32 8 25 8
97 Bolivia 224 35 116 68 59 8 12 Equatorial Guinea 41 29 29 98 8 27 Honduras
2,712 58 2,453 172 7 7 4 Nepal 178 39 176 8 4 7 85 Congo 411 338 7 2 6 93 El
Salvador 1, 603 22 1,497 54 4 6 11 Jordan 31 1 29 6 21 5 82 Latvia 227 6 219
6 3 5 85 Madagascar 80 6 53 6 12 5 79 Kenya 106 55 8 14 5 62 Bosnia-
Herzegovina 15 9 5 52 4 89 French Polynesia 43 10 5 45 4 81 Uzbekistan 27 19
4 23 4 83 Papua New Guinea 108 55 4 7 4 99 Lithuania 92 4 72 4 6 3 74
Armenia 15 11 143223 89 Jamaica 664 33 478 57 12 3 5 Seychelles 5 * 4 3 62 3
97 Panama 338 48 168 47 28 3 5 Guyana 101 34 17 51 2 13 Albania 9 2 6232 292

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 39 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable U. S.

imports U. S. imports

covered by GSP

Share of dutiable U. S.

imports covered by

GSP Actual U. S.

imports receiving GSP rates

Share of covered U. S.

imports actually receiving GSP rates

Togo 3 1 2171 199 Barbados 59 20 55 12 21 1 11 Tanzania 34 2 8 4 54 1 26
Cambodia 592 590 1 * 1 70 Haiti 3018328822 8 1 4 Senegal 17 * 10 1 10 1 72
Trinidad and Tobago 1,285 42 667 136 20 1 * Cameroon 77 2 48 1 3 1 40 St. L
ucia 28 15 2728125 Ethiopia 30 2 1 67 1 49 St. K itts a nd N evis33 57 3225
79** 2 Namibia 30 2 1 34 ** 57 Moldova 89 3 88 1 1 ** 38 Zambia 38 * 1 1 62
** 35 Tokelau Islands 6 5 2 30 ** 20 Mali 9 6 ** 7 ** 77 Niger 5 1 1 36 **
52 Tonga 5 2 ** 10 ** 91 Anguilla 2 1 ** 16 ** 100 Suriname 123 18 7 ** 4 **
60 Rwanda 4 ** ** 47 ** 80 Belize 80 46 4610 22** 1 Mozambique 10 12 1 ** 13
** 100 Dominica 23 5 18 1 5 ** 10 Guinea 115 7 5 79 ** 2 Central African
Republic 3 * ** ** 33 ** 92 Burkina Faso 3 3 ** 3 ** 99 Cook Islands 1 ** **
70 ** 31 Vanuatu 2 ** ** 81 ** 18 Gaza Strip ** ** ** 37 ** 100 Cape Verde
** ** ** 93 ** 80 Uganda 20 2 ** ** 35 ** 46 Norfolk Island ** ** ** 90 **
29 Yemen 15 * 10 9 89 ** * Sierra Leone 10 2 ** 17 ** 8 Kyrgyz Republic 1 3
** ** 43 ** 14 Gambia ** ** ** 33 ** 44 Bhutan ** ** ** 22 ** 12

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 40 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable U. S.

imports U. S. imports

covered by GSP

Share of dutiable U. S.

imports covered by

GSP Actual U. S.

imports receiving GSP rates

Share of covered U. S.

imports actually receiving GSP rates

Burundi 7 1 1 96 ** 1 Djibouti ** ** ** 91 ** 92 Antigua Barbuda 2 1 ** 10
** 3 New Caledonia 9 ** ** 43 ** 3 Solomon Islands 1 ** ** 11 ** 7 Lesotho
111 111 ** * ** 100 St Vincent and the Grenadines 8 2 8794*** British Indian
Ocean Territory 3 **** 18*** British Virgin Islands 23 10 4 41 ** * Chad 7
** ** * ** Christmas Island ** ** ** 30 ** * Cocos Islands ** ** ** * **
Comoros 2 ** ** 78 ** * Eritrea ** ** ** 57 ** * Falkland Islands 1 ** ** *
** Gibraltar 8 7 ** 4 ** * Grenada 20 17 14 11 80 ** * Guinea- Bissau ** **
** 99 ** * Kiribati 1 1 ** * ** Mauritania 1 ** ** 89 ** * Niue ** ** ** *
** Pitcairn Island ** ** ** * ** Sao Tome and Principe 3 2297*** Somalia **
** ** 39 ** * St. Helena ** ** ** 31 ** * Turks and Caicos Islands 6 3******
Wallis and Futuna ** * ** ** 87 ** * West B ank 3 ** 3**3 *** Western Sahara
** * ** ** * **

Subtotal (GSP countries) $131,325 76,830 18,825 25% 13,569 72% Total (all U.
S. imports) $1,017,435

Legend * = value rounds to zero

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 41 GAO- 01- 647 U. S. and European Union Preference Programs

** = values are less than $1 million Note 1: U. S. trade data are imports
for consumption at customs value. Note 2: Countries in this table may be
eligible for other preference programs for the same products. Therefore, the
amount of actual imports receiving a preference under this program for some
countries may be lower if some imports are entering under another preference
program.

Sources: United Nations Conference on Trade and Development (UNCTAD) Trade
Analysis and Information System CD- ROM, U. S. Department of Commerce
official trade statistics, United Nations International Trade Statistics,
and GAO calculations.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 42 GAO- 01- 647 U. S. and European Union Preference Programs

Table 6: U. S. CBERA Beneficiary Country Trade, 1999 (Sorted by Actual U. S.
imports Receiving CBERA Rates)

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable

U. S. imports U. S. imports

covered by CBERA

Share of dutiable U. S.

imports covered by

CBERA Actual U. S.

imports receiving

CBERA rates

Share of covered U. S.

imports actually receiving

CBERA rates

Dominican Republic 4,278 57% 3,557 1,284 36% 820 64% Costa Rica 3,954 52
1,670 808 48 683 85 Guatemala 2, 258 35 1,674 320 19 285 89 Trinidad and
Tobago 1,285 42 667 222 33 218 98 Honduras 2,712 58 2,453 385 16 180 47
Jamaica 664 33 478 96 20 90 93 El Salvador 1, 603 22 1,497 134 9 59 44
Bahamas 194 71 111 66 60 56 84 Nicaragua 492 38 334 69 21 51 74 Panama 338
48 168 53 32 46 86 St. K itts a nd N evis3357 3228 88 2692 Barbados 59 20 55
51 91 25 49 Belize 8046 4623 51 2399 Haiti 301 83 288 44 15 22 50 Guyana 101
34 21 61 15 71 Grenada 20 17 14 12 81 11 100 Dominica 23 5 18 10 57 9 93 St.
L ucia 28 1527 1452966 St. Vincent and the Grenadines 8 28 795799
Netherlands Antilles 384 327 11 3 2 15 British Virgin Islands 23 10 4 43 **
8 Antigua Barbuda 2 1 ** 16 ** 11 Aruba 525 455 ** * ** 23 Montserrat ** **
** 62 ** 6

Subtotal (CBERA countries) 19,365 13,924 3, 662 26% 2,637 72% Total (all U.
S. imports) 1,017,435

Legend * = value rounds to zero ** = values are less than $1 million Note 1:
U. S. trade data are imports for consumption at customs value. Note 2:
Countries in this table may be eligible for other preference programs for
the same products. Therefore, the amount of actual imports receiving a
preference under this program for some countries may be lower if some
imports are entering under another preference program.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 43 GAO- 01- 647 U. S. and European Union Preference Programs

Sources: UNCTAD Trade Analysis and Information System CD- ROM, U. S.
Department of Commerce official trade statistics, United Nations
International Trade Statistics, and GAO calculations.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 44 GAO- 01- 647 U. S. and European Union Preference Programs

Table 7: U. S. Andean Trade Preference Act (ATPA) Beneficiary Country Trade,
1999 (Sorted by Actual U. S. Imports Receiving ATPA Rates)

(Values in millions - $US)

Country U. S. imports

Share of country?s total exports

destined for the U. S. Dutiable

U. S. imports U. S. imports

covered by ATPA

Share of dutiable U. S.

imports covered by

ATPA Actual U. S.

imports receiving ATPA rates

Share of covered U. S.

imports actually receiving ATPA rates

Colombia 5,883 51% 3,413 853 25% 797 93% Peru 1,871 30 1,226 693 57 631 91
Ecuador 1,853 39 926 284 31 260 92 Bolivia 224 35 116 69 60 61 88

Subtotal (ATPA countries) 9,830 5,681 1,899 33% 1,750 92% Total (all U. S.
imports) 1,017,435

Legend * = value rounds to zero ** = values are less than $1 million Note 1:
U. S. trade data are imports for consumption at customs value. Note 2:
Countries in this table may be eligible for other preference programs for
the same products. Therefore, the amount of actual imports receiving a
preference under this program for some countries may be lower if some
imports are entering under another preference program.

Sources: UNCTAD Trade Analysis and Information System CD- ROM, U. S.
Department of Commerce official trade statistics, United Nations
International Trade Statistics, and GAO calculations.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 45 GAO- 01- 647 U. S. and European Union Preference Programs

Table 8: EU GSP Beneficiary Country Trade, 1999 (Sorted by Actual EU Imports
Receiving GSP Rates)

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by GSP

Share of dutiable EU

imports covered by

GSP Actual EU

imports receiving GSP rates

Share of covered EU

imports actually receiving GSP rates

China 50,499 15% 41,514 16,794 40% 10,416 62% India 10,020 29 7, 746 5,683
73 4,398 77 Indonesia 8,505 13 6,382 4,562 71 2,552 56 South Africa 9,973 36
3,976 3,008 76 2,233 74 Thailand 9,767 16 7,015 3,330 47 1,903 57 Brazil
12,789 26 5, 651 2,735 48 1,748 64 Vietnam 3,197 2,929 2,908 99 1,635 56
Mexico 4,167 4 2, 525 2,346 93 1,441 61 Pakistan 2,256 2,139 1,232 58 972 79
Malaysia 12,513 15 4, 598 1,811 39 921 51 Bangladesh 2,241 45 2,198 2,198
100 848 39 Russia 22,034 32 3, 812 1,559 41 828 53 Colombia 1,994 15 1,336
1,024 77 759 74 Argentina 4, 766 19 2,360 1,117 47 739 66 Philippines 5,647
21 1,924 1,434 75 602 42 Iran 4,880 4 718 699 97 444 63 Venezuela 1, 799 6
609 542 89 410 76 Ecuador 993 17 933 542 58 402 74 Saudi Arabia 7, 647 11
684 522 76 359 69 Peru 1,503 24 538 499 93 348 70 Ukraine 1, 674 881 489 56
348 71 Sri Lanka 1,182 27 899 894 99 295 33 Costa Rica 1,826 22 891 476 53
272 57 Chile 3,635 25 1,197 516 43 270 52 Guatemala 412 11 392 357 91 243 68
Honduras 289 13 262 219 83 147 67 Cuba 294 257 204 79 139 68 United Arab
Emirates 1,510 911 775 85 137 18 Kuwait 1,389 170 170 100 122 72 Belarus 390
8 250 194 78 121 63 Libya 6, 942 473 140 30 121 86 Nepal 158 51 155 155 100
108 70 Algeria 6,279 63 803 765 95 102 13 El Salvador 174 13 171 170 99 88
52 Bahrain 250 239 214 90 78 37 Nicaragua 119 20 114 103 90 71 69 Uruguay
491 19 337 91 27 66 73

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 46 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by GSP

Share of dutiable EU

imports covered by

GSP Actual EU

imports receiving GSP rates

Share of covered EU

imports actually receiving GSP rates

Egypt 2, 172 41 1,097 979 89 65 7 Moldova 8721 5951 87 4995 Uzbekistan 396
53 49 92 40 82 Turkmenistan 263 49 49 100 39 80 Syria 2, 245 220 195 88 37
19 Cambodia 279 274 274 100 36 13 Kazakhstan 1,667 22 301 66 22 33 50
Nigeria 2,912 22 473 381 80 33 9 Laos 115 114 114 100 31 28 Morocco 4,994 62
4,051 3,567 88 27 1 Virgin Islands 37 31 31 100 24 77 Tajikistan 45 23 22 96
22 97 Tunisia 4, 378 80 3,946 3,817 97 20 1 Kenya 816 606 583 96 15 3 Panama
375 19 312 33 10 14 44 Zimbabwe 756 559 471 84 14 3 Aruba 134 65 36 56 13 36
Georgia 120 32 30 94 13 44 Haiti 2115 1716 98 1274 Paraguay 195 38 24 15 62
11 74 Belize 153 44 134 59 44 10 18 Bolivia 262 16 21 18 85 10 55
Netherlands Antilles 162 118 84 71 10 11 Uganda 270 35 232 232 100 9 4
Former Yugoslav Republic of Macedonia

389 363 23 6 9 38 Lebanon 163 102 97 96 9 9 Azerbaijan 468 46 36 35 96 8 24
Albania 74 93 45 36 80 8 21 Ethiopia 171 152 151 100 7 5 Croatia 1,627 48
1,234 21 2 7 34 Cyprus 412 50 314 279 89 6 2 Mauritius 1, 130 70 1,085 737
68 6 1 Dominican Republic 234 25 171 143 83 6 4 Qatar 95 13 13 98 6 42
Mongolia 41 14 11 9 85 5 57 Yemen 23 12 12 100 5 42 Maldives 22 26 21 21 100
5 23

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 47 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by GSP

Share of dutiable EU

imports covered by

GSP Actual EU

imports receiving GSP rates

Share of covered EU

imports actually receiving GSP rates

Macao 672 665 109 16 5 4 Ivory Coast 2, 209 1,825 1,540 84 5 * Trinidad and
Tobago 293 11 205 160 78 4 3 Ghana 1,124 58 701 473 67 4 1 Zambia 211 77 74
96 4 5 Oman 40 2 22 22 96 4 17 Madagascar 519 63 468 456 98 4 1 Papua New
Guinea 405 318 311 98 3 1 Tanzania 235 36 155 147 95 3 2 Afghanistan 27 9 9
100 2 28 Namibia 459 312 117 38 2 1 Cameroon 1,403 79 610 294 48 2 1 Malawi
211 184 161 88 1 1 Armenia 100 15 5 4 91 1 25 Botswana 440 59 13 22 1 8
Rwanda 31 26 26 99 1 4 Swaziland 138 134 30 22 1 3 Djibouti 5 4 4 96 1 25
Jamaica 497 30 493 95 19 1 1 Togo 68 14 35 35 99 1 2 Fiji 154 143 3 2 1 18
Mali 79 12 12 100 1 5 Congo 304 72 46 63 1 1 Grenada 15 47 12 12 96 1 5
Kyrgyz Republic 139 5 1 1 84 1 49 Gabon 376 114 46 41 ** 1 Sierra Leone 61
32 32 100 ** 1 Antigua Barbuda 4 4 3 74 ** 13 Burundi 42 31 31 100 ** 1
Senegal 388 23 349 299 86 ** * Guinea 420 36 35 97 ** 1 Burkina Faso 63 18
18 100 ** 2 Jordan 128 62 58 93 ** * Mayotte 3 2 1 75 ** 22 Gambia 66 11 10
99 ** 2 Polar Region 1 ** ** 64 ** 82 Eritrea 8 2 2 97 ** 12 Bosnia and
Herzegovina 296 257 6 2 ** 4

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 48 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by GSP

Share of dutiable EU

imports covered by

GSP Actual EU

imports receiving GSP rates

Share of covered EU

imports actually receiving GSP rates

Benin 42 9 9 95 ** 2 Congo (Democratic Republic) 911 57 50 88 ** * Bahamas
353 24 282 39 14 ** * New Caledonia 149 12 12 98 ** 1 Turks and Caicos
Islands 1 1 ** 94 ** 27 Mozambique 116 37 77 76 98 ** * Liberia 409 33 8 25
** 1 Surinam 155 34 146 20 13 ** * British Virgin Islands 53 5 5 98 ** 2 St.
Pierre and Miquelon 8 2135** 15 Falkland Islands 87 74 63 85 ** * Barbados
52 22 45 11 25 ** 1 Mauritania 331 83 82 99 ** * Niger 6 2 2 100 ** 3 Sudan
195 33 39 17 44 ** * Western Samoa 3 ** ** 98 ** 77 American Oceania 4 3 3
96 ** 2 Central African Republic 191 97 11 9 80 ** 1 Marshall Islands 7 2 2
99 ** 2 Chad 59 ** ** 87 ** 35 Guyana 198 183 14 8 ** * Wallis and Futuna 1
** ** 100 ** 5 Tonga 2 2 2 100 ** 1 Greenland 197 85 194 3 2 ** 1 Bhutan **
** ** 100 ** 21 New Zealand Oceania 1 ** ** 68 ** 4 Comoros 7 4 4 95 ** *
St. Vincent 73 49 34 3 8 ** * Vanuatu 15 2 2 100 ** * Equatorial Guinea 334
19 13 66 ** * Gibraltar 35 17 17 99 ** * St. Lucia 57 65 56 3 5 ** *
Pitcairn 5 1 1 94 ** * Solomon Islands 29 29 29 100 ** * Dominica 31 37 28 5
18 ** * Seychelles 123 90 119 8 7 ** *

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 49 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by GSP

Share of dutiable EU

imports covered by

GSP Actual EU

imports receiving GSP rates

Share of covered EU

imports actually receiving GSP rates

Brunei 78 73 44 60 ** * Cayman Islands 101 1 1 99 ** * Angola 808 34 33 96
** * Anguilla ** ** ** 8 ** * Australian Oceania 1 ** ** 100 ** * British
Indian Ocean Territories ** ** ** 89 ** * Bermuda 83 39 37 96 ** * Cape
Verde 13 13 12 99 ** * Federated States of Micronesia 1 ** ** 100 ** *
French Polynesia 35 12 10 83 ** * Guinea- Bissau 9 6 6 100 ** * Iraq 3,922 1
** * ** * Kiribati ** ** ** 100 ** * Lesotho 16 1 1 83 ** * Montserrat 1 1 1
92 ** * Myanmar 228 197 ** * ** * Nauru 2 1 1 100 ** * Palau ** ** ** 100 **
* Sao Tome and Principe 10 9 9 100 ** * Somalia 1 ** ** 93 ** * St. Helena 1
** ** 55 ** * St. Kitts and Nevis 13 38 13 3 22 ** * Tuvalu 1 1 1 100 ** *

Subtotal (GSP countries) 253,103 133,798 78,593 59% 37,418 48% Total (all EU
imports) 746,817

Legend * = value rounds to zero ** = values are less than $1 million Note 1:
EU trade data are normal imports. Country- level values exclude some imports
classified as confidential information.

Note 2: Countries in this table may be eligible for other preference
programs for the same products. Therefore, the amount of actual imports
receiving a preference under this program for some countries may be lower if
some imports are entering under another preference program.

Sources: EUROSTAT, UNCTAD Trade Analysis and Information System CD- ROM,
United Nations International Trade Statistics, and GAO calculations.

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 50 GAO- 01- 647 U. S. and European Union Preference Programs

Table 9: EU African Caribbean and Pacific (ACP) Beneficiary Country Trade,
1999 (Sorted by Actual EU Imports Receiving ACP Rates)

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by ACP

Share of dutiable EU

imports covered by

ACP Actual EU

imports receiving ACP rates

Share of covered EU

imports actually receiving ACP rates

Mauritius 1, 130 70% 1,085 1,084 100% 964 89% Ivory Coast 2, 209 1,825 1,789
98 926 52 Ghana 1,124 58 701 684 98 418 61 Madagascar 519 63 468 466 100 396
85 Zimbabwe 756 559 558 100 389 70 Kenya 816 606 605 100 361 60 Cameroon
1,403 79 610 591 97 333 56 Jamaica 497 30 493 492 100 325 66 Senegal 388 23
349 348 100 320 92 Namibia 459 312 311 100 285 91 Bahamas 353 24 282 282 100
270 96 Nigeria 2,912 22 473 461 97 245 53 Papua New Guinea 405 318 317 100
198 62 Uganda 270 35 232 232 100 178 77 Trinidad and Tobago 293 11 205 205
100 154 76 Malawi 211 184 184 100 130 71 Guyana 198 183 143 78 127 89 Fiji
154 143 143 100 124 87 Ethiopia 171 152 152 100 109 72 Swaziland 138 134 134
100 99 74 Seychelles 123 90 119 119 100 98 82 Tanzania 235 36 155 154 99 96
62 Dominican Republic 234 25 171 171 100 93 54 Mauritania 331 83 82 99 80 97
Mozambique 116 37 77 76 99 69 90 Belize 153 44 134 133 99 66 50 Surinam 155
34 146 137 94 56 41 St. Lucia 57 65 56 56 100 55 98 Botswana 440 59 59 100
45 75 Congo (Democratic Republic) 911 57 50 88 44 88 Congo 304 72 68 94 39
57 Gabon 376 114 112 99 39 34 Zambia 211 77 77 100 38 49 Barbados 52 22 45
45 100 35 79 St. Vincent 73 49 34 34 100 33 97

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 51 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by ACP

Share of dutiable EU

imports covered by

ACP Actual EU

imports receiving ACP rates

Share of covered EU

imports actually receiving ACP rates

Angola 808 34 33 96 29 87 Togo 68 14 35 35 99 27 79 Dominica 31 37 28 28 100
26 94 Guinea 420 36 35 97 26 74 Solomon Islands 29 29 29 100 23 78 Burundi
42 31 31 100 20 64 Sudan 195 33 39 28 72 17 62 St. Kitts and Nevis 13 38 13
13 100 12 95 Rwanda 31 26 26 100 11 43 Cape Verde 13 13 12 100 11 86 Sierra
Leone 61 32 25 79 9 38 Equatorial Guinea 334 19 13 66 9 70 Gambia 66 11 10
99 9 82 Central African Republic 191 97 11 9 80 8 94 Burkina Faso 63 18 18
100 8 43 SaoTome and Principe 10 9 9 100 6 68 Benin 42 9 9 96 5 62 Grenada
15 47 12 12 100 5 43 Guinea- Bissau 9 6 6 100 5 72 Mali 79 12 12 100 4 37
Comoros 7 4 4 100 3 69 Liberia 409 33 8 25 2 22 Haiti 21 151716 99210
Antigua and Barbuda 4 4 4 99 2 39 Nauru 2 1 1 100 1 100 Vanuatu 15 2 2 100 1
71 Niger 6 2 2 100 1 47 Eritrea 8 2 2 100 1 49 Tonga 2 2 2 100 1 31 Djibouti
5 4 4 99 ** 13 Lesotho 16 1 1 83 ** 43 Tuvalu 1 1 1 100 ** 14 Somalia 1 **
** 100 ** 25 New Zealand Oceania 1 ** ** 98 ** 1 Western Samoa 3 ** ** 98 **
8 Chad 59 ** ** 87 ** * Federated States of Micronesia 1 ** ** 100 ** *

Appendix III: Additional Information on Beneficiary Country Trade, 1999

Page 52 GAO- 01- 647 U. S. and European Union Preference Programs

(Values in millions - $US)

Country EU imports Share of

country?s total exports

destined to EU Dutiable EU

imports EU imports

covered by ACP

Share of dutiable EU

imports covered by

ACP Actual EU

imports receiving ACP rates

Share of covered EU

imports actually receiving ACP rates

Kiribati ** ** ** 100 ** * Marshall Islands 7 2 2 99 ** * Palau ** ** ** 100
** *

Subtotal (ACP countries) 21,268 11,212 10,996 98% 7,521 68% Total (all EU
imports) 746,817

Legend * = value rounds to zero ** = values are less than $1 million Note 1:
EU trade data are normal imports. Country- level values exclude some imports
classified as confidential information.

Note 2: Countries in this table may be eligible for other preference
programs for the same products. Therefore, the amount of actual imports
receiving a preference under this program for some countries may be lower if
some imports are entering under another preference program.

Sources: EUROSTAT, UNCTAD Trade Analysis and Information System CD- ROM,
United Nations International Trade Statistics, and GAO calculations.

Appendix IV: Products Receiving the Greatest Tariff Preferences

Page 53 GAO- 01- 647 U. S. and European Union Preference Programs

Some of the products covered under the U. S. and EU nonreciprocal trade
preference programs receive significant tariff reductions. For example, the
U. S. GSP program covers some products that normally face duties of up to 30
percent, including cantaloupes, certain ceramic products, and macadamia
nuts. Table 10 shows the products for which the difference between the U. S.
most- favored- nation (MFN) rate and GSP rate is at least 15 percentage
points.

Table 10: U. S. Imports for Which the Difference Between the MFN and GSP
Tariff Is at Least 15 Percent, 2000

Product description MFN rate GSP rate Difference

Cantaloupes 29.8% 0% 29.8% Porcelain kitchenware 26 0 26 Ceramic serviette
rings 22.9 0 22.9 Okra 20 0 20 Articles for pocket or handbags 20 0 20 Salad
and cooking oils 18 0 18 Macadamia nuts 17.9 0 17.9 Artificial flowers 17 0
17 Certain preserved plants 16 0 16 Parts and accessories of telescopic
sights 16 0 16 Railway, tramway passenger coaches or cars 15.6 0 15.6
Ceramic mugs 15.4 0 15.4 Sturgeon 15 0 15 Caviar 15 0 15 Headbands 15 0 15
Titanium bars and rods 15 0 15

Note: Product descriptions are not legal definitions but are intended to
provide an indicator of the type of product discussed. Different tariff
rates may be applied to similar types of products that vary by one or more
product characteristic, such as weight.

Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

The European Union also offers some significant reductions for its GSP
beneficiaries. The European Union reduces tariffs on certain products, such
as smoking tobacco, fruit juices, and tuna, and eliminates duties on
pineapples and road tractors. Table 11 shows the products for which the
difference between the EU MFN rate and GSP rate is at least 15 percentage
points. Appendix IV: Products Receiving the

Greatest Tariff Preferences

Appendix IV: Products Receiving the Greatest Tariff Preferences

Page 54 GAO- 01- 647 U. S. and European Union Preference Programs

Table 11: EU Imports for Which the Difference Between the MFN and GSP Tariff
Is at Least 15 percent, 2000

Product description MFN rate GSP rate Difference

Pineapples 25.6 0 25.6 Smoking tobacco 74.9 52.4 22.5 Juice of fruit or
vegetables 33.6 11.7 21.9 Cigarettes, cigars, etc. 57.6 40.3 17.3 Perfumes
and oils 17.3 0 17.3 Cigars, etc. 26 9.1 16.9 Mixtures of fruit, etc. 25.6
8. 9 16.7 Road tractors for semitrailers 16 0 16 Homogenized preparations of
fruit jams 24 8.4 15.6 Mixtures of fruit, etc. 24 8.4 15.6

Note: Product descriptions are not legal definitions but are intended to
provide an indicator of the type of product discussed. Different tariff
rates may be applied to similar types of products that vary by one or more
product characteristic, such as weight.

Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

Appendix V: U. S. and EU Tariffs That Are Greater Than 20 Percent, for
Products Excluded From the Non- LDC GSP Programs

Page 55 GAO- 01- 647 U. S. and European Union Preference Programs

Table 12: U. S. Tariffs That Are Greater Than 20 Percent for Products
Excluded From Non- LDC GSP Program, 2000 Product description MFN rate GSP
(LDC) rate CBERA rate ATPA rate

Tobacco a 350 . . . Peanuts a 132 to 164 . . . Peanut butter a 132 . . .
Footwear 26.2 to 48 . . . Glassware 26 to 38 0 0 0 Tunas and skipjack 35 0 .
. Apparel (various types) b 20 to 33 . . . Glassware, drinking glasses 32.3
0 0 0 Brooms of broomcorn 32 0 0 0 Ceramics table and kitchenware 30.8 0 0 0
Glassware 30 0 0 0 Onion, garlic powder, or flour 29.8 . 0 0 Dates 29.8 0 0
0 Apricots 29.8 0 0 0 Woven fabric of animal hair 29.4 . . . Porcelain or
China table or kitchenware 29 0 0 0 Ski suits 22.3 to 28. 8 . 0 . Woven
fabrics of wool 28.2 . . . Melons 28 0 0 0 Bovine meats a 26.4 . . . Dairy
products a 20 to 25 0 0 0 Trucks 25 0 0 0 Gloves 24.1 . 23 23 Woven fabric
of cotton, etc. 21.3 to 24 . . . Ceramic food and drink kitchenware 23.1 . .
. Mixtures of nuts and seeds 22.4 0 0 0 Dates, prepared or preserved 22.4 0
0 0 Pillowcases 22.1 . . . Goya cheese 21.3 0 0 0 Asparagus 21.3 0 0 0 Sweet
corn 21.3 . 0 0 Dried onions, except powder or flour 21.3 . 0 0

Note: Product descriptions are not legal definitions but are intended to
provide an indicator of the type of product discussed. Different tariff
rates may be applied to similar types of products that vary by one or more
product characteristic, such as weight. a These products are subject to
tariff- rate quotas. Tariff- rate quotas allow a certain quantity of a
product to be imported at a low ?in- quota? rate, while any remaining
quantity enters at a higher ?outof-

quota? rate. The MFN tariff rates listed for these products are generally
the ?out- of- quota? rates. b This category covers a wide variety of types
of apparel products. Although the CBERA program does

not cover the majority of these, a few types, including certain ski suits,
do receive zero duties under CBERA.

Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

Appendix V: U. S. and EU Tariffs That Are Greater Than 20 Percent, for
Products Excluded From the Non- LDC GSP Programs

Appendix V: U. S. and EU Tariffs That Are Greater Than 20 Percent, for
Products Excluded From the Non- LDC GSP Programs

Page 56 GAO- 01- 647 U. S. and European Union Preference Programs

Table 13: EU Tariffs That Are Greater Than 20 Percent for Products Excluded
From the Non- LDC GSP Program, 2000

Product description MFN rate GSP (LDC) rate ACP rate

Grape must 32 . . Apricots 25.6 0 0 Sardines 25 0 0 Anchovies 25 0 0 Tunas
24 0 0 Euthynnus (type of fish) 24 0 0 Apple purï¿½e 2400 Jams, fruit jellies,
marmalades 24 0 0 Apricots 24 0 0 Miscellaneous fruit preparations 24 0 0
Sardines 23 0 0 Plum purï¿½e and paste 22.40 0 0 Albacore 22 0 0 Tunas 22 0 0
Skipjack 22 0 0 Euthynnus (type of fish) 22 0 0 Strawberries 20.8 0 0
Apricots 20.8 0 0 Sour cherries 20.8 0 0

Note: Product descriptions are not legal definitions but are intended to
provide an indicator of the type of product discussed. Different tariff
rates may be applied to similar types of products that vary by one or more
product characteristic, such as weight.

Sources: UNCTAD Trade Analysis and Information System CD- ROM and GAO
calculations.

Appendix VI: GAO Contacts and Staff Acknowledgments

Page 57 GAO- 01- 647 U. S. and European Union Preference Programs

Beth Sirois (202) 512- 8989 Nina Pfeiffer (202) 512- 9639

In addition to those listed above, Kim Frankena, Matthew Helm, Ernie
Jackson, Rona Mendelsohn, and Timothy Wedding made key contributions to this
report. Appendix VI: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

(320006)

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