International Trade: The United States Needs an Integrated	 
Approach to Trade Preference Programs (12-JUN-08, GAO-08-907T).  
                                                                 
U.S. trade preference programs promote economic development in	 
poorer nations by providing duty-free export opportunities in the
United States. The Generalized System of Preferences, Caribbean  
Basin Initiative, Andean Trade Preference Act, and African Growth
and Opportunity Act unilaterally reduce U.S. tariffs for many	 
products from over 130 countries. However, two of these programs 
expire partially or in full this year, and Congress is exploring 
options as it considers renewal. This testimony describes the	 
growth in preference program imports since 1992, identifies	 
policy trade-offs concerning these programs, and evaluates the	 
overall U.S. approach to preference programs. The testimony is	 
based on two recent studies on trade preference programs, issued 
in September 2007 and March 2008. For those studies, GAO analyzed
trade data, reviewed trade literature and program documents,	 
interviewed U.S. officials, and did fieldwork in six trade	 
preference beneficiary countries.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-907T					        
    ACCNO:   A82343						        
  TITLE:     International Trade: The United States Needs an	      
Integrated Approach to Trade Preference Programs		 
     DATE:   06/12/2008 
  SUBJECT:   Developing countries				 
	     Economic analysis					 
	     Economic development				 
	     Economic growth					 
	     Economic policies					 
	     Exporting						 
	     Financial management				 
	     Foreign economic assistance			 
	     Foreign trade agreements				 
	     Importing						 
	     International economic relations			 
	     International trade				 
	     International trade regulation			 
	     International trade restriction			 
	     Program evaluation 				 
	     Program management 				 
	     Tariffs						 
	     Trade agreements					 
	     Trade policies					 
	     Trade regulation					 
	     Program goals or objectives			 
	     Caribbean Basin Initiative 			 
	     Generalized System of Preferences			 
	     Program						 
                                                                 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Product.                                                 **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-08-907T

This text file was formatted by the U.S. Government Accountability 
Office (GAO) to be accessible to users with visual impairments, as part 
of a longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to [email protected]. 

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately. 

Testimony: 

Before the Committee on Finance, United States Senate: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EDT:
Thursday, June 12, 2008: 

International Trade: 

The United States Needs an Integrated Approach to Trade Preference 
Programs: 

Statement of Loren Yager:
Director, International Affairs and Trade: 

GAO-08-907T: 

GAO Highlights: 

Highlights of GAO-08-907T, a testimony before the Committee on Finance, 
U.S. Senate. 

Why GAO Did This Study: 

U.S. trade preference programs promote economic development in poorer 
nations by providing duty-free export opportunities in the United 
States. The Generalized System of Preferences, Caribbean Basin 
Initiative, Andean Trade Preference Act, and African Growth and 
Opportunity Act unilaterally reduce U.S. tariffs for many products from 
over 130 countries. However, two of these programs expire partially or 
in full this year, and Congress is exploring options as it considers 
renewal. 

This testimony describes the growth in preference program imports since 
1992, identifies policy trade-offs concerning these programs, and 
evaluates the overall U.S. approach to preference programs. The 
testimony is based on two recent studies on trade preference programs, 
issued in September 2007 and March 2008. For those studies, GAO 
analyzed trade data, reviewed trade literature and program documents, 
interviewed U.S. officials, and did fieldwork in six trade preference 
beneficiary countries. 

What GAO Found: 

Total U.S. preference imports grew from $20 billion in 1992 to $92 
billion in 2006, with most of this growth taking place since 2000. The 
increases from preference program countries reflect legislation passed 
by Congress in 1996 and 2000 that enhanced preference programs and 
added new eligible products. 

Preference programs give rise to three critical policy trade-offs. 
First, preferences entail a trade-off to the extent opportunities for 
beneficiary countries to export products duty free must be balanced 
against U.S. industry interests. Some products of importance to 
developing countries, notably agriculture and apparel, are ineligible 
by statute as a result. Secondly, certain developing countries have 
been given additional preferential benefits for such import-sensitive 
products under regional programs. But some of the poorest countries, 
outside targeted regions, do not qualify. Third, Congress faces a trade-
off between longer program renewals, which may encourage investment and 
undermine support for the likely greater economic benefits of broader 
trade liberalization, a key U.S. goal, and shorter renewals, which may 
provide opportunities to leverage the programs to meet evolving 
priorities. 

Trade preference programs have proliferated over time, becoming more 
complex (as shown below), but neither Congress nor the administration 
formally considers them as a whole. Responsive to their legal mandates, 
the Office of the U.S. Trade Representative (USTR) and other agencies 
use different approaches to monitor compliance with program criteria, 
resulting in disconnected review processes and gaps in addressing some 
countries and issues. Disparate reporting makes it difficult to 
determine progress on programsï¿½ contribution to economic development in 
beneficiary countries. 

Growth of Trade Programs over Time: 

[See PDF for image] 

This figure is a timeline depicting the growth of trade programs over 
time, as follows: 

1976: 
GSP. 

1983: 
GSP; 
CBI. 

1991: 
GSP; 
CBI; 
ATPA. 

1996: 
GSP; 
LDC; 
CBI; 
ATPA. 

2000: 
GSP; 
LDC; 
CBI; 
CBTA; 
ATP; 
AGOA. 

2002: 
GSP; 
LDC; 
CBI; 
CBTA; 
ATP; 
AGOA; 
ATPDEA. 

2006: 
GSP; 
LDC; 
CBI; 
CBTA; 
ATP; 
AGOA; 
ATPDEA; 
HOPE. 

Notes: 

AGOA: African Growth and Opportunity Act; 
ATPA: Andean Trade Preference Act; 
ATPDEA: Andean Trade Promotion and Drug Eradication Act; 
CBI: Caribbean Basin Initiative; 
CBTPA: Caribbean Basin Trade Partnership Act; 
GSP: Generalized System of Preferences; 
HOPE: Haitian Hemispheric Opportunity through Partnership Encouragement 
Act; 
LDC: Expanded GSP for Least-developed Country. 

Source: GAO analysis of official U.S. trade statistics. 

[End of figure] 

What GAO Recommends: 

In the March 2008 report, GAO made a number of recommendations to the 
U.S. Trade Representative, including to review beneficiary countries 
that have not been considered under the regional programs, and 
periodically consider preference programs jointly. In response, USTR 
indicated that it would undertake an interagency review of the programs 
and consolidate discussion of them in its annual report. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-907T]. For more 
information, contact Loren Yager at (202) 512-4347 or [email protected]. 

[End of section] 

United States Government Accountability Office: Washington, DC 20548: 

Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss our work on U.S. trade 
preference programs. Since the committee's hearing last year on this 
subject, GAO has completed two in-depth studies of U.S. preference 
programs for the Finance Committee and the Committee on Ways and Means. 
[Footnote 1] Our findings suggest that these programs do provide 
benefits to recipient nations, but it is more challenging to determine 
programs' contribution to economic development in those nations. Our 
findings in those studies also support the need to consider whether a 
more integrated approach would better ensure programs meet shared 
goals. 

This hearing is particularly timely, as a number of the preference 
programs were or are still scheduled for expiration during the current 
calendar year. We believe that this provides an opportunity for 
Congress and the administration to review the progress and performance 
of these programs as a group and begin to address some of the difficult 
questions that you posed in the last hearing. In order to contribute to 
that discussion, I will address three topics today. First, I will 
describe preference import trends. Second, I will outline key policy 
trade-offs between various domestic and foreign interests that are 
inevitable in the design of preference programs. Finally, I will 
summarize our recent findings and recommendations regarding the 
importance of considering the preference programs as a group. 

My remarks are based on the two studies of the preference programs that 
we have published in the last year. In conducting the work for 
Congress, we consulted with the Office of the U.S. Trade Representative 
(USTR) and other executive agencies involved in implementing the 
programs, as well as representatives from trade and development 
organizations who have expertise and interest in the programs. In 
addition, we met with government representatives from a number of the 
beneficiary nations, including some of the larger beneficiaries such as 
Brazil, as well as poorer nations such as Haiti and Ghana. We conducted 
this performance audit from March 2007 to February 2008 in accordance 
with generally accepted government auditing standards. Those standards 
require that we plan and perform the audit to obtain sufficient, 
appropriate evidence to provide a reasonable basis for our findings and 
conclusions based on our audit objectives. We believe that the evidence 
obtained provides a reasonable basis for our findings and conclusions 
based on our audit objectives. 

Background: 

In an effort to promote and achieve various U.S. foreign policy 
objectives, trade preference programs have expanded in number and scope 
over the past 3 decades. The purpose of these programs is to foster 
economic development through increased trade with qualified beneficiary 
countries while not harming U.S. domestic producers. Trade preference 
programs extend unilateral tariff reductions to over 130 developing 
countries. Currently, the United States offers the Generalized System 
of Preferences (GSP) [Footnote 2] and three regional programs, the 
Caribbean Basin Initiative (CBI), [Footnote 3] the Andean Trade 
Preference Act (ATPA),[Footnote 4] and the African Growth and 
Opportunity Act (AGOA). Special preferences for Haiti became part of 
CBI with enactment of the Haitian Hemispheric Opportunity through 
Partnership Encouragement (HOPE) Act in December 2006. The regional 
programs cover additional products but have more extensive criteria for 
participation than the GSP program. Eight agencies have key roles in 
administering U.S. trade preference programs. Led by USTR, they include 
the Departments of Agriculture, Commerce, Homeland Security, Labor, 
State, and Treasury, as well as the U.S. International Trade Commission 
(ITC). 

GSP--the longest standing U.S. preference program--expires December 31, 
2008, as do ATPA benefits. At the same time, legislative proposals to 
provide additional, targeted benefits for the poorest countries are 
pending. U.S. trade preference programs are widely used, but some 
economists and others have raised questions about them. Their concerns 
include the potential for diversion of trade from other countries that 
these programs can cause; the complexity, scope of coverage, duration, 
and conditionality of these programs; and the potential opposition to 
multilateral and bilateral import liberalization preferences can 
create. 

U.S. Preference Imports Have Increased Sharply: 

U.S. imports from countries benefiting from U.S. preference programs 
have increased significantly over the past decade. Total U.S. 
preference imports grew from $20 billion in 1992 to $92 billion in 
2006. Most of this growth in U.S. imports from preference countries has 
taken place since 2000. Whereas total U.S. preference imports grew at 
an annual rate of 0.5 percent from 1992 to 1996, the growth quickened 
to an annual rate of 8 percent from 1996 to 2000, and 19 percent since 
2000. This accelerated growth suggests an expansionary effect of 
increased product coverage and liberalized rules of origin for LDCs 
under GSP in 1996 and for African countries under AGOA in 2000. 

Figure 1: Trends in U.S Preference Import Levels (1992-2006): 

[See PDF for image] 

This figure is a multiple line graph depicting the following data: 

Trends in U.S Preference Import Levels (1992-2006): 

Year: 1992; 
ATPA/ATPDEA: $0 billion; 
CBI/CTPA: $2 billion; 
GSP: $17 billion. 

Year: 1993; 
ATPA/ATPDEA: $0 billion; 
CBI/CTPA: $2 billion; 
GSP: $20 billion. 

Year: 1994; 
ATPA/ATPDEA: $1 billion; 
CBI/CTPA: $2 billion; 
GSP: $18 billion. 

Year: 1995; 
ATPA/ATPDEA: $1 billion; 
CBI/CTPA: $2 billion; 
GSP: $18 billion. 

Year: 1996 (GSP expanded); 
ATPA/ATPDEA: $1 billion; 
CBI/CTPA: $3 billion; 
GSP: $17 billion. 

Year: 1997; 
ATPA/ATPDEA: $1 billion; 
CBI/CTPA: $3 billion; 
GSP: $16 billion. 

Year: 1998; 
ATPA/ATPDEA: $2 billion; 
CBI/CTPA: $3 billion; 
GSP: $16 billion. 

Year: 1999; 
ATPA/ATPDEA: $2 billion; 
CBI/CTPA: $3 billion; 
GSP: $14 billion. 

Year: 2000 (AGOA initiated; CBTPA added); 
ATPA/ATPDEA: $2 billion; 
CBI/CTPA: $3 billion; 
GSP: $16 billion. 

Year: 2001; 
ATPA/ATPDEA: $2 billion; 
CBI/CTPA: $8 billion; 
GSP: $16 billion; 
AGOA: $8 billion. 

Year: 2002 (ATPDEA added; GSP renewed through 2006); 
ATPA/ATPDEA: $1 billion; 
CBI/CTPA: $10 billion; 
GSP: $18 billion; 
AGOA: $8 billion. 

Year: 2003; 
ATPA/ATPDEA: $6 billion; 
CBI/CTPA: $10 billion; 
GSP: $21 billion; 
AGOA: $13 billion. 

Year: 2004; 
ATPA/ATPDEA: $8 billion; 
CBI/CTPA: $11 billion; 
GSP: $23 billion; 
AGOA: $22 billion. 

Year: 2005; 
ATPA/ATPDEA: $11 billion; 
CBI/CTPA: $12 billion; 
GSP: $27 billion; 
AGOA: $33 billion. 

Year: 2006; 
ATPA/ATPDEA: $13 billion; 
CBI/CTPA: $10 billion; 
GSP: $33 billion; 
AGOA: $36 billion. 

Source: GAO analysis of U.S. official trade statistics, based on 
preferences actually claimed upon entry. 

Note: Values of imports are expressed in nominal dollars, not adjusted 
for inflation. 

[End of figure] 

There is also some evidence that leading suppliers under U.S. 
preference programs have "arrived" as global exporters. For example, 
the 3 leading non-fuel suppliers of U.S. preference imports---India, 
Thailand, and Brazil--were among the top 20 world exporters and U.S. 
import suppliers in 2007, and their exports in 2007 grew faster than 
world exports, according to the World Trade Organization (WTO). 
[Footnote 5] 

Critical Policy Trade-offs among U.S. Consumers, Producers, and Foreign 
Beneficiaries Are Inherent in Preference Programs: 

Preference programs entail three critical policy trade-offs. First, the 
programs are designed to offer duty-free access to the U.S. market to 
increase beneficiary trade, but only to the extent it does not harm 
U.S. industries. U.S. preference programs provide duty-free treatment 
for over half of the 10,500 U.S. tariff lines, in addition to those 
that are already duty-free on a most favored nation basis. But, they 
also exclude many other products from duty-free status, including some 
that developing countries are capable of producing and exporting. GAO's 
analysis showed that notable gaps remain, particularly in agricultural 
and apparel products. For 48 GSP-eligible countries, more than three- 
fourths of the value of U.S. imports that are subject to duties (i.e., 
are dutiable) are left out of the programs. For example, just 1 percent 
of Bangladesh's dutiable exports to the United States and 4 percent of 
Pakistan's are eligible for GSP. Although regional preference programs 
tend to have more generous coverage, they sometimes feature "caps" on 
the amount of imports that can enter duty-free, which may significantly 
limit market access. Imports subject to caps under AGOA include certain 
meat products, a large number of dairy products, many sugar products, 
chocolate, a range of prepared food products, certain tobacco products, 
and groundnuts (peanuts), the latter being of particular importance to 
some African countries. 

The second trade-off is related and involves deciding which developing 
countries can enjoy particular preferential benefits. A few LDCs in 
Asia are not included in the U.S. regional preference programs, 
although they are eligible for GSP-LDC benefits. Two of these 
countries--Bangladesh and Cambodia--have become major exporters of 
apparel to the United States and have complained about the lack of duty-
free access for their goods. African private-sector spokesmen have 
raised concerns that giving preferential access to Bangladesh and 
Cambodia for apparel might endanger the nascent African apparel export 
industry that has grown up under AGOA. Certain U.S. industries have 
joined African nations in opposing the idea of extending duty-free 
access for apparel from these countries, arguing these nations are 
already so competitive in exporting to the United States that in 
combination they surpass U.S. FTA partners Mexico and CAFTA, as well as 
the Andean/AGOA regions, which are the major export market for U.S. 
producers of textiles. 

This same trade-off involves decisions regarding the graduation of 
countries or products from the programs. It relates to the original 
intention that preference programs would confer temporary trade 
advantages on particular developing countries, which would eventually 
become unnecessary as countries became more competitive. Specifically, 
the GSP program has mechanisms to limit duty-free benefits by 
"graduating" countries that are no longer considered to need 
preferential treatment, based on income and competitiveness criteria. 
Since 1989, 28 countries have been graduated from GSP, mainly as a 
result of "mandatory" graduation criteria such as high income status or 
joining the European Union. Five countries in the Central American and 
Caribbean region were recently removed from GSP and CBI/CBTPA when they 
entered free trade agreements with the United States. 

In the GSP program, the United States also pursues an approach of 
ending duty-free access for individual products from a given country by 
means of import ceilings--Competitive Needs Limitations (CNL). Over one-
third of the trade from GSP beneficiaries--$13 billion in imports in 
2006--is no longer eligible for preferences because countries have 
exceeded CNL ceilings for those products. Although the intent of 
country and product graduation is to focus benefits on those countries 
most in need of the competitive margin preferences provide, some U.S. 
and beneficiary country officials observe that remaining GSP 
beneficiaries will not necessarily profit from another country's loss 
of preference benefits. We repeatedly heard concerns that China would 
be most likely to gain U.S. imports as a result of a beneficiary's loss 
of preferences. In 2007, the President revoked eight CNL waivers as a 
result of legislation passed in December 2006. Consequently, over $3.7 
billion of trade in 2006 from six GSP beneficiaries--notably Brazil, 
India, and Thailand--lost duty-free treatment. Members of the business 
community raised concerns that revocation of these waivers would harm 
U.S. business interests while failing to provide more opportunities for 
poorer beneficiaries. GAO's analysis showed that China and Hong Kong 
were the largest suppliers of the precious metal jewelry formerly 
eligible under GSP for duty-free import by India and Thailand; Canada, 
Mexico, Japan, and China were the leading competitors to Brazil's motor 
parts.[Footnote 6] 

Policymakers face a third trade-off in setting the duration of 
preferential benefits in authorizing legislation. Preference 
beneficiaries and U.S. businesses that import from them agree that 
longer and more predictable renewal periods for program benefits are 
desirable. Private-sector and foreign government representatives have 
complained that short program renewal periods discourage longer-term 
productive investments that might be made to take advantage of 
preferences, such as factories or agribusiness ventures. Members of 
Congress have recognized this argument with respect to Africa and, in 
December 2006, Congress renewed AGOA's third-country fabric provisions 
until 2012 and AGOA's general provisions until 2015. However, some U.S. 
officials believe that periodic program expirations can be useful as 
leverage to encourage countries to act in accordance with U.S. 
interests such as global and bilateral trade liberalization. 
Furthermore, making preferences permanent may deepen resistance to U.S. 
calls for developing country recipients to lower barriers to trade in 
their own markets. Global and bilateral trade liberalization is a 
primary U.S. trade policy objective, based on the premise that 
increased trade flows will support economic growth for the United 
States and other countries. Spokesmen for countries that benefit from 
trade preferences have told us that any agreement reached under Doha 
round of global trade talks at the WTO must, at a minimum, provide a 
significant transition period to allow beneficiary countries to adjust 
to the loss of preferences.[Footnote 7] 

Proliferation of Preference Programs Has Led to a Need for a More 
Integrated Approach: 

Preference programs have proliferated over time. In response to 
differing statutory requirements, agencies pursue different approaches 
to monitoring the various criteria set for programs. The result is a 
lack of systematic review and little to no reporting on impact. 

Trade Preferences Have Proliferated, Creating a Complex Array of 
Programs, but Congress Still Considers Each Program Separately: 

U.S. trade preferences have evolved into an increasingly complex array 
of programs. Congress generally considers these programs separately, 
partly because they have disparate termination dates. [Footnote 8] 

Table 1: Growth of Trade Preference Programs: 

Program: GSP; 
Enactment date: January 1975; Several amendments; 
Number of eligible countries, 2007: 131. 

Program: CBI: Caribbean Basin Economic Recovery Act; 
Enactment date: August 1983; 
Number of eligible countries, 2007: 19. 

Caribbean Basin Economic Recovery Expansion Act; 
Enactment date: Amended August 1990; 
Number of eligible countries, 2007: 19. 

Program: CBI: CBTPA; 
Enactment date: May 2000; 
Number of eligible countries, 2007: 9. 

Program: CBI: HOPE; 
Enactment date: December 2006; 
Number of eligible countries, 2007: 1. 

Program: ATPA: 
Enactment date: December 1991; 
Number of eligible countries, 2007: 4. 

Program: ATPA: ATPDEA; 
Enactment date: Amended August 2002; 
Number of eligible countries, 2007: 4. 

Program: AGOA; 
Enactment date: May 2000; Several amendments; 
Number of eligible countries, 2007: 39. 

Source: GAO. 

[End of table] 

Many countries participate in more than one of these programs. Of the 
137 countries and territories eligible for preference programs, as of 
January 1, 2007, 78 benefit from more than one program, and 34 were 
eligible for more than two programs.[Footnote 9] 

While there is overlap in various aspects of trade preference programs, 
each program is currently considered separately by Congress based on 
its distinct timetable and expiration date. Typically the focus has 
been on issues relevant to specific programs, such as counternarcotics 
cooperation efforts in the case of ATPA, or phasing out benefits for 
advanced developing countries in the case of GSP. As a result, until 
last year's hearing before this committee, congressional deliberations 
have not provided for cross-programmatic consideration or oversight. 

The oversight difficulties associated with this array of preference 
programs and distinct timetables is compounded by different statutory 
review and reporting requirements for agencies. Reflecting the relevant 
statutory requirements, two different approaches--a petition process 
and periodic reviews--have evolved to monitor compliance with criteria 
set for various programs. We observed advantages to each approach, but 
individual program reviews appear disconnected and result in gaps. 

The petition-driven GSP reviews of country practices and product 
coverage have the advantage of adapting the programs to changing market 
conditions and the concerns of businesses, foreign governments, and 
others.[Footnote 10] However, the petition process can result in gaps 
in reviews of country compliance with the criteria for participation: 

* From 2001 to 2006, three-quarters of the countries eligible only for 
GSP did not get examined at all for their conformity with eligibility 
criteria. 

* Long periods passed between overall reviews of GSP. USTR completed an 
overall review of the GSP program in fall 2006. USTR completed the last 
general review of the program approximately 20 years earlier, in 
January 1987. 

* The petition-driven review process also fails to systematically 
incorporate other ongoing monitoring efforts. For example, the lack of 
review under GSP provisions of any of the 26 preference beneficiary 
countries cited by USTR in 2006 for having problems related to the 
adequate and effective protection of U.S. intellectual property rights 
(IPR) makes it appear no linkage exists between GSP and ongoing 
monitoring of IPR protection abroad. 

The periodic reviews under the regional programs offer more timely and 
consistent evaluations of country performance against the criteria for 
participation, but may still miss important concerns. For example, 11 
countries that are in regional programs were later subject of GSP 
complaints in the 2001 to 2006 period: 

* Although AGOA has the most intensive evaluation of country 
performance against the criteria for participation, the GSP process 
later validated and resulted in further progress in resolving concerns 
with AGOA beneficiaries Swaziland and Uganda on labor issues. 

* The African country of Equatorial Guinea has been reviewed for AGOA 
eligibility and found to be ineligible. Yet, Equatorial Guinea has not 
been subject to a GSP country practice petition or reviewed under GSP. 
As a result, Equatorial Guinea remains eligible for GSP and exported 
more than 90 percent of its $1.7 billion in exports duty free to the 
United States under that program in 2006.[Footnote 11] 

Only One Preference Program Directly Links to Capacity Building 
Efforts: 

Many developing countries have expressed concern about their inability 
to take advantage of trade preferences because they lack the capacity 
to participate in international trade. Sub-Saharan Africa has been the 
primary focus of U.S. trade capacity-building efforts linked to the 
preference programs, with the United States allocating $394 million in 
fiscal year 2006 to that continent. Although AGOA authorizing 
legislation refers to trade capacity assistance, USTR officials noted 
that Congress has not appropriated funds specifically for that purpose. 
However, USTR has used the legislative language as leverage with U.S. 
agencies that have development assistance funding to target greater 
resources to trade capacity building. In other regions of the world, 
U.S. trade capacity building assistance has less linkage to preference 
programs. 

Separate Reporting and Examination Hinder Measuring Progress on 
Programs' Contribution to Economic Development: 

Separate reporting for the various preference programs makes it 
difficult to measure progress toward achieving the fundamental and 
shared goal of promoting economic development. Only one program (CBI) 
requires agencies to directly report on impact on the beneficiaries. 
Nevertheless, in response to statutory requirements, several government 
agencies report on certain economic aspects of the regional trade 
preference programs. However, different approaches are used, resulting 
in disparate analyses that are not readily comparable. Agencies do not 
regularly report on the economic development impact of GSP. Moreover, 
there is no evaluation of how trade preferences, as a whole, affect 
economic development in beneficiary countries. 

GAO Recommendations and Agency Response: 

To address the concerns I have summarized today, in our March 2008 
report, GAO recommended that USTR periodically review beneficiary 
countries that have not been considered under the GSP or regional 
programs. Additionally, we recommended that USTR should periodically 
convene relevant agencies to discuss the programs jointly. In response, 
USTR is undertaking two actions. First, USTR will conduct a review of 
the operation and administration of U.S. preference programs to explore 
practical steps that might improve existing communication and 
coordination across programs. Second, beginning with the annual Report 
of the President of the United States on the Trade Agreements Program 
to be issued on March 1, 2009, the discussion of the operation of all 
U.S. trade preference programs will be consolidated into its own 
section. 

We also suggested that Congress should consider whether trade 
preference programs' review and reporting requirements may be better 
integrated to facilitate evaluating progress in meeting shared economic 
development goals. We believe that the hearings held by the committee 
last year and again today are responsive to the need to consider these 
programs in an integrated fashion and are pleased to be able to 
contribute to this discussion. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
answer any questions that you or other members of the committee may 
have. 

GAO Contact and Staff Acknowledgments: 

For further information on this testimony, please contact Loren Yager 
at (202) 512-4347, or by e-mail at [email protected]. Juan Gobel, 
Assistant Director; Kim Frankena, Assistant Director; R. Gifford 
Howland; Karen Deans; Ernie Jackson; and Ken Bombara made key 
contributions to this statement. 

[End of testimony] 

Footnotes: 

[1] GAO, International Trade: U.S. Trade Preference Programs Provide 
Important Benefits, but a More Integrated Approach Would Better Ensure 
Programs Meet Shared Goals, [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-443] (Washington, D.C.: Mar. 7, 2008), and GAO, 
International Trade: An Overview of Use of U.S. Trade Preference 
Programs by Beneficiaries and U.S. Administrative Reviews, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1209] (Washington, D.C.: Sept. 
27, 2007). 

[2] In 1996, the number of duty-free tariff lines offered under GSP was 
expanded to provide additional benefits to beneficiary least-developed 
countries (LDC). 

[3] In 2000, CBI was expanded by the Caribbean Basin Trade Partnership 
Act (CBTPA). 

[4] In 2002, ATPA was expanded by the Andean Trade Promotion and Drug 
Eradication Act (ATPDEA). 

[5] For additional information, see WTO, World Trade 2007, Prospects 
for 2008: Developing, Transition Economies Cushion Trade Slowdown, 
Press Release No. 520, Apr. 17, 2008, p. 19. 

[6] For GAO's analysis of the scope and impact of the CNL waiver 
terminations, see pp. 38-41 of [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-1209]. 

[7] For additional information on these issues see [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-08-443] and [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-1209]. 

[8] For example, the Caribbean Basin Trade Partnership Act was to 
expire on September 30, 2008, while GSP and ATPA expire December 31, 
2008. 

[9] For a listing of beneficiary countries and the programs for which 
they are eligible, see p. 48 of [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-08-443]. 

[10] In the annual GSP review process, petitions may be filed by 
interested parties (for example, governments, businesses, or 
nongovernmental organizations) to request actions allowed under the 
statutes and regulations governing the GSP program, including adding or 
removing a product from overall GSP eligibility, waiving the 
competitive-need-limit for a product from a specific beneficiary. Any 
person may file a petition requesting that the status of any eligible 
beneficiary be reviewed with respect to any of the designation criteria 
listed in the statute governing the GSP program, including worker 
rights and intellectual property rights. For a summary of GAO's 
analysis of the product and country petitions filed in recent years, 
see pp. 42-44 and p. 72 of [hyperlink, http://www.gao.gov/cgi-
bin/getrpt?GAO-07-1209]. 

[11] AGOA requires countries to be eligible for GSP, but the reverse is 
not true; AGOA's criteria are more extensive than GSP. For example, 
AGOA requires countries to have or be making progress toward political 
pluralism and the rule of law and prohibits participation of countries 
that undermine U.S. national security and foreign policy, commit gross 
violations of human rights, or support international terrorism. GAO's 
analysis showed that all (100 percent of the value) of Equatorial 
Guinea's exports to the United States were eligible for GSP in 2006. 
Equatorial Guinea exported approximately $1.6 billion in fuel products 
to the United States under GSP in 2006. 

[End of section] 

GAO's Mission: 

The Government Accountability Office, the audit, evaluation and 
investigative arm of Congress, exists to support Congress in meeting 
its constitutional responsibilities and to help improve the performance 
and accountability of the federal government for the American people. 
GAO examines the use of public funds; evaluates federal programs and 
policies; and provides analyses, recommendations, and other assistance 
to help Congress make informed oversight, policy, and funding 
decisions. GAO's commitment to good government is reflected in its core 
values of accountability, integrity, and reliability. 

Obtaining Copies of GAO Reports and Testimony: 

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each 
weekday, GAO posts newly released reports, testimony, and 
correspondence on its Web site. To have GAO e-mail you a list of newly 
posted products every afternoon, go to [hyperlink, http://www.gao.gov] 
and select "E-mail Updates." 

Order by Mail or Phone: 

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to: 

U.S. Government Accountability Office: 
441 G Street NW, Room LM: 
Washington, D.C. 20548: 

To order by Phone: 
Voice: (202) 512-6000: 
TDD: (202) 512-2537: 
Fax: (202) 512-6061: 

To Report Fraud, Waste, and Abuse in Federal Programs: 

Contact: 

Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]: 
E-mail: [email protected]: 
Automated answering system: (800) 424-5454 or (202) 512-7470: 

Congressional Relations: 

Ralph Dawn, Managing Director, [email protected]: 
(202) 512-4400: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7125: 
Washington, D.C. 20548: 

Public Affairs: 

Chuck Young, Managing Director, [email protected]: 
(202) 512-4800: 
U.S. Government Accountability Office: 
441 G Street NW, Room 7149: 
Washington, D.C. 20548: 

*** End of document. ***