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63–015 2012

THE OPERATION, IMPACT AND FUTURE OF 

THE U.S. PREFERENCE PROGRAMS 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

NOVEMBER 17, 2009

Serial No. 111–36 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK B. MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

LINDA T. SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

JOHN A. YARMUTH, Kentucky 

DAVE CAMP, Michigan 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GINNY BROWN–WAITE, Florida 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

JANICE MAYS, Chief Counsel and Staff Director 

JON TRAUB, Minority Staff Director 

SUBCOMMITTEE ON TRADE 

SANDER M. LEVIN, Michigan, Chairman 

JOHN S. TANNER, Tennessee 

CHRIS VAN HOLLEN, Maryland 

JIM MCDERMOTT, Washington 

RICHARD E. NEAL, Massachusetts 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

BOB ETHERIDGE, North Carolina 

LINDA T. SA ́ NCHEZ, California 

KEVIN BRADY, Texas, Ranking Member 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

WALLY HERGER, California 

DEVIN NUNES, California 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory as of November 10, 2009 announcing the hearing ................................ 2 

WITNESSES 

The Honorable Jim McDermott, Representative of the State of Washington, 

U.S. House of Representatives ............................................................................ 9 

The Honorable Linda Sa ́nchez, Representative of the State of Washington, 

U.S. House of Representatives ............................................................................ 11 

The Honorable Elliot Engel, Representative of the State of Washington, U.S. 

House of Representatives .................................................................................... 15 

Tim Reif, General Counsel, Office of the U.S. Trade Representative ................. 21 

Sandra Polaski, Deputy Undersecretary, U.S. Department of Labor, Bureau 

of International Labor Affairs ............................................................................. 29 

Mary Ott, Ph.D., Deputy Assistant Administrator, U.S. Agency for International Development (USAID), Bureau of Economic Growth, Agriculture 

and Trade .............................................................................................................. 35 

Burnham (Bud) Philbrook, Deputy Under Secretary, U.S. Department of Agriculture (USDA), Farm and Foreign Agricultural Services ............................... 41 

Stephen Karangizi, Assistant Secretary General, the Common Market for 

Eastern and Southern Africa (COMESA) .......................................................... 67 

His Excellency Cham Prasidh, Senior Minister and Minister of Commerce, 

Kingdom of Cambodia .......................................................................................... 78 

W. David Hastings, President and Chief Executive Officer, Mount Vernon 

Mills, Inc., Mauldin, South Carolina .................................................................. 103 

Paul O’Brien, Vice President of Policy and Advocacy, Oxfam America .............. 118 

The Honorable F. Toma ́s Duen ̃ as, Former Ambassador of Costa Rica to the 

United States; Chief Executive Officer, ESCO InterAmerica .......................... 127 

David Love, Senior Vice President and Chief Supply Chain Officer, Levi 

Strauss & Co., San Francisco, California ........................................................... 137 

Jeff Vogt, Global Economic Policy Specialist, American Federation of Labor 

& Congress of Industrial Organizations (AFL–CIO) ......................................... 142 

William A. Reinsch, President, National Foreign Trade Council (NFTC) .......... 153 

Meredith Broadbent, Trade Advisor, The Global Business Dialogue .................. 160 

Margrete Strand Rangnes, Director, Labor, Workers’ Rights & Trade Program, Sierra Club ................................................................................................ 165 

Loren Yager, Ph.D., Director, U.S. Government Accountability Office (GAO), 

International Affairs and Trade .......................................................................... 172 

SUBMISSIONS FOR THE RECORD 

VF Corporation ........................................................................................................ 201 

US Preference Reform Working Group .................................................................. 202 

African Cotton and Textiles Industries Federation .............................................. 211 

Albaugh, Inc. ............................................................................................................ 215 

United Scientific Supplies, Inc. .............................................................................. 218 

American Apparel & Footwear Association ........................................................... 219 

American Fiber Manufacturers Association .......................................................... 221 

U.S. Chamber of Commerce .................................................................................... 223, 

227 

American Sugar Alliance ........................................................................................ 229 

Association of Colombian Flower Exporters .......................................................... 231 


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iv 

U.S. Association of Importers of Textiles and Apparel ......................................... 234 

Republic of Mauritius .............................................................................................. 239 

Bangladesh Garment Manufacturers and Exporters Association ....................... 240 

Bangladesh Knitwear Manufacturers & Exporters Association .......................... 245 

Centre for Policy Dialogue ...................................................................................... 248 

International Sugar Trade Coalition ...................................................................... 249 

Bangladesh Secretariat ........................................................................................... 253 

Chevron Corporation ............................................................................................... 255 

African Coalition for Trade, Inc. ............................................................................. 257 

Coalition for GSP ..................................................................................................... 260 

Sugar Alliance of the Philippines ........................................................................... 263 

Ecuadorian-American Chamber of Commerce ...................................................... 264 

Embassy of the Kingdom of Lesotho ...................................................................... 269 

Emergency Committee for American Trade .......................................................... 272 

Center for Global Development .............................................................................. 274 

Government of Trinidad and Tobago ..................................................................... 276 

Jamaica Chamber of Commerce ............................................................................. 282 

International Sugar Trade Coalition ...................................................................... 284 

National Association of Manufacturers .................................................................. 287 

Lesotho Textile Exporters Association ................................................................... 289 

Campbell Soup Company ........................................................................................ 291 

Government of Thailand ......................................................................................... 293 

Embassy of the Republic of the Fiji Islands ................................................... 294 

Federation of Industries of the State of Sao Paulo ........................................ 294 

God’s Pantry Food Bank .................................................................................. 296 

Michael Smiddy ................................................................................................ 297 

National Milk Producers Federation .............................................................. 297 

National Retail Federation .............................................................................. 299 

Nien Hsing Textile Co., Ltd. ............................................................................ 302 

Picard Bangladesh Limited ............................................................................. 304 

Office of International Trade Negotiations Ministry of Trade and Industries of the Republic of Panama .................................................................. 305 

Retail Industry Leaders Association ............................................................... 306 

U.S.-India Business Council ............................................................................ 308 

Embassy of the United Republic of Tanzania ....................................................... 311 

California Cut Flower Commission ........................................................................ 313 

Sandra Polaski, Harnessing Global Forces to Create Decent Work in Cambodia ...................................................................................................................... 320

One ............................................................................................................................ 350 

David J. Steinberg ................................................................................................... 354 


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THE OPERATION, IMPACT AND FUTURE OF 

THE U.S. PREFERENCE PROGRAMS 

TUESDAY, NOVEMBER 17, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON TRADE, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:08 a.m., in 

Room 1100, Longworth House Office Building, the Honorable Sander Levin [chairman of the subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Trade Subcommittee Chairman Levin Announces 

a Hearing on the Operation, Impact, and Future 

of the U.S. Preference Programs 

November 10, 2009 

By (202) 225–6649 

Ways and Means Trade Subcommittee Chairman Sander M. Levin today announced the Trade Subcommittee will hold a hearing to evaluate the operation and 

impact of the U.S. preference programs to date, as well as opportunities for improvement moving forward. The hearing will take place on Tuesday, November 17, 

2009 in the main Committee hearing room, 1100 Longworth House Office 

Building, beginning at 10:00 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from the invited witness only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. 

FOCUS OF THE HEARING: 

Preference programs provide unilateral market access to developing countries and 

are seen as central to U.S. trade and development policy, as well as an important 

foreign policy tool. Over the years, Congress has maintained active oversight of 

these programs, repeatedly revising and expanding them to better meet the goal of 

spurring economic growth and development. With two key preference programs 

nearing expiration in December, this hearing provides a timely opportunity to continue this critical oversight. 

Specifically, the hearing will focus on evaluating the operation and impact of the 

U.S. preference programs to date, to understand the lessons learned from the circumstances where the preference programs have been successful and to identify opportunities for improvement in areas where challenges remain. 

BACKGROUND: 

Since the 1970s, the United States and other major developed countries have 

viewed preference programs as an important policy tool to spur economic growth 

and counter poverty. The United States developed the Generalized System of Preferences (GSP) on this basis, as well as later regional programs for the Caribbean 

Basin (Caribbean Basin Economic Recovery Act, Caribbean Basin Trade Partnership 

Act, Haitian Hemispheric Opportunity through Partnership Encouragement, 

CBERA/CBTPA/HOPE), sub-Saharan Africa (AGOA), and Andean (ATPA/ATPDEA) 

countries. 

In the decades since their inception, the U.S. trade preference programs have 

made significant strides. Currently, over 130 developing countries can benefit from 

one or more of the U.S. programs. And the programs have provided critical benefits 

in some of the world’s poorest and most vulnerable countries (including the so-called 

‘‘least-developed countries’’). For example, trade preferences for Haiti (known as 

HOPE), contributed to an increase in Haitian apparel exports to the United States 

of 30 percent in 2009, contributing to critical job creation in a country with nearly 

70 percent unemployment. 


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The United States Trade Representative (USTR) has reported that imports from 

sub-Saharan African countries under AGOA/GSP have increased six-fold from 2001, 

the first full year of AGOA, to 2007 (to $51.1 billion). Non-oil exports from sub-Saharan Africa have doubled over the same period. Imports under the Andean preference program also grew significantly, from approximately $97 million in 1992, the 

first full year after enactment of ATPA, to more than $17 billion in 2008. 

The preference programs have been important for U.S. businesses and workers as 

well. For example, the Andean trade preference arrangement has helped to develop 

an important export market for U.S. textiles. Similarly, U.S. companies rely heavily 

on GSP to obtain raw materials, parts, and equipment necessary for their manufacturing operations in the United States. 

At the same time, many important stakeholders believe that challenges remain 

and the preference framework can be improved. One concern that has been raised 

is that relatively few countries and relatively few products dominate the preference 

programs, in particular the regional preference programs. Stakeholders have argued 

that Congress should take a hard look at such factors as the product coverage of 

the preference programs, the rules of origin regimes, the frequency of expiration of 

the programs, and the linkages between the programs and trade capacity-building 

assistance to see whether improvements can be made to improve utilization and diversification. 

Other stakeholders have argued that the U.S. preference programs—in particular, 

the more generous market provisions of the regional programs—should be extended 

to all of the world’s poorest countries. At present, least-developed, low-income countries like Bangladesh, Cambodia, Laos and others do not have such access. 

Still others have urged Congress to review the extent to which the preference programs establish other incentives for development. For example, each of the preference programs has eligibility criteria designed to promote development (e.g., on 

respecting internationally-recognized labor rights, promoting rule of law, protection 

of intellectual property, etc.). Important questions have been raised about the extent 

to which these criteria have been effective and whether (and how) they might be 

improved. 

This hearing provides an opportunity to explore these important questions and arguments. In announcing the hearing, Chairman Levin said, ‘‘The preference programs have been an important part of the effort to expand and shape trade so that 

its benefits can be more broadly spread. We need to make sure that the framework 

of these programs plays a role in promoting economic growth and development.’’ 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Committee Hearings’’. Select the hearing for 

which you would like to submit, and click on the link entitled, ‘‘Click here to provide 

a submission for the record.’’ Once you have followed the online instructions, complete all informational forms and click ‘‘submit’’ on the final page. ATTACH your 

submission as a Word or WordPerfect document, in compliance with the formatting 

requirements listed below, by close of business Tuesday, December 1, 2009. Finally, 

please note that due to the change in House mail policy, the U.S. Capitol Police will 

refuse sealed-package deliveries to all House Office Buildings. For questions, or if 

you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or suppleVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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mentary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman LEVIN. If everyone will be seated then we will start. 

We tried to organize this hearing, as you all know if you have 

seen the agenda, there are four panels, and there is also a Democratic caucus at noon, so Mr. Brady and I and are staffs have 

talked about how we will organize this important hearing. 

[Interruption to proceedings.] 

Chairman LEVIN. One way we will organize is by turning off all 

cell phones. ‘‘We are in the hearing, I will call you later.’’ If it is 

the President—— 

[Laughter.] 

Chairman LEVIN. Family. And if everybody else would like to do 

the same, it would help. 

So there are four panels, and we thought we would proceed this 

way, with the panel of our three colleagues first, and they, I think, 

have been informed and I think they are pleased about this, that 

we will very much look forward and hear their testimony, but since 

we see all of you on the floor later on, we will withhold our questions and bombard you on the floor during quiet moments there. 

So that should, in a half an hour or so, allow us to go on to the 

second panel of government people from the administration. And 

we would have the testimony and try to finish that, if we could, by 

noon or shortly thereafter, and then take a 45 to 50 minute break 

so some could go to the caucus and everybody could grab a bite to 

eat. 

And then we would start the third panel at around—say between 

1:00 and 1:15, at the latest, and we are notifying everybody on the 

third and fourth panels that they will come here after lunch, unless 

they would like to be here before that. 

So let’s start, and Mr. Brady and I will give our brief opening 

statements. But before we do that, I would like very much if Mr. 

Brady joins me in welcoming—not welcoming, but glad with your 

schedule, Mr. Chairman, that you could be here for this important 

hearing, and ask for you to kick this off. 


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Chairman RANGEL. Well thank you Chairman Levin, and Congressman Brady. I am just overlooking—looking over, rather, my 

opening prepared remarks, and I think I would like to set it aside, 

because when we first got a chance to have the leadership, former 

Congressman McCreary and I tried to find out, judging the political 

atmosphere that exists, whether this committee could work towards a bipartisanship since our subject matters seemed, at that 

time, less partisan than some of the other committees. 

And even though it looks as though the political situation will 

not lend itself to much bipartisanship, to my deep regret—and I’m 

certain that most all of the Members of the Committee feel that 

strongly—still, there comes a time when our country has to come 

together, and basically it has to be what is for our country and the 

world, and basically the conditions of poverty and the fiscal crisis 

will dictate our agenda. 

Having someone like you, Mr. Levin, who has dedicated such a 

large part of your life in trying to make our country more prosperous and stronger and at the same time increasing the standards 

of people all over the world and recognizing this is one of the major 

roles that we have think in terms of traveling to avert war. Especially at a time when nuclear power seems to be so common with 

so many countries, and so many poor countries that should be more 

concerned with how to feed themselves and trade rather than how 

to prepare for war. 

And I had a wonderful educational time and traveling with Mr. 

Brady, with you, and learning so much from him and from the trip 

in general, which allows me to believe that even partisanship can’t 

take away from facts that we have inherited from our communities, 

our country, and from the world. And I am so optimistic to have 

somebody like Jim McDermott whose ideas came ‘‘What about Africa?’’ and as a result of that and putting together our minds, we realized what a fortunate country we are and continue to be, but also 

how much more there is to be done. 

And we are blessed that we have an opportunity to help the poorer countries, especially in our hemisphere, and Haiti has proven to 

be the height of the challenge here that we face, but there is so 

much more that can and should be done. 

Lastly, I would think and would hope that everyone comes to 

Congress wanting America to be perceived, and in reality, be the 

hope that they would want to achieve. It is hard to think of any 

challenge that we have that is more spiritual in nature, that involves the patriotic will to protect our country, but at the same 

time to help other countries. 

So I know that you are sorry that you asked me to say anything, 

but you asked for it and you got it. I yield back, Mr. Chairman. 

Chairman LEVIN. Never sorry. With all of your deep involvement in these issues going back many, many years, and some of 

these programs, Mr. Rangel, would not be in place if it weren’t for 

you. 

Chairman RANGEL. Thank you. 

Chairman LEVIN. So let me just briefly summarize. I have an 

opening statement, and I think there are copies if anybody would 

like to take a look at it. 


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This is indeed an important hearing, and the Senate Finance 

Committee is holding a hearing on this, on preference programs, on 

Thursday. Not as extensive hearings as we are having, but of 

course you would expect that from the House, that we would have 

more extensive hearings. 

These issues really reflect—relate to the overall trade challenge 

that we face in this new century, and that is how to craft sound 

trade policies that reflect both the need for expanding trade, and 

also to shape its course, to do both, in order to maximize its benefits and to address adverse consequences. So within that general 

framework of a modern trade policy in favor of its expansion, but 

on terms that spread its benefits, we turn today to the preference 

programs that focus in on developing nation’s in our relations with 

them in trade. 

This committee and Subcommittee, under your leadership and 

your predecessors on both sides of the aisle, have been really devoted to this issue. It has crossed party lines with your leadership, 

Mr. Chairman, Phil Crane’s leadership—we should remember 

that—and the leadership of many others, including our colleague, 

Jim McDermott. 

So out of this has developed these programs of preferences, they 

are called, additional access to our markets for the Caribbean 

under CBI, the Andean nations, of course, under ATPA, AGOA for 

sub-Saharan Africa, and the HOPE program for Haiti. And these 

programs have achieved real results. I won’t go into a lot of detail 

this morning. It is in my opening statement, and our witnesses are 

going to comment on this. But, for example, under AGOA there has 

been a substantial increase in non-oil exports since its inception. 

CBI has seen, since the early years, ’84, a very major growth, from 

576 million at first to almost 5 billion. And the same with ATPA, 

the Andean Trade Preference Act and recently with the HOPE program. 

And it is also important to understand that these programs support U.S. economic interests, and our exports to these various countries have been growing rather substantially. And also what is 

sometimes forgotten, and that is a substantial portion of the imports from GSP countries help to sustain U.S. manufacturing raw 

materials, parts, components, and machinery and equipment. 

It is also—and we are going to be discussing this today—it is important to remember that there has been an increasing effort to 

shape the terms of trade based on the principal that I very much 

believe is true, that it is not enough to expand trade. You have to 

expand it in ways that are mutually beneficial. Trade isn’t an end 

in and of itself, after all, it is a means to the end to help people 

come out of poverty and help people move up the ladder. And so 

as a result, we have placed criteria in preference programs, and 

they include respective rule of law, respect for fundamental labor 

rights, and others, including rules against corruption. 

Increasingly, we have put into place provisions regarding labor 

rights, and not because they are social issues. They are indeed economic issues, and the notion is that in order for the benefits of expanded trade to be spread and to work, one of the elements is that 

workers need to have their basic international rights. And indeed 

to help workers in developing countries join the middle class, and 


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that is mutually beneficial for those countries and for us, for those 

countries, as they develop the strength to come from middle class 

growth, and for us having middle classes in other countries to buy 

our goods. 

So today we will be discussing those issues, and I finish with 

this, and I think Mr. Brady you agree, that preference programs 

are an important part of the constellation of our trade agenda. But 

no one says they are perfect. There is room for improvement, and 

indeed there are, as would be expected from expanded trade, some 

issues that need to be addressed. So what we are doing today is 

looking at the past, looking at the present, and also looking at the 

future. And we are going to hear a variety of points of view on the 

past record, the present situation, and also some issues relating to 

changes or improvements in our programs. 

As we sit here, I am not sure of the result of this. I feel strongly—the administration does, I think it is true in the Senate—that 

the programs that have deadlines at the end of the year, that there 

need to be extensions. The purpose of this hearing is to give us the 

information so that we can make some decisions regarding extensions and improvements and changes, and how they mesh. 

So, Mr. Brady, if you will take over, and then we will turn to our 

three distinguished colleagues. 

Mr. BRADY. Well thank you Mr. Chairman, and Chairman Rangel. 

International trade is a powerful engine for economic growth and 

job creation, as our experience here at home demonstrates. One out 

of every five American jobs depends on trade, and as our U.S. trade 

representative Ambassador Kirk notes, jobs supported by exports 

pay higher wages than other jobs, and for that reason I commend 

you for holding this hearing. This global economic downturn has 

hurt workers all over the world. International trade will be a vital 

tool for promoting economic recovery and creating jobs everywhere. 

The indisputable benefits of trade liberalization are why I strongly support open markets both here in the United States and 

abroad. The trade preference programs we are discussing today can 

be a key tool to help developing countries break into the international market. 

As you and Chairman Rangel have noted, Congress has worked 

on a bipartisan basis to develop preference programs that provide 

a vital economic boost to many developing countries. Congress has 

also demonstrated its willingness to regularly revisit our programs 

to make them more effective. Congress has amended the African 

Growth and Opportunity Act several times to spurt the creation of 

thousands of jobs in Africa without creating adverse affects on U.S. 

workers here at home. The benefits have provided U.S. consumers 

with better prices and more choices. 

Effective trade preferences are one stop on a country’s journey to 

becoming a full player in the international market, but trade preferences cannot be an end unto themselves. In fact, a truly successful trade preference program is one that makes itself ultimately obsolete. For example, Malaysia and South Korea successfully used 

GSP as a tool for economic development, exceeding the need for 

continued benefits and thriving once those benefits were removed. 

Chile, Singapore, the CAFTA countries, and Peru all graduated 


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from trade preferences into permanent bilateral trade agreement 

relationships, showing that trade preferences are a stepping stone 

to full engagement in the international market. 

These trade agreements offer advantages for both parties over a 

trade preference relationship. Partner countries achieve full, permanent, duty-free access to the U.S. market, a significant benefit 

over the partial, temporary access provided by preferences. This relationship also sends a strong signal to track investment and capital. The capacity building and enforceable labor commitments help 

improve standards significantly. For the United States, the benefits 

are obvious. American workers and businesses finally enjoy a level 

playing field because these markets are open to our exports, supporting more American jobs. 

When Chile, the CAFTA countries, and Peru went from a one 

way preference relationship to a two way free trade relationship, 

the United States went from a trade deficit to a trade surplus with 

these countries. In the case of CAFTA, we saw our deficit of over 

$1.2 billion shift to a trade surplus of over $6 billion, and American 

workers have benefitted. These examples demonstrate the importance of having developing countries become full partners in the 

international market. We can quickly realize similar benefits by 

implementing the free trade agreements with Colombia and Panama, two countries anxious to move from a one way relationship 

to a permanent, mature relationship, leveling the playing field for 

U.S. workers. 

There are many countries that aren’t yet ready to move from 

preferences to a free trade relationship. For these countries, effective trade preference programs are the right policy. To that end, we 

must design our preference programs to ensure that developing 

countries can take full advantage of them, assuming they meet certain key conditions. That means having eligibility criteria that 

challenge countries to improve their laws, but at the same time encourage investment. After all, a developing country can have the 

best labor laws in the world, but that won’t make any difference 

if there aren’t any jobs. 

The eligibility criteria currently enshrined in our preference programs provide the right balance and incentives. As the GAO has 

noted, we have successfully used these criteria to prompt improvements. And even for the least developed countries, our preference 

programs must not become a disincentive to take that next critical 

step to becoming full members in the international market through 

enthusiastic participation in the Doha Round. The ultimate goal of 

duty-free, quota-free access to the U.S. market for the least developed through the Round will provide incentives for those countries 

to push the emerging developing countries to make the concessions 

we need to bring the Round to a successful close. 

And I will close with this. Engagement in the international market is a key development tool. Many countries have benefitted from 

this engagement, and U.S. trade preference programs can help 

countries take advantage of opportunities to export their goods, create jobs, and eventually join the global market. 

With that, Mr. Chairman, I yield back and look forward to hearing from our witnesses. 


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Chairman LEVIN. Well thank you very much, and I think your 

reference to Doha is very apt, because it is supposed to be a development round, and here are we are having some discussion this 

morning about our relations with the developing countries. 

So that is a good segue to our distinguished panel, two members 

of our committee and an important member of the Committee on 

Foreign Affairs. Jim McDermott—I don’t know. I don’t think I have 

to laud you all too much. Your credentials speak for yourselves. 

Jim, your interest in this area goes back many, many years, and 

Linda, as a newer member here, you have been dedicated to 

digging into these issues, really particularly effectively. And Elliot 

has used his position in foreign affairs matters to be interested not 

only in kind of the first glances of foreign affairs, but digging beneath the surface. So we look forward to your testimony. 

Jim, are you going to go first? Representative McDermott and 

then Representative Sanchez, and then Representative Engel. 

STATEMENT OF THE HONORABLE JIM MCDERMOTT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. MCDERMOTT. Mr. Chairman, thank you, and the Committee for inviting me to testify on my views for this preference review. The excellent group of witnesses you have called today to 

work with us will cover very important issues that confront our 

trade policy, and I look forward to crafting a policy with the Committee. 

In difficult economic times like these, developed countries sometimes pull back. They pull back from international engagement, 

and pull back from thinking long term, and that is quite understandable. But I think that in these times and in this globalized 

economy, now is the time to push forward on improving trade with 

the poorer countries of the world. 

Our preference programs have important issues that need addressing, but while we think about all the things we need to fix, 

we should also keep in mind that our preference programs have 

done enormous good for the poor of the world and for America. 

They provided jobs that have fed and clothed millions of the poor, 

and been a boon to the American businesses. We shouldn’t forget 

that. 

I think it is also important to keep in mind that our work is far 

from over. As Congressman Brady mentioned, when we passed 

AGOA in 2000 it was not perfect, and it was a big step forward, 

but we have amended it sequentially since then. In the 9 years, the 

Africans have made huge progress in growing trade. But we know 

that for development to really accelerate, we need to get more 

countries involved in trading more products. 

We know that the trade capacity building is as important as extending more preferences. It is not simply enough to open the door. 

We know that with sustained, long term help we can make a difference. I don’t think we are close to the finish line on that, I think 

we are just beginning. The Members of the Committee have worked 

hard on encouraging development through trade, and I think we 

should focus on a few things in particular. 


anorris on DSK9Q6SHH1PROD with HEARING
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While there are details to work out, I think there is broad agreement that our trade programs need to be stable, they need to be 

simplified, they need to be more effective, and they need to help 

more people. First, I think we need to agree that the stability of 

our programs is essential to them being effective. Our largest program, GSP, is weeks away from expiring. Other agreements partially expire in 2012, and others in 2015. When we extend our programs, sometimes we do it for only a few months or for a year. No 

one who has ever run a business would want to invest in a climate 

that is so unstable. Our programs need to be long term. 

Second, our programs are too complicated and too hard to use. 

Our rules of origin prevent common sense business from happening. We impose regulations that poor countries cannot meet 

without our help. We need to fix this. Simplifying our programs 

and doing more to help partners meet the important standards we 

set are keys to the success. 

Third, we need to address the capacity building program. We all 

know the wisdom of trade, not aid. But I think we need to make 

aid for trade an equally large part of our programs. 

Different countries face different challenges with trading with us. 

They need functioning ports, better roads, permission to fly directly 

to the United States, help with energy and more technology. They 

need training. Now we can do this in a targeted way. Preferences 

have helped our trading partners quite a bit, but without thoughtful capacity building, we can only help so much. With over 24 federal agencies giving out foreign aid, we don’t always coordinate our 

efforts. We need to pull these efforts together to help poor countries 

grow, and to give American business more customers. 

Finally, we need to find a way to strengthen the programs we 

have while at the same time helping more people. Trade is not a 

zero sum game. We can strengthen our current programs while 

also helping other desperately poor countries who right now get no 

benefits. We can help different countries like Lesotho, the Philippines, and Cambodia at the same time. 

As we all know, the Andean Trade Preference Act and the GSP 

are expiring next month. We need to extend these programs immediately, in this coming year and in the Congress, and push forward, 

not pull back. It is the moral thing to do for the poor of the world. 

It is good for American business and consumers, and we know it 

is good for America’s security. 

I want to thank you for your time. 

[The prepared statement of Mr. McDermott follows:] 

Prepared Statement of The Honorable Jim McDermott, Representative of 

the State of Washington, U.S. House of Representatives 

Mr. Chairman I want to thank you and the Committee for inviting me to testify 

here today and to offer my views on Preference Reform. The excellent group of witnesses you have called to work with us today will cover very important issues that 

confront our trade policy. I look forward to helping with this effort. 

In difficult economic times like these developed countries sometimes pull back. 

They pull back from their international engagement and pull back from thinking 

long term. It’s understandable. But I think that in these times and in this globalized 

economy now is the time to push forward on improving trade with the poorer countries of the world. 

Our Preference programs have important issues that need addressing. But while 

we think about all of the things we need to fix, we should also keep in mind that 

our preference programs have done enormous good for the poor of the world and for 


anorris on DSK9Q6SHH1PROD with HEARING
11 

America. They have fed and clothed millions of the poor and been a boon to American businesses. We can’t forget that. 

I think it is also important to keep in mind that our work is far from over. When 

we passed AGOA in 2000 it was a big step forward. In only 9 years the Africans 

have made huge progress in growing trade. But we know that for development to 

really accelerate we need to get more countries involved in trading more products. 

We know that trade capacity building is as important as extending more preferences. And we know that with sustained long-term help we can make a big difference. I don’t think we’re close to the finish line—I think we’re only just beginning. 

The Members of the Committee have worked hard on encouraging development 

through trade and I think we should focus on a few things in particular. While there 

are details to work out, I think there is broad agreement that our trade programs 

need to be stable, they need to be simplified, they need to be more effective, and 

they need to help more people. 

First I think we agree that the stability of our programs is essential to them being 

effective. Our largest program, GSP, is weeks away from expiring. Other agreements partially expire in 2012 and others expire in 2015. When we extend our programs sometimes we do it for only a few months or a year. No one who has ever 

run a business would want to invest in a climate that is so unstable. Our programs 

need to be long-term. 

Second, our programs are too complicated and too hard to use. Our rules of origin 

prevent common sense business from happening; we impose regulations that poor 

countries cannot meet without our help. We need to fix this. Simplifying our programs and doing more to help our partners meet the important standards we set 

are keys to their success. 

Third, we need to address the capacity building problem. We all know the wisdom 

of ‘‘trade not aid’’. Well, I think we need to need to make ‘‘aid for trade’’ an equally 

large part of our programs. Different countries face different challenges when trading with us. They need functioning ports, better roads, permission to fly directly to 

the United States, help with energy, and more technology. They need training. 

Now, we can do this in a targeted way. Preferences help our trading partners 

quite a bit, but without thoughtful capacity building we can only help them so 

much. With over 24 federal agencies giving out foreign aid we don’t always coordinate our efforts. We need to pull these efforts together to help poor countries grow 

and to give American business more customers. 

Finally, we need to find a way to strengthen the programs we have while at the 

same time helping more people. Trade is not a zero-sum game. We can strengthen 

our current programs while also helping other desperately poor countries who right 

now get no benefits. We can help different countries like Lesotho, the Philippines, 

and Cambodia at the same time. 

As we all know the Andean Trade Preference Act and GSP are expiring next 

month. We need to extend these programs and in this coming year, in this Congress, 

push forward, not pull back. It’s the moral thing to do for the poor of the world, 

it is good for American business and consumers, and we all know it’s good for America’s security. 

Thank you for time and your efforts. 

f 

Chairman LEVIN. Thank you. 

Ms. Sa ́nchez, welcome. 

STATEMENT OF THE HONORABLE LINDA SA ́ NCHEZ, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. SA ́ NCHEZ. Thank you Chairman Levin and ranking member Brady for allowing me the opportunity to testify today regarding our trade preferences policies, and their effect on working families. The hearing today, I think, is an important opportunity to examine what works about our trade preferences policies, as well as 

what really doesn’t. 


anorris on DSK9Q6SHH1PROD with HEARING
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As many of you may know, I have been a long time advocate for 

a new trade model, because I feel that too often our approach fails 

working families both here and abroad. 

Our preferences programs have a very laudable goal, to assist developing countries in their efforts to build up domestic industry, increase exports, and alleviate poverty. And, in some cases the preferences appear to have been wildly successful. As Mr. Brady mentioned, some countries, including South Korea, Singapore, Bahrain, 

and Slovenia have graduated from the GSP program and no longer 

qualify for preferences. 

In other cases, however, the preferences have been less successful, at least from the point of view of working families. A case in 

point is the Republic of Philippines, a beneficiary of the General 

System of Preferences. According to a petition filed with the United 

States Trade Representative, the government of the Republic of 

Philippines has engaged in policies that deny workers the freedom 

of association, as guaranteed under International Labor Organization ILO Convention 87, and has undermined the ability of workers 

to form and join unions, in violation of ILO Convention 98. The petition also accuses the Philippine government of involvement in 

extra-judicial killings and abductions of union leaders, members, 

organizers, and supporters through elements of the armed forces of 

the Philippines, the Philippine national police, local police forces, 

and private security forces. 

Given these reports, which are not limited to the Philippines, I 

strongly believe that it is appropriate and necessary to re-examine 

our approach to preference system creation and renewal. Encouraging and rewarding such abhorrent human rights policies with 

trade benefits is contrary to what America stands for, and not only 

harms families abroad, but also those struggling to make a living 

here at home. 

Ecuador is another nation in which our trade policies may be 

leaving working families behind. Chevron may have approached 

some of you before this hearing to ask that you consider limiting 

or eliminating altogether benefits for Ecuador under the Andean 

Trade Promotion and Drug Eradication Act. This effort arises from 

a private lawsuit between thousands of indigenous Ecuadorian 

peasants and Chevron. The plaintiffs, some of whom suffer from 

cancer, physical deformities, and multiple miscarriages, allege that 

Chevron is responsible for illegally dumping billions of gallons of 

toxic oil waste into rivers and streams, causing extraordinary environmental and human damage. 

Texaco, now Chevron, began its oil operations roughly 40 years 

ago in a once pristine region of the Amazon. Today, this region, 

which is roughly the size of Rhode Island, struggles to deal with 

an environmental and humanitarian crisis. More than 1,400 residents have died from cancer, birth defects are prevalent, and the 

region still suffers from water contamination, rain forest deforestation, and ecosystem degradation. The inhabitants of the region 

still drink and bathe in the polluted water. There are innumerable 

stories that I could share from the 230,000 people who live along 

the oil fields in northern Ecuador. 

Thick pools of oil dot the landscape where Chevron dumped oil 

waste into unlined or improperly lined pits. Water tests of one local 


anorris on DSK9Q6SHH1PROD with HEARING
13 

farmer’s land revealed oil contamination at 20,000 percent above 

safe water consumption levels. Too many children have cancer, and 

as a result, too many parents have to experience the ultimate 

heartbreak, which is the death of a child. 

Instead of allowing this case to come to a conclusion in a court 

of law, embarking on cleanup efforts, or even seeking mediation, 

Chevron has engaged in a lobbying effort that looks a little bit 

more like extortion. Apparently because it can’t get the outcome 

that it wants in the Ecuadorian court system, Chevron wants to 

use the U.S. government to deny trade benefits until Ecuador cries 

‘‘uncle.’’ This turns the goal of trade preferences on its head. 

Trade preferences should be used as a hand up to provide needed 

help to families of developing nations, not a paddle to punish governments who refuse to succumb to the demands of multi-billion 

dollar corporations. As a private entity, Chevron certainly has the 

right to take action to advance its own interests. However, it is 

Congress’ job to take a wider view. It is well past time to reform 

our trade policies so that they will work for working families. 

As we re-examine our trade preference system, I urge the Committee to explore options for holding nations accountable for protecting the rights of working families. I hope we also consider 

whether to add environmental standards, and to reform investor 

protection provisions, and examine which criteria, like private lawsuits, we should avoid. 

We must examine our trade preferences with a focus on shared 

prosperity. We should encourage development with dignity. We 

should shape preferences programs to promote labor rights and a 

clean environment without dictating the outcome of cases pending 

in the civil justice systems of developing nations. 

Finally, I think we have to abandon the naive view that free 

trade alone is the only economic development strategy that we 

should pursue. As we have seen with other nations with whom we 

have completed trade accords, like Jordan, lowering tariffs is simply not enough to improve the working lives of impoverished families. We must staunchly defend the right to work with dignity, to 

freely associate and, to organize for safer working conditions, better 

wages, and a secure retirement. Trade preferences can be combined 

with other forms of assistance that will help countries sustain 

themselves and develop the infrastructure and capacity they need 

to fully take advantage of trade preference programs the U.S. offers, as well as, the world market at large. 

I thank you for your patience in hearing my alternate perspective, but I really think now is the time that we should be looking 

at what works and what doesn’t with trade preferences in crafting 

a long-term trade strategy. Thank you so much. 

[The prepared statement of Ms. Sa ́nchez follows:] 

Prepared Statement of The Honorable Linda Sa ́nchez, Representative of 

the State of California, U.S. House of Representatives 

Chairman Levin and Ranking Member Brady, thank you so much for allowing me 

the opportunity to testify today regarding our trade preferences policy and its effect 

on working families. 

The hearing today is an important opportunity to examine what works about our 

trade preferences policy as well as what doesn’t. As many of you know, I have been 

a long time advocate for a new trade model. Our current approach too often fails 

working families, both here and abroad. 


anorris on DSK9Q6SHH1PROD with HEARING
14 

Our preferences programs have a laudable goal: to assist developing countries in 

their efforts to build up domestic industries, increase exports, and alleviate poverty. 

In some cases, the preferences appear to have been wildly successful. Some countries, including South Korea, Singapore, Bahrain, and Slovenia have graduated from 

the GSP program and no longer qualify for preferences. 

In other cases, the preferences have been less successful—at least from the point 

of view of working families. 

A case in point is the Republic of the Philippines, a beneficiary of the General 

System of Preferences. 

According to a petition filed with the United States Trade Representative, the 

government of the Republic of the Philippines has engaged in policies that deny 

workers freedom of association as guaranteed under International Labor Organization (ILO) Convention 87, and has undermined the ability of workers to form and 

join unions in violation of ILO Convention 98. 

The petition also accuses the Philippine government of involvement in extra-judicial killings and abductions of union leaders, members, organizers, and supporters 

through elements of the Armed Forces of the Philippines, the Philippine National 

Police, local police forces, and private security forces. 

Given such reports, which are not limited to the Philippines, I strongly believe 

that it is appropriate to re-examine our approach to preference system creation and 

renewal. 

Encouraging and rewarding such abhorrent human rights policies with trade benefits is contrary to what America stands for, and not only harms families abroad, 

but also those struggling to make a living here at home. 

Ecuador is another nation in which our trade policies may be leaving working 

families behind. 

Chevron may have approached some of you before this hearing to ask that you 

consider limiting or eliminating benefits for Ecuador under the Andean Trade Promotion and Drug Eradication Act. 

This effort arises from a private lawsuit between thousands of indigenous Ecuadorian peasants and Chevron. The plaintiffs, some of whom suffer from cancer, 

physical deformities, and multiple miscarriages, allege that Chevron is responsible 

for illegally dumping billions of gallons of toxic oil waste into rivers and streams, 

causing extraordinary environmental and human damage. 

Texaco, now Chevron, began its oil operations roughly 40 years ago in a once pristine region of the Amazon rainforest. 

Today, this region, the size of Rhode Island, struggles to deal with an environmental and humanitarian crisis. More than 1,400 residents have died from cancer, 

birth defects are prevalent, and the region suffers from water contamination, 

rainforest deforestation, and ecosystem degradation. The inhabitants of the region 

still drink and bathe in polluted water. 

There are innumerable stories I could share from the 230,000 people who live 

along the oil fields in northern Ecuador. Pools of thick oil dot the landscape where 

Chevron dumped oil wastes into unlined or improperly lined pits. 

Water tests of one local farmer’s land revealed oil contamination at 20,000 percent 

above safe water consumption levels. Too many children have cancer and, as a result, too many parents have to experience the ultimate heartbreak—the death of a 

child. 

A group of Ecuadorians originally filed suit in the U.S., but the case was dismissed when Chevron successfully argued that Ecuador was a better forum. 

The case was refiled in Ecuador seeking damages, and experts have estimated 

that damages in this case could be as high as $27 billion. 

Instead of settling with the plaintiffs, embarking on clean-up efforts, or even seeking mediation, Chevron has engaged in a lobbying effort that looks like little more 

than extortion. Apparently, if it can’t get the outcome it wants from the Ecuadorian 

court system, Chevron will use the U.S. government to deny trade benefits until Ecuador cries uncle. 

This turns the goal of trade preferences on its head! Trade preferences should be 

used as a hand up to provide needed help to the families of developing nations, not 

a paddle to punish governments who refuse to succumb to the demands of multibillion dollar corporations. 

As a private entity, Chevron certainly has the right to take action to advance its 

interests. However, it is our job to take a wider view. 

It’s well past time to reform our trade policies so that they work for working families. 

As we re-examine our preference systems, I urge the Committee to explore options 

for holding nations accountable for protecting the rights of working families. 


anorris on DSK9Q6SHH1PROD with HEARING
15 

I hope that we also consider whether to add environmental standards and to reform investor protection provisions and examine which criteria, like private lawsuits, we should avoid. 

We must examine our trade preferences with a focus on shared prosperity. We 

should encourage development with dignity. We should shape preferences programs 

to promote labor rights and a clean environment without dictating the outcome of 

cases proceeding through the civil justice systems of developing nations. 

Finally, we must recognize that trade alone is not a development policy. Trade 

preferences must be combined with other forms of assistance that will help countries to sustain themselves and develop the infrastructure and capacity they need 

to fully take advantage of the trade preferences programs the U.S. offers. 

Thank you for allowing me to testify. 

f 

Chairman LEVIN. Thank you very, very much. You raise issues 

that clearly have been part of the dialogue on preferences in TSP, 

and I am confident will continue to be. 

So after that excellent testimony, the Honorable Eliot Engel will 

take over. Eliot, welcome. You have been to this room before. We 

are glad to see you again. 

STATEMENT OF THE HONORABLE ELIOT ENGEL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW 

YORK 

Mr. ENGEL. Well thank you Mr. Chairman, Chairman Levin, 

ranking member Brady, Chairman Rangel, and other distinguished 

members of the Trade Subcommittee. Thank you for the opportunity to testify at today’s hearing on U.S. trade preference programs. 

Through Democratic and Republican administrations and Congresses, the Andean Trade Promotion and Drug Eradication Act, or 

ATPDEA, has been one of the cornerstones of U.S. policy toward 

Latin America, providing the United States with the opportunity to 

make a real difference in the politically and economically fragile 

Andean region. 

As chairman of the Western Hemisphere Subcommittee of the 

House Foreign Affairs Committee, I have seen firsthand the benefits of ATPDEA. In Ecuador, for example, I met with producers of 

flowers, broccoli, coffee, and cacao. Without the Andean free trade 

preferences, workers in these sectors would undoubtedly lose their 

jobs, leaving them with little outside option other than the illegal 

drug trade or illegal immigration to the United States. 

Unfortunately, too often ATPDEA has been extended for only 

short time periods, creating uncertainty and an unstable investment climate in the beneficiary countries. To make a real impact, 

I believe we must immediately extend ATPDEA for at least two 

years. 

As this subcommittee considers the renewal of the Andean trade 

preferences and future trade preference reforms, I also urge you to 

add Paraguay as an ATPDEA beneficiary country. In April I introduced H.R. 1837, the U.S.-Paraguay Partnership Act of 2009, 

which would do just that. My bipartisan bill would be a catalyst 

for economic development in Paraguay while also supporting essential U.S. geopolitical goals. 

Paraguay is the second poorest country in South America. 30 

percent of Paraguayans live in poverty, and according to the 2008 


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16 

world development indicators, 14 percent of Paraguayans live on 

less than $1 per day. Paraguay’s inclusion as an Andean trade 

preference beneficiary country would be fundamental in helping to 

reduce these poverty levels. 

But the U.S.-Paraguay Partnership Act of 2009 is about much 

more than poverty reduction. My bill will also strengthen the already robust relationship between our two countries. I visited Paraguay and president Fernando Lugo in Asuncion last November, and 

he expressed to me his interest in a strong relationship with the 

United States. 

Paraguay is a small, landlocked country that is often left out of 

discussions of U.S. policy toward Latin America, but it is a critical 

partner in so many areas. According to the State Department’s 

February 2009 international narcotics control strategy report, in 

2008 Paraguay’s national anti-drug secretariat seized a record 172 

metric tons of marijuana. Paraguay also works closely with the 

U.S. and its neighbors, Argentina and Brazil, in the three plus one 

process to curb illicit activities in the so-called tri-border area 

where the borders of Paraguay, Argentina, and Brazil meet. And 

by the way, that is also, we believe, a source of terrorism funding 

as well, so it is an important place. 

The U.S.-Paraguay Partnership Act of 2009, as I said which I 

have introduced as a bipartisan bill, which I introduced with my 

good friend Congressman Dan Burton of Indiana. There is also a 

bipartisan companion bill in the Senate, S780, introduced by Senator Nelson of Florida and Senator Cornyn of Texas, and my bill 

is supported by an extremely wide ranging number of organizations, including Oxfam, the National Foreign Trade Council, the 

Washington Office on Latin America, and the American Apparel 

and Footwear Association. 

Mr. Brady mentioned before in this opening statement that international trade is an engine of economic growth and job creation. I 

agree. I also want to add that it enhances good feeling and good 

relationships with the U.S., so it is good policy for us, and good politics as well. 

In April, I led the official Congressional delegation to the Summit of the Americas in Trinidad and Tobago. At the summit, President Obama pledged ‘‘a new chapter of engagement that will be 

sustained throughout my administration.’’ That is a quote. In less 

than a year, the President has made impressive strides in enhancing hemispheric relations. 

As chairman of the Western Hemisphere Subcommittee, I believe 

it is crucial for Members of Congress to support the President in 

re-engaging the hemisphere. This hemisphere is so important to us. 

It is right in our backyard. The U.S.- Paraguay Partnership Act of 

2009 will do just that and will be extremely positive for both of our 

countries. Again, it is good policy and it is good politics. It helps 

these countries to become closer to us, and that is the way we win 

back the hemisphere from Chavez and the others that would go in 

a different direction. 

I would thank you again for the opportunity to testify today. 

[The prepared statement of Mr. Engel follows:] 


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Prepared Statement of The Honorable Elliot Engel, Representative of the 

State of New York, U.S. House of Representatives 

Chairman Levin, Ranking Member Brady and distinguished Members of the 

Trade Subcommittee, thank you for the opportunity to testify at today’s hearing on 

U.S. trade preference programs. 

Through Democratic and Republican Administrations and Congresses, the Andean 

Trade Promotion and Drug Eradication Act (ATPDEA) has been one of the cornerstones of U.S. policy toward Latin America, providing the United States with an opportunity to make a real difference in the politically and economically fragile Andean region. 

As Chairman of the Western Hemisphere Subcommittee, I have seen first hand 

the benefits of ATPDEA. In Ecuador, for example, I visited with producers of flowers, broccoli, coffee, and cacao. Without the Andean trade preferences, workers in 

these sectors would undoubtedly lose their jobs, leaving them with little option outside of the illegal drug trade or illegal immigration to the United States. 

Unfortunately, too often, ATPDEA has been extended for short time periods, creating uncertainty and an unstable investment climate in the beneficiary countries. 

To make a real impact, we must immediately extend ATPDEA for at least two 

years. 

As this Subcommittee considers the renewal of the Andean trade preferences and 

future trade preference reforms, I also urge you to add Paraguay as an ATPDEA 

beneficiary country. In April, I introduced H.R. 1837—the U.S. Paraguay Partnership Act of 2009—which would do just that. My bipartisan bill would be a catalyst 

for economic development in Paraguay, while also supporting essential U.S. geopolitical goals. 

Paraguay is the second poorest country in South America. 30% of Paraguayans 

live in poverty. And, according to the 2008 World Development Indicators, 14% of 

Paraguayans live on less than $1 per day. Paraguay’s inclusion as an Andean trade 

preference beneficiary country would be fundamental in helping to reduce these poverty levels. 

But, the U.S.-Paraguay Partnership Act of 2009 is about much more than poverty 

reduction. My bill will also strengthen the already robust relationship between our 

two countries. I visited Paraguayan President Fernando Lugo in Asuncio ́n last November, and he expressed to me his interest in a strong relationship with the 

United States. President Lugo is the first Paraguayan president to be elected not 

from the country’s Colorado party in 60 years, and he is already a good friend and 

important ally of the United States. 

Paraguay is a small, landlocked country that is often left out of discussions of U.S. 

policy toward Latin America. But, it is a critical partner in so many areas. According to the State Department’s February 2009 International Narcotics Control Strategy Report, in 2008, Paraguay’s National Anti-drug Secretariat (SENAD) seized a 

record 172 metric tons of marijuana. Paraguay also works closely with the United 

States and its neighbors Argentina and Brazil in the ‘‘3+1 process’’ to curb illicit 

activities in the so-called tri-border area where the borders of Paraguay, Argentina 

and Brazil meet. 

The U.S.-Paraguay Partnership Act of 2009 is a bipartisan bill which I introduced 

with my good friend, Congressman Dan Burton (R–IN). There is also a bipartisan 

companion bill in the Senate—S. 780—introduced by Senators Bill Nelson (D–FL) 

and John Cornyn (R–TX). And, my bill is supported by an extremely wide-ranging 

number of organizations, including Oxfam, the National Foreign Trade Council 

(NFTC), the Washington Office on Latin America (WOLA), and the American Apparel and Footwear Association (AAFA). 

In April, I led the official Congressional Delegation to the Summit of the Americas 

in Trinidad and Tobago. At the Summit, President Obama pledged a ‘‘new chapter 

of engagement that will be sustained throughout my administration.’’ In less than 

a year, the President has made impressive strides in enhancing hemispheric relations. As Chairman of the Western Hemisphere Subcommittee, I believe it is crucial 

for Members of Congress to support the President in re-engaging the hemisphere. 

The US–Paraguay Partnership Act of 2009 will do just that, and will be a win-win 

for both of our countries. 

Thank you again for the opportunity to testify today. 

f 

Chairman LEVIN. Thank you very much. And as stated at the 

beginning, we will be in close touch with all of you with a lot of 


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back and forth. We won’t do it today, but we will do it on the floor, 

and as we work on decisions as to extension and as to reforms. 

I know I speak on behalf of all of us here to thank you for your 

critical involvement in these issues. So thanks again, and if any of 

you want to come up here, feel free to do that. 

And we will now go on to the second panel, and we will ask the 

four witnesses to come forth. 

Let me add, as they are joining us, we also have a written statement for the record from the Department of State. It hasn’t arrived 

yet, but I guess I should ask, without objection, we will enter it 

into the record—any objection?—once it arrives. And of course it 

will be distributed. 

[The statement follows:] 


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f 

Chairman LEVIN. We welcome all of you, a distinguished panel. 

Some of you have been very much here before. I think your involvement here does symbolize how with this administration there is a 

determination that there be the fullest back and forth between the 

executive and Members of Congress, and that’s going to be true as 

to all trade policy issues, so your presence really is important. 

Let me go from left to right and introduce, and then you’ll take 

over. Tim Reif is now General Counsel of USTR, and as all of you 

know served here with total distinction as chief of the trade staff 

for the now majority, and earlier for the minority. 


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21 

Sandra Polaski has a long career in government, is now Deputy 

Under Secretary in the U.S. Department of Labor, the Bureau of 

International Labor Affairs, and as I said brings years of background on work with developing nations, was with Carnegie before 

she agreed to join the administration as she has been in previous 

administrations, so Ms. Sandra, welcome to you. 

And Mary Ott, Dr. Ott, is a Deputy Assistant Administrator for 

USAID, the Bureau of Economic Growth, Agriculture and Trade. 

When I was in AID years ago there was no such bureau. It was 

differently constructed, and now we have the nomination of a new 

administrator of AID, and will welcome the forward movement of 

AID, and look forward to your testimony. 

And then finally, Burnham (Bud) Philbrook, who is Deputy 

Under Secretary for the Department of Agriculture, the Farm and 

Foreign Agriculture Services, and I think we all know the absolutely indispensable role that Agriculture plays in work with developing nations. This goes back 50, 60 years, anyway. 

So each of you has five minutes. I think you know the rules, 

which we would like to adhere to if possible, that you enter your 

statement in the record, and then do as you wish. If you wish to 

follow your statement, do so, if you would like to summarize, if you 

would like to pick out key issues that you know will be of interest. 

As you can see there’s a lot of interest here among the members 

in moving ahead in delving into these issues. 

So Tim, we’ll call you Tim. Mr. Reif, the General Counsel Reif— 

Reif, I should say. Tim, take over. 

STATEMENT OF TIM REIF, GENERAL COUNSEL, OFFICE OF 

THE U.S. TRADE REPRESENTATIVE 

Mr. REIF. Thank you, Mr. Chairman. Congressman Brady, 

Chairman Rangel, good morning. I would like at the outset to express on behalf of my agency and Ambassador Ron Kirk our great 

appreciation to you for convening this important hearing on this 

vital subject. 

U.S. trade preference programs are a critical component of both 

U.S. trade and development policy. U.S. trade preference programs 

have helped to spur economic growth and provide benefits to countries that need them the most. Each of you joined by your colleagues and predecessors on the subcommittee and the committee 

has played a central role in maintaining and enhancing the 

strength of these programs to the lasting benefit of both developing 

and least developed countries around the world, and to American 

workers, farmers, ranchers and businesses. 

In addition, on a personal note, this is a subject on which I was 

privileged to spend many enjoyable, challenging and productive 

hours working with your majority and minority chief counsels over 

the last decade. I had the good fortune to learn a great deal from 

both of them, and I am not telling you anything you don’t know to 

say that you are very fortunate to have them at your side as you 

examine ways to improve these programs even further in the coming months. 

My statement for the record addresses 10 subjects. I would like 

to briefly address 5 points. First, the conduct and expansion of U.S. 

trade preference programs over the last 35 years, and particularly 


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over the last decade has been a bipartisan, bicameral Congressional executive collaboration success story. As the chart before you 

shows, in the last 10 years alone, Congress has passed and the executive has signed into law on 23 separate occasions improvements, 

expansions and extensions to the 5 pillar U.S. trade preference programs. 

This track record is remarkable and reflects the strong and sustained commitment of this committee, the House, the Congress and 

the executive to expanding economic opportunity for developing 

countries and least developed countries, and in the United States 

through these programs. 

As we face the challenging issues ahead, we can take particular 

confidence that we will meet them successfully based on this strong 

track record. 

Second, U.S. trade preference programs have achieved and continue to achieve important successes to expand trade, boost economic growth and reduce income inequality, thereby providing people living in developing and least developed countries with greater 

hope and confidence for their economic futures. 

My testimony contains a number of examples, from Afghan exports of dried plums and prunes and figs and gold jewelry, to Tunisian exports of sauces and condiments and electrical switching apparatus, to Georgian exports of jams and jellies. I’m getting hungry. 

At the same time—not for the electric switching apparatus. At 

the same time, these programs are a major source of imports and 

products for U.S. business, and in particular small and mediumsized companies, and provide important partnership opportunities 

between U.S. workers and businesses, and workers and businesses 

in developing countries. 

Third, the administration strongly supports the immediate renewal of the GSP program, set to expire just six weeks from now 

on December 31st. The administration is, of course, aware of the 

range of issues that is under discussion and the voices for reform, 

a number of whom you will be hearing from later in the hearing. 

We stand ready to work with the members of this committee, others in Congress and interested stake holders to address these 

issues. For now, we urge the speedy renewal of GSP and stand 

ready to work with you. 

Fourth, the second preference program that expires at the end of 

the year is the Andean Trade preference program, as you know. 

This program has continued to achieve a key goal established at its 

creation in 1990 by President Bush, provide sustainable economic 

alternatives to drug crop production and form a key element in 

U.S. counter narcotic strategy. The administration supports an extension of this program and looks forward to continuing to work 

with you on how best to use the program and to respond to the specific circumstances presented by each of the Andean countries. 

My statement also addresses the critical role that AGOA, CBI 

and HOPE are playing for those critical regions and countries to 

promote development and economic growth. I won’t dwell on that 

now, but would be happy to answer any questions you may have. 

In closing, for more than 30 years, Republican and Democratic 

administrations and Republican and Democratic Congresses have 


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worked shoulder to shoulder and tirelessly to craft and implement 

preference programs that will promote development and economic 

growth in developing countries, in turn providing a stronger multilateral trading system by expanding opportunities for American 

workers, farmers, ranchers and business. Your collective efforts 

have resulted in a strong and steady growth in trade with our developing country trading partners, in good measure thanks to these 

preference programs. This growth in turn has benefitted those 

countries and their workers, as well as U.S. business and families. 

While much work remains to be done, much has already been accomplished. 

Thank you again for convening this important hearing and for inviting USTR and the administration to testify before you. 

[The prepared statement of Mr. Reif follows:] 

Prepared Statement of Tim Reif, General Counsel, 

Office of the U.S. Trade Representative 

Good morning, Chairman Levin and Congressman Brady. I would like at the outset to express, on behalf of my agency and Ambassador Kirk, great appreciation to 

you for convening this hearing on this vital subject. The optimal design and functioning of U.S. trade preference programs is a critical component of both U.S. trade 

policy and U.S. development policy. 

U.S. trade preference programs have helped to spur economic growth and provide 

benefits to countries that need them the most. Each of you, joined by your colleagues and predecessors on the Subcommittee and Committee, have played a central role in maintaining and enhancing the strength of these programs over the last 

decade—to the lasting benefit of both American workers, farmers, ranchers and 

businesses, and developing and least-developed countries around the world. 

This morning, I would like to address 10 subjects. 

1. Bipartisan, Bicameral, Congressional-Executive Collaboration Success 

Story 

First, the conduct and expansion of U.S. trade preference programs over the last 

35 years, and particularly over the last decade, is a bipartisan, bicameral, congressional-executive collaboration success story. In the last 10 years alone, Congress has 

passed, and the Executive has signed into law on 23 separate occasions, improvements, expansions and extensions to the five pillar U.S. preference programs: the 

U.S. Generalized System of Preferences (GSP); the Caribbean Basin Initiative (CBI); 

the African Growth and Opportunity Act (AGOA); the Andean Trade Preference Act 

(ATPA); and the Haitian Hemispheric Opportunity Through Partnership Encouragement Act (HOPE). See chart. 

This track record is remarkable and reflects the strong and sustained commitment 

of this Committee, the House of Representatives, the Congress and the Executive, 

to expanding economic opportunity in the United States and developing countries 

through these important programs. These efforts have never been easy; little that 

is worthwhile is. However, as we face the challenging issues ahead, we can take 

particular confidence that we will meet them head-on and successfully based on this 

strong track record. 

2. Economic Development in Developing and Least-Developed Countries 

Expanded trade with the world’s developing countries is critical to boosting their 

growth, reducing income inequality, and providing people living in these countries 

with greater hope and confidence for their economic future. Our preference programs have achieved important successes in helping to improve lives and generate 

greater opportunities and to advance these indicia of economic development. 

In 2008, the total value of U.S. imports under our preference programs was $110 

billion, up 21 percent from 2007. Imports under our preference programs in 2008 

held a 5.3 percent share of total U.S. goods imported for consumption, up from 4.7 

percent in 2007. The 21 percent growth rate in imports under these programs compares to a 7.6 percent increase for total U.S. imports from the world over the same 

period. 

There are many individual success stories behind these larger numbers. For example, Afghanistan’s agricultural and artisanal exports to the United States have 

increased substantially since we strengthened outreach on the duty-free export opVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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portunities available to the country’s producers. In 2007, only dried apricots and a 

small amount of dried berries were exported to the United States under GSP. In 

the first nine months of 2009, however, gold jewelry and six additional types of agricultural products, including dried plums, prunes, figs, dried peas, and dried fruit 

mixtures, have begun to enter under GSP. 

In October 2008, USTR worked with the Departments of State and Commerce to 

provide a series of GSP educational seminars and industry meetings in three Tunisian cities. Since that time, imports of many of the products discussed have increased, notwithstanding that total imports from Tunisia have dropped. These products include sauces, condiments, and other food preparations (which have increased 

by 268 percent); electrical switching apparatus (which have increased by 76 percent); and dates (which have increased by 39 percent). Small and medium-sized enterprises benefit from these increases. 

Similarly, in September 2008, USTR sponsored a joint outreach effort to Georgian 

producers and exporters. In the intervening year, exports from Georgia’s agricultural and processed food sectors—which were emphasized during the USTR outreach seminars because of their benefit to rural Georgians—have increased substantially, even as its overall exports to the United States under GSP have decreased. 

For example, imports of jams and jellies have increased by 600 percent, imports of 

sweetened mineral waters have increased by 126 percent, and imports of prepared 

or preserved vegetables have increased by 100 percent. 

The GSP program provides duty-free access for many items produced by smalland medium-sized businesses, including in rural areas, such as wooden jewelry 

boxes, rattan basketwork, string instruments, and certain national flags. Exports of 

these flags by least-developed countries Cambodia and Haiti in 2009 have grown by 

over 4000 and 9000 percent, respectively, compared to the same time period in 2008. 

3. Generating New Economic Opportunities in the United States 

As noted earlier, our preference programs help not only beneficiary developing 

countries, but also U.S. businesses and families. These programs are a major source 

of imports and products for U.S. businesses, including small- and medium-sized 

companies, and include important partnership opportunities between U.S. workers 

and businesses, and workers and businesses in beneficiary developing countries. 

Imports under these programs lower costs for U.S. consumers and producers. For 

example, in 2008, duty-free treatment under GSP resulted in a total savings of approximately $850 million. 

In 2005, according to the U.S. Chamber of Commerce, 75 percent of U.S. imports 

entering duty-free under GSP were raw materials, components or equipment used 

by U.S. companies to manufacture goods either for domestic consumption or export. 

The Chamber also found that GSP is particularly important to U.S. small businesses, many of which rely on the program’s duty savings to compete with much 

larger companies. Maintaining lower costs for our small- and medium-sized enterprises is particularly important as companies struggle to recover from the economic 

downturn. 

4. Eligibility Criteria 

From the outset, eligibility criteria have been a critical component in Congress’ 

design of U.S. preference programs, and in their operation, to ensure that they are 

achieving their stated goals and are functioning as Congress and the Administration 

intended. In this regard, three points are key. 

First, the criteria were intended to and have achieved four core goals: (1) 

strengthened the rule of law in beneficiary countries; (2) provided incentives for sensible policies and policy reforms; (3) promoted development; and(4) improved the operating environment for U.S. exporters in the beneficiary countries. There are numerous examples: 

• In response to a GSP review, Swaziland ratified a new constitution and 

amended its Industrial Relations Act to strengthen labor rights. 

• In response to GSP and AGOA reviews, Uganda enacted comprehensive labor 

reform, established a new industrial court to address labor issues, and has 

undertaken to assign labor inspectors in every district in the country. 

• To have GSP reinstated in 2006, Liberia repealed a decree that prohibited 

strikes and invited the International Labor Organization (ILO) to assist in 

bringing its laws and practices into conformity with international standards. 

• The April 2009 Special 301 report announced among other things that USTR 

would review the IPR practices of beneficiaries, including The Bahamas, as 

part of its biennial review of the operation of the Caribbean Basin Economic 

Recovery Act. Following a meeting with U.S. officials and industry representatives in August 2009, the government of The Bahamas announced that it 


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would implement changes to its Copyright Act to restore copyright protection 

for U.S. pay television content. Those changes went into effect last month. • Similarly, increased protection and enforcement of intellectual property rights 

have occurred in Ukraine and India. Following the suspension of its GSP benefits, in July 2005, Ukraine passed legislation that strengthened its licensing 

regime and enforcement efforts to stem the illegal production and trade of 

CDs and DVDs, and its GSP benefits were restored. Also in 2005, India’s GSP 

benefits were restored after it adopted legislation that strengthened its patent 

protection of pharmaceutical and agricultural chemical products. 

Second, the Administration by statute and practice engages in two types of reviews to ensure that the statutory criteria are being met. In the first type of review, 

by statute, USTR is required to conduct annual reviews of the AGOA and ATPA 

programs, and biennial reviews of the CBI program. We solicit information from 

stakeholders in each of these reviews and publish reports as required by Congress. 

An interagency team is currently conducting the regular reviews under AGOA, 

ATPA and CBI. 

The second type of review, established by regulation for the GSP program, is petition-driven. Under this approach, every year the interagency team requests petitions from stakeholders regarding the eligibility of beneficiary countries and regarding possible modifications to the list of products eligible for duty-free treatment. Our 

reviews of beneficiary eligibility focus on issues that interested parties, including 

unions, NGOs, and industry groups, raise in petitions. Our interagency team, led 

by USTR, responds to these petitions by examining the issues, raising concerns with 

the foreign governments, and encouraging reforms. We also conduct in-country visits 

where appropriate. 

Between 2001 and 2009, the interagency group evaluated 61 petitions concerning 

thirty-four beneficiaries under the GSP program. Progress is frequently achieved in 

these cases without limiting or revoking benefits. We were able to close fifty-one of 

these cases without modifying benefits. One case during this time period (Ukraine) 

resulted in a complete suspension of benefits. However, we were subsequently able 

to restore Ukraine’s eligibility, as well as the eligibility of three countries (Liberia, 

India, and Pakistan) whose benefits had been revoked prior to 2001. 

Third, we are aware that both the criteria and the ways in which they are applied 

and made effective are subjects that the Committee and others in Congress are interested to discuss moving forward. We stand prepared to answer questions about 

the operation of the criteria and reviews currently and to date, offer technical advice 

and engage with you on policy issues as you advance in your deliberations. 

5. Renewal of the Generalized System of Preferences 

GSP is the oldest and most broadly based of the U.S. preference programs, first 

enacted by Congress in the Trade Act of 1974. Today, 131 developing countries are 

beneficiaries, with forty-four countries receiving additional benefits as least-developed beneficiaries. All GSP beneficiaries receive duty-free treatment for nearly 3500 

tariff lines, and least-developed countries receive duty-free treatment for an additional 1400 tariff lines. 

In 2008, U.S. imports under the GSP program were valued at $31.7 billion, an 

increase of 2.6 percent over 2007. To put this in perspective, in 2008, the GSP program provided duty-free treatment to significant percentages of U.S. imports from 

individual beneficiary countries. For example, 76 percent of all U.S. imports from 

Paraguay, nearly 60 percent of U.S. imports from Georgia, and over 40 percent of 

U.S. imports from Fiji, Lebanon, and Macedonia received duty-free treatment under 

the GSP program. Total U.S. imports under GSP through September 2009 have 

amounted to $14.7 billion. 

The GSP program has been a substantial success. For example, between 2002 and 

2006, there was an average 17 percent annual increase in imports under GSP. GSP 

imports from least-developed countries grew by an annual rate of 26 percent. In addition, individual countries such as Afghanistan, as noted above, have been able to 

diversify their exports under GSP. 

We are, of course, aware of the range of issues that have been under discussion 

in recent years and the voices for reform of the program within Congress and in 

the private sector, from all perspectives. 

There are a number of important questions that deserve careful deliberation and 

analysis in considering possible modifications to GSP and the other programs. 

Among other issues, questions have been raised related to country graduation, harmonization of U.S. preference programs and rules of origin, and possible modifications to eligibility criteria. In view of the very short time remaining before the program expires on December 31, 2009, we would propose to continue to work with all 

interested Members, and private sector stakeholders, to address these and any other 


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concerns. However, for now, the Administration urges speedy renewal and stands 

ready to work with Congress to achieve this as quickly as possible. 

In regard to the length of an extension, the recent past indicates that Congress 

provided a one-year extension in 2008, a two-year extension in 2006, and a five-year 

extension in 2002. The Administration is aware that there may be differences of 

view now as there were at the time of these earlier renewals on the most appropriate length of a possible extension. The Administration is also aware of—and welcomes and looks forward to participating in—efforts to reform this and other trade 

preference programs. The Administration favors an extension at this time that is 

consistent with the sound, efficient and predictable operation of the program. Recognizing that discussions are ongoing in Congress on both immediate extension and 

reform, we stand prepared to work with you and with all those interested to secure 

an extension of the program as quickly as possible. 

6. Renewal of the Andean Trade Preference Program 

The second preference program that expires at the end of the year, as you know, 

is the Andean trade preference program. This program was proposed by President 

Bush in 1990, and enacted into law as part of the Andean Trade Preference Act 

(ATPA) of 1991, and amended and expanded in 2002 through the Andean Trade 

Promotion and Drug Eradication Act (ATPDEA). A major goal of the ATPA/ATPDEA 

is to help defeat the scourge of drug trafficking in the Andean region by providing 

sustainable economic alternatives to drug-crop production, forming a part of our 

overall counternarcotics strategy. 

As demonstrated in a report USTR submitted to Congress in April of this year, 

the ATPA/ATPDEA program has continued to achieve this goal. For instance, it has 

created employment for displaced persons in the flower farms and textiles factories 

of Colombia and has provided jobs for female heads of household in Ecuador’s tuna 

factories. 

Approximately 90 percent of U.S. imports from ATPA/ATPDEA countries enter 

the United States duty-free under ATPA/ATPDEA, GSP or most favored nation. Significantly, all twenty leading imports from the region were eligible for duty-free 

treatment in 2008. Over the past five years, U.S. imports from the region increased 

144 percent, and U.S. exports grew even faster, increasing by 203 percent. 

In fact, the United States is the leading source of imports and the leading export 

market for the ATPA/ATPDEA beneficiary countries. The current ATPA/ATPDEA 

beneficiary countries collectively represented a market of about $21.1 billion for U.S. 

exports in 2008, and were home to about $13 billion in U.S. foreign direct investment in 2007. Thus, the ATPA/ATPDEA has benefitted both the Andean region and 

the United States. The Administration encourages Congress to extend the program 

when it expires at the end of this year. 

In recent years, as the circumstances of the original ATPA/ATPDEA beneficiary 

countries have changed, we have been working to implement the program in a way 

that addresses these changes. For example, as a result of the President determining 

that he was not able to certify by June 30 of this year that Bolivia was meeting 

the program’s eligibility criteria, Bolivia is no longer eligible for ATPA/ATPDEA 

benefits. In the same report to Congress, the President flagged concerns regarding 

Ecuador, particularly its investment policies, and said that he would monitor all of 

the concerns. Meanwhile, we need to work with you and review the implications of 

the February 1, 2009, entry into force of the United States-Peru free trade agreement for Peru’s status as an ATPA/ATPDEA beneficiary country. Colombia has negotiated an FTA, but the Administration is still working with Colombia to address 

labor-related issues. As Congress considers an extension of the ATPA/ATPDEA, we 

look forward to continuing to work with you on how best to use the program to respond to the specific circumstances presented by each of these countries. 

7. The African Growth and Opportunity Act 

The African Growth and Opportunity Act (AGOA) is another important U.S. trade 

preference program. Enacted in May 2000, AGOA was designed to expand U.S.-subSaharan African trade and investment, stimulate economic growth, promote a highlevel dialogue on trade and investment-related issues, encourage economic integration, and facilitate sub-Saharan Africa’s integration into the global economy. AGOA 

builds on GSP by eliminating duties on an additional 1800 products for beneficiary 

sub-Saharan African countries, of which there are currently 40. Beneficiary countries must meet eligibility criteria based on ‘‘best practices’’ policies, thereby supporting African efforts to liberalize trade, implement economic reforms, establish the 

rule of law, reduce poverty, and strengthen labor and human rights. 


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Congress passed significant enhancements to AGOA in 2002, 2004, 2006, and 

2008. AGOA’s current authorization ends in 2015, and its special third-country fabric provision is scheduled to end in September 2012. 

Over the last nine years, AGOA has helped to increase both the volume and diversity of U.S. trade with sub-Saharan Africa. U.S. imports under AGOA totaled $66.3 

billion in 2008, more than eight times the amount of AGOA imports in 2001, the 

first full year of the program. While much of this increase is attributable to oil, nonoil AGOA imports more than tripled during this period, reaching $5.1 billion in 

2008. Thanks in part to AGOA, in recent years more than 98 percent of African exports to the United States entered duty-free, either under AGOA, GSP or zero-rate 

MFN duties. 

Most of those familiar with AGOA are aware of the success stories involving African apparel exports to the United States—such as the great strides that small, landlocked Lesotho, a least-developed country, has made in becoming the leading African 

exporter of AGOA apparel. Less well known is that AGOA has also helped to spark 

significant increases in African exports of transportation equipment, footwear, cut 

flowers, and a wide range of farm and food products, including processed agricultural goods. 

The Annual U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum— 

better known as ‘‘the AGOA Forum’’—provides an opportunity for high-level dialogue between officials of the United States and AGOA beneficiary countries, as well 

as the American and African private sectors and civil society. Most recently, Ambassador Kirk, Secretary Clinton, and Secretary Vilsack led the U.S. delegation to the 

2009 AGOA Forum in Nairobi, Kenya in August. 

After several years of growth, trade between the United States and sub-Saharan 

Africa has slowed considerably in 2009, largely as a result of the global economic 

crisis and declining oil and commodity prices. During the first eight months of 2009, 

total imports under AGOA declined by 61 percent over the same period in 2008. 

This is obviously of concern to us and only underscores the importance of helping 

African countries to continue to build their trade capacity. 

One of the biggest challenges we face with respect to AGOA is how best to help 

African countries to make the most of the program. Many AGOA beneficiary countries have yet to export any significant amount of products under the program as 

a result of poor or insufficient infrastructure and limited productive capacity. Continued trade capacity building assistance will be crucial to helping African countries 

to take advantage of AGOA trade opportunities. 

8. The Caribbean Basin Initiative and HOPE 

The U.S. trade preference programs for the Central American and Caribbean region, known collectively as the Caribbean Basin Initiative (CBI), continue to generate important benefits for beneficiary countries. Expansion of CBI benefits 

through enactment of the Caribbean Basin Trade Partnership Act (CBTPA) in 2000, 

and the provisions included in the Trade Act of 2002, the HOPE Act of 2006 and 

the HOPE II Act of 2008, represents an important affirmation of the ongoing U.S. 

commitment to economic development in the Caribbean Basin, by expanding dutyfree access to the U.S. market for CBI goods. 

The CBTPA provisions are being extensively used by CBI exporters and U.S. importers. The total value of U.S. imports from CBI countries in 2008 was $19.6 billion, an increase of $56 million from 2007. 

U.S. exporters have also benefitted from the trade expansion fostered by the CBI 

program. Total U.S. exports to the CBI region, having reached $25.1 billion in 2008, 

made the CBI region the 14th largest market for U.S. exports. 

The HOPE program allows duty-free access to the U.S. market for certain Haitian-made apparel and other articles, with the goals of fostering stability and economic development in Haiti. As I am sure you are aware, Haiti is the poorest country in the Western Hemisphere, with 80 percent of the population living in poverty 

and 54 percent in abject poverty. The economy has recovered in recent years, but 

four tropical storms in 2008 caused nearly $1 billion in damages, killed over 800 

people, and severely hurt the transportation infrastructure and agricultural sector. 

U.S. economic engagement under the HOPE program has boosted apparel exports 

and investment in Haiti. HOPE II has further improved the environment for the 

apparel sector by extending preferences to 2018. The first international buyers’ 

forum in Haiti took place in October, with senior USTR officials in attendance. 

USTR continues to work with various agencies to help Haitian and U.S. businesses 

take full advantage of the benefits under HOPE and HOPE II. We remain hopeful 

that the HOPE program can help to improve conditions across Haiti. 


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9. Trade-Related Development Assistance 

Expanded trade under the right framework of rules is a necessary condition for 

sustainable economic development. At the same time, trade alone cannot be expected to be the solution to issues of economic development. Expanded trade must 

be accompanied by the right mix of policy efforts on the part of the host country 

and various effective forms of technical and development assistance. Trade expansion is essential for the smallest and poorest developing countries to access markets 

of sufficient size and with sufficient demand to support rapid expansion of production, employment and incomes. 

The Obama Administration has an aid strategy integrated within our overall development assistance framework. U.S. trade-related assistance helps developing 

countries to achieve sustained and broad-based economic growth through three program approaches: (1) development of well-functioning markets; (2) enhanced access 

to productive activities; and (3) strengthening the international framework of policies, institutions and public goods, which provide benefits for many. Expanded rulesbased trade is a key component of each of these elements. 

Second, the most effective form of trade-related development assistance in a given 

instance is likely to vary widely. For example, providing to African countries more 

staff qualified in U.S. sanitary and phytosanitary standards (SPS) can help those 

countries’ governments and businesses to understand better U.S. SPS legal requirements and procedures. In this way, exporters in those countries have a greater opportunity to satisfy U.S. legal requirements and to export products that American 

consumers can enjoy. Similarly, improving infrastructure and modernizing customs 

administration can better enable beneficiary countries to access more fully the benefits of trade. One size does not fit all. 

Third, the goal of the Administration is to work with Congress, countries and the 

private sector to improve the aid dimension. Our goal is to provide the most effective assistance to maximize the benefits provided and the synergies between that 

assistance and fully enabling beneficiary countries to take advantage of the opportunities afforded by the world trading system. For this reason, U.S. trade-related assistance focuses on country-based bilateral and regional programs, thereby ensuring 

that programs are flexible and can respond in a timely way to local needs and opportunities. 

Another example of trade-related assistance is our Millennium Challenge Corporation (MCC) programs. These programs enhance economic growth in a way that 

delivers tangible benefits to the poor. MCC partner countries have prioritized Aid 

for Trade in their proposals. More than half of all the funds MCC has obligated from 

2005–2008 fall within Aid for Trade. From 2005 to 2008, total U.S. trade-related assistance was almost $6.4 billion. In fiscal year 2008 alone, the total annual trade 

related assistance was $2.24 billion, 60 percent higher than in 2007. 

10. Challenges Ahead 

For more than thirty years, Republican and Democratic Administrations and Republican and Democratic Congresses have worked closely together and tirelessly to 

craft and implement preference programs that will promote development and economic growth in developing countries, in turn providing a stronger multilateral 

trading system by expanding opportunities for American workers, farmers, ranchers 

and businesses. Our collective efforts have resulted in a strong and steady growth 

in trade with our developing country trading partners, in good measure thanks to 

these preference programs. This growth in turn has benefitted those countries and 

their workers, as well as U.S. businesses and families. 

The success of our preference programs provides a strong foundation on which to 

build and ensure that U.S. trade policy toward developing countries and U.S. preference programs leads to even more effective economic integration with developing 

and least-developed countries as well as new opportunities for American workers, 

farmers, ranchers and businesses. We recognize the importance of the continued 

success of these programs. We know that more work lies ahead and are fully committed to and prepared to engage in this effort. 

Here at home, there are questions about the best ways to ensure that we maintain the most effective framework and structure for these programs and achieve the 

broadest possible utilization of them by all countries. Much has been achieved, but 

much remains to be done. We look forward to working with you as we work to address the many and important challenges ahead. 

Thank you again for convening this important hearing and for inviting USTR and 

the Administration to testify this morning. 

f 


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Chairman LEVIN. Thank you. It’s a special welcome to see you, 

Tim. 

Sandra Polaski is next. We look forward to your testimony. 

STATEMENT OF SANDRA POLASKI, DEPUTY UNDER SECRETARY, U.S. DEPARTMENT OF LABOR, BUREAU OF INTERNATIONAL LABOR AFFAIRS 

Ms. POLASKI. Chairman Levin, Ranking Member Brady, Chairman Rangel, distinguished Members of the Subcommittee. On behalf of the Secretary of Labor, Hilda Solis and the Bureau of International Labor Affairs at the Department of Labor, I thank you for 

the opportunity to testify here today. As you, the leaders of the 

subcommittee have already said, and Chairman Rangel as well, the 

trade preference programs were created by Congress in order to 

contribute to economic growth and development by providing new 

trade opportunities for developing countries. 

At the Department of Labor we focus on helping to ensure that 

this additional access to the U.S. market created by the preference 

programs should translate into broad opportunities for the 

workforces of those countries, so that the benefits of trade are 

broadly shared and gradually contribute to poverty alleviation and 

the growth of a middle class. This is one of the key channels 

through which preference programs can achieve the broad goal of 

development for which Congress created them. 

In addition to benefitting development, the effort to broadly distribute the benefits of trade is also one of the most promising paths 

to expand markets for U.S. exports. My testimony goes into detail 

on those issues, but I would like to focus here on the labor criteria 

of the preference programs, which constitute one of the key mechanisms through which the increased market access can lead to this 

broad based distribution of opportunities that arise from trade. 

Those criteria are meant to ensure that children are kept in 

schools, rather than toiling on plantations or in factories, that the 

labor that goes into export products is free of coercion, such as debt 

bondage or prison labor, that workers can choose freely to join 

unions and engage in collective bargaining, and that the conditions 

of work in export sectors are acceptable and don’t offend human decency. These criteria contribute both directly and indirectly to the 

broader distribution of the benefits and opportunities of trade. 

They help to put the recipient countries on a virtuous ‘‘cycle’’ of 

sustainable development. 

It is important that our preference programs include these criteria because labor markets in many developing countries are characterized by numerous shortcomings or market failures. For example, economic power is often highly consolidated with large segments of the population and workforce excluded. The institutions 

that would allow workers to claim their rights under law are often 

very weak. This may include weak labor inspectorates or weak or 

nonexistent protections for the rights of workers to take action on 

their own behalf, for example, through collective bargaining. In 

some countries these problems are compounded by pervasive corruption. Under such conditions the likelihood that trade preferences alone will translate into significant and sustained benefits 

for workers and their families is unfortunately low, therefore the 


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labor criteria that Congress has created can provided a needed balancing force. 

As I mentioned earlier, the effect is also good for U.S. workers 

and firms, because the broader distribution of gains through the 

economies of our trading partners spurs their domestic consumption and global aggregate demand. In addition, by helping to build 

a more level playing field in the global economy the programs shore 

up support for free trade both at home and in the recipient countries. 

We have numerous examples of success in achieving progress on 

labor rights through our application of the labor eligibility criterion. For example, the U.S. accepted for review a petition from 

the public to remove Uganda’s eligibility for GSP benefits based on 

alleged serious shortcomings of Ugandan labor law and enforcement. Following high level U.S. government engagement on the 

issues, Uganda committed to expedite passage of a long overdue 

labor law to improve the situation and with their legislature followed through. 

In this and many other cases we were able to make progress on 

labor rights through the review process and engagement with the 

relevant governments without interrupting benefits. Indeed, the 

goal of a country labor eligibility reviews is not to remove benefits, 

but rather to encourage compliance, analogous to labor inspections 

in our own country. That is why where engagement did not 

produce positive involvement we did occasionally remove eligibility. 

For incentives in our preference programs to be effective, they 

must be credible, just as our own domestic law enforcement must 

be credible. Over the years we have suspended eligibility 12 times 

due to failures by beneficiary countries to address abuses of worker 

rights. Trade preferences have also been used to provide additional 

incentives to countries to make improvements in worker rights. 

This approach has great potential because it can closely align the 

incentives that face the private export sector with the public goal 

of improving worker rights and living standards. 

An excellent example of this is the 1999 Textile Agreement with 

Cambodia that offered additional textile quoted to Cambodia on an 

annual basis in response to improvement in worker rights and 

working conditions. More details of the success of that program are 

in my testimony and I would be happy to answer questions on it. 

The program was so successful that the Cambodian government 

and garment sector decided to continue it even after the expiration 

of the multi-fiber agreement. We are now implementing similar 

programs in Haiti and we are launching a similar program in Lesotho. 

Thank you again for inviting me to participate in this hearing, 

Chairman Levin, Ranking Member Brady and distinguished Members of the Subcommittee. At the Department of Labor we share 

your goal of making preference programs more effective tools for 

development and poverty alleviation, and we stand ready to provide any assistance that we can offer. Thank you. 

[The prepared statement of Ms. Polaski follows:] 


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Prepared Statement of Sandra Polaski, Deputy Undersecretary, 

U.S. Department of Labor, Bureau of International Labor Affairs 

Chairman Levin, Ranking Member Brady and distinguished Members of the Subcommittee on Trade: on behalf of the Department of Labor, thank you for the opportunity to discuss how to ensure that U.S. trade preference programs are achieving 

their goals. 

As you know, U.S. trade preferences were created in order to spread economic 

growth and development through new trade opportunities for developing countries. 

Secretary Solis and I support this goal. The Secretary has made the overarching 

goal for the Department of Labor, ‘‘Good Jobs for Everyone.’’ In the Department’s 

Bureau of International Labor Affairs (ILAB), which I lead, we support this goal by 

working to ensure that workers and their households are able to share in the benefits of trade—both in developing countries and here at home. This goal is also an 

essential component of the President’s broader vision for international growth and 

development that broadly benefits the people of the world. 

Today I would like to focus on one essential aspect of preference programs—the 

labor component. I will discuss the role that labor provisions play in preference programs, and why they are indispensible in achieving the development objectives of 

preference programs. I will also share some observations on the functioning of the 

preference programs, particularly areas where Congress may want to consider 

whether the programs could be improved. 

Trade, Labor and Economic Development 

When Congress authorized the first U.S. trade preference program—the Generalized System of Preferences (GSP)—through the 1974 Trade Act, the goal was to provide greater access to the U.S. market for developing countries. The purpose was 

to create additional export opportunities which would attract investment, develop 

new industries, create jobs, and thereby foster growth and development. Since then, 

Congress has expanded U.S. trade preferences roughly each decade, through the 

Caribbean Basin Initiative (CBI) in 1983, the Andean Trade Preference Act (ATPA) 

in 1991, the African Growth and Opportunity Act (AGOA) in 2000, and the Haitian 

Hemispheric Opportunity through Partnership Encouragement (HOPE) Act in 2006 

and 2008. Each of these new programs modified the original GSP model to incorporate the knowledge and experience gained about how best to stimulate development using market access incentives. 

One of the key ways in which the preference programs evolved over these last 35 

years was through the program eligibility criteria that beneficiary countries must 

meet in order to receive unilateral duty exemptions. Congress gradually included 

eligibility criteria in the programs—covering matters as diverse as treatment of investors and treatment of workers—that reflected the understanding that without a 

positive policy framework, greater access to the U.S. market alone would not lead 

to broad-based and sustained development. 

The labor requirements of preference programs first emerged in 1984, when Congress and then-President Reagan negotiated the addition of internationally recognized worker rights to the GSP eligibility criteria. This innovation reflected the understanding that fundamental labor rights were an essential component of broadbased economic development in low and middle income countries, just as they were 

an essential component in our own economic development. Labor markets in many 

developing countries are characterized by numerous short comings. Economic power 

is often highly consolidated and the institutions that would allow workers to claim 

their rights under law are often very weak. In some countries these problems are 

compounded by pervasive corruption. Under these conditions, the likelihood is low 

that trade preferences alone will easily translate into significant and sustained benefits for workers and their families. However, if workers share in the benefits of 

trade and have effective means of addressing their exclusion, then the economic 

growth that comes from expanding trade may help address existing inequalities. It 

should increase the incentives for employers and workers to upgrade productivity 

and skills, rather than encouraging cost-cutting through disregard of national labor 

laws and international labor standards. When labor is free from coercion, when children are kept in schools rather than factories, and when workers are able to freely 

organize and bargain for their interests, the economic opportunities that come 

through trade are more likely to create widespread prosperity and put the beneficiary country on a virtuous upward cycle. 

By protecting the most basic human and workers’ rights and ensuring a broader 

distribution of gains throughout an economy the labor provisions of trade preference 

programs also spur global aggregate demand, which is good for U.S. workers and 


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1 Independent Final Evaluation Report (covering the period February 2003–December 2005), 

Ensuring that Working Conditions in the Textile and Apparel Sector in Cambodia Comply with 

Internationally-Recognized Core Labour Standards and the Cambodian Labour Law, Luis 

Reguera & Christopher Land-Kazlauskas, P.7, Oct. 2007. 2Twenty-Second Synthesis Report on Working Conditions in Cambodia’s Garment Sector, Better Factories Cambodia, International Labor Organization, April 30, 2009, p.5 (graph 3). 

firms. And by helping to build a more level playing field in the global economy, they 

shore up support for free trade both at home and in recipient countries. 

Improvements in Worker Rights 

By adding the labor eligibility provisions on internationally recognized worker 

rights to the U.S. preference programs, Congress created both a requirement and 

an opportunity for developing countries to improve their labor standards. As we 

have utilized these provisions in the past, they have led to positive changes in workers’ lives. 

For example, in August 2005 the U.S. government accepted for review an AFL– 

CIO petition to remove Uganda’s eligibility for GSP benefits. The petition alleged 

serious shortcomings in Ugandan labor law and enforcement, including a requirement that a minimum of 1,000 workers were needed to form a union. Following 

high-level U.S. government demarches on the issues raised in the petition, Uganda 

committed to expedite passage of long-overdue labor legislation to improve the situation. The legislation, which the International Labor Organization (ILO) reviewed, 

addressed each of the main problems cited in the petition and was ultimately passed 

and enacted in May 2006. The government also undertook measures to fund and 

begin operations of a new industrial court for labor issues and posted labor inspectors in each district of the country. 

On occasion, benefits have actually been withdrawn when countries did not make 

progress addressing worker rights and other eligibility criteria. For example, Liberia’s benefits were suspended in 1990 because of worker rights concerns. However, 

following two decades of war, Liberia’s new President, Ellen Johnson Sirleaf, made 

improving worker rights a high priority. This included repealing a decree that prohibited strikes and inviting the ILO to assist Liberia in bringing its laws and practices into conformity with its ILO obligations. In 2006, Liberia’s GSP eligibility was 

reinstated. 

Trade preferences have also been used to provide additional incentives for countries to make concerted improvements in worker rights. In 1999, the U.S. negotiated 

a textile agreement with Cambodia that offered additional textile quota annually to 

Cambodia when worker rights criteria were met based on factory-level monitoring 

reports. I was closely involved in the creation and implementation of that agreement 

and believe that certain lessons from that experience continue to be instructive 

today. 

First, the agreement aligned the market incentives facing the government, investors, international buyers, employers, and workers. Since improvements in working 

conditions were tied to a positive incentive—increased textile quota—both the private sector and the government benefitted when workers benefitted. Because the 

quota determinations were made annually, there was a close temporal relationship 

between improvements on the factory floor and greater market access. The result 

of the program was significant growth in trade, employment, and incomes for apparel workers in one of the world’s poorest countries. From 80,000 apparel jobs in 

1998,1 before the agreement took effect, employment increased to over 350,000 jobs 

by the end of 2008.2 As the industry and employment were growing, the labor rights 

of Cambodian workers and their working conditions also improved. It is important 

to note that even after the Multi-Fiber Agreement ended at the end of 2004—and 

with it the quota incentives that were used at the beginning of the program—the 

country continued its efforts to improve worker rights. 

A second element of the Cambodia program that deserves close attention is the 

way the factory conditions were monitored and the information was transmitted. 

The program introduced an innovative design that combined transparency and integrity to overcome limited market information and lower costs for producers. The 

ILO was asked by the U.S. and Cambodian governments to carry out a monitoring 

program, known as the Better Factories project that monitored factories and made 

the results public. This provided transparency about the conditions in all the export 

firms to international buyers, consumers and other factories, as well as to the governments and the labor force. This information helped buyers make better sourcing 

decisions and rewarded the factories that were improving, while channeling business away from factories with a record of labor abuses. Since the monitoring was 

conducted by a credible outside entity, buyers were able to reduce or eliminate their 


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own inspections of their supplier factories. Since factories pay for these buyer-required inspections, the program reduced factory costs and eliminated redundant 

monitoring. Estimates show the Cambodia monitoring program cost factories about 

$3 per worker per year, compared to third-party monitoring costs of up to $50 per 

worker per year. 

A third element in the success of the program was the decision by the Cambodian 

government that all firms benefitting from the market access should participate in 

the Better Factories project. This ensured that factories that complied with the national labor laws and internationally recognized worker rights were not at a disadvantage compared to factories not in the program. This sector-wide participation 

avoided creating perverse incentives in which factories joining the program would 

be subject to greater transparency than factories outside the program, which would 

free ride on the reputation of the industry and program benefits. It also avoided the 

risk that the reputation of Cambodia and its apparel industry could be damaged by 

media exposes of poor labor practices by non-compliant factories outside the program. 

In sum, preference programs can be effective tools to both promote economic development and improve labor standards, so that economic development is broad 

based and sustainable. Our preference programs work best when economic incentives are aligned in a way that produce optimal results for overall growth of exports, 

employment generation, and improved respect for workers’ rights. That is when we 

are most likely to see broad distribution of the benefits from preferential access to 

our market. 

Observations on Existing Preference Programs 

Since the original inclusion of internationally recognized worker rights in the GSP 

statute, the United States has included labor provisions in every subsequent preference program and virtually every free trade agreement. However, Congress created the preference programs over time and our current system is made up of varying levels of benefits, eligibility criteria, and eligibility reviews. These variations 

provide insight into how the incentives created by the programs work in practice. 

Incentives 

Congress has authorized the preference programs to provide benefits to countries 

that meet the eligibility criteria and to remove benefits when these criteria are not 

being met. The objective of the labor provisions of the programs is to align the incentives facing government, employers, and workers. When we have been able to effectively operationalize this alignment, we have been able to make significant and 

lasting progress. 

Regarding the incentives, I want to make an important point. The goal of reviewing a country’s eligibility is not to remove benefits, but rather to encourage compliance. It may be helpful to think of the analogy to enforcement of U.S. labor laws. 

The goal of enforcement is not to impose penalties, but rather to create effective deterrents in order to elicit voluntary compliance. For the incentives in our preference 

programs to be effective, they must be credible, just as our domestic enforcement 

must be credible. 

The purpose of eligibility reviews—whether for worker rights or other program 

criteria—is to examine whether a country is failing to meet the criteria, engage with 

them to help them come into compliance, and—failing that—determine whether eligibility should be revoked. Eligibility for U.S. preference programs has been removed in the past at least 12 times due to failure to address abuses of worker 

rights, but nearly all of the actions were taken in late 1980s and 1990s. There have 

been several occasions when countries responded to U.S. engagement, through the 

petition and review process, to make positive changes to come into compliance with 

eligibility criteria. When this happens, this is a win-win situation: improvements are 

made and benefits are retained. 

There has also been one worker rights case under the GSP program, involving 

Pakistan, in which benefits were withdrawn for some, but not all, eligible tariff 

lines. Under the HOPE Act, benefits can be withdrawn for particular firms that fail 

to meet the programs’ requirements, but benefits are maintained for rest of the 

country. As currently authorized, preference programs provide duty-free access for 

eligible goods; but if eligibility is revoked, then rates revert to the normal trade relations duty rate. 

Transparency 

Transparency helps provide better information to all stakeholders and can lead 

to desirable outcomes with efficiency and speed. President Obama has called on the 

Federal Government to improve the transparency of decision making. In administering the preference programs, the interagency representatives regularly meet 


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with petitioners, government officials, and other stakeholders to discuss the process 

and specific allegations when they are raised in a petition. Public hearings are also 

held to gather information. At the conclusion of the review process, a decision is 

made public on whether to close the review, continue the review, or remove benefits. 

However, additional consideration could be given to how the process can be made 

further transparent. 

Standards 

Over time, our definition of labor rights has evolved. The definition of internationally recognized worker rights found in the GSP statute in 1984 preceded the development of the ILO’s 1998 Declaration on Fundamental Principles and Rights at 

Work, a consensus definition which the U.S. supports. U.S. preference programs include the following labor rights: 

• freedom of association and the right to organize and bargain collectively; 

• a minimum age with respect to children; 

• the elimination of the worst forms of child labor, 

• freedom from compulsory labor, and 

• ‘‘acceptable conditions of work’’ with respect to minimum wages, hours of 

work and occupational safety and health. 

The ILO’s 1998 Declaration includes these labor rights except for acceptable conditions of work. The Declaration also includes freedom from discrimination in the 

workplace as an additional right, which is not included in U.S. preference programs. 

The most recent U.S. free trade agreements combined the Declaration labor rights 

with acceptable conditions of work. 

Petitions versus Systematic Reviews 

Another area where preference programs vary is on the trigger for eligibility reviews of beneficiary countries. For example, the GSP and ATPA programs have a 

petition-driven process, while AGOA has an annual self-initiated review. It should 

be noted that both systems have advantages and are not mutually exclusive. Petitions can serve to highlight, in a timely way, where significant labor abuses are occurring. These petitions are usually filed by stakeholders and organizations ‘‘on the 

ground’’ that have real-time knowledge and also may bring the capacity to collaborate on solutions to the problems identified. 

However, there are also cases in which third party petitions are not received simply because such stakeholder groups do not exist or because information is strictly 

controlled by the government and organizations that typically would file petitions 

are constrained from doing so. In these cases, regular, systematic reviews by the 

U.S. may better identify countries that are failing to meet the eligibility criteria of 

the preference programs. For example, the AGOA annual eligibility review examines 

every beneficiary country against each criterion every year and makes a recommendation to the President on eligibility. This has the benefit of applying the criteria universally and regularly each year. The review is completed at a certain date 

and decisions on individual countries are rarely extended. In contrast, some GSP 

petition reviews remain open for several years. While this allows for greater discretion and engagement with the beneficiary country to address the concerns raised in 

the petition, it may also lesson the incentive for countries to act expeditiously. As 

a practical matter, though, I should mention that the GSP program has approximately 140 eligible countries and a full annual review process would be resource intensive. It may be preferable to effectively target resources at the most significant 

or strategic cases. 

Conclusion 

Thank you again for inviting me to participate in this hearing, Chairman Levin, 

Ranking Member Brady, and distinguished Members of the Subcommittee. I believe 

we share the common goal of making preference programs more effective tools for 

development and poverty alleviation. Secretary Solis and I believe that the labor 

provisions of the preference programs are an essential component in meeting these 

goals. The Bureau of International Labor Affairs and the Department of Labor 

stand ready to provide any assistance or support to you and your staff as you continue in your deliberations. 

f 

Chairman LEVIN. Well, and a special thanks. 

So Dr. Ott, take over, if you would. 


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STATEMENT OF MARY OTT, PH.D., DEPUTY ASSISTANT ADMINISTRATOR, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID), BUREAU OF ECONOMIC GROWTH, AGRICULTURE AND TRADE 

Ms. OTT. Chairman Levin, Ranking Member Brady, Chairman 

Rangel, and distinguished Members of the Subcommittee on trade, 

on behalf of the U.S. Agency for International Development, I 

thank you for the opportunity to present our experience in implementing trade capacity building programs. I ask that my written 

statement be included into the record and will take this time to 

highlight some of the key points of my statement as to how effective trade capacity building assistance activities can advance both 

the objectives of our trade preference programs and the long term 

developments needs of our developing country partners. 

Although the levels of trade and investment have increased rapidly over the past 20 years, global economic integration remains incomplete. The world’s least developed countries hold 12 percent of 

the world’s population, but account for less than 1 percent of global 

trade. Expanding trade with and among developing countries is a 

critical driver of economic growth and poverty reduction, and can 

work to encourage entrepreneurship, human resource development, 

technology transfer, technological innovation and good governance. 

We see the relationship between trade and development all the 

more clearly today, as reduced trade flows due to the global economic downturn have contributed not only to less jobs in the 

United States, but also to rising poverty in developing countries. 

Trade capacity building assistance is a priority of USAID’s work to 

promote rapid, sustained and broad based growth in developing 

countries. 

Since 2001 USAID has provided more than $3.9 billion in assistance for trade capacity building programs. This assistance has been 

focused on helping more than 110 developing countries to implement trade commitments, reduce both the time and cost of exporting and importing goods and to improve business and commercial 

practices. USAID’s on the ground presence in developing countries 

is an essential component of our trade capacity building support. 

TCB programs help to promote other USG development objectives, 

including agricultural development and food security, and even improved health. USAID currently provides TCB assistance to countries in all regions of the world. We support implementation of free 

trade agreements, trade and investment framework agreements, 

trade preference programs such as AGOA and HOPE, and regional 

economic integration and trade. 

I would now like to provide some brief examples of USAID trade 

capacity building programs supporting trade preference programs 

in Latin America and Africa. In Africa, the African Growth and Opportunity Act trade preferences have been an important stimulus 

to development of viable export enterprises across Africa. Trade 

preferences alone, however, cannot achieve their maximum benefit 

due to the many physical, procedural and administrative barriers 

affecting African trade with the United States. USAID has worked 

hard to help countries take full advantage of the AGOA trade preferences. Support for the AGOA preference program largely has 

been provided through activities carried out by four USAID funded 


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regional hubs based in Botswana, Kenya, Ghana and Senegal, complemented by activities implemented by USAID’s bilateral missions. 

For example, USAID worked with government partners along the 

Trans-Kalahari transport corridor in southern Africa to implement 

a single administrative document which allows transit consignments to pass through all border posts using one customs document. Transport through the corridor is now faster, more efficient 

and cheaper. 

In the western hemisphere, regional preference programs and related USAID trade capacity building activities date back to the establishment of the Caribbean Basin Initiative in 1983. In Haiti, 

USAID is helping local producers and workers take advantage of 

the opportunities presented by HOPE by improving the quality of 

the apparel industry’s sourcing production and marketing. For example, USAID is providing financial and technical assistance for an 

apparel industry training center in Port-au-Prince in collaboration 

with the government of Haiti and the textile industry. 

USAID has gained significant experience and knowledge of best 

practices for trade capacity building. First, TCB projects should 

seek large and systemic impacts. Implementing programs directed 

toward enabling just a few firms to export to the U.S. is not sufficient to achieve the objectives of our preference programs. 

Second, TCB efforts produce better results in reform-minded 

partner countries. Support for trade policy improvements requires 

partnerships with reform-minded governments willing to tackle 

corruption that benefits from the status quo. 

Third, there is no single model for effective delivery of trade capacity building. USAID provides effective TCB activities on a bilateral basis through regional trade hubs, through regional associations and through multi-lateral fora. The particular technical assistance model selected will vary according to country capacities 

and needs. 

Fourth, successful TCB requires close inter-agency coordination. 

USAID programs are coordinated closely with our colleagues at 

USTR where USAID has established a detail position. Specialized 

technical advice is also coordinated with our colleagues at the Departments of Agriculture, Labor and Commerce and many other departments and agencies. 

Thank you again for inviting me to participate in this hearing 

Chairman Levin, Ranking Member Brady, Chairman Rangel, and 

distinguished Members of the Subcommittee. USAID stands ready 

to provide any assistance or support to you and your staff as you 

continue in your deliberations. 

[The prepared statement of Ms. Ott follows:] 

Prepared Statement of Mary Ott, Ph.D., Deputy Assistant Administrator, 

U.S. Agency for International Development (USAID), Bureau of 

Economic Growth, Agriculture and Trade 

Chairman Levin, Ranking Member Brady and distinguished Members of the Subcommittee on Trade: on behalf of the U.S. Agency for International Development 

(USAID), I thank you for the opportunity to present our experience in implementing 

trade capacity building (TCB) programs. I hope to provide the Committee insight 

into how effective TCB assistance activities can advance both the objectives of our 

trade preference programs and the long-term development needs of our developing 

country partners. 


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Although the levels of trade and investment have increased rapidly over the past 

twenty years, global economic integration remains incomplete. The world’s least developed countries hold 12 percent of the world’s population, but account for less 

than one percent of global trade. Expanding trade with and among developing countries is a critical driver of economic growth and poverty reduction and can work to 

encourage entrepreneurship, human resource development, technology transfer, 

technological innovation and good governance. We see the relationship between 

trade and development all the more clearly today, as reduced trade flows due to the 

global economic downturn have contributed not only to lost jobs in the United 

States, but also to rising poverty in the developing countries. 

TCB assistance is a priority of USAID’s work to promote rapid, sustained, and 

broad-based growth in developing countries. TCB activities represent a significant 

portion (approximately 12%) of USAID’ total economic growth assistance, which was 

approximately $3.3 billion in FY08. Since 2001, USAID has provided more than $3.9 

billion in assistance for TCB programs. This assistance has been focused on helping 

more than 110 developing countries to implement trade commitments, reduce both 

the time and cost of exporting goods, and improve business and commercial practices. In FY08, USAID funding for TCB totaled $385 million across 75 countries. 

These programs included $118 million for trade facilitation (speeding the movement 

of goods across borders), $62 million for trade-related agriculture, $36 million for financial sector development and good governance, $32 million for environmental 

issues, $27 million for physical infrastructure development, and $25 million for 

human resources and labor standards. 

USAID’s on-the-ground presence in developing countries is an essential component of our TCB support, as is our decades-long experience in implementing these 

programs across a wide variety of countries and regions. TCB programs also promote other USG development objectives, including agricultural development and 

food security, access to microfinance and even improved health. 

USAID currently provides TCB assistance to countries in all regions of the world 

in support of a variety of shared USG and developing country trade objectives. 

USAID supports implementation of Free Trade Agreements (e.g., DR–CAFTA, Jordan, Peru, Morocco), trade and investment framework agreements and bilateral investment treaties, trade preference programs (such as AGOA and HOPE), and regional economic integration and trade. We also provide TCB support through organizations such as ASEAN and APEC. In addition, USAID’s TCB helps developing 

countries to effectively integrate into the global multilateral trading community. For 

example, USAID has assisted more than 25 countries in the WTO accession process 

over the last 10 years. 

USAID TCB Initiatives in Africa in support of AGOA 

The United States’ trade policy demonstrates our nation’s strong interest in assisting African countries to advance economically and improve living standards for 

their citizens. The African Growth and Opportunity Act trade preferences have been 

an important stimulus to development of viable export enterprises across Africa. 

Trade preferences alone, however, cannot achieve their maximum benefit due to the 

many physical, procedural and administrative barriers affecting African trade with 

the U.S. USAID has worked hard to help African countries take full advantage of 

the AGOA trade preferences. 

Support for the AGOA preference program largely has been provided through activities carried out by four USAID-funded Regional Hubs—based in Botswana, 

Kenya, Ghana, and Senegal—complemented by activities implemented by USAID bilateral missions. The sub Saharan African region is unique in being subdivided into 

48 independent countries, the overwhelming majority of which are small economies. 

Therefore, USAID decided to pursue a regional Trade Hub model to concentrate resources and technical expertise in regional centers of excellence, to support the ongoing efforts at regional integration, and to recognize the reality that a large number of land-locked countries are dependent on regional trade corridors to participate 

in international trade. The Trade Hubs have helped African countries to expand and 

diversify their exports to the United States, as well as increase the value of intraregional trade for targeted commodities. 

An example will illustrate how USAID TCB supports AGOA trade preferences. 

USAID’s Southern African Trade Hub assisted a chili production company with a 

new farming investment in Mozambique. With our support, the company is increasing its production of chili mash for Tabasco, an internationally known brand distributed both in the United States and globally. In addition, the new production in Mozambique will be used as raw ingredients into South African processed food products, providing another regional outlet for a high-value agricultural crop. The new 


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investment in Mozambique will provide much needed employment to farmers in the 

area, and expand both regional and AGOA-related trade from Mozambique. 

In this way, the Trade Hubs have worked extensively to promote exports under 

AGOA, via direct firm and sector-level assistance, buyer/seller linkages, and participation in trade fairs. They have successfully generated tens of millions of dollars 

in exports to the U.S. (more than $50 million in FY08). As in the case just described, 

an important lesson from our TCB programs has been that when our assistance is 

focused on increasing overall export competitiveness and awareness, significant results are also reflected in exports to other important markets beyond the United 

States. 

Along with company, industry, and sector-level assistance, the Trade Hubs also 

support regional economic communities in their integration efforts, and trade facilitation efforts designed to reduce the time/cost to move goods along transit corridors 

and through customs and ports. For example, USAID has worked with government 

partners along the Trans-Kalahari transport corridor to implement a single administrative document which allows transit consignments to pass through all border 

posts using one custom document. Transport through the corridor is now faster, 

more efficient and cheaper. Implementing this type of reform in Africa and elsewhere is increasingly important because reducing the internal costs of conducting 

business in countries with difficult business environments and pervasive corruption 

can be accomplished unilaterally by the countries themselves and can foster greater 

benefits than what tariff reductions alone can provide. TCB programs in Africa will 

be particularly useful in supporting food security objectives. 

USAID TCB Programs in Latin America 

Regional preference programs in the Western Hemisphere date back to the establishment of the Caribbean Basin Initiative (CBI) in 1983. Much has changed since 

then. The U.S. Government recognizes the vital link between our trade policy agenda and trade capacity building programs. 

HOPE 

Implementation of the HOPE II legislation illustrates much of the policy evolution 

that has taken place since the Generalized System of Preferences (GSP) and CBI 

were first put in place. Building on the AGOA model, and tailoring our assistance 

to the Haiti context, USAID is helping Haiti take advantage of the opportunities 

presented by HOPE. With USAID support, Haiti is adapting to HOPE II opportunities by improving the quality of the apparel industry’s sourcing, production and 

marketing. For example, USAID’s program with a leading garment manufacturer 

showed results in the first seven months of 2009. The firm attracted three new clients, created 375 skilled, semi-skilled, and administrative jobs, and saved an additional 200 jobs that otherwise may have been filled in one of the highly competitive 

Asian countries. Workforce development programs have trained young adults in 

basic industrial sewing, with 50 trainees finding long term factory jobs, and 60 more 

currently enrolled. USAID is also providing financial and technical assistance for an 

apparel industry training center in Port-au-Prince, in collaboration with the Government of Haiti and the textile industry. Additional USAID support to the export sector consists of providing technical assistance for the development of a garment sector strategic plan to enable firms to take advantage of trade preferences; and supporting the Investment Facilitation Center (CFI). 

Caribbean Basin Initiative 

Prior to HOPE, USAID experience with regional trade preference programs included CBI, which laid the foundation for several beneficiary countries in the region 

to prepare for, and successfully negotiate, a free trade agreement with the United 

States. Now USAID and USTR lead the interagency process to coordinate TCB provision to the CAFTA–DR countries and Peru, and other potential FTA countries 

(Panama and Colombia). 

The CAFTA–DR agreement elevated TCB into a standing committee of the bilateral agreement—a similar model has been followed for Peru and is proposed for Colombia and Panama, while preserving the need to be flexible within the country context. The committee serves as a forum for trade partners to present their TCB needs 

and report on country progress, with donor support, in meeting those needs. 

USAID’s support for the USG trade agenda played a critical role in the negotiation of these FTAs and was instrumental in preparing the countries to negotiate, 

informing the public on the opportunities of trade, identifying and targeting areas 

to help implement specific aspects of the trade agreement, and transitioning these 

developing economies to expand the benefits of the agreement through longer-term 

development efforts in rural diversification and small business growth. Our work 

gave the Central American countries greater confidence and fostered their ability 


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to negotiate, implement the terms of the agreement, and target policy reforms, investments, and capacity building to expand the benefits of trade to a larger segment 

of the population. Complementing the negotiation of a FTA with the provision of 

TCB assistance demonstrated the importance of linking aid to trade. 

Elsewhere in the Caribbean region, assistance under the Bridgetown Accords 

(1997) and subsequent negotiation of a multilateral agreement (the Free Trade Area 

of the Americas, which was never completed) helped countries to address several 

trade-related issues ranging from sanitary and phytosanitary (SPS) measures, customs reforms, and competition policy. Currently, in the Eastern Caribbean, USAID 

activities aim to help the region meet its requirement to participate in open trade 

regimes, reduce business constraints, and leverage market opportunities. USAID 

works through a public-private alliance that leverages private sector resources to 

train selected farmers and exporters to use sound market intelligence, agronomic 

and production technology packages, and integrated pest management systems for 

selected specialty crops for export to North America and regional markets. 

Principles for Effective TCB Assistance to Support U.S. Trade Preference 

Programs 

Producers and investors need a long-term planning horizon. USAID’s TCB activities support a wide range of U.S. trade policy objectives from trade preference programs to implementation of fully-fledged free trade agreements. One constant concern articulated by investors relates to the stability and predictability of some of 

these programs. Participants have noted that preference programs’ utility is affected 

if they are subject to frequent changes or expiration dates. 

Both bilateral and regional programs are needed to achieve USG goals for TCB. 

An important lesson from the LAC region is the need to recognize when TCB should 

be delivered bilaterally instead of regionally. For example, in the CAFTA–DR countries and in the Andean Region, USAID regional programs provided support to meet 

obligations in such areas as SPS measures, customs reform and trade facilitation, 

and intellectual property rights. Bilateral programs focused their attention on agricultural diversification, small business development, improving the ‘‘doing business’’ 

environment and fostering competitiveness. 

TCB projects should seek large and systemic impacts. Implementing programs directed toward enabling a few firms to export to the U.S. is not sufficient to achieve 

the objectives of our preference programs. Finite resources and large TCB needs demand prioritization of activities based on a targeted aid-for-trade agenda that emphasizes TCB investments with the highest returns—specifically those reforms associated with trade policy and regulation. For example, the Trade Hub model has 

evolved to focus on regional trade facilitation issues and to expand its scope beyond 

AGOA exports to a broader concept of trade competitiveness, including through developing the capacity of African producers to export regionally and to other markets 

such as the European Union and Middle East. 

TCB efforts produce better results in reform-minded partner countries. There is 

strong evidence that improving trade facilitation—for example better port and information infrastructure, more rapid customs clearance times, and regulatory reform 

to remove duplicative technical requirements on imports—has a positive impact on 

trade performance. The opportunities presented by U.S. trade preference programs 

can be a powerful catalyst for motivating these reforms. Nevertheless, support for 

trade policy improvements requires partnerships with reform-minded governments 

willing to tackle corruption and the vested interests that benefit from the status 

quo. This would suggest greater returns by focusing assistance on countries prepared to undertake reforms. 

It is important to note that as average import tariffs worldwide have dropped significantly over the past 50 years, other trade barriers such as onerous border procedures have become the primary obstacles to trade for developing countries. USAID 

has funded research to calculate the tariff equivalents of time lost to export delays 

and found that they significantly exceed tariffs faced by exporters in all developing 

country regions with the exception of East Asia and the Pacific. Reform steps to reduce such delays will go far to assist developing countries to expand their trade; indeed, trade facilitation may represent the greatest potential return on investment 

for USG TCB activities. Trade facilitation is an area in which USAID TCB programs 

have shown significant success. For example, successful programs over the last four 

years in Georgia, Macedonia, Afghanistan, Egypt, Guatemala, and Ghana, have cut 

the average time to ship, process, and deliver shipments from buyers to sellers by 

an average of 31 days. (Reduction of a single day can reduce costs by one percent 

or more depending on the type of good). 

TCB investments need not be large to have significant impacts. The median bilateral TCB program implemented by USAID during FY 08 was approximately $1.75 


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million. Modest resources can be translated into highly significant results when focused on key policy issues in countries whose governments are committed to implementing reforms. For example, USAID provided extensive technical assistance for 

the U.S.-Vietnam Bilateral Trade Agreement (BTA), and later for Vietnam’s full accession into the World Trade Organization (WTO). With its effective implementation, investment and bilateral trade have surged. This relatively small activity supported trade-facilitating laws related to the labor code, credit institutions, standards, arbitration, consumer protection and regulations affecting imports, investment, and exports, including intellectual property rights. USAID assistance also 

supported the Prime Minister’s sweeping initiative to reduce, simplify, or eliminate 

the costly and risky burdens on business/trade caused by tens of thousands of outdated administrative procedures and cumbersome regulations. 

There is no single model for effective delivery of TCB. USAID provides effective 

TCB activities on a bilateral basis, through regional Trade Hubs, through regional 

associations, and through multilateral forums. The particular technical assistance 

model selected will vary according to country capacities and needs, the extent of regional integration efforts, and the technical capacity of our bilateral Missions to deliver assistance. For example, while a Trade Hub approach may be appropriate to 

Africa, the same approach would not be as effective for the Andean region where 

countries have significant variations in their level of development and where regional economic integration is not advancing with the same level of political commitment. 

Over time, TCB has become more closely integrated with trade preference programs. Recent experiences with both AGOA and HOPE when compared with earlier 

programs such as GSP and CBI, demonstrate how TCB activities have evolved to 

become increasingly connected with the implementation of U.S. trade preference 

programs. Coordination between U.S. trade and development objectives has improved; moreover, our developing country partners themselves now find integration 

into global markets as essential to their economic and social aspirations. USAID 

prioritizes strategic investments in TCB in support of these initiatives without the 

need for legislation requiring or mandating TCB assistance. Mandating specific levels of TCB assistance for beneficiaries of preferential tariff programs could prove 

counter-productive in cases where developing countries’ leadership does not place a 

priority on undertaking the needed trade policy reforms. 

TCB objectives may be different across regions. Measuring success is not a 

straightforward exercise. TCB activities are not uniform and different metrics are 

needed to evaluate different programs due to their varied goals. For example, TCB 

in Latin America has focused more intently on issues related to ensuring compliance 

and enforcement of the free trade agreements, particularly in relation to labor, environment, and protection of intellectual property rights. Such activities are not designed to cause direct increases in exports to the United States and should not be 

measured by that metric. TCB activities will also differ depending on the relative 

emphasis between the objective of supporting greater trade with the U.S., and other 

worthwhile objectives such as facilitating more inclusive trade with a greater focus 

on poverty reduction. If the objective is inclusive trade, TCB programs will target 

small and micro firms. 

Successful TCB requires close coordination with USTR and other USG agencies. 

Successful implementation of TCB efforts reflects a ‘‘whole of government’’ approach. 

USAID programs are coordinated closely with our colleagues at USTR—where 

USAID has established a detail position to improve coordination and collaboration. 

Specialized technical advice is closely coordinated with our colleagues at the Departments of Agriculture, Labor, and Commerce, Customs and Border Protection, the 

Federal Trade Commission, the Security and Exchange Commission, and many 

other departments and agencies. 

Thank you again for inviting me to participate in this hearing, Chairman Levin, 

Ranking Member Brady, and distinguished Members of the Subcommittee. USAID 

stands ready to provide any assistance or support to you and your staff as you continue in your deliberations. 

f 

Chairman LEVIN. Well, thank you and we look forward to your 

involvement with the naming of a new—I’m not sure the title these 

days. 

Ms. OTT. Administrator. 


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Chairman LEVIN. Administrator. It’s still the way it was when 

I was there. We look forward to intensified work with you. How 

long have you been there? 

Ms. OTT. In USAID? Since 1984. 

Chairman LEVIN. Have you? 

All right, Mr. Philbrook, take over. We’re anxious to hear about 

your work. 

STATEMENT OF BURNHAM (BUD) PHILBROOK, DEPUTY 

UNDER SECRETARY, U.S. DEPARTMENT OF AGRICULTURE 

(USDA), FARM AND AGRICULTURAL SERVICES 

Mr. PHILBROOK. Thank you, Mr. Chairman and Ranking Member Brady, Chairman Rangel and Members of the Committee. I’m 

pleased to appear before you today to discuss U.S. trade preference 

programs. In particular, I’ll focus on the United States Department 

of Agriculture’s perspective on the African Growth and Opportunity 

Act. 

Trade preferences support the administration’s goal for improved 

food security in Sub-Saharan Africa. USDA, both in Washington 

and abroad, plays an important role in accomplishing AGOA’s objectives of expanding U.S. Sub-Saharan African trade investment, 

stimulating economic growth and facilitating Sub-Saharan Africa’s 

integration into the global economy. USDA is committed to providing capacity building, technical assistance and training and research programs that will enhance Africa’s ability to trade in agricultural products. 

Since AGOA’s implementation in 2001 this assistance has con- tributed to a $100 million increase in U.S. imports of agricultural 

products from Sub-Saharan African countries. Products imported 

include fruits, nuts, coffee, wines, fruit juices, cocoa products, prepared vegetables, cut flowers and prepared seafood. However, before we can permit the import of agricultural products into the U.S. 

from any country, USDA’s Animal and Plant Health Inspection 

Service must complete an extensive analysis of the pest and disease risks associated with those products. 

To expedite the import approval process APHIS published a final 

rule in 2007 that has been used to allow the import of products 

such as baby carrots and baby corn from Kenya, currants and 

gooseberries from South Africa and peppers, eggplant and okra 

from Ghana. With that said, it’s important to note that even if 

APHIS determines that the pest and disease risks associated with 

the import of these products can be appropriately mitigated, this 

does not mean that export of these products to the United States 

will begin immediately. 

Recognizing these challenges, USDA, working in concert with the 

U.S. Agency for International Development, continues to assist African host countries in strengthening their sanitary and phyto-sanitary safeguarding capacity. Together USAID and USDA have positioned SPS advisors at three USAID funded Africa trade hubs. 

These advisors work with their African counterparts to implement 

SPS improvement activities that are critical to building the institutional regulatory capacity necessary to facilitate trade. 

Since AGOA was enacted USDA has conducted training on 

phyto-sanitary issues for more than 35 Sub-Saharan countries. 


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USDA has several flagship programs that provide technical training and research opportunities for policy makers, scientists, private 

sector representatives, university professors and other agricultural 

professionals. These programs include the Cochran fellowship program, the Borlaug International Agricultural Science and Technology fellowship program, the faculty exchange program and the 

scientific cooperation research program. 

Successes include a Cochran fellow who doubled milk production 

on his small Kenyan farm, and also implemented marketing strategies that improved the prices he gets for milk. 

A successful Borlaug initiative is our public private partnership 

with the World Cocoa Foundation. This partnership helps cocoa 

producing countries learn state of the art modern production and 

processing techniques to improve overall quality and increase exports of high quality cocoa and cocoa products worldwide. 

Agriculture is not only a basis for achieving AGOA’s objectives, 

it is the heart of the administration’s food security strategy. Our 

food security strategy employs a whole of government approach 

under the leadership of the State Department and in cooperation 

with USAID, and this strategy will link all pertinent U.S. government agencies together as well as partners in the private sector, 

non-governmental, private voluntary and international organizations, civil society and small holder farmers. 

The administration is committed to assisting Sub-Saharan African and food insecure countries globally to achieve food security. 

USDA is striving to assist countries to develop the capacity to capitalize on the beneficial terms provided by AGOA, and I look forward, Mr. Chairman, to your comments and questions, and thank 

you very much. 

[The prepared statement of Mr. Philbrook follows:] 

Prepared Statement of Burnham (Bud) Philbrook, Deputy 

Under Secretary, U.S. Department of Agriculture (USDA), 

Farm and Foreign Agricultural Services 

Mr. Chairman, Members of the Committee, I am pleased to appear before you 

today to discuss U.S. trade preference programs. In particular, I will focus on the 

U.S. Department of Agriculture’s perspective on the African Growth and Opportunity Act (AGOA). 

Introduction 

U.S. trade preferences, such as AGOA, support the Administration’s goal for improved food security in Sub-Saharan Africa. USDA, both in Washington and overseas, plays an important role in accomplishing AGOA’s objectives of expanding U.S.- 

sub-Saharan African trade and investment, stimulating economic growth, and facilitating sub-Saharan Africa’s integration into the global economy. Nearly 20 USDA 

personnel are located at American embassies and trade hubs on the sub-Saharan 

African continent. Since agriculture accounts for one-third of sub-Saharan Africa’s 

gross national product and employs two-thirds of its workers, it forms the basis on 

which the continent can reach its full potential. 

AGOA Successes 

USDA is committed to providing capacity building, technical assistance and training, and research programs that will enhance Africa’s ability to trade in agricultural 

products. This assistance has contributed to a $100-million increase in exports of 

agricultural products—including non-traditional and value-added products—from 

Sub-Saharan countries to the United States since 2001, AGOA’s first full year of implementation. Products imported include fruits and nuts, coffee and tea extracts, 

wines, fruit juices, cocoa products, prepared vegetables, cut flowers, and prepared 

seafood. 


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Before we can permit the import of agricultural products into the United States 

from any country, our Animal and Plant Health Inspection Service (APHIS) must 

complete an extensive analysis of the pest and disease risks associated with those 

products and determine if and how those risks can be mitigated to allow for safe 

importation. Under the AGOA initiative, APHIS has completed several pest risk 

analyses from potential trading partners in sub-Saharan Africa. To simplify and expedite the regulatory process for approving new fruit and vegetable imports and 

pest-free areas, APHIS published a final rule in July 2007 that has been used to 

expedite the imports of several types of agricultural products including those from 

Africa, while still providing pest risk assessments for public comment. This new 

process has been used to allow the import of products such as baby carrots and baby 

corn from Kenya; currants and gooseberries from South Africa; and peppers, eggplant, and okra from Ghana. We have also permitted the import of certain commodities under our traditional approval system, including blueberries from South Africa; 

and baby squash from Zambia. 

However, it is important to note that, even if APHIS determines that the pest and 

disease risk associated with the import of these products can be appropriately mitigated, this does not mean that export of these products to the United States will 

begin immediately. USDA efforts at analyzing risk and granting import approvals 

are more effective if infrastructure is in place to take advantage of exporting opportunities. A country or industry may not have the ability to take the steps needed 

to mitigate the pest and disease risk associated with its products, or may not have 

the transportation or marketing infrastructure in place. For example, APHIS approved the import of peppers and eggplant from Ghana; however, the country’s 

irradiator is not currently functional. Ghana needs to overcome this technological 

hurdle to treat fruits and vegetables to mitigate pest and disease risk. 

Recognizing these challenges, USDA, working in concert with the U.S. Agency for 

International Development (USAID), continues to assist African host countries in 

strengthening their sanitary and phytosanitary (SPS) safeguarding capacity. Together, USAID and USDA have positioned SPS advisors at three USAID-funded Africa Trade hubs. These advisors work with their African counterparts to implement 

SPS improvement activities that are critical to building the institutional regulatory 

capacity necessary to facilitate trade. In Swaziland, USDA supported the initiation 

of a honeybee pest surveillance program to meet requirements for regional trade. 

In Mozambique, USDA and the Ministry of Agriculture collaborated to design and 

implement a national fruit fly surveillance program that is required to maintain 

market access for Mozambican fresh horticultural exports. 

Since AGOA was enacted, USDA has conducted training on phytosanitary issues 

for more than 35 sub-Saharan countries. USDA has several flagship programs that 

provide technical training and research opportunities for policymakers, scientists, 

private sector representatives, university professors, and other agricultural professionals. These programs include the Cochran Fellowship Program, the Borlaug 

International Agricultural Science and Technology Fellowship Program, the Faculty 

Exchange program, and the Scientific Cooperation Research Program. 

Successes include a Cochran fellow who has doubled milk production on his small 

Kenyan dairy farm and implemented marketing strategies that improved the prices 

he gets for milk, while also helping hundreds of fellow farmers by conducting onfarm training and contributing to a farm radio talk show. A woman Cochran graduate from South Africa now owns her own company and is leading industry efforts 

to improve product quality and expand the range of soy food products throughout 

Southern Africa. 

A successful Borlaug initiative is our public-private partnership with the World 

Cocoa Foundation. This partnership helps cocoa producing countries learn state-ofthe-art modern production and processing techniques to improve overall quality and 

increase exports of high quality cocoa and cocoa products worldwide. Currently, nine 

Borlaug fellows from six African countries are receiving training in organic production and marketing management in the United States that will facilitate collaboration between the U.S. organics industry and African producers, leading to increased 

incomes and improved food security for small-scale sub-Saharan African farmers. 

Recognizing the important role that women play in agricultural production in Africa, USDA is hosting three African Borlaug Women in Science fellows who are currently receiving water resource and livestock disease management training at the 

University of Florida. This training will also help increase incomes and promote food 

security. 

In addition, USDA’s two food assistance programs—the Food for Progress (FFPr) 

and the McGovern-Dole International Food for Education and Child Nutrition 

(McGovern-Dole) Programs—contain unique, long-term developmental aspects. Our 

FFPr program is benefitting 72,000 smallholder livestock owners in Ethiopia by deVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00047 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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veloping the animal feed industry through activities that strengthen feed distribution channels and improve feed formulation and manufacturing and feedlot management and forage production. In Tanzania, the FFPr is empowering rural women entrepreneurs by developing their leadership skills and providing micro-credit loans 

that help them increase their incomes, allowing them to obtain better medical services, food and education. The McGovern-Dole program in Senegal has extended 

health services to more than 58 maternal and child health sites in vulnerable communities so that mothers, pregnant women, and children benefit from health services in their villages. 

Administration’s Food Security Strategy 

Agriculture is not only a basis for achieving AGOA’s objectives, it is the heart of 

the Administration’s food security strategy. Achieving a food-secure Africa is a 

major goal of this Administration. 

The U.S. food security strategy is based on the principles laid out in the July 2009 

G8 Joint Statement on Global Food Security. USG efforts must be long-term. As 

part of a whole of government approach under the leadership of State and USAID, 

we are focusing on the entire spectrum of food security beginning with helping countries develop strategies to increase crop output by adopting the latest seed technology and land management techniques, appropriately applying fertilizer, linking 

small producers to markets and strengthening post-harvest infrastructure, as well 

as national and regional trade and transportation corridors. 

Our food security strategy employs a whole-of-government approach that links all 

pertinent U.S. Government agencies together and increasingly partners in the private sector, non-governmental, private-voluntary, and international organizations, 

civil society, and the poor themselves. 

USDA will use its resources to work with the U.S. Department of State and 

USAID to focus on three key principles of food security: availability, accessibility, 

and utilization. USDA is tapping into its network of U.S. land-grant universities, 

research institutions, extension experts, trade associations, private voluntary and 

non-governmental organizations, and other non-profit organizations and private 

companies across the country to provide capacity building, technical assistance and 

training, and research and food assistance programs. 

Conclusion 

The Administration is committed to assisting sub-Saharan Africa, and food insecure countries globally, to achieve food security. Full utilization of AGOA trade preferences is a critical piece of the puzzle. USDA is striving to assist countries to develop the capacity to capitalize on the beneficial terms provided by AGOA. I look 

forward to your comments and questions. Thank you. 

f 

Chairman LEVIN. Well, thank you. All right, let’s go. Oh, just 

take a couple minutes and then we’re going to go down the line. 

So let me just ask you as we shape this hearing to—the four of you 

help us list what some of the outstanding issues are as we proceed. 

And these will come up with future—with the further panels, but 

I think you can help us from the point of view of your agencies, 

illuminate what the present issues are as we expand, extend and 

expand perhaps and reform the preference programs. 

From the point of view of USTR, I know you’re not in a position 

yet to necessarily comment on these issues, but Tim, if you would 

start, just list what you think the key issues that the committee 

and the administration face as we proceed, in addition to keeping 

the programs alive while we’re reforming, expanding, et cetera. You 

want to help us? We’ll go down the row in a few minutes. 

Mr. REIF. Sure. Thank you, Mr. Chairman. So I think the— 

among the key issues would be are the programs serving the goals 

of development amongst developing countries and particularly in 

the least—amongst the least developed countries, are the criteria 

that are established in the programs functioning well and smoothVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00048 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ly, and in particular serving the objectives that Congress established in regard to those criteria over the last 30 years? 

Chairman LEVIN. Those criteria include—— 

Mr. REIF. These are the eight or twelve criteria related to investment, intellectual property rights, labor standards and the 

other elements that relate to both country eligibility and products. 

How does the functioning of the trade preferences today fit with 

other elements of U.S. trade and development policy? So those 

would be a few of the issues I might flag as you go forward. 

Chairman LEVIN. And you’ll participate in the discussion of 

which countries will be subject to renewal, right? USTR will participate in that, the issues relating to Bolivia, Ecuador—— 

Mr. REIF. We will participate very actively. We have been in discussions with the committee and with others and we will continue 

to be, very much so. 

Chairman LEVIN. And discussion of perhaps the expansion of 

the preferences and how that expansion would interact with for example, the present preferences for AGOA and for Haiti, in other 

words the dynamics as you talk about expanding some preferences, 

how they impact the present status of preferences for certain countries? 

Mr. REIF. Yes sir, very much so. The proposals, including Mr. 

McDermott’s proposal, past and I understand future relating to 

those issues, and the question of how they interact with our existing programs, their impact on workers and businesses in the 

United States. Those will very much be a part of our discussions 

with you. 

Chairman LEVIN. Okay. Sandra Polaski, do you want to add 

from your perspective, just so we have the challenge in front of us? 

Ms. POLASKI. I do, Chairman Levin, thank you. I think first of 

all, we would pose the question of whether we are utilizing the full 

potential of the preference programs to achieve this broadening of 

the opportunities of trade that I talked about in my testimony, and 

I think there are things that we’re looking at in the Department 

of Labor about ways that we can improve this and obviously we’ll 

be engaging in the inter-agency process, but we will be very open 

to be in a dialogue with your committee, with your subcommittee, 

to discuss ways of utilizing the full potential, particularly in our 

case of the labor conditionalities to achieve real development, really 

broad based growth in the beneficiary countries. 

And the second area that I think I would point to is that we have 

a sort of natural experiment among the different preference programs. Each of the preference programs has some of its own characteristics. The conditionalities are somewhat different in the different programs, the level of benefits, the particular shape of the 

programs. Can we look at this natural experiment of different approaches and draw out the lessons that have been the most effective, that have created the most growth, the most development, the 

most broad distribution of opportunities, the most employment creation and use that to inform whatever the committee, the House 

and the Senate decided to do in preferences going forward? Thank 

you. 

Chairman LEVIN. And you have before you a petition on Guatemala, and also there have been discussions about conditions in JorVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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dan implementing the Jordan Free Trade Agreement and worker 

conditions there, right? So there are also specific petitions or issues 

in front of you. 

Ms. POLASKI. That’s correct, Chairman Levin, and it’s an issue 

that we are devoting very significant attention to, to be sure that 

we get it right, so to speak, that we look at the problems and that 

we find, working with those governments to the maximum extent 

possible, ways to go forward so that we actually provide this protection for worker rights, that we actually do improve living conditions and living standards in those countries. 

Chairman LEVIN. Thank you. Dr. Ott, briefly. 

Ms. OTT. Thank you, Chairman Levin. USAID also shares the 

concern regarding countries’ ability to reach the full potential implicit in the preference programs. Namely, are we supporting beneficiary countries’ efforts to take advantage of the preferences, which 

can be quite a complex undertaking? It involves perhaps policy 

change, certainly building government capacity, building capacity 

within the private sector, and helping producers to have the information and the services they need to expand their exports. This implies a role for trade capacity building programs to support the 

preference programs and ensure that countries take full advantage. 

Certainly we want to be sure that trade is part of a broadly based 

growth strategy in the countries that we are extending preferences 

to. We like to see not just the three largest companies in the capital city—take advantage of the preference programs, but to see 

farmers and small and medium business benefit from the trade opportunities they represent. Thank you. 

Chairman LEVIN. Thank you. 

Mr. Philbrook. 

Mr. PHILBROOK. Yes. Mr. Chairman, in addition to the other 

issues that have been raised, I think the question is how do trade 

preferences fit into overall rural development in developing countries? 85 percent of all the farms in the world are less than 5 acres, 

and half are an acre or less. 70 percent of all the farmed labor is 

generated by women, oftentimes the least educated among the 

rural population. So a question is how do trade preferences work 

with or facilitate human and economic development at the village 

level, knowing that that requires a comprehensive approach to be 

successful. That’s what I would pose. 

Chairman LEVIN. All right, thank you very much. 

Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. Mr. Philbrook, I would 

note Doctor Norman Borlaug is a hero of mine. Had the opportunity to become friends and work with him while representing 

Texas A&M University and while, with his recent death, he’ll be 

missed, his research and ideas will live I think ultimately forever 

in a very good way. 

Mr. Reif, first let me congratulate the President on the announcement this week in Singapore on moving forward with talks 

with the Trans-Pacific partnership. It’s a move that has broad bipartisan support here in the House and the Senate. Depending on 

its composition, finally it could be, I think, a major access to new 

customers in that region, signals our engagement over there in a 


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region that’s literally blowing and going economically, and look forward to the talks as USTR proceeds. 

Also, I think it’s critical too that we prepare a South Korea trade 

agreement for consideration for Congress, and I’m anxious in regards to this hearing for Colombia and Panama to complete their 

transition from a one way preference program to two way full trade 

relationship, to level the playing field for our workers as we try to 

sell goods and services into that region. 

In panels after this we’ll probably look more closely at specific 

preference programs, but could you, because of your knowledge and 

position at USTR, can you sort of look at the bigger picture for us? 

Obviously completion of a successful Doha Round is critical for the 

world and for us, but as U.S.—we want to provide preference programs to these developing countries to help them move forward 

into the global marketplace. At the same time giving away our 

preferences for free also reduces the incentive for them to participate fully in Doha and to help craft ultimately a successful round. 

From your perspective, how do we find that balance as we go forward? 

Mr. REIF. Well, thank you, Mr. Brady, and it’s an important 

question. As you know, the United States is engaged as we speak 

in important negotiations leading up to an end of the month summit relating to the Doha negotiations. Those are enormously important for our country, they’re enormously important for developing 

countries and hold the potential to be the largest source of economic growth out of trading agreements. And so that is an important priority in the area of trade and development, for us and for 

others. 

There are also fitting in with those, part of my answer to Chairman Levin’s question was that as we look forward, look in the future towards the development of our preference programs and fitting into our overall policies is an important component of that. So 

how preference programs fit into our ongoing negotiations over 

Doha where we are continuing to press particularly more advanced 

developing countries with respect to market access issues, in the 

NAMA area and the agricultural area, certainly also in services. 

And at the same time the preference programs have had a particular purpose for all developing countries and in particular the 

least developed, to help them climb onto the escalator that enables 

them to move ahead in the context of multi-lateral trade, as well 

as you note in bilateral trade contexts. 

Mr. BRADY. Do our trading partners, preference partners understand that this is not a free pass, that we expect, you know, full 

participation, we want their input and commitment through the 

Doha Round? 

Mr. REIF. I think our trading partners understand very clearly 

and have for some time that the United States is seeking important market access throughout particularly the more advanced developing countries in the developed world. And those negotiations 

have been ongoing for some time and I think they are intensifying 

at the current time. 

Mr. BRADY. Do you think—I’m just watching Europe change its 

strategy. They’re moving away from preference programs and more 


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to economic partnership agreements, our equivalent of trade agreements. How does that impact our U.S. interests? 

Mr. REIF. Well, the economic partnership agreements are still a 

work in progress for the European Union and their partner countries. They are in different stages of acceptance and different 

stages of development, as I understand it. But they have several 

approaches, as do we, with respect to our trading regime. We have 

the multi-lateral, we have our bilateral agreements and then we 

have our other programs, and they are roughly in parallel, albeit 

with some distinctions. 

Mr. BRADY. Great. Thank you, Mr. Reif, appreciate it. Thanks, 

panel. 

Chairman LEVIN. Thank you. 

Mr. MCDERMOTT. He was just here. 

Mr. Rangel. 

Chairman RANGEL. All of you have some general idea about the 

outstanding trade agreements that we have with Panama, Korea 

and Colombia. I’m trying to get a—some kind of a status report as 

to where they are with the new Administration. 

Mr. Reif. 

Mr. REIF. Yes, sir. Thank you, Mr. Chairman. With respect to 

Panama, there are ongoing conversations with respect to two outstanding issues, one in the labor area and one in the tax area, to— 

hope to resolve those as quickly as possible, and there have been 

some recent conversations with the government of Panama about 

that. 

With respect to Colombia, the President has indicated his strong 

support for the Colombia FTA and the need to continue to work on 

the labor rights issues in that context. There were bilateral meetings three times this summer, I believe in May and June. In July 

and August USTR sent down a fact finding mission to Colombia to 

work further on those issues, so our contact with the government 

of Colombia as well as with the Congress and with stakeholders is 

very active and ongoing. 

Also, with respect to Colombia the USTR solicited public comment in September and received a large range of views with respect to that. 

With respect to the Korean agreement, the public comment also 

was completed in September and we are continuing to review and 

to work on the outstanding issues there that include access to the 

manufacture sector and in the automobile sector, also some issues 

in agriculture. 

Chairman RANGEL. Now what kind of group did you send to, 

say, Colombia in order to take a look at what progress was being 

made in providing safety to the workers and to the union of workers? Who would be sent from where? 

Mr. REIF. In the fact finding group it was a broad based administration trip. USTR participated, and I believe there were representatives of other agencies, the Department of Labor, State and 

others, to both establish facts and understand better what the situation is on the ground, as well as to begin to understand better 

how to move forward and achieve particular goals collectively. 

Chairman RANGEL. Well, you’re right with these countries, so 

how would you judge their performance has been in the last four 


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years as it relates to these issues of safety, worker safety? I’m trying to get a feel about what—could you tell me, what does a group 

look for and basically what do they come back and say? Because 

it’s been the same problem that I’ve heard for years, and I don’t 

know what the reports are or if there’s any solution. 

Mr. REIF. Well, the efforts both domestic with the Congress, as 

well as with interested private sector groups, and with the government of Colombia have focused on the different ways that the issue 

of—the issues of prosecution and impunity, and the questions of 

addressing the violence issue going forward as well as the labor 

standards issue within Colombia have attempted to address different parameters, where it would be possible to understand better 

whether there was a sufficient framework in place or an ability to 

measure where things stand and where they were going. 

Chairman RANGEL. Their criminal justice system, can it be 

compared to ours so that we know what we’re trying to find out 

there? 

Mr. REIF. Well, there are—with respect to the criminal justice 

system, a number of things have been done, and a lot of it has related to fact gathering. There are as—— 

Chairman RANGEL. To what? 

Mr. REIF [continuing]. In our own federal system divisions of 

labor. 

Chairman RANGEL. What’s it related to? 

Mr. REIF. Pardon me? 

Chairman LEVIN. It’s related to—you said that the system is related to—Mr. Rangel didn’t hear. The gathering, you said? 

Mr. REIF. Oh. A lot of work in respect to the criminal justice 

system in Colombia has related to fact gathering. 

Chairman RANGEL. Okay. 

Mr. REIF. And to understanding the way their system—there 

are divisions of labor and responsibility in terms of the issue of 

prosecution, for example, between centrally and federal conducted 

work and work that’s done outside of the federal purview. So there 

has been an effort to understand how that division of labor functions and what is exactly being accomplished, and how it may be 

accomplished in the future. 

Chairman RANGEL. Do you think that we can find some way of 

removing this problem ever, since it’s so subjective under—using 

our standards, with their standards and the different cultures? Is 

this something that you think professionally can be resolved as to 

what the issue is, so that we can determine with some degree of 

accuracy whether they are cooperative or whether they are part of 

the problem, that is, the government? 

Mr. REIF. Sir, I can tell you that from all perspectives, from the 

perspective of the administration, from the perspective of those 

here that we work with in the Congress, from the perspective of 

the government of Colombia, there is a hard effort. It is a good 

faith effort, and—to understand exactly what the parameters of the 

problem are and ways that it could be addressed successfully. 

Chairman RANGEL. Well, you said there’s a good faith effort, 

but I asked you do you think that we will be able to resolve the 

problem? 


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Mr. REIF. Sir, I am an optimistic person by nature and I’m hopeful that we’re—we will be able to do so. The President has indicated that he is supportive of this FTA and that if we can resolve 

these issues, he would like to move forward on it. 

Chairman RANGEL. It’s that bad, huh? Thank you. 

Chairman LEVIN. Let’s see. I guess next will be Mr. Davis. 

Mr. DAVIS. Thank you, Mr. Chairman. Mr. Reif, has USTR been 

able to use the eligibility criteria and U.S. preference programs to 

prompt countries to improve their labor IPR investment policies, 

and can you elaborate on some examples of the success. And in 

particular I’d like you to comment if you think Colombia’s progress 

in the last 20 years has been rated—you would rate that as a success. 

Mr. REIF. Well, sir, we have been able use the criteria and the 

preference programs on a number of different occasions. With respect to both labor and IPR are the two that are most active. 

Under AGOA, for example, most recently Uganda, Swaziland; these 

are countries where we were able to utilize the criteria there to 

seek improvements in those countries’ regimes. 

During the 1990s and the 1980s, a number of different examples 

in both the IPR and the labor standards area in Central America, 

where countries were able to take additional steps in these particular areas. And in the case of Colombia, there have also been 

steps taken under both of those elements. 

Mr. DAVIS. The reason I’m kind of curious is the Colombians 

have made massive progress. I have first-hand experience in this 

area since the late 1980s, early 1990s, and I did find it somewhat 

ironic that the Colombian labor organizations came up here to 

lobby on behalf of the passage of the Colombia FTA eventually. 

And I know that we’re not talking about FTAs, but as a bridge, I 

think there’s been a tremendous good faith effort. And in particular 

the context of a lot of these questions we deal with labor standards 

in particular. I think there’s a common goal to move in this area. 

But anytime we seek to impose standards, I think it’s important 

that we keep it in context of progress that’s being made and walking in the correct pattern versus achieving perfection overnight. 

And I think when, you know, I think it’s been something like a 90 

percent drop in violence. 

And I keep hearing the word ‘‘violence’’ come up in reports from 

the administration or other organizations, but in fact the Colombians have a somewhat different perspective in the very organizations that are allegedly being protected. I receive a huge amount 

of feedback in the national security arena of other countries being 

very fearful that this FTA being stalled for American domestic politics principally is potentially going to lead to conflict in Latin 

America that may end up dragging us in because we’re unwilling 

to do that, considering the extremely aggressive moves of Chavez 

and others. And I think economic growth is key to that. 

This does have implications in the direction that we go. I guess— 

Ms. Polaski, in your testimony, you note that the purpose of labor 

eligibility criteria is not to remove benefits, and you provide quite 

a number of good examples in which the United States was able 

to remove—or to improve labor rights without revoking benefits. Do 

you agree that it’s more effective to engage in a collaborative, in 


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a consultative process with the beneficiary country to improve their 

policies instead of revoking their benefits outright? 

Ms. POLASKI. Yes sir, I absolutely agree with that point. And 

in fact, it’s our normal modus operandi. So if we initiate ourselves 

a review of a country because of reports or information we become 

aware of that suggests a problem or if we receive a submission 

from the public, a petition to review eligibility, our first step after 

we investigate and learn the facts will be to engage with that government and to try to find the ways that we can move forward to 

engage them on many levels. And most often, the overwhelming 

number of cases, we make progress through that engagement process. 

I did flag the fact that sometimes we have gone on, perhaps even 

for several years, trying to make progress and simply not finding 

the political will in the partner country to address the issues. And 

in those limited cases, we revoke the benefits in order to preserve 

the credibility of our programs and their conditionality. 

But overwhelmingly, we engage with the governments. We usually go to the country. I mean, I will go myself. My senior staff will 

go. We’ll look for every avenue to try to solve the problems. We’ll 

bring in the International Labor Organization, we’ll bring in the 

business community, the unions, et cetera, because the purpose 

really is not to revoke the benefits. The purpose is to solve the 

problems. 

Mr. DAVIS. I appreciate your answer. I just think the one thing 

that I would throw out here as a point of thought as we discuss 

this, I think we agree that these preference programs work in collaboration but we can’t impose an unreachable, or unreachable 

short-term standard on these nations. And one of the things that 

concerns me in this growing global economy is we stand a potential 

right now as a nation to wall ourselves out of many, many markets 

by setting unreasonably high standards. 

And looking particularly with what the EU and China especially 

has done in taking a generational approach to investment and developing markets basically so it can consume their products in the 

long term, I’m concerned that if we set these standards too high, 

we’re going to find ourselves in second or third place behind either 

the European Union or East Asia coming in, whereas in fact Colombia being a perfect example of an FTA gone awry. The GSP 

worked tremendously well over time. And in fact, we’ve let it languish now for two years and have a potential to have significant 

setbacks in that region. 

So with that, Mr. Chairman, I yield back the balance of my time. 

Chairman LEVIN. Let me just say as we keep the focus of this 

hearing, the standards that we’re talking about are the basic international standards that the countries have agreed to. They’re not 

American standards. They’re the basic ILO standards. And that’s 

what we’re applying. And these aren’t local political issues. They’re 

the question of whether as we proceed with trade agreements we’re 

going to build in standards that are basically international standards, and whether it isn’t mutually beneficial for us to do so. 

Mr. BRADY. Mr. Chairman, if I may, I think the point being 

made is that our goal, shared goal, is to reach those international 

core labor standards. How we achieve it, incrementally or in other 


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ways, is the question. I think again, the great reason why this preference hearing is being held is to explore some of those issues. 

Chairman LEVIN. Exactly. Exactly. And we’ve been working 

these. There are State Department reports and other reports relating to each of these. And for a number of years under GSP, there 

was a relaxation of efforts to try to implement the standards that 

we built into GSP. And the recent discussions we’ve had with Jordan, there we have an FTA, and the evidence came out very clearly 

that there was a major default in their implementation of what 

they agreed to. And it wasn’t an American standard. It was the 

international standard that they agreed to. 

Mr. BRADY. I think perhaps the point is because we have an 

agreement with them, we can address these issues as partners 

with equal stakes and a good outcome for it, so those are good 

tools. 

Chairman LEVIN. That’s the purpose. That’s the purpose. Okay. 

Mr. Doggett. 

Mr. DOGGETT. Mr. Chairman, thank you, and I certainly want 

to subscribe to the view you just mentioned that it is important in 

this area of trade preferences as well as our other trade agreements that we operate competitively but on a level playing field 

and we don’t see unfair competition such as with the use of child 

labor. And I think that’s the kind of standard that you’re focused 

on here and in our other trade agreements. 

Let me ask you, Mr. Reif, I gather from your written testimony 

that you feel our preference system as it works today has had a 

very positive effect on labor laws, working condition laws. I believe 

you cite Swaziland, Uganda and Liberia, and on intellectual property protection in Ukraine and India. Do I read your testimony correctly? 

Mr. REIF. Yes sir. 

Mr. DOGGETT. And that in fact, but for our GSP provisions, 

probably some of these laws might not have been changed in these 

other countries. The positive impact appears to be directly related 

to what we’ve done through GSP. 

Mr. REIF. That’s correct. 

Mr. DOGGETT. With reference to the petition process, are there 

any petitions pending at USTR at present that deal with working 

conditions or labor conditions? 

Mr. REIF. There are some petitions pending at this time in those 

areas, yes sir. 

Mr. DOGGETT. And do you have—I know you have been making 

improvements to your website. Do you post on your website when 

a petition comes in, what it’s concerned with and when you resolve 

it? 

Mr. REIF. I don’t know if that’s on our website at this current 

time. I’m happy to figure that out and get back to you, sir. 

Mr. DOGGETT. Great. Because I know one of the concerns, and 

you’ve only been there of course a few months, is that some of 

these petitions seem to languish as long as some decisions do at the 

courthouse. Haven’t there been some petitions that have been filed 

there that have lingered there for a couple years? 

Mr. REIF. Well, sometimes petitions do what we call, we hold 

them over from one year to the next. There are a variety of reaVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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sons, sir, as you probably know. We’re working on it. We receive 

incremental progress. We’re not ready to close the file, so we maintain it open. There are different reasons that the USTR keeps these 

petition files open on occasions. 

Mr. DOGGETT. Well, and in some cases they just don’t get resolved very promptly, do they, when you look back over prior years 

of petitions at USTR? 

Mr. REIF. In some cases they move more slowly than we would 

like, that’s true. 

Mr. DOGGETT. I think it would be helpful to be able to see since 

so much of our understanding of the way government operates here 

in Congress and in the executive agencies is over the web to see 

when a petition comes in, what it concerns, and when USTR disposes of it or decides to carry it forward, as you said. 

Given the success you feel you’ve had in the labor standard area, 

and given the many times that President Obama has said that our 

trade policy going forward needs to be concerned with both labor 

and environmental standards, I don’t see anything in your testimony about environmental standards. Is there any reason that as 

we renew GSP we consider that legislation? That we shouldn’t, at 

a minimum, include the kind of requirements that were in the Peruvian free trade agreement concerning adherence to multilateral 

environmental agreements of a global nature, such as the trade in 

endangered species, and requiring our trading partners who get 

these preferences to enforce their own environmental laws and not 

denigrate them? 

Mr. REIF. Yes sir. That’s a very important question. And it goes 

to—my testimony addressed in part the question of reform efforts, 

different kinds of proposals that are being made now, including 

proposals like that with respect to modifying the criteria of our 

preference programs. And we are—we stand ready to engage with 

you and with the committee and others, to discuss that proposal 

and others with respect to the criteria that govern our trade preference programs. 

Mr. DOGGETT. Well, there have been—since it’s about time to 

renew these, I think at the end of the year, are you—do you expect 

in connection with this renewal to have recommendations for us to 

follow the approach that was taken in the Peruvian free trade 

agreement? 

Mr. REIF. I don’t expect to have recommendations in the short— 

the six-week timeframe that we have with respect to renewal of 

GSP and ATPA. However, with respect to those broader questions, 

we are anxious to engage with this committee and with others in 

the Congress that are looking at broader questions of reform. I suspect, you know, that the issue you’re raising will be a part of that 

discussion as will a number of other issues that are in play. 

Mr. DOGGETT. Well, this is very important legislation to renew, 

and it would seem that there’s no better time than the present to 

implement these provisions if they work well in the working condition area, as you’ve indicated, they ought to be included, and we— 

though some of us might question the adequacy of the model, we 

have a model that even the Bush administration agreed to—you 

were actively involved in those negotiations—to say at a minimum, 


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global multilateral environmental agreements and enforcement and 

nondenigration of your own laws. 

Let me just say in closing on an unrelated matter, I want to be 

sure—you’ve seen the communication I forwarded to you concerning the very troubling report that USTR was involved in trying 

to weaken the ban on foreign—on federal contracts for corporations 

that have reincorporated overseas in order to dodge their tax responsibilities. That would seem to be totally inconsistent with what 

President Obama has said on the issue of corporate tax avoidance, 

and I hope you will review that and cease any effort in the Senate 

since the House did not take any action on this in the financial 

services area, cease any action that would undermine the existing 

statute and will respond promptly to my inquiries to you about 

that. Thank you. 

Chairman RANGEL. Will the gentleman yield? 

Mr. REIF. Yes sir. 

Chairman RANGEL. Would you cc me when you respond on that 

issue? 

Mr. REIF. Yes sir, absolutely, of course. 

Mr. DOGGETT. Thank you. 

Chairman LEVIN. Okay. Mr. Reichert. 

Mr. REICHERT. Thank you, Mr. Chairman. Appreciate you holding this hearing today and the opportunity to talk about our, as 

you said in your opening statement, the constellation of our trade 

program extensions, improvements and graduation from preferences. 

Mr. Reif, I’m very pleased to hear you talk about bipartisanship 

and your ability to work with both sides and both staffs, both sides 

of the aisle, as we look at shaping our U.S. preference program policy. However, I tell you that I am disappointed that the administration has yet to present a robust trade agenda. We’re still waiting 

for that. 

I had an opportunity to meet with Ambassador Kirk just a couple 

of weeks ago and ask how the FTA process was moving forward as 

those who have graduated from the preference programs, Korea, for 

example. And he said that the holdup was that the nation is so divided on this issue that it’s difficult to bring forward. I find that 

as a pretty weak excuse. The nation is divided on health care, yet 

we don’t have a problem bringing that forward. The nation is divided on cap and trade, yet we don’t have a problem bringing that 

forward. 

I think it’s time that we hear from the President about a robust 

trade agenda. I want to focus on and I want to associate myself 

with the comments made by Mr. McDermott. It’s time to push forward, not pull back. I associate myself with comments made by Ms. 

Sa ́nchez that this really—trade is very key not only to jobs but to 

security, the environment, labor rights, shared responsibilities and 

liabilities and all those things, the cultural exchanges, all those 

things that trade agreements bring. 

So my question to you is, looking at—Mr. Rangel focused on Colombia. My question is more toward, since being from Washington 

State, Korea is our fourth largest trading partner and it’s absolutely essential that we have an agreement with Korea for Washington State job growth, when will that come to the floor for an 


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agreement? When will Korea be graduated from—and we’ve graduated from this preference agreement to a full trading partner with 

the United States of America? When will that come to the floor for 

a vote? 

Mr. REIF. Thank you, sir. You, if I might start, you mentioned 

with respect to generally the administration’s trade policy. And as 

you know, the President just announced a few days ago the movement towards working on the Trans-Pacific partnership. 

Mr. REICHERT. I’m aware of that and give him props for that, 

I guess is what they say in today’s world. But when will the Korean agreement come to the floor for a vote? 

Mr. REIF. And there’s been extensive work also on all the three 

FTAs. With respect to the KORUS and the KORUS FTA, extensive 

work is ongoing. 

Mr. REICHERT. Do you have an estimated date maybe when 

that might come to the floor? 

Mr. REIF. I can’t offer you a date. I can offer you what has been 

going on since the administration took office. Ambassador Kirk has 

said that the—— 

Mr. REICHERT. What’s the holdup with the Korean agreement? 

Mr. REIF. Well, the agreement was not—there was not a basis 

for presenting the agreement successfully to the Congress when the 

administration took office, and we have been working on that to 

see if we can achieve that kind of both substantive, addressing 

the—— 

Mr. REICHERT. Can we look forward to next year? I know it’s 

not going to happen this year, even though we’ll be here till almost 

Christmas, but. 

Mr. REIF. I can assure you that we are working hard with respect to the outstanding issues to see if there is a basis for an 

agreement. 

Mr. REICHERT. Is it your hope that it come to the floor next 

year? 

Mr. REIF. Pardon me, sir? 

Mr. REICHERT. Is it your hope that it comes to the floor next 

year? 

Mr. REIF. I would rather not focus on a particular date, but 

rather on the work that we are doing, we’re doing with the Congress, with our private sector, to see if we can resolve these issues 

so that the agreement can move forward successfully and on a bipartisan basis. 

Mr. REICHERT. Well, Mr. Reif, I’m just going to say I’m very 

disappointed in your answer and that you’re not able to answer the 

question. Mr. Chairman, I yield back. 

Chairman RANGEL. Could I ask the gentleman to yield? 

Chairman LEVIN. Yes. I mean, I would just recognize you. 

Chairman RANGEL. Thank you. Don’t we have some idea that 

the problem with the Korean agreement concerns the trade in automobiles? 

Mr. REIF. That is a core problem, the largest problem, yes. 

Chairman RANGEL. Okay. And what is the difference in trade 

of automobiles? How many automobiles do we import annually 

from Korea? 

Mr. REIF. It varies between 600 and 700 thousand. 


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Chairman RANGEL. And how many do we export to Korea? 

Mr. REIF. That is about 5 or 10 thousand. 

Chairman RANGEL. That’s the problem. 

Mr. REICHERT. Will the gentleman yield? 

Chairman RANGEL. Yes. 

Mr. REICHERT. I have a question too. How long has Korea been 

graduated from the preference program? How long have we known 

about the automobile trade imbalance, and how long does it take 

to address an issue like that? 

Chairman LEVIN. Let me answer that. You’ve raised it. I’ll answer it. 

Mr. REICHERT. Yes sir. Thank you. 

Chairman LEVIN. And I will send you the material. It goes back 

three years, sir, in our discussions with the administration. Korea 

has essentially kept out American manufacturing products 

throughout its modern economic history, in its automobiles, its refrigerators. Whirlpool can’t sell their major refrigerator in Korea. 

They can sell their refrigerator into any place in this country. They 

can export their cars here without any—any hesitation from us. 

Essentially, we’ve had one-way trade. And we told the previous 

administration that these issues had to be addressed in the Korean 

free trade agreement. They did not address the beef issue, and they 

did not address the manufacturing issue. And as a result, and they 

were pre-warned if they did not do so, there would not be support 

within this institution for proceeding, despite the fact that there 

were major improvements in other areas. They went ahead and 

signed the agreement anyway without effectively addressing the 

tax restrictions, the regulation restrictions, and the failure to have 

a dispute settlement system while we gave up the tariffs that we 

had on their cars, and also phasing out the tariff on trucks. 

President Obama when he was a candidate made clear he had 

problems regarding the Korea free trade agreement. This was already clear. Since then, this new administration has been talking 

to the Koreans. Mr. Rangel and I have met with the trade minister, 

with the ambassador, and suggested to them that there needs to 

be some serious discussion about revisions in the Korea free trade 

agreement—I use the word revision—we don’t have to worry about 

the technical term—to meet their having essentially a history of 

one-way trade when it comes to manufacturing that means jobs in 

America. 

Mr. REICHERT. Mr. Chairman, if I—— 

Chairman LEVIN. So I’ll be glad to send you the history of this. 

Mr. BRADY. Well, I’d like to get in on this debate as well if we’ve 

got time. Because I disagree with some of those characterizations. 

Chairman LEVIN. Okay. We’ll do that some other time. 

Mr. BRADY. That’s a deal. 

Chairman LEVIN. This is a hearing on preferences. You raised, 

and I urged you at the beginning to have a hearing on preferences. 

Mr. REICHERT. Mr. Chairman, if I could respond. I mean, I see 

the two, as you mentioned in your opening statement, this is a constellation of trade—of program, which includes preferences and 

graduating to a full trade agreement. I don’t know how you can 

hold a hearing on preferences and not connect trade agreements to 

it. They’re interconnected. And so when you talk about Korea and 


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the fact that Korea has graduated to this preference status, the 

only natural follow-up question then, sir, is when will it finally become a full trade agreement? 

Chairman LEVIN. I’ll tell you. The answer is when the Korean 

government agrees to sit down with the United States and address 

the issues that are outstanding—— 

Mr. REICHERT. So, sir, if I may, would you yield? 

Chairman LEVIN. And then we will proceed with the agreement. 

Mr. REICHERT. Well, it’s taken three years so far. 

Chairman LEVIN. I know, because they for three years have refused to sit down and discuss revisions in the agreement. 

Mr. BRADY. Well, that’s not exactly true. 

Chairman LEVIN. Okay. 

Mr. BRADY. Mr. Chairman, I know we have Mr. Etheridge and 

Mr. Herger who do want to question the administration. 

Chairman LEVIN. Okay. Look, we can take this up. Mr. Rangel 

and I had a meeting just a month ago with the Koreans on this 

very subject, and it’s been publicized by them, an unwillingness to 

sit down and discuss. They say the agreement is the agreement. 

They’re not willing to change it. That’s not an acceptable position. 

We want to proceed. There are positive elements in the free trade 

agreement. We all acknowledged that in services, in other areas. 

Now in agriculture, at least temporarily. We need to resolve the 

outstanding issues on a mutual basis. 

Chairman RANGEL. Will the gentleman yield? Maybe you two 

can help us, because at the last meeting we had with the minister 

of trade, he made it abundantly clear that as far as he was concerned, his government had signed off on an agreement. And we 

cannot argue with what position he takes. We also take the position just because we change presidents doesn’t mean that we 

change policies. But he was really offended when the chairman 

brought up the question of can we look over these areas that are 

holding the agreement up with our USTR? 

So I know, Mr. Brady, that you’re saying that you differ with the 

facts. If you differ with the fact as it relates to the Korean government considering that agreement completed and not going to be reopened, you can help our country by meeting with them and telling 

them that it has to be reopened. 

Mr. BRADY. Chairman, I would be glad to sit down with you. I 

know I visited with them in Singapore and, you know, their position is a contract is a contract and they’ve moved forward. But I 

do think there’s room for discussion on autos and beef that could 

prepare this agreement for consideration by Congress. I think 

that’s the goal. 

Chairman LEVIN. Okay. Let’s leave it at that, because I met 

with the gentleman in Korea in Singapore. Let’s leave it at that. 

If there’s a willingness to sit down and discuss these issues, we can 

move forward. 

Mr. REICHERT. Thank you, Mr. Chairman. 

Chairman LEVIN. Until now there has not been. Mr. Etheridge 

is next. 

Mr. ETHERIDGE. Thank you, Mr. Chairman, and let me thank 

you for holding this hearing on trade preferences. I think it’s important. But that being said, Mr. Reif, let me ask you a question 


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because there’s some other things swirling. I’m one who really believes in fair trade and that we need to enforce the agreements we 

make. And I’ve supported an awful lot of them, but I get more and 

more concerned that we don’t enforce them once we make them, 

and we fail to go back and find out what we didn’t do right or some 

others didn’t. 

But my question is a little more pointed, because there are rumors and pushes for Bangladesh and Cambodia. My question is, if 

they’re granted free quota access to the U.S. market, and I’m particularly concerned about the hearing we’re having today about textile products that will impact not only my state but the whole 

Southeast where many plays unemployment is now at 15 percent 

or higher. 

What effect do you believe that trade diversion from the African 

region in CAFTA will result? And secondly, do you think this will 

have a negative impact on the stability of these markets? Because 

that’s certainly what we are talking about today. 

Mr. REIF. Yes sir. Thank you, Mr. Etheridge. The question of 

whether and how to expand our preference programs, including in 

Southeast Asia, it is very closely related to an assessment of how 

it would impact existing preference programs as well as our own 

domestic industry. 

Secondly, as these programs have been crafted over the last decade or so, great attention has been paid to potential synergies between our own industry, particularly in the textiles area, and the 

apparel industries in Africa and particularly obviously the CAFTA 

countries and in the Caribbean. So those will continue to be important considerations for us to ensure that we have partnerships in 

ways that both Americans and our developing country partners can 

benefit from these programs. 

And lastly, we have issues of enforcement where we are seeking 

to make sure that the issues of transshipment, the provisions, the 

particular rules of origin that are built into these agreements that 

are there to ensure that they operate the way that the Congress 

intended and the way the executive intends, are being taken care 

of. 

That is not a perfect track record, sir. There are areas where we 

still have a lot of work to do, but I can tell you that we are focused 

on those and seeking to do better in these areas. 

Mr. ETHERIDGE. See if I understand your first answer. It was 

that you’re evaluating it, but there’s no answer? 

Mr. REIF. That’s with respect to these new proposals? 

Mr. ETHERIDGE. Yes sir. 

Mr. REIF. Yes sir, those are under consideration. 

Mr. ETHERIDGE. I would be interested in that because obviously they are closer to one of the major markets of China that 

would be able to trend—than they are now. And I’d be interested 

in those numbers, because it seems to me you would wind up moving all these markets to another marketplace. 

Next question in that same area, assuming we were to give new 

duty-free benefits to Bangladesh and Cambodia, what impact 

would that have on U.S. negotiating leverage power I guess or the 

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tions? How would that impact that negotiations? Or those negotiations. 

Mr. REIF. Yes sir. The question of expanding the preference programs is something I suspect this committee and others in the Congress will engage in a robust dialogue with, and together with the 

administration in the coming months, and I’m certain that both 

Members of Congress and the administration will be mindful of the 

impact in a number of different directions, including the impact on 

the Doha negotiations. 

Mr. ETHERIDGE. That means we haven’t reached a position on 

it yet? 

Mr. REIF. Well, we haven’t reached a position on the specific 

proposals, and as I understand it, new proposals are coming out 

every day, including tomorrow, that we will have to take and understand the specifics of. But with respect to the broader question 

of preference reform, we are engaged with the Congress on that, 

and one consideration as we engage with you on that will be the 

impact on other parts of our trade, trade policy, including the Doha 

negotiations. 

Mr. ETHERIDGE. Mr. Chairman, thank you, and I look forward 

to that dialogue, because that is I think very important to what 

we’re talking about today in terms of years we do have preference 

and what an expansion would do in a very negative impact not only 

on that but on jobs that are now here in the United States tied to 

those areas that have been built up over the last number of years. 

Thank you, Mr. Chairman. I yield back. 

Chairman LEVIN. I just want to assure you that that will be 

done. Trade issues aren’t simple. They interact, and the notion of 

expanding preferences for some can affect the preferences of others. 

And the discussion that we’ve had about Korea is an illustration 

of how you need to do trade policy, understanding the interactions 

and the need to look at them in a complete way and not just take 

one piece. 

So you can be assured, I think, the administration and I hope on 

a bipartisan basis, as we look at the expansion potentially of preference programs, we will consider what it means if we expand to 

some countries the impact on those with whom there are now preference agreements, and the impact on businesses and workers in 

the United States of America. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. I look forward to 

it. Thank you, sir. 

Chairman LEVIN. Mr. Herger, you’re next. 

Mr. HERGER. Mr. Chairman, I want to thank you. Chairman 

Rangel, Chairman Levin, for having this hearing. These hearings 

are so important on trade, and they’re so important to our districts, 

they’re so important to jobs, particularly at this time when our 

economy is down. I would urge the chairmen that we might continue with these hearings and have more of them, that we can 

work through the disagreements or the misunderstandings that we 

have. 

Because while we here in the United States, at least currently 

are not moving forward with these agreements, the rest of the 

world—nations are, as we know. And we just can’t afford to be losVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ing these jobs and losing these trade opportunities to other countries. So again, I want to thank you, want to specifically thank you. 

It’s great to have you with us, Mr. Reif, and as you’ve mentioned, 

trade has historically been bipartisan. And we need to do whatever 

we can to make sure it continues to be that way, whatever that is, 

because there’s too much at stake for it not to be. 

But I’d like to follow up on the questioning that Mr. Etheridge 

had, and while we’re not asking the least developed countries to 

make any market access commitments at the Doha round because 

of their special status, I think we all agree that the market access 

being offered by the more advanced developed countries is insufficient. 

And, Mr. Reif, I’d like you to discuss your thoughts on whether 

the United States should implement duty-free, quota-free access for 

the least developed countries before the conclusion of the Doha 

round negotiations in terms of how it will affect the positions of the 

more advanced developed countries. 

And could providing these duty-free, quota-free access reduce the 

incentives that the least developed countries now have that push 

the more advanced developed countries like China, India, Brazil, to 

make more concessions so we can have a more ambitious Doha outcome? And isn’t this similar to the USTR’s rationale in opposing 

the long-term extension of unilateral tariff benefits through the 

miscellaneous tariff bill because it could complicate the Doha round 

negotiations? 

Mr. REIF. Good morning, Mr. Herger, it’s good to see you again, 

sir. With respect to duty-free, quota-free, it is envisioned, it was envisioned at the Hong Kong Ministerial to be concluded together 

with the completion of the overall Doha negotiations, and that’s 

currently where we stand with respect to that. 

With respect to the more advanced developing countries, as well 

as others, our negotiators are pressing for these market access 

issues in Agriculture, NAMA as well as in services, so those are 

being hard pressed. I’m not sure I understood the question on the 

miscellaneous tariff bill, sir. 

Mr. HERGER. Well, again, if we grant these—if we grant this to, 

in the miscellaneous tariff bill, to these countries in advance, aren’t 

we taking away the pressure that they might be applying to the 

rest of the countries, like Brazil and China, to give concessions that 

they might not have given otherwise? 

Mr. REIF. Yes sir. Typically, the provisions of the miscellaneous 

tariff bill are ones that are developed in a noncontroversial basis. 

The administration reviews them at a policy level on a case-by-case 

basis to ascertain whether they would meet the criteria that we 

have for the bill. And so if there were issues with any particular 

proposal with respect to the MTB, the administration would have 

the opportunity to discuss that with you as you are putting together the bill. 

Mr. HERGER. Well, I thank you. And again, I just want to emphasize, because it’s so important to all of our friends, I think this 

is something, whether it be the labor movement or whoever it is 

it’s in, and we obviously have some disagreements in certain areas. 

We have some areas that we need to work out, but I think it’s so 

important for everyone, for labor, for those employees, for those inVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00064 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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dividuals that are out of work, wherever they might be, that we 

work together. We have to move forward. We just absolutely—I 

think it’s imperative for the betterment of our nation. 

So, Mr. Chairman, again, I thank you. 

Chairman LEVIN. Ms. Sa ́nchez. And then in this order, Mr. 

Pomeroy and Mr. Crowley. 

Ms. SA ́ NCHEZ. Thank you, Mr. Levin. I want to start with Dr. 

Ott. And I want to preface my question with the statement that I 

frequently make, which is that there seems to be sort of this naive 

belief that—in my opinion—in terms of trade policy that all trade 

is good and that if we just trade with developing countries or impoverished countries, that somehow that’s magically going to alleviate the disparities between those who have and those who don’t in 

those countries, and that somehow magically that’s going to pull 

them out of poverty and make them an industrialized development 

nation. 

And I don’t dispute the fact that trade can be a part of that. But 

I do dispute the notion that simply passing preferences or trade 

agreements is going to magically have that happen. And I wanted 

to ask you a question about your written testimony. You noted that 

the median bilateral trade capacity building program implemented 

in 2008 was $175 million. Is that correct? 

Ms. OTT. $1.75 million. 

Ms. SA ́ NCHEZ. Right. Do you think that that kind of an investment really can help a nation build a reliable road system or a 

modern port or customs facility or other infrastructures which 

might be necessary to compete with more developed nations? Does 

that sound like it’s commensurate with the need in some of these 

countries? 

Ms. OTT. I thank you for posing such an interesting question. 

Having worked in development for quite some time, I would observe that there are no magic bullets. And you’re quite correct in 

questioning whether trade is a magic bullet to development and to 

lifting standards of living. 

Trade is, however, an important component of that effort, and 

trade liberalization and greater access to trade, greater involvement of the private economy and trade bring many benefits to developing countries, some more apparent than others. Certainly 

trade helps create income opportunities, whether for small farmers, 

whether for micro-entrepreneurs, or for workers. 

Ms. SA ́ NCHEZ. I understand, but—— 

Ms. OTT. Trade also brings often more transparency, better governance—— 

Ms. SA ́ NCHEZ. I don’t dispute that, but my point being that if 

you have small farmers that suddenly can export to the United 

States but they have no road to get their products to the port to 

export to the United States, are they really reaping the benefits of 

these trade preferences programs? And my point simply being, and 

again, I don’t dispute that trade can be one part of that, but in and 

of itself, I believe liberalizing trade in and of itself solely is not an 

economic development strategy necessarily for these countries, and 

that perhaps when paired with other types of assistance, it might 

be even more effective in doing all of the lovely things that you’re 


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talking about that trade can potentially do in these countries. 

Would you agree with that? 

Ms. OTT. I do agree with that. Certainly in many of the countries where we implement trade capacity programs there are infrastructure issues, there are power issues, and our programs and 

programs of other U.S. government agencies that support trade and 

programs of other donors address, whether it’s road construction, 

road repair and other needs to get products to markets and facilitate the reaping of the benefits from trade. 

Ms. SA ́ NCHEZ. Thank you. Mr. Reif, is the USTR making any 

effort to sort of more broadly incorporate other development objectives like infrastructure development and education and skill 

trainings into our preferences program, or USTR is just concerned 

with liberalizing trade and not really the whole picture? 

Mr. REIF. No. We have an office specifically of trade and development that works closely with Dr. Ott’s agency and with others 

to try to promote these other objectives. 

I think it’s the administration’s position very strongly that trade 

is a critical part of—a component of development, but that these 

others—excuse me—these other issues, including infrastructure development, whether it’s making cell phones available to small farmers or making a road available to a small farmer, improving a port 

so that individual can export their products is a critical component 

of the successful functioning of the preference program. 

Ms. SA ́ NCHEZ. So there is a recognition that trade in and of 

itself is not going to be the magic bullet, so to speak? 

Mr. REIF. There is a recognition and also—— 

Ms. SA ́ NCHEZ. Thank you. 

Mr. REIF [continuing]. Recognition of the other components. 

Ms. SA ́ NCHEZ. Ms. Polaski, you said that in these preferences 

that there are some labor standards in these preferences and if I 

heard your testimony correctly, that you think that those need to 

be maintained? 

Ms. POLASKI. Yes, Ms. Sa ́nchez. All of the preference programs 

do have labor standard requirements so that the developing countries that benefit from the preference programs must be taking 

steps to implement the internationally recognized core labor standards and to maintain acceptable conditions of work in the sectors 

that are affect. So that’s in all of the programs. 

Ms. SA ́ NCHEZ. Okay. Are there any environmental standards in 

the preferences programs? 

Ms. POLASKI. I don’t believe in any of the preference programs. 

I’ll defer to my colleagues. 

Ms. SA ́ NCHEZ. Mr. Reif, are there any environmental standards 

in the preference programs? 

Mr. REIF. No ma’am, there are no environmental standards. 

Ms. SA ́ NCHEZ. And with respect to the labor standards, does 

the USTR conduct any onsite inspections, or is it pretty much petition-driven process for review of some of the standards that are 

going on? 

Mr. REIF. There’s both. There is onsite verification. 

Ms. SA ́ NCHEZ. How often does that occur? 

Mr. REIF. Well, it varies from country to country. 

Ms. SA ́ NCHEZ. Can you give me a rough idea, a rough estimate? 


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Mr. REIF. I could look into it. I don’t—not off the top of my head 

I’m afraid. 

Ms. SA ́ NCHEZ. Okay. Because my understanding is that it’s basically petition-driven, and if workers don’t have the rights to free 

association or to collectively bargain for better wages, and in some 

countries, like, for instance, Colombia, where there is threats, harassment and intimidation, it might actually discourage workers 

from filing petitions when they have working conditions that are 

substandard or less than those that meet the requirements of the 

preferences. 

And I’ll just close by saying this. That I would seriously consider 

or ask you to consider thinking about perhaps a GSP-plus tier, 

which would be certain preferences, enhanced preferences for countries who guarantee certain labor rights in their countries because 

as we’ve seen with Jordan and the Philippines and other countries, 

I know that you guys are really keen about talking about the successes and how you move people towards better labor standards, 

but I would still allege that there are plenty of failures that need 

to be addressed. And with that, I will yield back my time and 

thank the chairman for his indulgence. 

Chairman LEVIN. Mr. Pomeroy. 

Mr. POMEROY. I second the questions asked by my colleague 

Sa ́nchez, particularly relative to trade capacity building, which I do 

not believe has had sufficient focus and attention by our country 

as we have hoped for. I believe more development and more 

progress in the lives of people in the preferenced areas than has 

occurred, just with the preferences, themselves. 

Mr. Philbrook, USDA, has got a part of this and I thought your 

testimony was very interesting. I was very encouraged in visiting 

with Dr. Shah, the Undersecretary at USDA, prior to, now I understand he’s, new direction, coming over to USAID. I actually think 

this could be a very exciting new period in both agencies’ lives as 

we look at devoting ourselves more to production building and 

hopefully the production building in these places will also have an 

eye on making optimal use of their trade opportunities. 

Mr. Philbrook, would you talk about that, and Dr. Ott, I’d like 

your comments on that. 

Mr. PHILBROOK. Well, Mr. Chairman and Mr. Pomeroy, let me 

just say, I am absolutely delighted that Dr. Shah is going to 

USAID. I’m deeply disappointed that he’s leaving USDA. He and 

I have had the opportunity to work together over these last few 

months and enjoy a deep friendship. He brings to this job an enormous understanding of issues that relate to agriculture and food 

security and it’s my view that he will be able to assist, as USAID 

and USDA try to work more together, that he will be able to assist 

that remarkably well. 

Mr. POMEROY. You know, I’m on the agriculture committee, 

I’ve been very involved in the farm bill legislation, but I believe it’s 

a fair statement that USDA’s central thrust in responding to a 

hungry world has been looking at commodity support we might 

provide to them. I’m for that. But, in the end, in the honor of Dr. 

Bullock, we want to continue to raise production capacity in these 

places. And I believe maybe we’ve taken our eye off the ball in that 

regard. 


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Dr. Ott, there’s some very disturbing statistics relative to the diminishing number of personnel in USAID with expertise in food 

production. Can you speak to that? 

Ms. OTT. Thank you. Thankfully, the distressing number regarding our expertise in agriculture and other areas is being turned 

around through the development leadership initiative. And we have 

made it a priority to expand our staff of agriculture experts who 

will be deployed in the field so that we have a robust capacity to 

address food security efforts and other efforts related to agricultural development. We are recruiting and hiring skilled agricultural officers for our foreign service as fast as we can. 

Mr. POMEROY. I’m delighted to hear that. My visit with Dr. 

Shah involved cross leveraging other production experts in our 

country, including the land grant universities. And I hope that as 

he comes from USDA over to USAID, we’ll be able to really have 

a level of collaboration not seen before in these agencies, in this 

area. We really took our eye off the ball. People eat every day. 

You’ve got to produce food every season. And yet, to have the dwindle, it is a fraction of the sheer number of employees that we had 

dedicated in this area. We need to reverse that. Dr. Ott, I’m glad 

to hear you saying that we are reversing it. 

Final question to Mr. Philbrook. The foreign ag service, USDA officials in these embassies across the world, is there capacity there 

to assist and perhaps, in a more robust way, work with USAID at 

expanding food production capacity and commensurate trade building capacity as a result? 

Mr. PHILBROOK. Well, we certainly hope so, Mr. Pomeroy. 

Many of the agricultural attaches’ background is in agricultural economics, not agricultural development. Although, we do have some. 

The gentleman, our attache in Peru, for example, in Lima, has a 

development background, having served both in USAID and others. 

And there’s a handful around the world. We’re trying to encourage 

them, I suppose is the word, to work in countries in Sub-Sahara 

Africa. We’ve expanded the number of ag attaches in sub-Sahara 

and Africa. 

But I don’t think it’s reasonable to expect that if they have a 

macro-agricultural economic background that they’re going to be 

able to immediately do the kind of work that’s necessary at rural 

village development. But, we’re working toward that. And we’re actually thinking of creating a, I don’t know what the term is, I 

haven’t been in government long enough to know what all these 

terms are, but to create a cadre of attaches that have development 

backgrounds and to hire people to fulfill that role. 

Mr. POMEROY. I’m excited to hear that. Thank you. 

Chairman LEVIN. Mr. Pomeroy, Mr. Crowley’s next. Mr. Pomeroy, do pursue this issue. When I had the privilege of being the 

assistant administrator of Ag, in our bureau we had a rural development entity and we did the kinds of things that you mentioned. 

And there’s been a dismantling of that capacity within AID and I 

hope there can be a rejuvenation. Mr. Crowley? 

Mr. CROWLEY. Thank you, Mr. Chairman. Thank you to you, 

Mr. Chairman and the Chairman of the full committee as also 

ranking member for allowing me to participate. 


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Chairman LEVIN. No, no, you’re fully, you just come at the end, 

but we’re so glad you’re here. 

Mr. CROWLEY. Glad to be here, so thank you. I just have a 

quick question, a couple of quick questions as it relates to the 

LDCs again. I know Mr. Herger had mentioned, made some reference to it, as well. And in particular, a country that I have a particular concern about, and that is Bangladesh. Currently, Bangladesh ranks 146th out of 182 countries in the UN Human Development Index, the HDI, with almost half of its population living on 

a $1.25 or less per day. 

I’ve traveled to Bangladesh on several occasions and I’ve seen for 

myself the dire poverty of the Bangladeshi people. Even though 

Bangladesh is already a participant in the GSP program, I believe 

it could and should benefit from the same types of programs authorized by regional preference programs. Bangladesh has the capacity to take advantage of preferences if we only give them that 

chance and the opportunity. 

How can we move forward on including the least developed countries, which are not beneficiaries of regional benefits, into a position where they can take advantage of preference programs? If 

there is not room for full participation, are there other measures 

that we could take to make them more fully participatory? 

Mr. REIF. Thank you, Mr. Crowley. And as you know, I think 

you know, the basic talking points on this issue. So, maybe I’ll try 

to go beyond those. It’s not a simple question. As you state, Bangladesh is very far down in terms of least developed countries. It’s 

also our third largest supplier of textiles and apparel. It competes 

up the chain to our first and second largest suppliers of textiles 

and apparel and it also competes down the chain towards the others. Those are all considerations that will factor into our discussions with you and with others and the Congress about how to 

move forward in this particular area. 

There are issues of, there are problems there that would probably manifest themselves in terms of meeting the criteria of any 

new program that Bangladesh might participate in. In the worker 

rights area and other things. So, it’s not a simple equation, sir, but 

it is one that I think, happily, will be given very careful and 

thoughtful attention in the coming months as this committee and 

others begin to work on this subject. 

Mr. CROWLEY. I appreciate that response. Let me just point 

out, just for the record that, particularly for women in Bangladesh, 

their advancement has been linked intrinsically to their advancement on trade, particularly in the garment sector. And I think 

that’s something we all ought to, if we don’t, support. 

Let me just go back to what Ms. Sa ́nchez in her line of questions 

to Dr. Ott, which I thought was important. And I agree with her 

that not enough is done in trade building capacity. Going back to 

Bangladesh though, in particular, they have invested a great deal 

of resources per capita in improving the infrastructure of their 

country in order to make them a more effective exporter. 

Yet this committee staff, ways and means committee staff, appointed, and this is an interesting statistic, that Bangladesh currently pays $570 million in duties on $3.7 billion of exports to the 

United States. By contrast, our ally, Great Britain, the United 


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Kingdom, only pays $400 million on $58 billion in exports. That 

seems strikingly out of balance and a steep penalty for a country 

that lives in dire poverty. Is there any reason that the 

Bangladeshis and other poor countries should have to pay such 

steep prices for market access here? Is it Dr. Ott or Tim? Either 

one can? Dr. Ott, you can take it first. 

Ms. OTT. On the trade policy aspect of your question, I would 

defer to my colleague from USTR. 

Mr. CROWLEY. But, the question to you, in terms of the investment that country’s making itself in infrastructure improvements, 

a good deal of that money that’s being spent right now, could come 

from monies that they’re paying to the U.S. on duties. Would you 

agree with that? Does a country like Great Britain have the same 

issues that Bangladesh has in terms of capacity? 

Ms. OTT. Well, certainly to the extent there’s more economic activity in Bangladesh and it’s taxed and there would be the opportunity for additional investments in infrastructure or other areas. 

Mr. CROWLEY. Mr. Reif. 

Mr. REIF. Sir, just a point of clarification. The duties are actually paid by the businesses that are exporting to us, so that it’s not 

actually money coming out of the government’s pockets. But the 

point is—— 

Mr. CROWLEY. No, what it does do, it would create more opportunity for business to be done here and that money derived from 

that can be spent on infrastructure back in their country. 

Mr. REIF [continuing]. Well, and what it points out, certainly, is 

that there is clustering of reasonably high tariff levels in some particular product categories that Bangladesh and some other countries specialize in. Similarly, back on this end of the equation that 

there are individuals working and there are businesses working in 

those areas. That’s another difficult piece to the equation that 

we’re going to have to work on if we’re going to look in this area. 

Mr. CROWLEY. Thank you. Thank you, Mr. Chairman. 

Chairman LEVIN. We’ll finish it. Mr. Crowley, it’s so important 

that you be here and as we go forth with this, we hope all will participate. I think your last question does show the complexity, but 

the need to tackle these complexities. I think the basic answer is 

that the product that have come in from the country that you mentioned are not as complementary, if you want to put it with an e, 

not an i, as the products that come from Great Britain. And it’s a 

reason for the higher tariffs. But, as we look at this issue, and it 

also relates to Doha, we need to look at expanded trade and its impact on jobs in the United States. 

Another reason we want to try for developing nations to develop 

middle classes so they can buy our products. It’s all, I think, interrelated and that’s why, as we go forth with this issue of preferences, we’ll try to look at all of the aspects, including trade capacity. Sandra Polaski is an expert on this. They’re working on this 

issue. And so, we’re glad all of you are here; we say good luck to 

AID and Ag, as there’s new leadership there, and to you, Ms. 

Polaski, for coming, and to you, Tim Reif, we are exceptionally glad 

you are where you are, although we miss you. 

With that, we will stand adjourned until 1:30. Then the third 

and fourth panels will go right into it. 


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[Recess.] 

Chairman LEVIN. I think we’ll start, I’m sorry, we’re a few minutes late. Just waiting for Mr. Brady. Mr. McDermott’s here. Okay. 

Thank you, very much. And Mr. Brady and Mr. McDermott and I 

very much appreciate your patience. I think others will be joining 

us. There are now other areas of business in this place, but many 

will try to be back. So, this third panel, again, is a very distinguished one. Going from left to right, is Mr. Karangizi, who is the 

Assistant Secretary General of the Common Market for Eastern 

and Southern Africa. Welcome, sir. 

And His Excellency, Cham Prasidh, who is the Senior Minister 

and Minister of Commerce for the Kingdom of Cambodia. Welcome, 

Your Excellency. Glad you could make it. 

And also, David Hastings, who’s the President and Chief Executive Officer of Mt. Vernon Mills from Mauldin, South Carolina? 

Where’s Mauldin? Okay. 

And Paul O’Brien, who is Vice President of Policy and Advocacy 

for Oxfam. 

So each of you, if you would take five minutes. Your statements 

will be fully reviewed in the record. 

Oh, hi. That’s right. I was told you weren’t feeling well, but we’re 

especially pleased that you’re here, Ambassador Toma ́s Duen ̃ as. 

Can you hear us? 

Mr. DUEN ̃ AS. Yes. I can hear you. 

Chairman LEVIN. Modern technology, which isn’t perfect, but I 

think it will be good enough. And you’re the former Ambassador of 

Costa Rica to the U.S. and you’re Chief Executive Officer of ESCO. 

I think all of you might agree, Mr. Duen ̃ as, are you able to stay 

with us for the next half an hour or so? Is that okay? 

Mr. DUEN ̃ AS. Yes, I will, of course. 

Chairman LEVIN. All right, then, why don’t we do this, we’ll 

start, we’ll go down the line and then you’ll go last Mr. Duen ̃ as, 

but then we’ll see if there are any questions of you, so you could 

take them right away, okay? 

Mr. DUEN ̃ AS. Yes. 

Chairman LEVIN. Thank you very, very much. 

Mr. DUEN ̃ AS. You’re welcome. 

Chairman LEVIN. So, Mr. Karangizi, why don’t you take your 

five minutes? And again, we welcome all of you. 

STATEMENT OF STEPHEN KARANGIZI, ASSISTANT SECRETARY 

GENERAL, THE COMMON MARKET FOR EASTERN AND 

SOUTHERN AFRICA (COMESA) 

Mr. KARANGIZI. Thank you, Chairman Levin, ranking member 

Brady, and distinguished members of the sub-committee. It gives 

me great pleasure to express our appreciation, as COMESA, for the 

invitation from your sub-committee to participate in hearings to assist the performance of U.S. preference programs and potential opportunities for improvement. It is fitting to be here today to discuss 

AGOA’s future, as well. 

I remember that this is the committee where proposals for AGOA 

were conceived and without the dedicated work of Chairman 

Charles Rangel, and other long serving members, Sandy Levin, Jim 

McDermott and Ed Royce, we would never have had AGOA. In the 


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case of COMESA, fourteen out of nineteen member states of 

COMESA, are currently full beneficiaries of AGOA and I’ll focus 

my comments on this preference program. 

Suffice to note that, this comes at an appropriate time, when in 

the case of our region, efforts are being undertaken to expand integration with the proposal to have a larger free area covering three 

regional organizations of 26 countries, otherwise known as the Tripartite arrangement. 

In addition, other efforts have been undertaken to deepen the 

participation of the private sector with the establishment of an African cotton textiles industries federation and other private sector 

organizations in spearheading the role of the private sector in increasing the opportunities in AGOA. 

I will turn to the main issues regarding the future of the trade 

preferences in relation to our region. Over the past few years, following the end of the multi-five agreement, we’ve seen a decline in 

the exports from our region and AGOA. We believe that this decline is likely to continue especially, considering that our region 

faces more challenges. Despite the availability of the AGOA regime, there are still challenges in relation to capacity for the private sector to supply imports for garments in the textile sector and 

its difficulty in attracting investment in that area, and of course, 

the cost of doing business. 

This particular year, we’ve also had the opportunity of having 

another AGOA forum, the 8th AGOA forum in Nairobi, Kenya, 

where Ambassador Kirk extended the interests of the U.S. government to continue with AGOA and to seek ways in which it can be 

enhanced. 

Our overriding proposal, of course, is that AGOA could become 

permanent and its specific provisions, including the right to incorporate third country fabrics in garment exports, are made permanent. 

Other more specific trade policy proposals, which we believe 

would be beneficial in strengthening AGOA, include agriculture, 

and the elimination of tariff reduction quotas on all agriculture 

products with the exception of sugar, which would generate agriculture trade. For a number of countries, the trade generated could 

exceed their current trade levels. 

Secondly, another major impediment to new exports of agricultural products from the region is sanitary and phyto-sanitary measures, particularly, pest risk assessments. At the moment, they are 

expensive, require lengthy time periods to conduct and often aren’t 

successful. We believe that this is an area where particular attention could be harnessed if addressed. 

In line with the AGOA forum recommendations, we also believe 

increased U.S. assistance in enhancing and strengthening of institutional capacity to meet those SPS measures through training of 

national competencies in Sub-Saharan countries would go a long 

way in addressing this. And of course, the need for fast-tracking 

the pest risk analysis process for approval of Sub-Saharan exports 

to the U.S. would assist. 

Thirdly, we also believe that there is a need to provide substantial resources for capacity building in the agricultural sector, particularly in the areas of research, training and agriculture infraVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00072 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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structure. With respect to infrastructure, generally, we also feel 

that paying greater attention to infrastructure in our region and 

supporting the outcomes of the current WTO aid for trade excise 

in Geneva would greatly support the enhanced capacity of our private sector to increase their access to the AGOA market. 

With respect to the eligibility criteria, we remain concerned, of 

course, that while we appreciate the establishment of conditions for 

eligibility, some of our member states have not been able to move 

away from their non-eligibility criteria, hence the difficulty in their 

access to the market. 

We have a number of ideas for improving country eligibility requirements which we think would go a long way in enhancing 

AGOA. These include the U.S. should take into account the results 

of African peer reviews, which are ongoing. Secondly, the need to 

provide U.S. decision makers more flexibility by allowing non-trade 

sanctions for violations of eligibility conditions. 

U.S. laws include measures targeting the perpetrators of antidemocratic actions such as denying visas and access to overseas financial assets, which we believe would be more favorable than 

trade sanctions. 

Thirdly, we believe the designation of regional groups would be 

more beneficial and rather than one country falling out of conformity with the requirements, which affects regional integration, 

the groups can monitor each of its members if eligible, and maintain regional designation. 

With respect to trade policy, one of the most appealing aspects 

of AGOA is that of allowing designation of all African countries, irrespective of classification. We believe this is an area which could 

be strengthened, particularly giving consideration under WTO to 

generalizing the waiver to all such donor preferences. 

Secondly, in terms of trade policy, we believe under the Doha 

round of negotiations, it would be more favorable if concessions are 

not necessarily sought from the non-LCD countries, as this would 

affect in the long term, the establishment and strengthening of customs union in our region. 

And of course, we join all our members in terms of urging a 

prompt, balanced, and ambitious outcome of the round which has 

been articulated. With respect to textiles, it is obvious that Sub-Saharan textiles have difficulty in competing with manufacturers, 

particularly from the far east, as they have less competitive edge 

in terms of their production costs and so on. 

AGOA has a unique origin rule for garments, which has allowed 

it to maintain a small but significant share of the market. As signaled above, we’ve heard of the proposals for extending the MFA 

to other countries, particularly Bangladesh, although Bangladesh is 

the second largest exporter to the U.S. and has seen its imports increase while Sub-Saharan imports have declined. Thus, we argue 

that duty free treatment cannot be accorded to Bangladesh apparel 

exports if one hopes to maintain the most significant success story 

of AGOA, the growth of the garment industry in Sub-Saharan Africa. 

We have alternative proposals, for instance, the U.S. could consider a proposal for an end import allowance program, which has 

been used in some other forms as enumerated in my testimony. We 


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also plea that the U.S. extend the AGOA third country fabric beyond 2012 as I have expressed in the testimony with more details. 

With respect to origin rules, donor countries have a very wide variety of origin rules which makes it difficult for African producers 

to export and for African authorities to administer the program. 

We would hope that the WTO would be tough with developing common standard origin rules for all donor countries. One area where 

a special rule could be developed is canned tuna, due to the uniqueness of this rule, it is almost impossible at the moment for fish 

caught in African waters to meet origin criteria. 

Finally, we also think that the market access alone is not sufficient. While we have had some successes, there are opportunities 

in the non-trade area to improve AGOA. These were clearly highlighted at the AGOA forum and I have attached a summary of 

them as stipulated by the chairman of the Africa group at that 

forum, which include issues relating to development and investment. I have highlighted some of them in my testimony including: 

incentives for U.S. investment in the region, flexibility of and providing original mandate for the Millennium Challenge Corporation, 

the OPEC, U.S. export/import bank, assistance in the infrastructure projects, particularly with reference to the Aid for Trade agenda under WTO, support to industries where the region has competitive advantages, and of course, a clear option of time, trade and 

investment policies. 

We believe that addressing all these would greatly enhance the 

capacity of Sub-Saharan countries to be able to benefit fully from 

the AGOA provisions extended to them. 

We thank you, Mr. Chairman, and the other distinguished members for inviting us once again. Thank you. 

[The prepared statement of Mr. Karangizi follows:] 


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Chairman LEVIN. Thank you for coming. 

Mr. Minister, you’re next. 

STATEMENT OF HIS EXCELLENCY CHAM PRASIDH, SENIOR 

MINISTER AND MINISTER OF COMMERCE, KINGDOM OF 

CAMBODIA 

Mr. PRASIDH. Chairman Levin, ranking member Brady, Members of the Subcommittee, on behalf of the Royal Government of 

Cambodia, I appreciate the opportunity to appear before you to discuss reforms of the U.S. trade preference system. Let me begin by 


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expressing my gratitude for the Committee’s cooperation and work 

with Cambodia on trade policy over the past 15 years which resulted in restoring normalized trade relations in 1995, and in helping to shape the textile agreement in force from 1999 to 2004, and 

in our WTO session agreement in 2004 and implementation since 

then. 

As I trust you will appreciate, that I come to this hearing with 

a single message. The Cambodian apparel industry is facing an unprecedented crisis and the action we request in response from this 

committee and the Congress is, to give our apparel sector duty free 

and quota free access. 

Mr. Chairman, we recognize that this crisis is not the responsibility of the Congress of the United States. Indeed, it is the U.S. 

apparel market that has given us the chance to transform our industrial economy and we deeply appreciate that opportunity and 

partnership. 

While you are listening to me, I would like you to bear in mind 

the context we are living and the past tragic history of Cambodia. 

People of my age who have always resided in Cambodia have saluted six different national flags of Cambodia. That’s a record in 

the world. So, please bear that in mind when you are listening to 

our plea. 

Mr. Chairman, while we are rebuilding our country, we found 

our way together and we put in place through the International 

Labor Organization a reporting mechanism for our apparel factories that assured accountability for compliance with Cambodian 

labor law and fundamental international workers’ rights. The better factories Cambodia project has been so far branded the most innovative mechanism to promote corporate social responsibility. We 

took, also, accompanying measures to make the policy work. 

Cambodia’s reputation was transformed from a country known 

for tragedy, for the killing fields, to that of a country that was a 

pioneer in international trade policy. We made Cambodia a safe 

haven for all the major brands who source apparel from Cambodia 

free from sweat shops. The Cambodia model was born and it is now 

followed by a growing number of other countries but risks of its 

failing, are looming in the horizon. 

I have attached some slides for you to see how we have been able 

to perform and the current crisis that we are facing is that we are 

going to see a drop of 24 percent to 36 percent of our government 

export, not just through the U.S.A., but also through the world. 

And what we have seen as well is, that we are also very vulnerable 

to external shocks. Our government sector export represents 87.87 

percent of our total exports in 2008. This is affecting the government export mean as well as, the whole community of Cambodia. 

Over the past year, we have seen 60 factories, garment factories, 

close down. 52,000 jobs lost. And what will happen to these 52,000 

workers, mostly female, after being laid off is a very big question 

mark. The Cambodian government does not have money to provide 

social securities as in developed countries. 

Over two million people, who have seen recent improved living 

conditions in Cambodia, could suddenly see it wipe out like a tsunami. 


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We have tried to take all the necessary reforms to make our garment sector competitive. How have we been able? We have been 

successful, or not, in securing a market share in the U.S., you look 

to the chart that we have provided, you would see that from 2004 

to 2008, our market share from 2.1 percent grew to 3.9 percent. 

But from this year, it is only 2.4 percent. 

Comparing us with AGOA, AGOA also started with 2.1 percent, 

almost the same level. And nowadays with 1.2 percent. Quite the 

drop. But this drop is not because of Cambodia. If you look to the 

chart, you would see that China has come from 16.01 percent to 

34.74 percent of the market share. 

For the U.S. buyers, corporate social responsibility is just one 

factor. Other factors such as competitive price, speedy delivery of 

goods, and credit facilities continue to prevail in their decision to 

source products. These are all related to competitiveness. 

Since the world financial crisis started in 2008, industrial tensions in Cambodia are flaring up. Factories are closing doors and, 

workers are laid off. We have taken steps to improve our apparel 

sector competitiveness. We are working on programs to boost productivity, assist laid off workers and provide further tax incentive 

for the industry. But we are have a limited budget. But from the 

U.S. side, there are also steps that the Ways and Means Committee can take to provide us a bridge to manage the transition in 

our economy and extend the life of our apparel sector. Duty free access under the U.S. trade preference program. 

I have provided also slides to show you that Cambodia is now 

bleeding white. You look to the chart, you would see that Cambodia 

is paying more and more duties to the U.S. while countries also 

LDCs like the Sub-Saharan countries, see less and less duties to 

be paid to the U.S. So, for example, in the last year, 2008, Cambodia paid $407 million as duties to the U.S. while all the 41 countries in AGOA only paid $14 million. 

Does including LDCs on the same footing as the LDCs of AGOA 

affect AGOA’s economy? I would say, no. I would dare to say, no. 

The end of the quota system in 2005 has started to erode our competitive advantage. The trade preferences the United States can 

give to Cambodia will help us develop our competitiveness vis-a`-vis 

bigger countries with long and well-established apparel sector, especially our neighbors in Asia. 

If you can carve just one or two percent of the U.S. market share 

for our products, out of China’s 34.7 percent share for example, it 

would change dramatically the economy of Cambodia. It will not affect China’s economy at all. This one or two percent slice is certainly not carved from AGOA countries. It’s not carving from 

AGOA’s share in the U.S. market. The AGOA countries can use 

Cambodia as a model for building their competitiveness. Cambodia 

is not their imagined competitor. We are as poor as them. We cannot be condemned in our market access because we are performing 

better. Let us not forget that performing better requires painful reforms and strong political will to change for the better. 

Performing better is not through protecting infirm or ailing industries, but developing your competitive advantage. I believe African countries can shape a brighter future for themselves, too. The 

issue of the rules of origin, specifically when a product is ordered 


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from LDCs, should also be addressed by the U.S. Congress in a 

manner that they can be effectively utilized. 

We also should not be viewed as taking jobs from American 

workers in the textile and apparel sector, as we are not producing 

the same type of categories of apparel that they are doing. 

The last chart that I would like to share with you, excellencies 

and other Members of the Subcommittee, shows the GDP growth 

of Cambodia. At this time, there is still a quota and a policy of 

linking trade which we understand. We have been able to secure 

additional quota and our GDP growth went up as did our export 

of garments to the U.S. But at the end of the quota system in 2005, 

you look toward our GDP growth, we start to fall from 13.3 percent 

to 10.8 percent in 2007, to 10.2 percent in 2007, to 6.7 percent in 

last year. And this year, to ¥2.75 percent. This is why I said it 

is a crisis because 87 percent of our world export relies on garments. And if nothing is done for our apparel sector, we are going 

to go deeper than what you are seeing here. 

This means that quota free and free competition, has just offered 

the opportunity for the onslaught of our products by cheaper Chinese and Indian products and that there is a real free fall of Cambodian export and at the same time, a free fall of Cambodia GDP 

gross. 

What will the U.S. do with its GSP scheme? I am here to make 

a plea from a war devastated country, a plea from the killing fields. 

At this moment of crisis, I hope the committee will take the modest 

steps that can preserve Cambodia garment industry as a success 

story in development, of labor rights, and of poverty reduction. It 

is all about opportunities. It is all about competitiveness. It is all 

about fairness. It is all about strong political will to change, to 

make a positive change that will impact positively the least developed countries. 

The 41 Sub-Saharan LDCs enjoy preferential market access to 

the U.S. market on the duty free, quota free basis under the AGOA 

while Asian LDCs, including Cambodia, and Pacific LDCs do not. 

Cambodia is as poor as any of the AGOA countries. Why can’t they 

receive similar treatment? If Cambodia fails, the AGOA countries 

are not going to benefit from it, either. What will be the Doha development agenda? Ultimate results for LDCs. Making them poorer 

or better off? What are the millennium development goals aiming 

at? 

Please, give Cambodia opportunities to export duty free, quota 

free to the U.S. market, build a stronger private sector and gets its 

people out of poverty. Our people have suffered long enough. And 

should not be left out in the cold. 

Thank you. 

[The prepared statement of Mr. Prasidh follows:] 


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Chairman LEVIN. Mr. Hastings, you’re next. 

STATEMENT OF W. DAVID HASTINGS, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, MOUNT VERNON MILLS, INC. 

Mr. HASTINGS. Chairman Levin and ranking member Brady, 

thank you for the opportunity to testify on trade preference reform. 

My name is David Hastings and I am the CEO of Mt. Vernon Mills 

and the vice chairman of the National Council of Textile organizations. 

The overall U.S. textile sector employs over 600,000 workers and exports more than $12 billion a year. My company, Mt. Vernon 

Mills employs 2,657 textile workers and 17 facilities located in 

mostly rural areas of the Southeast. Our largest plant in Trion, 

Georgia, employs 1,142 workers and has been a mainstay in the 

Trion community since 1845. 

Most of what we make at Trion is exported to the NAFTA and 

CAFTA regions and returns as garments to the United States. On 

November 7th, Mt. Vernon announced that we had several job 

openings at the Trion plant. People began lining up outside the 

plant at four a.m. to apply. By noon we had taken 270 applications 

from people looking for work. That is how difficult life is in the 

rural communities today. 

I understand that the committee is considering a proposal to extend duty free status to apparel imports for Bangladesh and Cambodia, or to make other changes to the textile and apparel trade 

rules. 45 textile and apparel groups from 29 countries in Africa and 

the Western Hemisphere asked me to present a letter today stressing their strong opposition to such efforts. This list includes nine 

least developed countries, including Haiti. As this committee considers this proposal I appeal to you to keep in mind the workers 

at our Trion facility and at textile facilities across the country. 

Their livelihoods literally rest in your hands. If this committee 

grants duty free status to large competitive countries, Mt. Vernon’s 

Trion facility as well as many other textile mills across the country 

will be forced to close. And in the case of Trion, the U.S. military 

will lose one of the country’s largest producers of combat fabric for 

our soldiers. The reason is simple economics. Bangladesh already 

pays its workers the lowest wages of any apparel producer in the 

world. The minimum wage for apparel workers in Bangladesh is 11 

cents an hour. 

On top of that, Bangladesh has a long history of worker abuse. 

Over the last six months tens of thousands of garment workers 

have rioted on multiple occasions with numerous deaths. I grew up 

in Greenwood, South Carolina, and my father and mother worked 

their entire careers at Greenwood Mills. Their hard work paid off 

to the point that I was able to become the CEO of Mt. Vernon 

Mills. That story of opportunity and promise has been replayed in 

some of the poorer sections of this country for many generations. 

That story has also been replayed around the world. The United 

States has extended special access in textiles and apparel to 55 

countries. Through these programs two-way trade worth nearly $30 

billion has been created. Nearly two million workers have escaped 

from poverty; however, these gains are threatened by the proposals 

to extend new preferences to Bangladesh and Cambodia. With the 


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removal of quotas over the last five years, countries that have 

heavily subsidized their textile export sectors, practice currency 

manipulation, or pay only the very lowest of wages have seen importers flock to their shores. 

Since 2004 China has gained $14 billion in new apparel exports. 

Exports for Bangladesh and Cambodia have increased by 63 percent, over $2 billion. Exports from Bangladesh and Cambodia have 

increased by 63 percent, over $2 billion. However, apparel imports 

from the CAFTA countries have fallen 32 percent while the AGOA 

countries are down another 40 percent. The U.S. textile industry, 

in turn, has lost over 150,000 jobs. 

Mr. Chairman, I do not think our country believes we should do 

anything that could jeopardize any additional jobs at home. In particular, we should not be abandoning manufacturing jobs when 

economists and the president tell us we must produce more and export more to return to economic health. I also do not think we 

should abandon our preference partners in order to reward countries that barely pay their workers or engage in predatory and illegal subsidy schemes. Instead, I believe that we should be focused 

in our efforts on ensuring a prosperous future for United States 

workers as well as for the millions of workers in the preference and 

free trade areas. 

As an immediate issue I urge the committee to move quickly to 

extend trade preferences that are expiring in the Andean region. 

Thank you, and I will be pleased to answer your questions. 

[The prepared statement of Mr. Hastings follows:] 


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Chairman LEVIN. Thank you very much. 

Mr. O’Brien. 

STATEMENT OF PAUL O’BRIEN, VICE PRESIDENT OF POLICY 

AND ADVOCACY, OXFAM AMERICA 

Mr. O’BRIEN. Thank you Chairman Levin, Representative 

Brady, Members of the Subcommittee. 

I am Paul O’Brien. I am the vice president for policy and advocacy at Oxfam America. I want to say we’re very grateful for these 

hearings and for the depth of the discussion. 

We in particular agree with the recommendations of Representative McDermott and thank you very much for them this morning. 

Oxfam America: we have 14 affiliates around the world working in 

a hundred countries. We’re an aid organization, but we don’t think 

that the answer to global poverty problems is aid. We think trade 

is far more important. If you increased global trade by one percent 

it would be more than two and a half times the global aid budget. 

It’s far more significant. 

What we really need to see is bringing aid and trade together in 

a coherent global development strategy from the United States, 

which is always going to be the leader on this front, but could do 

far more to fulfill its potential. It doesn’t make sense that we give 

Cambodia one dollar in aid for every seven dollars we charge them 

in trade. It doesn’t make sense that we are charging Bangladesh 

$500 million in 2008 on $3.3 billion of exports, while at the same 

time we’re charging less to the United Kingdom on over $50 billion 

of exports. 


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We have got to bring some greater coherence to our global development strategies. We are going to make three recommendations to 

you, which hopefully will be consistent with other things you’ve 

heard this morning. One, expand program and product coverage. 

Two, establish a single, unified program. Make it simpler. Make it 

more predictable. Three, bring our trade and aid policies together, 

particularly in trade capacity building under a global development 

strategy. 

Let me say a few more words about each of those. We need to 

expand our program and product coverage. Why? Because we have 

still a billion people living in poverty, and a global financial crisis 

that put a hundred million more of them into poverty. LDCs make 

up less than one percent of global trade; and imports from LDCs 

in total are half a percent of U.S. non-oil imports to the United 

States. That’s why we need duty free, quota free access for all 

LDCs. 

On products, when we exclude the key exports that help these 

countries lift themselves out of poverty, we are undermining our 

global efforts at sustainable development. If we take textiles and 

apparel out of duty-free, quota-free access, and they are the key industries in places like Cambodia, as you heard from the minister, 

we are undermining our longer term development goals there. The 

same with peanuts, sugar and dairy products under the AGOA 

agreement. 

Our second recommendation is to create a single, unified program with simpler rules and predictability. If we really want trade 

to drive sustainable growth overseas and we see sustainable 

growth as the key to long-term development, we have to think 

about the customers that we have on the ground. Instead of one 

unified program now, we have ad hoc solutions to specific problems, 

developed at different times for different reasons. We don’t have a 

simple set of rules, and from the customer’s perspective, it’s just 

too confusing to work with. 

Because our programs aren’t as predictable as they could be, 

businesses, the people we want to make use of these, can’t plan 

around them. They’re not sure if they’re going to be there in time. 

We need, in our legislation, to make a home for preferences in our 

trade policies. Until we get that legislation, and we believe this 

committee is going to be key to that, we need to make sure that 

the GSP and the Andean programs which are going to be coming 

up next month are renewed for a predictable period of time. We 

recommend five years at Oxfam. 

Third, we need to link trade and aid. I spent the last couple of 

years working on U.S. aid policy. We are by far the global leader 

in aid. We spend one in every four dollars globally, but we are 

underperforming in terms of what we could do to help lift people 

out of poverty, and that’s why we’re a part of the modernizing foreign assistance network to try and make our aid more effective for 

global development. But we face many of the same challenges in 

the trade world. 

There are 15 different agencies that are doing trade capacity 

building. That’s just not an efficient use of resources. People are 

trying to coordinate. There are interagency discussions, but nobody 

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ment strategy. If we don’t do this, we are not going to be able to 

help the countries that need the help most. It’s a problem that 12 

of the 38 countries in AGOA aren’t using this program. 

Why? Because they lack the physical and administrative infrastructure to avail of trade preference opportunities. So we urge this 

committee to work with the appropriations committee and the foreign affairs authorization committee to give us, the United States, 

a global development strategy that brings these things together. As 

I was listening to the minister from Cambodia I was struck by how 

stark this reality is. As he mentioned, their garment sector is in 

crisis. They’ve lost 63,000 jobs. 

Many of those jobs are for women. Many of them come from rural 

areas. We estimate it’s around 90 percent. The fear is that many 

of them are going to go into the sex industry. At the same time 

that that’s happening, one-third of our aid dollars to Cambodia are 

going to protect HIV AIDS. So we can either address the symptom 

through our aid work, or we can get at the underlying cause by 

keeping those women in the jobs that we tried to help them with, 

with our preference programs. 

Whatever we do, we should have a coherent plan. We shouldn’t 

be creating one problem with one of our policies and trying to solve 

it with another one. We need to bring these together. Thank you 

for the opportunity to share these three sets of recommendations 

with you to expand program and product coverage, to make sure 

we have a simpler program with more predictability; and, ultimately, to bring our trade and aid policies together. 

We look forward to working with you as we hope you try to address these problems going forward. 

[The prepared statement of Mr. O’Brien follows:] 

Prepared Statement of Paul O’Brien, Vice President of Policy and 

Advocacy, Oxfam America 

Good morning Mr. Chairman, Representative Brady and Members of the Subcommittee. I am Paul O’Brien, Vice President of Policy and Advocacy for Oxfam 

America. Thank you for the opportunity to testify today on the important matter 

of trade preference programs and international development. Oxfam appreciates the 

subcommittee’s initiative to take a comprehensive review of existing programs and 

to consider how they have been working and how they can be improved. 

Oxfam America is an international development and humanitarian relief agency 

working for lasting solutions to poverty, hunger and social injustice. We are part 

of a confederation of 14 Oxfam organizations working together in nearly 100 countries around the globe. 

Oxfam believes that trade can be an engine for development and poverty reduction as long as the rules of trade work to benefit poor people and developing countries. Well-functioning trade has the potential to lift millions of people out of poverty. To ensure that trade does work for development, U.S. trade policy should hold 

sustainable economic development as a core objective in order to help improve livelihoods and reduce poverty in developing countries. Likewise, U.S. trade and development policies should be harmonized so that they may bolster each other and build 

synergies rather than compete against one another. U.S. trade preference programs 

are an important part of our trade agenda that can help achieve these outcomes. 

I would like to talk briefly about why trade preference programs are important, 

provide a few examples of the strengths and weaknesses of existing programs, and 

suggest how these programs can be improved to better foster development. Oxfam 

believes that U.S. preference programs should be improved by: 

1. Expanding program coverage to benefit all the world’s poorest countries, at 

a minimum those defined as least-developed countries (LDCs) by the United 

Nations (UN); 


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1 United Nations, World Economic Situation and Prospects 2009, Update as of mid-2009, January 2009. 2 Ibid. 

3World Bank. ‘‘Financial Crisis Facts and Figures,’’ http://www.worldbank.org/financialcrisis/ 

bankinitiatives.htm. 4Shaohua Chen and Martin Ravallion, ‘‘The Impact of the Global Financial Crisis on the 

World’s Poorest,’’ 30 April 2009, accessible at: http://www.voxeu.org/index.php?q=node/3520. 5 ‘‘Protecting Progress: The Challenge Facing Low-Income Countries in the Global Recession,’’ 

Background paper prepared by World Bank Group staff for the G–20 Leaders’ Meeting, Pittsburgh, USA, September 24–25, 2009. 6 USITC, 2009, accessible at: www.usitc.gov. 

7Massimiliano Cali, Isabella Massa and Dirk Willem te Velde, ‘‘The Global Financial Crisis: 

Financial Flows to Developing Countries Set to Fall by One Quarter,’’ Overseas Development 

Institute, November 2008. 8 ‘‘Remittance Flows to Developing Countries to Decline by 7.3% in 2009, Predicts World 

Bank,’’ Updated estimates released at July 13–14 International Diaspora and Development Conference, Press Release No. 2010/024/DEC, July 13, 2009. 9 Xinhua News Service, June 16, 2009. 

10Phnom Penh Post, ‘‘Recession Threatens Families,’’ 8/26/09. 11Public Forum on the Impact of the Global Economic Downturn and Need for Policy Responses, Cambodia-Japan Cooperation Center, Phnom Penh, Cambodia, July 14, 2009. 

2. Establishing a single, unified program with simplified rules in order to facilitate greater utilization amongst countries and products; and 

3. Linking preference programs with foreign assistance in order to help these 

countries to better take advantage of trade opportunities. 

I. Trade, preference programs, and development 

Poverty, hunger, disease and lack of economic opportunity in developing countries 

are a human tragedy that is now magnified by the global economic crisis. Even as 

the global economy begins to recover, developing countries continue to face increased 

hardships with mounting food insecurity and soaring unemployment. Improving 

U.S. preference programs to be more inclusive, accessible, reliable and easy to use 

can aid in their recovery and growth. 

Globally, between 73 and 103 million more people will remain poor or fall into extreme poverty (defined as living on less than $1.25 per day) in 2009.1 The majority of this hardship will be felt in East and South Asia, with between 56 and 80 

million people likely to be affected. The crisis is estimated to push into poverty as 

many as 16 million more people in Africa and another 4 million in Latin America 

and the Caribbean this year.2 The World Bank predicts that by the end of 2010, 

the crisis will push an additional 90 million people into extreme poverty,3 and another 120 million will fall below the poverty line of $2 per day.4

At the same time, dramatic shortfalls in developing country financing are reported 

in core areas for development such as education, health, infrastructure, and social 

protection. Further, global export market demand for low-income countries has declined 5 to 10 percent in volume terms this year alone, and merchandise exports 

from these countries are anticipated to drop by 14.4 percent in 2009, compared with 

a 22.2 percent rise in 2008.5 Total U.S. imports from LDCs have fallen by 45 percent, with non-oil imports falling 12 percent.6 Private capital flows 7 and remittances 8 to developing countries are projected to continue to decline as well. 

Yet LDCs like Cambodia and Nepal, which have already been hit very hard by 

the crisis, face the added burden of higher tariffs in the United States. They do not 

benefit from existing preference programs because most of the products they export 

are excluded. Consider the situation of Cambodia, for example. Over the last year, 

U.S. demand for clothing has dropped and Cambodia’s exports to the United States 

have fallen 23.6 percent from January to mid June this year alone.9 This has led 

to the loss of an estimated 70,000 garment factory jobs in the country,10 primarily 

affecting women from poor rural areas, since the onset of the global financial crisis 

in 2008. Anecdotal evidence shows these job losses in the garment industry have 

heightened the precariousness of job security and wages in the industry and reduced 

internal remittances to poor families in rural areas, hindering Cambodia’s poverty 

reduction efforts.11

Expanding U.S. market access for exports from the world’s poorest countries, including Cambodia, Bangladesh and Nepal, can help mitigate the impacts of the global economic crisis, spur broad-based economic growth and make progress towards 

poverty reduction in urban and rural areas. For more than three decades, U.S. trade 

preference programs have been one important way that U.S. trade policy has helped 

to promote development through export expansion and product diversification. While 

some changes to programs have been made over the years, limitations remain that 

keep them underutilized, particularly by some of the poorest countries. 


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II. Strengths and weaknesses of existing preference programs 

A GAO review of U.S. trade preference programs in 2007–8 provided some important insights into the effectiveness of these programs. Oxfam’s experience concurs 

with much of the GAO findings. I would like to highlight a few aspects we consider 

most important regarding the success of increased market access, but likewise the 

poor performance in the areas of utilization, accessibility, and assistance for trade 

capacity building. 

Market Access 

U.S. preference programs have provided increased market access for developing 

countries, which has stimulated economic growth in manufacturing and agriculture 

sectors and increased employment opportunities where there are few alternatives, 

particularly for women. U.S. imports under preference programs represent about 5 

percent of total U.S. imports of goods. While our overall imports from developing 

countries have been steadily increasing in value, particularly since 2000, imports 

through preference programs have been expanding at a faster rate. In general, we 

can affirm that U.S. preference programs have been effective in expanding developing country exports. 

Utilization 

Missing their full potential, the benefits of U.S. preference programs to developing 

countries have been underutilized, especially among LDCs. The reasons are multifaceted, but essentially, programs do not cover the main products LDCs export and 

can be difficult to use. The rules are complex, difficult to comply with and can be 

subject to interpretation or change. Most trade preference programs are temporary 

and are granted ever shorter duration periods, requiring Congressional renewal frequently. In recent years, expiring trade preference programs have been extended for 

very short periods—two years or less. This creates uncertainty and undermines the 

ability of businesses and governments to plan and make investments. 

Imports through preference programs are still concentrated disproportionately 

among middle-income countries, as existing programs have not accelerated exports 

from many LDCs, particularly in economic sectors that generate employment for 

people living in poverty. Of the 46 countries designated as LDCs, 34 barely used 

U.S. preferences in 2006. Ten countries account for 75 percent of all preference imports and over 50 percent of these are fuel imports concentrated in a few countries. 

In 2006, LDCs represented only 17 percent of imports under trade preferences, and 

of these, a large portion was concentrated in three oil-exporting countries: Angola, 

Chad, and Equatorial Guinea. It is a major shortcoming of existing trade preference 

programs that they exclude key exports from poor countries. Further, poor countries 

face supply-side constraints that programs cannot address unless a clear mechanism 

is established to provide trade capacity building support. 

Rules 

Complex and disparate rules within and across programs have generated significant challenges hindering some countries from utilizing preference programs. Rules 

of origin are often hard to understand and costly to administer; both exporters and 

importers often require technical expertise to use them correctly. In some cases the 

costs to both exporters and importers for meeting and administering the rules outweigh the benefits from the tariff preference. In addition, other rules can create obstacles. For example, artificial ceilings on product exports (competitive need limitations) could divert investment away from sectors that successfully generate employment through exports. While the intent of these rules may be to try to ensure a better distribution of benefits from preferences among countries, the increasing complexity of the rules is more of an obstacle than an advantage for poor countries. 

Program duration 

Currently, U.S. preference programs are subject to frequent renewals, under different terms for different programs. Instead of the 10-year or similar terms under 

which programs were originally established, the Generalized System of Preferences 

(GSP) and some regional programs are now extended for only one or two years or 

even less. Programs are generally renewed just days before they expire, or sometimes retroactively after expiry. The uncertainty created by such unstable and shortterm program durations is a strong disincentive for developing country exporters as 

well as U.S. importers, who tend to plan their sourcing six months to a year in advance. Lack of certainty for investors and importers leads to job instability and 

hinders incentives for diversification in developing countries. Moreover, the unpredictability created by short-term and haphazard extensions discourages long-term 

investment and undermines the potential effectiveness of preference programs for 

sustainable development. 


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12 African Growth and Opportunity Act. 13 Andean Trade Preference Act. 14 Caribbean Basin Initiative. 15 Caribbean Basin Trade Partnership Act. 16 Elliot, Kimberly, ‘‘Global Trade Preference Reform: Background Paper for Working Group 

Discussion Paper,’’ Center for Global Development, April 2009. 

Product coverage 

Many of the products poor countries export are ineligible or face restrictions from 

U.S. preference programs. Greater benefits are realized from preferences when there 

is broader product coverage. The most effective program would offer market access 

for the poorest countries that is 100 percent duty-free and quota-free (DFQF) with 

less restrictive rules of origin. 

Most of the gains and growth in imports under preference programs are tied to 

regional programs precisely because there are fewer constraints on imports. In 2008, 

African countries under AGOA 12 represented 51.5 percent of U.S. preference imports, Andean countries under ATPA 13 15.7 percent, and Caribbean basin countries 

under CBI 14 2.7 percent and CBTPA 15 1.5 percent, while GSP represented 28.5 percent of imports under preference programs. During the same year, AGOA and ATPA 

saw the strongest growth, while GSP saw the smallest growth at 4 percent. Overall, 

growth of imports under U.S. preference programs has accelerated since 2000, mostly due to the expansion of product coverage and easing of rules of origin associated 

with regional programs as well as the creation of special GSP benefits for LDCs. 

AGOA, which has less stringent rules of origin requirements and the greatest product coverage, has demonstrated the greatest success of all U.S. preference programs. 

These lessons should be carried forward as Congress reviews and improves U.S. 

preference programs in these and other areas. 

However, many LDC exports remain excluded from preference programs. For 15 

Asian LDCs, preferential market access is provided on only 83 percent of tariff lines, 

and continues to exclude key sectors like textiles and apparel and important agricultural products. These are crucial economic sectors for the economies of some Asian 

LDCs. Even though AGOA provides duty-free access on 98 percent of tariff lines for 

26 African LDCs that meet the program’s eligibility criteria, quotas remain on key 

agricultural products.16 Sugar and dairy products, for example, face severe restrictions on exports to the United States due to the quota system. These are precisely 

the sectors which have the highest preference margins and are of the greatest export potential for many developing countries, particularly LDCs. Only 0.2 percent 

of U.S. imports from Cambodia and 0.6 percent from Bangladesh currently receive 

preferential market access. Excluding important manufacturing and agricultural 

products means that countries like Bangladesh and Cambodia, two of the leading 

LDC exporters to the United States, gain very little from preference programs. 

Trade Capacity Building 

Many poorer countries have inadequate physical and administrative infrastructure to take advantage of the trade opportunities offered by preference programs. 

Producers and businesses face a range of challenges in getting products to market, 

and often lack adequate information and capacity to meet product standards. Moreover, many developing countries still lack the capacity to diversify their economies 

and to become more stable and resilient, particularly in the wake of economic crises. 

More is needed to help poor countries use preference programs to benefit from 

trade and further their development. Trade capacity-building assistance can help 

overcome these constraints, providing economic aid that enables countries to more 

effectively take advantage of preference programs and boost overall capacity to engage in trade. However, AGOA is the only existing preference program to provide 

a link to capacity-building efforts, albeit absent of any funding. 

In order for preference programs to promote long-term economic development that 

helps to broadly distribute the benefits of trade and reduce poverty, it is critical that 

they be linked with aid and capacity-building programs. Binding trade capacity 

building assistance to preference programs will enable developing country producers 

and businesses to take advantage of trade opportunities and will also help countries 

meet program eligibility criteria. In this vein, it is particularly important that aid 

benefit small-scale producers, especially women and other vulnerable groups, who 

often lack the information and tools necessary to access markets. 

Currently, over 15 U.S. government agencies are engaged in providing some form 

of trade capacity building assistance, with little effective coordination among them 

or with trade preference programs. Trade capacity building funds should be closely 

coordinated, particularly with our foreign aid programs, and should be designed to 


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meet development needs as determined by recipient countries’ national development 

strategies. 

III. Coherence between trade and aid policies to support sustainable development 

Stepping back from the intricacies of the preference programs, we must recognize 

that their weaknesses reflect underlying inconsistencies in U.S. trade and development policies. These programs are meant to facilitate access to the U.S. market for 

developing countries. Yet, some of the world’s poorest countries pay the highest tariffs on their exports to the United States. We must, therefore, align our trade and 

development policies to build synergies and catalysts for economic growth and sustainable development, rather than unintentionally thwarting progress. 

The average tariff rate on imports into the United States is 1.7 percent. In comparison, Cambodia, a country which ranks 137 on the Human Development Index, 

faces an average tariff of almost 17 percent on its exports to the United States. 

Similarly, Bangladesh must pay an average rate of more than 15 percent and Pakistan nearly 10 percent. Meanwhile, France, the UK, and Saudi Arabia pay average 

tariffs of less than one percent. Thus, in absolute terms, Cambodian and 

Bangladeshi exporters pay the United States much more in tariffs than do France 

or the UK. In fact, Bangladeshi exporters pay more than twice as much in tariffs 

to the United States than the UK, even though the value of Bangladeshi exports 

is only one-tenth the value of UK exports. 

Something is wrong when the poorest countries are paying more than the richest 

countries to do business with the United States. 

This reality is made more perverse when considering the investments we make 

through U.S. foreign aid programs. The incoherence of our aid and trade policies is 

underlined by the fact that we collect more in tariffs than we provide in aid to some 

developing countries. Nearly all the tariff revenue we collect from LDCs comes from 

only two countries—Cambodia and Bangladesh—which in 2008 accounted for about 

40 percent and 58 percent, respectively, of U.S. tariffs collected from LDCs. Similarly for these LDCs and other poor countries, the tariffs paid for exports were many 

times more than they received in aid. Cambodian exporters paid $407 million in tariffs to the U.S. and received $58 million in aid, while Bangladeshi exporters paid 

$573 million in tariffs and received $151 million in aid. Sri Lanka paints an identical picture: $238 million in tariffs and just $28 million in aid. Indonesian exporters 

pay the U.S. more than five times as much in tariffs ($856 million) than the country 

receives in foreign assistance ($187 million). 

Figure 1: Tariff Revenues vs. Foreign Assistance, 2008 

Source: USITC and CBJ Foreign Operations 2010 

This is not an effective development strategy. We could do much more to enable 

economic growth in these countries by eliminating these tariffs and encouraging 


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greater investment through improved trade preference programs. Moreover, freeing 

up these dollars would enable these countries greater flexibility in investing in underfunded sectors such as agricultural development, health and education. In order 

to be most effective in combating global poverty—which is in our economic and national security interest—more needs to be done to ensure full policy coherence and 

make sure all elements of our national and international policies and goals work 

together effectively. 

IV. U.S. preference programs should be expanded and improved 

Existing trade preference programs demonstrate a clear benefit to those countries 

that are able to take advantage of these market opportunities. However, not all developing countries are able. In order to assure that developing countries—LDCs, in 

particular—can utilize these programs to the fullest extent, U.S. trade preference 

programs must be expanded and improved. Oxfam recommends that Congress adopt 

the following measures: 

1. Provide 100 percent duty-free and quota-free market access for all products 

from all the world’s poorest countries—at minimum all LDCs as defined by 

the UN; 

2. Create a single, comprehensive and permanent preference program with simplified rules to encompass existing programs and enhance their effectiveness; 

and 

3. Effectively link aid with preference programs to improve the capacity of poor 

countries to take advantage of the opportunities offered through U.S. preference programs. 

Until new legislation to improve preference programs can take effect, it is critical 

that Congress act immediately to renew expiring trade preference programs. Both 

the GSP and ATPA are set to expire in just over a month. Already, developing country exporters and U.S. importers have had their business planning interrupted because they do not know whether the preferences will continue or whether the rules 

will change. Oxfam urges quick passage of a minimum five-year extension of both 

of these important programs. These and other existing trade preference programs 

should not again be allowed to expire, and future last-minute extensions should be 

avoided. 

Provide 100 percent DFQF market access for all poor countries 

Oxfam recommends that U.S. preference programs expand their coverage to provide duty-free and quota-free (DFQF) market access for all products from all poor 

countries, which at a minimum should include all LDCs as defined by the UN. 

These countries currently account for less than one percent of world exports, excluding energy, and a mere 0.5 percent of U.S. non-oil imports. 

The bi-partisan HELP Commission report released two years ago on improving 

the effectiveness of U.S. foreign assistance recommended that the United States provide DFQF market access to poor countries, which they defined as those with less 

than $2,000 GDP per capita as well as those eligible for a Millennium Challenge 

Corporation compact or threshold program. The Millennium Development Goals, 

agreed upon by the United States and other developed countries, call for DFQF market access to developed country markets for all LDCs. In addition, together with 

other developed countries, the United States has already made a similar commitment at the World Trade Organization in the context of the Doha Development 

Round. 

Create a single, permanent preference program with simplified rules 

Oxfam believes that the aims of the various U.S. trade preference programs could 

be better achieved if they were replaced with a single, comprehensive trade preference program. Such a program would increase opportunities for all developing 

countries to benefit as much as possible from global trade while, at the same time, 

creating certainty for exporters, importers and investors. 

To this end, Oxfam recommends that this Committee consider the establishment 

of a new, unified trade preference program that encompasses and enhances existing 

programs. In addition to expanding product coverage to provide 100 percent DFQF 

for all LDCs and ensuring adequate trade capacity building assistance, this new 

program would simplify rules and establish greater certainty for investors. 

Simplicity: Harmonization and simplification of the rules will make programs 

easier to use for developing country producers and exporters, as well as sourcing 

companies and U.S. importers. There should be one, simple rule of origin common 

to all products. Complex rules of origin that differ across programs have made programs difficult to use because the rules may be hard to satisfy, subject to differing 

interpretations, make it costly to demonstrate compliance, and create unnecessary 


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complexity for sourcing companies to develop supply chains and consistent business 

relationships. 

There should also be a common set of eligibility criteria and procedures for administering, reviewing and suspending or terminating country and product eligibility. 

These procedures must be fully transparent, predictable, and enforceable and include an effective mechanism for public comment. Oxfam also supports strengthening labor eligibility criteria and including environmental criteria in a comprehensive preference program as a means of promoting sustainable development and ensuring broad distribution of the benefits of trade. To this end, it is very important 

that a new preference program ensure the provision of the necessary technical assistance and aid that countries may need to help them to meet established criteria. 

Predictability: Only long-term trade preference programs with timely renewal well 

in advance of their expiration dates will serve the aim of promoting economic 

growth and poverty reduction in developing countries. The same predictability helps 

U.S. businesses be more competitive and lower prices for U.S. consumers. For this 

reason, Oxfam believes that trade preference programs should be made permanent, 

with countries graduating from eligibility when they reach a sufficient level of economic development. 

Making U.S. trade preference programs permanent would eliminate the ‘‘whipsaw’’ effect of expirations, short extensions, and uncertainty that undermines economic growth in developing countries as well as U.S. businesses who rely on imports. Short-term programs and last-minute renewals undermine the primary purpose of trade preferences and make them far less useful to their intended beneficiaries. 

Link aid with preference programs to help countries take advantage of trade opportunities 

Oxfam recommends that Congress act to ensure that trade capacity building assistance is provided together with preference programs, by statute, in order to help 

poorer countries to better utilize trade opportunities. A mechanism is needed to provide necessary funds and ensure effective coordination of trade capacity building assistance across U.S. government agencies as well as with other aid efforts. 

Assistance for trade capacity building can include enhancing worker skills, providing tools and training to meet product standards, modernizing customs systems, 

building roads and ports and other infrastructure needs, improving agricultural productivity and promoting export diversification. It should particularly address the 

needs of small-scale producers and women. Assistance should also be provided to 

help countries meet labor and environmental eligibility criteria. 

This trade capacity building assistance should be recipient-driven, additional to 

existing development aid, free of economic conditions and adequate to address identified needs. It should also be reliably delivered once committed and provided in a 

manner that is transparent, well-coordinated, and consistent with recipient countries’ development strategies. 

Conclusion 

Trade can be an engine for development when the rules of trade are fair and 

strive to help poor countries take advantage of the opportunities created by access 

to the U.S. market. Oxfam firmly believes that U.S. trade preference programs emulate the relationship between trade and development, but must be expanded and improved in order to realize their full potential. 

Oxfam urges this Committee to make it a priority to pass legislation in the 111th 

Congress to expand and enhance U.S. trade preference programs. We recommend 

that Congress take a new direction in using trade preference programs to spur development and poverty reduction in poor countries by: 

1. Providing 100 percent duty-free and quota-free market access for all products 

from all the world’s poorest countries; 

2. Create a single, comprehensive and permanent preference program with simplified rules to encompass existing programs and enhance their effectiveness; 

and 

3. Establishing an effective mechanism with binding commitments to provide 

aid and technical assistance to beneficiary countries, particularly LDCs, to 

enhance their ability to take advantage of trade opportunities and to meet 

program eligibility criteria. 

Until new, comprehensive legislation to improve preference programs can take effect, Oxfam urges this Committee to work for timely and longer-term renewals of 

all existing trade preference programs in order to ensure that benefits are not interrupted. This would send a clear message to developing countries of the U.S. commitVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00130 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ment to a trade policy that promotes sustainable development and poverty reduction. 

Thank you. 

f 

Chairman LEVIN. Well, thank you very much. Thank you. 

Ambassador, you have been patient, so let’s see how modern 

technology works. We are all ears. 

STATEMENT OF THE HONORABLE F. TOMA ́ S DUEN ̃ AS, FORMER 

AMBASSADOR OF COSTA RICA TO THE UNITED STATES; 

CHIEF EXECUTIVE OFFICER, ESCO INTERAMERICA 

Mr. DUEN ̃ AS. Good afternoon, Chairman Levin, ranking member Rangel, and distinguished members of the panel and the subcommittee. Thank you very much for bearing with me for Costa 

Rica in which that I was there personally. 

I think it is a great honor to be here before you. For all countries 

in the path of development, there is no other option but to deepen 

our integration with the global economy. Increased trade provides 

options and opportunities for the people, allows countries to modernize and learn new practices and improve their competitiveness. 

Today, I will talk about Costa Rica’s experience as beneficiary of 

trade preferences granted by the United States through unilateral 

trade programs and later on, and I will say quite successfully, in 

its more stable relationship through a bilateral trade agreement. 

Since the 1980s Costa Rica and the rest of Central America and 

the Caribbean had the opportunity to increase trade with the 

United States. Thanks to the bipartisan policy of the Caribbean 

Basin Initiative (CBI) and its subsequent expansions, the trade 

preferences granted by the CBI were major incentives to attract investors from the United States and other countries to our region 

and created a substantial flow of investment and trade growth to 

the basin. 

In the implementation of the initiative, it was clear that in order 

to enjoy preferential trade access to the United States market 

countries needed to put in place the necessary legal framework to 

create an environment of predictability and respect of the rule of 

law. In addition to foster investment and development it was essential to have the necessary infrastructure, education and healthcare, 

as well as the adequate security conditions. 

In that sense it was clear that non-reciprocal benefits were a 

great opportunity for developing countries like ours to partially 

solve the lack of investment and jumpstart the creation of sources 

of employment and economic activity. However, they were not 

enough to promote sustainable developments in the long run. 

Costa Rica was able to take advantage of the preferences promoting trade diversification, moving from exporting a few commodities to creating a diversified wide base of agricultural products, attracting a more sophisticated manufacturing, and finally inserting 

services with more added values. Across the line the region as a 

whole benefitted of the preferences, increasing its exports to the 

United States. Thanks to that Central America showed rapid 

growth, macro economic stability and a certain level of social prosperity. 


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CBI showed good results, partly because its simplicity, its predictability and its coverage. The system under which products entered the U.S. was simple and easy to administer and the benefits 

were granted across the board to a good range of products. CBI was 

expanded in the Caribbean Basin Trade and Partnership Act 

(CBTPA) with the caveat that it required periodical reauthorization 

by Congress. 

Unilateral trade preferences were a great opportunity, but clearly were not enough to lead countries towards freer trade and more 

sustainable economic growth. The region was prepared to move towards a more mature and permanent relationship with the United 

States; and, as a matter of fact, one of the most significant aspects 

of the CBTPA is that the U.S. Congress specifically defined it as 

a previous step to a Free Trade Agreement with the region. 

Because the U.S. and the region’s economies complement each 

other and because the CBTPA is a unilateral, temporary and 

discretional, preferential scheme, a free trade agreement, based on 

reciprocity, was seen as a natural and positive step for the CBI 

countries, be it bilateral or as part of the FTAA negotiations. As 

the FTAA negotiations stalled, and other countries around the 

world and in the Hemisphere were negotiating numerous bilateral 

trade agreements, the U.S. decided to embark in bilateral negotiations with Central America and Dominican Republic. 

The main goal of the United States through CAFTA was to expand opportunities for U.S. trade and investment, while promoting 

economic development and democratic governance. 

May I remind you that over 50 percent of our region’s exports go 

to the United States. More than 50 percent of our region’s imports 

come from the United States. An average of 63 percent of total foreign directed investment is of the United States. 

Central American countries realized that negotiating with the 

United States was both necessary and convenient. First, the U.S. 

is the most important trading partner for the region and one of the 

most significant investors in the area, and trade is very important 

for those countries for which integration into the world economy is 

the only means towards growth and development. Second, though 

CBI had been quite beneficial, the region was looking for a reciprocal, stable relationship based on a scheme of rights and obligations rather than on unilateral concessions. 

In the outset of the negotiations the U.S. recognized the importance of trade capacity building (TCB) to assist Central American 

countries in an adequate transition to free trade, implementation 

of the agreement and adjustment to liberalized trade. Therefore, for 

the first time an FTA included a section on trade capacity building. 

CAFTA is also the first trade agreement entered into by the 

United States, which contains explicit provisions on cooperation 

through capacity building to improve labor conditions. 

Our countries also agreed to develop concrete and ambitious 

projects to promote environmental protection. 

CAFTA is certainly far more than a trade accord, and it was conceived as the foundation of a more stable, mature relationship between the United States and these important neighbors to the 

South. 


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In my opinion, it is vital for the success of hemispheric relations 

that the United States will once more forge a new bipartisan alliance to support a productive engagement with the countries of the 

Western Hemisphere. 

The best medicine against extremisms and populism in the region is to show that those countries that follow the path of open 

markets, good governance and economic freedom are the ones that 

are growing and developing. These free trade agreements are a 

great step in that direction, whereas preferences are only a small 

step. 

Today, despite the adverse economic climate that we are confronting now, I am pleased to share with you some good results of 

the agreement in terms of growth and investment: 

CAFTA–DR has helped the region weather the recent economic 

crisis. While the region’s exports to the United States have declined 

in 2009, they have declined by much less than the overall decrease 

in U.S. imports from the world. 

In 2006 Central America experienced its highest economic 

growth rate since 1993. Overall trade in goods between the United 

States and the CAFTA–DR countries grew from $35.0 billion in 

2005 to $44.7 in 2008, an increase of 28 percent. 

From 2006 to 2007 foreign direct investment flows into the region increased considerably. El Salvador saw the largest increase 

in FDI (597 percent) of any country in Latin America. FDI inflows 

into Guatemala increased by 51 percent, Honduras by 21 percent, 

and Nicaragua by 19 percent. In each case these are larger increases in foreign direct investment than in the four to five years 

pre-CAFTA. 

Intra regional trade among the CAFTA–DR countries has increased significantly with trade among the Central American countries expanding by approximately 18 percent in 2008. 

In conclusion, sirs, despite the benefits created by the preference 

programs, it is necessary to have tools created by free trade agreements that allow us to further promote trade facilitation, continue 

with the removal of remaining barriers, and promote and attract 

more investment to our countries and our hemisphere. It is vital 

to keep the funding for trade capacity building, especially on the 

labor and environmental fronts. I thank you very much, once more. 

[The prepared statement of Mr. Duen ̃ as follows:] 

Prepared Statement of The Honorable F. Toma ́ s Duen ̃ as, 

Former Ambassador of Costa Rica to the United States; 

Chief Executive Officer, ESCO InterAmerica 

For all countries in the path of development there is no other option but to deepen 

our integration with the global economy. In times of globalization the dilemma that 

developing nations face is as harsh as it is simple: if we cannot export more and 

more goods, we will wind up exporting more and more people as they seek new opportunities elsewhere. Only if we open ourselves to the world we will be able to create enough jobs, and jobs of high enough quality, for our youth. 

Increased trade provides jobs and opportunities for the people, allows countries 

to modernize and learn new practices and improve their competitiveness. 

Today, I will talk about Costa Rica’s experience as beneficiary of trade preferences 

granted by the United States through unilateral trade programs and later on, in its 

more stable relationship through a bilateral trade agreement. 

Since the 1980s, Costa Rica and the rest of Central America and the Caribbean 

had the opportunity to increase trade with the United States thanks to the bipartisan policy of the Caribbean Basin Initiative (CBI) and its subsequent expansions. 


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Through this scheme the region was able to provide more jobs and opportunities to 

our people, and foster economic diversification, growth and development. 

The trade preferences granted by the CBI were major incentives to attract investors from the United States and other countries to our region, and created a substantial flow of investment and trade growth to the basin. 

In my opinion, we can correlate the benefits of a more vigorous trade between 

Central American and the United States with the consolidation of peace and democracy in the region at the beginning of the 1990s after several decades of political 

upheaval and civil unrest. People dislocated by war or violence were able to find decent jobs and slowly incorporate into civil life. 

Some countries extracted more benefits than others from this program. In the 

implementation of the initiative, it was clear that in order to enjoy preferential trade access to the United States market countries needed to put 

in place the necessary legal framework to create an environment of predictability and respect of the rule of law. 

In addition, to foster investment and development, it was essential to have the 

necessary infrastructure, education and health care as well as the adequate security 

conditions. 

In that sense, it was clear that non-reciprocal benefits were a great opportunity 

for developing countries like ours to partially solve the lack of investment and 

jumpstart the creation of sources of employment and economic activity. However, 

they were not enough to promote sustainable development in the long run. 

Costa Rica was able to take advantage of the preferences, promoting trade diversification, moving from exporting a few commodities to creating a diversified wide 

base of agricultural products, attracting a more sophisticated manufacturing and finally inserting services with more added values. 

At the same time Costa Rica continued investing in education and health care and 

improving its legal and tax frameworks for investors to operate in our country. 

These policies derived good results, putting the country as one of the leading per 

capita exporters in the region. 

Other countries, like the Dominican Republic, showed impressive results, thanks 

in great part to creating the right investment climate for certain types of investments, especially in the textile and apparel sector. 

Across the line the region as a whole benefited of the preferences, increasing its 

exports to the United States. Thanks to that Central America showed rapid growth, 

macro economic stability and certain level of social prosperity. 

CBI showed good results partly because of its simplicity, its predictability and its 

coverage. About 80% of Central American products enjoyed duty-free access in the 

United States. The system under which they entered the U.S. was simple and easy 

to administer and the benefits were granted across the board, to a good range of 

products. CBI was expanded in the Caribbean Basin Trade and Partnership Act 

(CBTPA) with the caveat that it required periodical reauthorization by Congress. 

Later on, normalization of relations between the United States and China also 

had a direct impact in the region, mostly in the textile industry. 

Unilateral trade preferences were a great opportunity but clearly were not enough 

to lead countries towards freer trade and more sustainable economic growth. The 

region was prepared to move towards a more mature and permanent relation with the United States. As a matter of fact, one of the most significant aspects of the CBTPA is that the U.S. Congress specifically defined it as a previous 

step to a Free Trade Agreement with the region. In Section 215, it mandates the 

President of the U.S. to convene a series of meetings between the trade ministers 

of the region and the U.S. Trade Representative with the purpose of ‘‘. . . reach[ing] 

agreement between the United States and CBTPA beneficiary countries on the likely timing and procedures for initiating negotiations for CBTPA beneficiary countries 

to enter into mutually advantageous free trade agreements with the United States 

that contain provisions comparable to those in the NAFTA . . .’’ 

Because the U.S. and the region’s economies complement each other, and 

because the CBTPA is a unilateral, temporary and discretional preferential 

scheme, a free trade agreement, based on reciprocity, was seen as a natural 

and positive step for the CBI countries, be it bilateral or as part of the 

FTAA negotiations. As the FTAA negotiations stalled, and other countries around 

the world and in the Hemisphere were negotiating numerous bilateral trade agreements, the U.S. decided to embark in bilateral negotiations with Central America. 

The main goal of the United States through CAFTA was to expand opportunities 

for U.S. trade and investment, while promoting economic development and democratic governance. It aimed to level the playing field among this major trading bloc 

by permanently granting benefits that the Central American countries and the DoVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00134 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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minican Republic have enjoyed for years as part of the successful Caribbean Basin 

Initiative (CBI). 

The Central American countries looked to consolidate and expand the market access benefits of the CBI in exchange of a commitment with the United States, which 

is the region’s main trade partner and main source of foreign investment to further 

modernize their political systems, strengthen the rule of law, democratic institutions, and to lock-in reforms that the region was able to achieve in the last two decades. 

Let me remind you that: 

• Over 50% of our region exports go to the U.S. 

• Over 50% of our region imports come from the U.S. 

• An average of 63% of total FDI during the last 7 years is U.S. investment. 

Central American countries realized that negotiating with the U.S. was both necessary and convenient. First, the U.S. is the most important trading partner for the 

region and one of the most significant investors in the area, and trade is very important for these countries, for which integration into the world economy is the only 

means towards growth and development. Second, though CBI had been quite 

beneficial, the region was looking for a reciprocal, stable relationship, 

based on a scheme of rights and obligations rather than on unilateral concessions. 

Furthermore, in the outset of the negotiations the U.S. recognized the importance 

of trade capacity building (TCB) to assist Central American countries in an adequate transition to free trade, implementation of the agreement and adjustment to 

liberalized trade. Therefore, for the first time an FTA included a section on Trade 

Capacity Building (Section B, Chapter 19). The DR–CAFTA governments also 

agreed to establish a Committee on Trade Capacity Building, whose work is concentrated in the prioritization of trade capacity building projects; promoting international organizations, private sector entities and non-governmental organization 

participation in the process and in monitoring and assessing progress in implementing the strategies. 

CAFTA is also the first trade agreement entered into by the United States which 

contains explicit provisions on cooperation through ‘‘capacity building’’ to improve 

labor conditions by: (1) ensuring effective enforcement of existing labor laws; (2) 

working with the ILO to improve existing labor laws and enforcement; and (3) building local capacity to improve workers rights. 

Our countries also agreed to develop concrete and ambitious projects to promote 

environmental protection. 

CAFTA is certainly far more than a trade accord. It was conceived as the foundation of a more stable, mature relationship between the United States and these important neighbors to the South. 

In my opinion, it is vital for the success of hemispheric relations that the United 

States will once more forge a new bipartisan alliance to support a productive engagement with the countries of the Western Hemisphere. The best medicine against 

extremisms and populism in the region is to show that those countries that follow 

the path of open markets, good governance and economic freedom are the ones that 

are growing and developing. These free trade agreements are a great step in that 

direction, whereas preferences are only a small step. Washington’s engagement 

through a productive multilateral relationship could be a decisive factor to improve 

the economic, social and political conditions of the hemisphere for the benefit of both 

the United States and Latin America. 

Some feared that CAFTA could ruin many of the five and a half million small 

farmers who make their living from traditional agriculture in Central America. 

However, there are some amazing statistics regarding trade on agriculture products 

upon implementation of CAFTA. For example farm and agribusiness exports from 

El Salvador to the United States had an 85% increase from 2005. 

It is noteworthy that external conditions have hit the region hard, first with the 

increase in prices of food and fuel in 2007 and 2008 and then, of course, with the 

economic crisis that is having a negative impact in terms of employment, investment, production and trade. Part of the benefits of CAFTA–DR will probably take 

some time to materialize in a scenario like this. 

Despite the adverse economic climate that we are confronting now, I am pleased 

to share with you some good results of the agreement in terms of growth and investment: 

• CAFTA–DR has helped the region weather the recent economic crisis. 

While the region’s exports to the United States have declined in 2009, 

they have declined by much less than the overall decrease in U.S. imVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00135 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ports from the world. In fact, out of the top 20 suppliers to the United 

States, only one country, Ireland, had a smaller decline in exports to the U.S. 

than CAFTA–DR. The region’s performance this year has been strengthened 

by continued expansion of electronic components shipments from Costa Rica 

as well as steady shipments of bananas, pineapples, and melons and medical 

supplies, and expansion of precious metals. 

• In 2006 Central America experienced its highest economic growth rate since 

1993. 

• Overall trade in goods between the United States and the CAFTA–DR countries grew from $35.0 billion in 2005 o $44.7 billion in 2008, an increase of 

28.0 percent. 

• From 2006 to 2007, FDI flows into the region increased considerably. 

El Salvador saw the largest increase in FDI (597%) of any country in 

Latin America. FDI inflows into Guatemala increased by 51%, Honduras by 21%, and Nicaragua by 19%. In each case these are larger 

increases in FDI than in the four to five years pre-CAFTA. 

• Intra-regional trade among the CAFTA–DR countries has increased 

significantly with trade among the Central American countries expanding by approximately 18 percent in 2008, following a gain of 

about 17 percent in 2007. 

Despite the benefits created by the preference programs, it is necessary to have 

tools created by free trade agreements that allow us to further promote trade facilitation, continue with the removal of remaining barriers, and promote and attract 

more investment to our countries and our hemisphere. Furthermore, it is vital to 

keep the funding for trade capacity building, especially on the labor and environmental fronts. 

f 

Chairman LEVIN. Thank you very much. Fortunately, because 

modern technology isn’t quite up to what we hope, it wasn’t a very 

good connection. But you had submitted your testimony in advance, 

so we were also able to follow it reading it as you presented it. 

So let me suggest because it isn’t a very ample connection that 

we will. I just checked with Mr. Brady and he has agreed that we 

will submit some questions to you in writing; and, if you would 

then give us answers in writing. Okay? And we know how to reach 

you. I’ll ask the staff. 

We do. We know how to reach you so that we will send you questions, not by television, but we will send you questions by the 

Internet or maybe even by old fashioned mail. Okay? And then if 

you could give us your answers and we will place them in the 

record, is that okay? 

Mr. DUEN ̃ AS. Thank you. 

Chairman LEVIN. Thank you very, very much, and good luck to 

you. We are honored that you could join us. 

Mr. DUEN ̃ AS. Thank you very much for the opportunity, sir. 

Chairman LEVIN. Okay. Can you see me wave? 

[Laughter.] 

Chairman LEVIN. Thank you very much, Ambassador. 

All right. So we will have some questions. We’ve been told that 

there are going to be votes, so why don’t we just start coming this 

way, if that’s okay, and we will start with Congresswoman 

Sa ́nchez. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman. 

I have a very brief set of questions for this panel, but again, I’m 

going to sort of preference my questions with a little bit of commentary as is often the practice of Members of Congress. 

We can’t resist an opportunity to make comments on specific 

issues. But all along, sort of my basic premise has been that liberVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00136 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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alizing trade in and of itself is not going to be the silver bullet for 

economic development of impoverished or developing countries, and 

ideally what I would like to see is an overhauled trade model for 

trade agreements in preferences in which we are looking at other 

investments that can be made in conjunction with trade to help 

some of these countries develop. 

And to the premise of liberalizing trade is that if we can help 

other countries develop, and develop a middle class, that there will 

then be consumers for many of the goods the United States produces, so it will be a benefit to U.S. workers as well. And one of 

the things that I’m keenly interested is in trying to help other 

countries succeed that we also don’t neglect our own workers here 

at home and put them at a disadvantage. So the questions that I 

have, I’m going to start with Mr. Hastings. 

What is the average wage and benefits package that you offer 

your full-time employees? 

Mr. HASTINGS. Our average wages range from including bene- fits, probably from around $26,000 a year to around $60,000 a year. 

Ms. SA ́ NCHEZ. Okay. And does that include also like healthcare 

benefits? 

Mr. HASTINGS. Yes, it does. 

Ms. SA ́ NCHEZ. In your opinion do you think that paying those 

kinds of wages and benefits allows Mt. Vernon Mills to compete 

globally? 

Mr. HASTINGS. I would say 10 years ago it did. Over the last 

10 years there’s been a significant decline in our industry and I 

think of all manufacturing. I guess that decline would be attributed 

to the trade policies that our country has followed during the last 

10 years. Our industry has seen a significant decline during that 

time and also over the last two years. We’ve lost within the last 

year 60,000 textile jobs and over a million manufacturing jobs. I 

think there’s been two million manufacturing jobs lost since the recession began, so it’s making it more difficult for our industry and 

I think all manufacturing industries to retain the market share 

that they have. 

Ms. SA ́ NCHEZ. Okay. And in your own words, could you tell me, 

Mr. Hastings, what in your opinion it would take for Mt. Vernon 

to compete with, say, Bangladesh or Cambodia, or even China? 

What kinds of changes would you have to do to your company in 

order for them to be able to compete? 

Mr. HASTINGS. Well, I mean, I think over all, the country, we 

need to see a major shift in our trade policy. I mean it’s not set 

up where it’s a level playing field, and especially against China. I 

mean I think it is well documented of the illegal subsidies that 

China has, the currency manipulation, it’s very hard for us to compete. And it’s proven out in the numbers. 

Over the last five years, China has gone from less than 20 percent of the U.S. textile or U.S. garment or import market to 45 percent. There’s been an increase of $17 billion, so it’s pretty tough, 

obviously, for us to compete in that kind of environment; and, you 

know, during that same timeframe, we have had a decrease of 

150,000 jobs, so. 

Ms. SA ́ NCHEZ. So what kind of legislative proposals do you 

think that this committee should be considering in order to try to 


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level that playing field so that U.S. manufacturers are not necessarily a participant? 

Mr. HASTINGS. I think the major one would be currency manipulation. If you look at the currency issue, currency manipulation 

gives Chinese exporters such a significant advantage over U.S. 

manufacturers and U.S. textile companies. And I think there have 

been some countervailing duties against the illegal subsidies that 

they offer but nothing against currency manipulation. I think it is 

documented that the Chinese government offers everything from 

free land to subsidized rent and subsidized energy. Somehow we 

need to level that playing field. 

Ms. SA ́ NCHEZ. So some kind of oversight to make sure that people are adhering to the same set of rules so that there is a level 

playing field for competition? 

Mr. HASTINGS. That is correct. 

Ms. SA ́ NCHEZ. Thank you. I have no more questions. I yield 

back. 

Chairman LEVIN. Mr. Brady. 

Mr. BRADY. Thank you, Mr. Chairman. Thank you Secretary 

General, Mr. Minister. I appreciate Ambassador Duen ̃ as being here 

today, and my question was directed toward him about why he 

needed to move from a preferenced relationship to a full, pretrade 

agreement relationship; and I think he answered that. But, let me 

ask this. I really appreciate Ms. McDermott’s efforts to try to extend references broadly as he testified today to simplify and creates 

consistency with it. 

One of our problems is that as we make more products eligible, 

while it is very helpful to the preference countries in welcome by 

our U.S. importers creates a great deal of heartburn for Mr. 

Hastings and other businesses that compete against them. Same 

goes for rules of origin as we try to deal with that issue, now tailored to each region, but changes if you go to a broader standard. 

Clearly, preferences have been historically a bipartisan effort as we 

try to move them forward. 

So, my question is to the panel what advice, criteria or counsel 

would you give this committee as we look at broader reforms within this area. How do we deal with those issues, some of which conflict as Minister Prasidh made the point that adding new countries 

doesn’t necessarily take away market share. We lose it to China instead, but other preference countries feel strongly that that’s not 

the case or they fear losing that market access. 

Any advice? And I’ll start with Mr. O’Brien. Any advice or guidance you would give the committee as we look at those issues? 

Mr. O’BRIEN. Well, we think they’re difficult issues. I mean 

Oxfam is working on poverty issues in the United States too, but 

when we go overseas and we go to a place like Cambodia where 

you’ve got 30 percent of the population living on less than a dollar 

a day, it brings home the reality that what we need is some kind 

of fairness in the trade system. And what we mean by fairness isn’t 

just equal opportunity. It’s giving these countries the chance, the 

opportunity to enter the global marketplace. 

Mr. BRADY. Good. Thank you. 

Chairman LEVIN. Mr. Hastings. 


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Mr. HASTINGS. Yes. I think when you look within the last few 

years the overall decline in AGOA, the overall decline in trade with 

CAFTA—I think I’ve indicated Cambodia is down, which is probably tied to the recession—that’s not the case in China. That’s not 

the case in Bangladesh. China has increased its market share, as 

I stated earlier, from less than 20 percent to 45 percent. That’s a 

lot, and I think their actual textile and apparel exports are now up 

to $45 billion. 

That’s a big piece of the pie. If you could take some of that and 

share that with some of the other countries I think that would fix 

a lot of the issues that come up. 

Chairman LEVIN. Thanks, Mr. Hastings. Minister Prasidh? 

Mr. PRASIDH. Thank you. I think that I join also Mr. O’Brien 

that normally when you like to address the world trade preferences 

you have also the thing of linking it with technical assistance to 

support infrastructure, to deal with supply capacity of those people 

who are recipient of your preferences. If not, they would not be able 

to maximize the advantages that you have provided. 

They look to the case of AGOA. You have provided that group 

eight times, but they can do more if you provide more things to 

support the infrastructure and build up their trade capacity. For 

the case of Cambodia we see the same thing, but what is important 

to stress here is that the decline in our government export is not 

because of the current recession. It is because we are no more competitive because we are facing competition from China, who can 

produce everything, very fast, and at the same time even can give 

credits to the buyers, the retailers in the U.S. Why we cannot do 

the same thing. 

Mr. BRADY. Thank you, Minister. 

Secretary General. 

Mr. KARANGIZI. Thank you. 

I think there are various issues, First of all, I think it’s quite obvious that the trade preferences alone do not assist particularly our 

countries enhancing access to the markets, so definitely investment 

in infrastructure, support capacity building to the private sector 

and other related issues. But, we also think other incentives, therefore, private sector investment that would result in increased production to access the market would greatly support our region. But, 

other than that, I mention some other points. 

We think you should look at alternative ways for the other RDCs 

that would not erode the market that sub-Saharan countries have. 

And I’ve mentioned them, including things like an import allowance program, which I have mentioned. Those are the kind of reforms I could think of. 

Mr. BRADY. Thank you, Mr. Secretary. Thank you, Chairman. 

Chairman LEVIN. Mr. Etheridge, do you want to try to rehash 

in several minutes? 

Mr. ETHERIDGE. I’ll be very brief, Mr. Chairman, so you get 

time in. 

Let me thank each of you for being here. And, Chairman, it 

seems to me that last round of questioning, one of the big issues 

is the playing field is far from level. It is a great deal of unfairness 

that relates to that and as you look at market share and marketplaces, you know, we are sort of like the fellow that just said ‘‘I 


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gave at the office. Now I’ve got to give again.’’ And when you are 

opening markets, there is one thing to open the markets and another thing to monitor and make sure that fairness is being done. 

And if you can’t get transparency, you’ve got real problems. And we 

are dealing in an untransparent situation. 

So with that, Mr. Hastings, let me ask you just one question. 

Now, we’ve got several. Mr. Chairman, I’ll submit those for the 

record for the Ambassador from Costa Rica. Because I come at it 

a little different. I’m looking at the state and unemployments and 

double digits and holding strong and climbing. And we have already given at the office. We are giving at home, and it looks like 

we are going to be giving again, not only in textile jobs, but others. 

And it’s across the board, part of it. 

So as we look at these preferences, my question to you, Mr. 

Hastings—you touched on it a while ago—let’s assume we opened 

up more preferences. Tell me what happens, not just to your business, but to all those suppliers that you deal with, plus all of those 

families that depend on your business for salaries in those communities that take care of Boys and Girls Clubs and all those other 

things that happen in our communities. 

Mr. HASTINGS. Well, like I stated earlier, over the last 10 years 

we’ve had a significant decline in our company. We used to be over 

6,000 employees. We are down to 2,700 now. We’ve closed large factories. But our whole industry, not just Mount Vernon, is at a critical juncture. We have downsized and downsized, but to maintain 

our businesses and be competitive we all need to run a certain 

amount of volume. And once you get to that critical juncture if you 

lose, just a little bit more volume, then your competitiveness as 

business just starts spiraling out of control. 

If you get to where you’re not competitive from a cost standpoint, 

as I think we are now approaching in our industry, then you are 

at the point that you really can’t lose any more orders or jobs and 

still be competitive. And that point would be a death knell to our 

industry. 

Mr. ETHERIDGE. Let me follow it up. I promise I’ll ask just one 

other one. It deals with your raw materials and the farmers behind 

that. 

Mr. HASTINGS. We consume 17,000 bales of cotton a month. So 

the vendors of cotton would be impacted. Take a community like 

Trion, where we’ve got 1,200 employees. It’s a rural community 

with no industry. If Trion had to close, the impact on the local vendors and the schools from the loss of user fees, and the property 

taxes, would be devastating. 

Mr. ETHERIDGE. Thank you. Thank you, Mr. Chairman. I yield 

back. 

Chairman LEVIN. All right. I think we have three minutes and 

we all agreed that we appreciate your presence, and we’ll be for a 

while. So why don’t you go about your other busy business, and 

then we will take the fourth panel. 

Mr. O’Brien, as you know, we work with Oxfam a lot. I’d like 

you, if you would, to ask the economists of Oxfam if we took your 

first provision a hundred percent duty free and quota free market 

access for all products from all the world’s first countries; and, you 

know, we are in favor of opening up our trade to developing counVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00140 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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tries. It’s part of the Doha Round. But what would be the impact 

on job loss in the United States if we followed what you suggest? 

All right, with that, and send it to us in writing, not by modern 

technology. 

Thank you so much and we will recess and then hear the fourth 

panel. And thanks again to the four of you for excellent testimony 

to especially our friends from other places who have come a long 

ways. Thank you very much. 

So we are in recess. 

[Recess.] 

Chairman LEVIN. We will reconvene. 

As we were discussing informally, we very much appreciate your 

patience. This very gifted panel, people who come from different 

walks of life, in a sense, and different viewpoints, all with a lot of 

expertise. 

David Love is senior vice president and chief supply chain officer—not quite sure what that means—at Levi Strauss & Co. Jeff 

Vogt, who is a specialist on global economic policy from the AFL– 

CIO. William ‘‘Bill’’ Reinsch, who is president of the National Foreign Trade Council. Meredith Broadbent, a trade advisor and a veteran of these wars here. Margrete Strand Rangnes, who is the director for Labor, Worker Rights, and Trade Program for the Sierra 

Club, and Dr. Loren Yager, who is director of international affairs 

and trade for the GAO. 

So, if you would, each of you take five minutes. I think that 

would be helpful if you could try to limit it to that so that those 

of us who have been able to come back could have a few minutes 

to have some real back and forth, and we might even get some of 

you arguing with each other, if it isn’t interesting enough. Because 

we like that back and forth, and these panels aren’t very well set 

up for that. 

So, Mr. Love, why don’t you start and then we will just go down? 

Thank you very much. 

STATEMENT OF DAVID LOVE, SENIOR VICE PRESIDENT AND 

CHIEF SUPPLY CHAIN OFFICER, LEVI STRAUSS & CO., SAN 

FRANCISCO, CALIFORNIA 

Mr. LOVE. Thank you, Mr. Chairman, and Members of the Subcommittee for the opportunity to provide this testimony today regarding the operation of U.S. trade preference programs. I am the 

chief supply chain officer for Levi Strauss & Co., which means I 

source the product. I am the key buyer for Levi Strauss & Co. 

As you may know, Levi Strauss & Co. is based in San Francisco, 

California, a global corporation with roughly 11,000 employees. 

More than 3,000 of them are employed in the United States. We 

are one of the world’s leading branded apparel companies. We design apparel and related accessories for men, women, and children 

under the Levi’s, Dockers, and Signature by Levi Strauss & Co. 

brands, and we market our products in more than 100 countries— 

actually 110 countries worldwide. 

As a truly global company, Levi Strauss sources our jeans and 

other apparel products from roughly 50 countries around the world. 

The supply chain my team and I manage is quite complex, particularly when you look at the way in which we source for the imporVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00141 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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tant U.S. market. Over the years we have adapted our sourcing 

strategies to take advantage of the various U.S. trade preference 

programs that have been available to us and our apparel products. 

These programs have not been the sole reason for our decision to 

source from a particular country, but they have been a key consideration in those decisions, both to enter a country and to migrate 

out of it. I will get to that latter point a little later in my testimony. 

Some of the trade preference programs that we have utilized 

have worked better than others over time, and I would like to take 

a moment to describe what, in our view, are the critical factors that 

make a program workable from a business perspective. First, the 

program must be stable and predictable. We need to know that it 

will be in operation over the long term. Short term program durations and the need for often shorter term extensions are not good 

for business and do not encourage long term investment. 

Second, the rules of trade under the preference program must be 

as simple and liberal as possible. We as businesses need maximum 

trade flexibility to structure our operations in developing countries, 

which often present other challenges in areas of infrastructure and 

capacity. Third, the rules of trade for the program should be stable. 

Once we have set up operations to take advantage of a particular 

program and it is working, changing the rules of the road can have 

an inadvertent effect of stifling business. 

I would like to take a moment to elaborate a little bit more on 

these issues with some real world examples. Take the issue of duration and predictability. When ATPA took effect in 1991, our suppliers began to take advantage of the program to dramatically increase production in Colombia. Using U.S. fabric, our partner operations in Colombia were a win-win for everyone. We had a stable 

base of quality supply for our products, U.S. textile producers benefitted, as did Colombian workers and the broader Colombian economy. At our peak, we were sourcing 60 million units annually from 

Colombia and the business may even have grown more. 

However, then the ATPA was set to expire in 2006 and the uncertainty started. We did not know if Congress was going to renew 

the program, and that caused us to doubt our sourcing plans for 

Colombia. In the end, Congress did renew the program, but only 

for a short duration, and these short term renewals have continued 

since. We cannot make commercial decisions based on such three 

to six month timeframes, especially when orders are placed at least 

one year in advance. 

As a side note, I would like to urge you to renew the ATPA as 

soon as possible for at least as long as it takes to implement the 

U.S. Colombia Free Trade Agreement. I say this because our 

sourcing from the country of Colombia has dropped from 60 million 

units to between 1 and 2 million units due to this uncertainty. And 

I think this is a real world example of why workable trade preference programs must have long and predictable durations. 

To my second criteria, simple and liberal rules of trade, here too 

the rules of origin and other aspects of trade preference programs 

can really make or break them from a business perspective. We 

have had great success working with programs like AGOA that 

allow for raw material imports to be sourced from wherever we can 


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secure the best and most reliable supply. Simple and liberal rules 

of origin for products traded under a preference program are critical, and programs that are based on them are definitely the most 

workable. When things get complicated, these programs can be 

very difficult to use. 

For example, when the first iteration of HOPE Act for Haiti was 

enacted, its complicated rules of origin made it extremely difficult 

for companies like Levi Strauss & Co. to use. Over time, Congress 

has modified the program, and now it is one of the most liberal and 

easy to use. However, we face other challenges in Haiti that restrict our trade with the country. 

Political and social security issues, labor concerns, port infrastructure deficiencies, water shortages, and other capacity issues 

make Haiti a difficult country in which to do business, and I would 

urge Congress and the U.S. government to work with Haitian officials to address these lingering concerns to help make the HOPE 

program work better for all stakeholders. 

And that brings me to my third point. You can’t change the rules 

of the road on trade preference programs if they are working. If 

you do, they could very well stop working quickly. The AGOA program that I mentioned earlier provides a prime example of this 

fact. We began taking advantage of AGOA soon after the program 

was created. We steadily increased our production in Southern Africa. 

The program was working well for us and we had future plans 

to grow, but then Congress enacted new legislation in 2006 which 

added a so-called abundant supply element to the program. We had 

no idea how these provisions would work in practice, particularly 

since denim fabric, our lifeblood, was arbitrarily listed as being in 

abundant supply in Africa, even though we knew that it really was 

not for our needs. 

As soon as we saw these provisions had actually been enacted, 

we basically put the brakes on our U.S. sourcing operations for Africa, put it on hold, and began a fight to remove the provisions. 

Fortunately, Congress eventually moved to eliminate the abundant 

supply provisions, but not for several years, and that delay certainly stunted our operations in Africa, and definitely not something I think was intended. 

So the key for success for a preference program from a business 

perspective, and something I urge you to keep in mind as this committee and the House of Representatives work to move forward 

broader preference program reform, is to keep the programs simple, 

predictable, and with liberal rules of origin that provide businesses 

the greatest opportunity to take advantage of them. 

I would also note that we need to keep in mind that these programs are designed to promote economic development and help 

raise the quality of life for citizens in many of the poorest countries 

of the world, and in our view, as a socially responsible company, 

upholding labor standards is a key aspect of these preference programs. We need to make sure that we provide trade preferences to 

those least developing countries that not only need a leg up but are 

committed to improving respect for worker rights. 

In that regard, I would like to associate myself with the Minister 

of Commerce from Cambodia, Dr. Prasidh, who spoke on the preVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00143 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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vious panel. Those LDCs that support international labor standards should be able to benefit from trade preferences for all products, including the apparel products of primary concern for Levi 

Strauss & Co. 

Fortunately, we have proof that preferential trade arrangements 

really can achieve the developmental objectives for LDCs and other 

developing countries that we hope they can achieve if structured 

correctly. Egypt, I think, provides an excellent example. While not 

technically a trade preference program, the QIZ program under the 

U.S.-Israel free trade agreement has been very successful. When it 

was extended to Egypt in 2004, Egypt’s apparel industry was minuscule. But now apparel exports to the United States have reached 

nearly $800 million in 2008, and the expanding trade has helped 

create new jobs for thousands of Egyptians. Not surprisingly, the 

QIZ has one of the simplest rules of origin, and has been one of 

the programs easiest for us to use from a trade and business perspective. 

So in short, preference programs can achieve their objectives if 

they are structured correctly. And when I say correctly, again, I 

mean that they must be predictable, with long duration. They must 

cover all products, including apparel products that are the primary 

exports and capabilities of developing countries. They must also 

have liberal rules of origin that get away from the highly restrictive ‘‘yarn forward’’ rule of origin in favor of more flexible rules 

that can actually work for developing countries and help U.S. companies innovate and compete in a very competitive marketplace. 

And finally, any preference reform must include all LDCs that 

respect international labor standards. Economically disadvantaged 

populations need our help, and those countries that support labor 

standards should be rewarded. Our developmental trade policy 

should reflect this need. So as you and your colleagues continue to 

work toward broader preference program modifications, I urge you 

to keep these tenets in mind as a recipe for success for future U.S. 

trade preference programs. 

Thank you, again, Mr. Chairman, for the opportunity to present 

this testimony today. 

[The prepared statement of Mr. Love follows:] 

Prepared Statement of David Love, Senior Vice President and Chief Supply 

Chain Officer, Levi Strauss & Co., San Francisco, California 

Thank you Mr. Chairman and Members of the Subcommittee for the opportunity 

to provide this testimony today regarding the operation of U.S. trade preference programs. 

As you may know, Levi Strauss & Co. (LS&Co.) is based in San Francisco, California and is a global corporation with roughly 11,000 employees, more than 3,000 

of whom are employed in the United States. LS&Co. is one of the world’s leading 

branded apparel companies. We design apparel and related accessories for men, 

women, and children under the Levi’s, Dockers, and Signature by Levi Strauss 

& Co. brands. We market our products in more than 100 countries. 

As a truly global company, Levi Strauss sources our jeans and other apparel products from roughly 50 countries around the world. The supply chain my team and 

I manage is quite complex, particularly when you look at the way in which we 

source for the important U.S. market. 

Over the years, LS&Co. has adapted our sourcing to take advantage of the various U.S. trade preference programs that have been available to us and our apparel 

products. These programs have not been the sole reason for our decision to source 

from a particular country, but they have been a key consideration in those deciVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00144 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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141 

sions—both to enter a country and to migrate out of it. I will get to that latter point 

a little later in my testimony. 

Some of the trade preference programs that we have utilized have worked better 

than others over time and I would like to take a moment to describe what, in our 

view, are the critical factors that make a program workable from a business perspective. 

First, the program must be stable and predictable. We need to know that it will 

be in operation over a long term. Short term program durations and the need for 

often shorter-term extensions are not good for business. 

Second, the rules of trade under the preference program must be as simple and 

liberal as possible. We as businesses need maximum trade flexibility to structure 

our operations in developing countries, which often present other challenges in 

areas of infrastructure and capacity. 

Third, the rules of trade for the program should be stable—once we have set up 

operations to take advantage of a particular program and it is working, changing 

the ‘‘rules of the road’’ can have the inadvertent effect of stifling business. 

I would like to take a moment to elaborate a little bit more on these issues with 

some real world examples. 

Take the issue of duration and predictability. When the Andean Trade Preference 

Act (ATPA) took effect in 1991, our suppliers began to take advantage of the program to dramatically increase production in Colombia. Using U.S. fabric, our partner operations in Colombia were a win-win for everyone. LS&Co. had a stable base 

of quality supply for our products, U.S. textile producers benefited as did Colombian 

workers and the broader Colombian economy. 

At our peak, we were sourcing 60 million units from Colombia and the business 

may have even grown more. However, then the ATPA was set to expire in 2006 and 

the uncertainty started. We didn’t know if Congress was going to renew the program and that caused us to doubt our sourcing plans for Colombia. In the end, Congress did renew the program but only for a short duration and those short-term renewals have continued since. We cannot make commercial decision based on such 

3 to 6 months timeframes, especially when orders are placed at least one year in 

advance. 

As a side note, since I have the opportunity, I would like to urge you to renew 

the ATPA as soon as possible and for as long as possible. I say this because our 

sourcing from the country has dropped from 60 million units to one to two million 

units due to uncertainty regarding the program’s status. This is a real world example of why workable trade preference programs must have long and predictable durations. 

To my second criteria—simple and liberal rules of trade—here too the rules of origin and other aspects of trade preference programs can really make or break them 

from a business perspective. We have had great success working with programs like 

the African Growth and Opportunity Act (AGOA) that allow for raw material imports to be sourced from wherever we can secure the best and most reliable supply. 

Simple and liberal rules of origin for products traded under preference programs 

are critical and programs that are based on them are definitely the most workable— 

when things get complicated these programs can be very difficult to use. For example, when the first iteration of the Hemispheric Opportunity through Partnership 

Encouragement Act (HOPE Act) for Haiti was enacted, its complicated rules of origin made it extremely difficult for companies like LS&Co. to use. Over time, Congress has modified the program and now it is one of the most liberal and easy to 

use. 

However, we are facing other challenges in Haiti that restrict our trade with the 

country. Political and social security issues, labor concerns, port infrastructure deficiencies, water shortages and other capacity issues make Haiti a difficult country 

in which to do business. I would urge Congress and the U.S. Government to work 

with Haitian officials to address these lingering concerns to help make the HOPE 

program work better for all stakeholders. 

And that brings me to my third point—you can’t change the rules of the road on 

trade preference programs if they are working. If you do, they could very well stop 

working quickly. The AGOA program that I mentioned earlier provides a prime example of this fact. 

LS&Co. began taking advantage of AGOA soon after the program was created. We 

steadily increased our production in southern Africa and the program was working 

for us. But then Congress enacted new legislation in 2006 which added a so-called 

‘‘abundant supply’’ element to the program. 

We had no idea how these provisions would work in practice, particularly since 

denim fabric, our life blood, was arbitrarily listed as being in abundant supply in 

Africa even though we knew that it really wasn’t for our needs. As soon as we saw 


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that these provisions had actually been enacted, we put our U.S. sourcing operations 

from Africa on hold and began a fight to remove the provisions. Fortunately, Congress eventually moved to eliminate the abundant supply provisions, but not for several years and that delay certainly stunted our operations in Africa—definitely not 

something I think was intended. 

So, the key for success for a preference program from a business perspective and 

something I urge you to keep in mind as this Committee and the House of Representatives work to move forward broader preference program reform is to keep the 

programs simple, predictable and with liberal rules of origin that provide business 

the greatest opportunity to take advantage of them. I would also note that we need 

to keep in mind that these programs are designed to promote economic development 

and help raise the quality of life for citizens in many of the poorest countries in the 

world. 

And in our view, as a socially responsible company, upholding labor standards is 

a key aspect of these preference programs. We need to make sure that we provide 

trade preferences to those least developing countries that not only need a leg up but 

are committed to improving respect for worker rights. In that regard, I would like 

to associate myself with the Minister of Commerce of Cambodia, Dr. Cham Prasidh 

who spoke on the previous panel. Those LDCs that support international labor 

standards should be able to benefit from trade preferences for all products, including 

the apparel products of primary concern for LS&Co. 

Fortunately, we have proof that preferential trade arrangements can really 

achieve the developmental objectives for LDCs and other developing countries that 

we hope they can achieve if structured correctly. Egypt provides an excellent example. While not technically a trade preference program, the Qualified Industrial Zone 

(QIZ) program under the U.S.-Israel Free Trade Agreement has been successful. 

When it was extended to Egypt in 2004, Egypt’s apparel industry was miniscule. 

But now, apparel exports to the United States have reached nearly $800 million in 

2008 and the expanding trade has helped create new jobs for hundreds of Egyptians. 

Not surprisingly, the QIZ has one of the simplest rules of origin and has been one 

of the programs easiest for us to use from a trade perspective. 

In short, preference programs can achieve their objectives if they are structured 

correctly. And when I say ‘‘correctly,’’ I mean that they must be predictable with 

long durations. They must cover all products including apparel products that are the 

primary exports of developing countries. They must also have liberal rules of origin 

that get away from the highly restrictive ‘‘yarn forward’’ rule of origin in favor of 

more flexible rules that can actually work for developing countries and help U.S. 

companies innovate and compete in a very competitive market. And finally, any 

preference reform must include all LDCs that respect international labor standards. 

Economically disadvantaged populations need our help and those countries that support labor standards should be rewarded. Our developmental trade policy should reflect this need. 

As you and your colleagues continue to work toward broader preference program 

modifications, I urge you to keep these tenets in mind as a recipe for success for 

future U.S. trade preference programs. 

Thank you again Mr. Chairman for the opportunity to present this testimony 

today. 

f 

Chairman LEVIN. Thank you very much. 

Mr. Vogt. 

STATEMENT OF JEFF VOGT, GLOBAL ECONOMIC POLICY SPECIALIST, AMERICAN FEDERATION OF LABOR & CONGRESS 

OF INDUSTRIAL ORGANIZATIONS (AFL–CIO) 

Mr. VOGT. Chairman Levin and Members of the Subcommittee, 

on behalf of the over 11 million members of the AFL–CIO, I thank 

you for the opportunity to review the operation of the U.S. trade 

preference programs. While the AFL–CIO is interested in multiple 

aspects of U.S. trade preference programs, I have been asked to 

focus today on labor eligibility criteria of the GSP and related preference programs. 

I have submitted for the hearing record written testimony that 

both examines in detail the problems with the current system as 


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well as articulates a reasonable, straightforward proposal for reform based on universal eligibility criteria and a more rational, 

transparent, and consistent process to review violations of that criteria. I would be happy to answer any questions you have with regard to that testimony. 

The labor criteria of our trade preference programs are of critical 

importance to the global labor movement. The AFL–CIO, together 

with partner unions and workers in numerous developing countries 

in Latin America, Africa, and Asia, has used this important tool 

over the last 25 years. In the best cases it has brought about modest improvements in labor laws or resolutions to long pending 

cases. Indeed, our most recent experience with Bangladesh shows 

that the GSP program can be used to create needed political space 

for positive change. 

Today, the vast majority of workers in the export processing 

zones of Bangladesh now have some form of worker representation 

on the job because of the hard work of local labor organizations 

that have made use of the political space generated by the continuing GSP review. Those workers can now begin the process of 

bargaining for their fair share of the gains of international trade. 

This is not to say there is not a very long way to go in Bangladesh, 

but it is—this is an example that when used and used properly, the 

GSP process provides leverage, that can bring about meaningful reform. 

However, the application of labor rights criteria in trade preference programs has been highly inconsistent over the years. Often 

unrelated geopolitical and foreign policy interests or sensitivity to 

the economic interest of multinational corporations has meant that 

clear cases of egregious labor rights violations are never accepted 

for review, or that cases, once accepted, are dropped without evidence of any meaningful improvement in the areas outlined in the 

complaint. 

The lack of clear criteria for the acceptance of petitions, of any 

fixed timelines by when the government must rule on the acceptability of a petition, or on the merits, and of any obligation that 

the government ever provide a written, public rationale for its actions has allowed the USTR in the past, over several administrations, to exercise almost unfettered discretion to apply the law. 

Even now, USTR has failed to accept for review two detailed petitions by the AFL–CIO filed well over a year ago. 

The lack of consistency of the application of the labor criteria 

over the last 25 years has substantially undermined the legitimacy 

of the program. A new set of procedures that put a premium on 

transparent, consistently applied criteria with reasonable timelines 

and an agency decision making based on the merits of the complaint would go a long way to improve the functioning of the labor 

provisions. I propose a new set of procedures in the written testimony I have submitted. 

I think we also need to take a fresh look at the eligibility criteria 

themselves. Trade preference programs still refer to internationally 

recognized worker rights. There is an important difference between 

these rights and the ILO core labor rights, which are the universal 

set of minimum labor standards as articulated by the ILO in 1998. 

For example, internationally recognized worker rights do not inVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00147 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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clude the prohibition on discrimination in respect of employment 

and occupation. In addition, the preference programs currently 

refer to a minimum age for the employment of children which is 

weaker than the ILO formulation of the effective abolition of child 

labor. 

Further, the labor criteria only requires that a country take steps 

to afford internationally recognized worker rights. The current 

preference program simply requires a country to improve labor 

standards over time, but not requires a country to have achieved 

any basic level of compliance to be eligible. Thus, a country may 

have horrendous labor laws and practices, so long as it temporarily 

and marginally improves them after a petition is filed. 

We also need to look at additional eligibility criteria outside of 

labor. We are supportive, obviously, of the addition of environmental criteria, human rights, and good governance criteria, which 

we find in other trade preference programs, such as AGOA. 

I do want to make clear—and this has come up earlier today— 

that we do not view the goal of filing labor petitions to be the suspension of preferences, and it never has. Rather, we file petitions 

with the aim of bringing about demonstrable improvements in the 

administration of labor justice, and thus improvement in the lives 

of workers and the economies of beneficiary countries. 

Thus, the approach taken to labor violations should be cooperative, at least initially, and that is why we propose that petitions 

lead first to the adoption of remediation plans with clear benchmarks developed by the U.S. government with input and continued 

participation of petitioners, workers, employers, and governments 

to address and resolve systemic violation of labor rights. If countries are making real progress but have not yet met those benchmarks at the end of an initial review, they should be given more 

time. Of course, the threat of suspension or withdrawal of benefits 

must be retained and wielded if governments fail to abide by the 

legal obligations under the preference programs. 

Finally, I would like to add that we support, obviously, trade capacity building. This is critical, as many witnesses have already 

testified today, to making preference programs work. A subset of 

that, I believe we need to develop better programs with regard to 

worker rights, programs that better help workers, unions, to better 

understand and better advocate for themselves, for the fulfillment 

of their basic labor rights on the job. 

So I will leave it there, and I will be happy to answer any questions you may have with regard to my written testimony or any of 

the statements I have made today. Thank you. 

[The prepared statement of Mr. Vogt follows:] 

Prepared Statement of Jeff Vogt, Global Economic Policy 

Specialist, American Federation of Labor & Congress of Industrial 

Organizations (AFL–CIO) 

Chairman Levin and Members of the Subcommittee, on behalf of the over 11 million members of the American Federation of Labor and Congress of Industrial Organizations (AFL–CIO), I thank you for the opportunity to address the future of U.S. 

preference programs. While the AFL–CIO is interested in the reform of multiple aspects of the preference program system, I will focus today on the labor eligibility 

criteria. 


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1 19 USC 2462(b)(2)(G). 

2 In 2000, countries were further required to implement their commitments ‘‘to eliminate the 

worst forms of child labor’’ to remain eligible. See 19 USC 2462(b)(2)(H). 3OECD, International Trade and Core Labour Standards (Oct. 2000), available online at 

http://www.oecd.org/dataoecd/2/36/1917944.pdf. 4See also, Aidt, Toke & Zafiris Tzannatos, Unions and Collective Bargaining, Economic Effects in a Global Environment, World Bank (2002), available online at http://wwwwds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2002/09/13/000094946_020831 

04140023/Rendered/PDF/multiopage.pdf. 5See, e.g. African Growth and Opportunities Act (AGOA), substituting ‘‘making continual 

progress toward establishing’’ in place of the ‘‘taking steps to afford’’ approach in GSP. The Haitian Hemispheric Opportunity through Partnership Encouragement Act (HHOPE) also contains 

a substantial labor monitoring program based on the ILO Cambodia labor monitoring project. 

Introduction 

In 1984, labor advocates succeeded in passing legislation conditioning a country’s 

eligibility under the Generalized System of Preferences (GSP) on ‘‘taking steps to 

afford internationally recognized worker rights.’’ 1 These rights include: the right of 

association, the right to organize and bargain collectively, a prohibition on the use 

of any form of forced or compulsory labor, a minimum age for the employment of 

children, and acceptable conditions of work with respect to minimum wages, hours 

of work, and occupational safety and health.2 The rationale for linking trade and 

labor rights was two-fold: i) workers who are able to exercise these fundamental 

rights will be able to bargain collectively for better wages and working conditions, 

ensuring that the benefits of trade accrue not only to capital but also to labor; and 

ii) while developing countries should be able to attract investment based on a comparative wage advantage, it should not benefit from wages that are artificially low 

due to labor repression. 

Economic research has also demonstrated that the adoption and enforcement of 

these core labor rights is essential to broad-based economic development. As the Organization for Economic Cooperation and Development (OECD) pointed out in a 

2000 report, International Trade and Core Labor Standards, ‘‘countries which 

strengthen their core labor standards can increase efficiency by raising skill levels 

in the workforce and by creating an environment which encourages innovation and 

higher productivity.’’ 3 The OECD also found in a 1996 report, entitled Trade, Employment and Labor Standards, that ‘‘any fear on the part of developing countries 

that better core standards would negatively affect either their economic performance 

or their competitive position in world markets has no economic rationale.’’ 4

Today, U.S. general or regional trade preference programs all contain either the 

GSP labor clause or a minor variation thereof.5 However, there are significant substantive and procedural problems with the current labor provisions. 

A. SUMMARY OF PROBLEMS WITH CURRENT GSP LABOR STANDARD 

AND PROCEDURES 

1. Outdated Standard 

In 1998, the member states of the International Labor Organization (ILO) agreed 

on a set of universal, core labor rights applicable to all members regardless of level 

of development. These core labor rights were enshrined in the ILO Declaration on 

Fundamental Principles and Rights at Work, which commits all members to respect, 

promote and realize four categories of labor rights: freedom of association and the 

effective recognition of the right to collective bargaining, the elimination of forced 

or compulsory labor, the abolition of child labor and the elimination of discrimination in respect of employment and occupation. Importantly, all members are obliged 

to respect, promote and realize these principles and rights regardless as to whether 

they have ratified the relevant, underlying conventions. This touchstone has now 

been incorporated into all bilateral free trade agreements pending as of May 10, 

2007. 

Despite the adoption of these principles and rights over ten years ago, trade preference programs still refer to ‘‘internationally recognized worker rights’’ (IRWR). 

There are important differences between IRWR and the core labor rights. For example, IRWR do not include the prohibition on discrimination in respect of employment 

and occupation contained to the ILO Declaration. In addition, the preference programs currently refer to ‘‘a minimum age for the employment of children,’’ which 

is weaker than the ILO formulation, ‘‘the effective abolition of child labor.’’ It has 

also been argued that the rights collectively defined as IRWR do not refer to any 

external source of law and thus may be invested with any meaning given to them 


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6 An infamous example of this is the so-called ‘‘Clatanoff Rule,’’ articulated by former Assistant USTR for Labor, William ‘‘Bud’’ Clatanoff. At a 2003 conference at the National Academy 

of Sciences regarding the monitoring of international labor standards, he stated with regard to 

freedom of association: ‘‘If someone tries to form a union, they can’t get shot, fired or jailed. 

I’m sorry. I know there are thousands of pages of ILO jurisprudence I am not going to read, 

but that’s my criteria—shot, fired or jailed, you’re not given freedom of association.’’ 7 15 CFR 2007.3 does provide that petition shall be conducted at least once a year according 

to the schedule set forth in therein. The deadline for petitions established in the regulations 

is June 1, unless otherwise specified by notice in the Federal Register. The petitions are rarely, 

if ever, due on that date. In 2009, petitions were actually due on June 24th. In 2004, petitions 

were due on December 14th. 8 15 CFR 2007.0(b). During the annual reviews and general reviews conducted pursuant to the 

schedule set out in § 2007.3 any person may file a request to have the GSP status of any eligible 

beneficiary developing country reviewed with respect to any of the designation criteria listed in 

section 502(b) or 502(c) (19 U.S.C. 2642(b) and (c)). Such requests must: (5) supply any other 

relevant information as requested by the GSP Subcommittee. If the subject matter of the request 

has been reviewed pursuant to a previous request, the request must include substantial new information warranting further consideration of the issue. 9See, 15 CFR 2007.0(b). During the annual reviews and general reviews conducted pursuant 

to the schedule set out in Sec. 2007.3 any person may file a request to have the GSP status 

of any eligible beneficiary developing country reviewed with respect to any of the designation 

criteria listed in section 502(b) or 502(c) (19 U.S.C. 2642(b) and (c)). Such requests must (1) 

specify the name of the person or the group requesting the review; (2) identify the beneficiary 

country that would be subject to the review; (3) indicate the specific section 502(b) or 502(c) criteria which the requestor believes warrants review; (4) provide a statement of reasons why the 

beneficiary country’s status should be reviewed along with all available supporting information; 

(5) supply any other relevant information as requested by the GSP Subcommittee. 

by the USTR, rather than the meaning conferred upon those rights by the international community through the ILO.6

2. No Minimum Level of Compliance 

The current preference programs simply require a country to improve labor standards over time, but do not require a country to have achieved any basic level of compliance to be eligible. A country may therefore have horrendous labor laws and practices (2 on a scale of 10), so long as it temporarily and marginally improves them 

after a petition is filed (3 of 10). 

3. Limited Petition Filing Window 

Preference programs, with the exception of the CBI and AGOA, allow for third 

parties to submit petitions alleging the violation of any eligibility criteria. The regulations implementing each program limit petitions to only once a year, though the 

statute imposes no such limitation. If a major labor rights violation occurs a month 

after the petition window closes, a potential petitioner will have to wait nearly an 

entire year to raise the matter through a petition process. Further, the petition windows for the various programs are not coordinated, nor are they fixed (in practice), 

meaning that the petition window can (and does) change from year to year.7 In 

2003, the petition window was never opened. The U.S. government has also failed 

to regularly review the compliance of beneficiary countries and self-initiate appropriate action. 

4. No New Information Rule 

A determination that a country does not merit review should not bar subsequent 

petitions on the same or similar issues, as it has in the past. The so-called ‘‘no new 

information’’ rule, 15 CFR 2007.0(b)(5) and 2007.1(a)(4), has no statutory foundation 

and should be abolished.8 In general, the rule prohibits the filing of a petition on 

any matter that has been raised in a previous petition against the same country. 

Thus, a country could take minimal steps towards compliance just to avoid review 

and then backslide into noncompliance once suspension of benefits is no longer 

threatened. If a petitioner were to file a complaint on the same subject matter, the 

petition could be rejected if the new information were not deemed sufficiently substantial. 

5. Exercise of Excessive Executive Discretion 

a. Meritorious Petition Not Accepted for Review and No Reason Given 

The only reason to reject a country practice petition for review that finds any support in the statute or regulations is that the petition fails to set forth facts that, 

if substantiated, would demonstrate that the beneficiary country in question has not 

taken steps to afford workers internationally recognized worker rights.9 However, 

numerous well-supported petitions detailing widespread and/or serious violations of 

worker rights have been rejected in the past without any official explanation. The 


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10 15 CFR 2007.2(g) and (h) regulate the process by which recommendations are made to the 

President. Nowhere do the regulations provide the TPSC (and superior committees) discretion 

to weigh considerations unrelated to the program’s eligibility criteria. 

(g) The TPSC shall review the work of the GSP Subcommittee and shall conduct, as necessary, 

further reviews of requests submitted and accepted under this part. Unless subject to additional 

review, the TPSC shall prepare recommendations for the President on any modifications to the 

GSP under this part. The Chairman of the TPSC shall report the results of the TPSC’s review 

to the U.S. Trade Representative who may convene the Trade Policy Review Group (TPRG) or 

the Trade Policy Committee (TPC) for further review of recommendations and other decisions 

as necessary. The U.S. Trade Representative, after receiving the advice of the TPSC, TPRG or 

TPC, shall make recommendations to the President on any modifications to the GSP under this 

part, including recommendations that no modifications be made. 

(h) In considering whether to recommend: (1) That additional articles be designated as eligible 

for the GSP; (2) that the duty-free treatment accorded to eligible articles under the GSP be withdrawn, suspended or limited; (3) that product coverage be otherwise modified; or (4) that 

changes be made with respect to the GSP status of eligible beneficiary countries, the GSP Subcommittee on behalf of the TPSC, TPRG, or TPC shall review the relevant information submitted in connection with or concerning a request under this part together with any other information which may be available relevant to the statutory prerequisites for Presidential action 

contained in Title V of the Trade Act of 1974, as amended (19 U.S.C. 2461–2465). 

government should accept for review a petition if the statements contained therein, 

if substantiated, would constitute a failure of the beneficiary country to comply with 

its obligations or commitments under the labor clause. If a petition is rejected, the 

government should provide in writing the reasons for that decision. If a defect in 

the submission could be remedied, the government should instruct the petitioner 

what is needed to make the petition acceptable for review. Further, the criteria that 

the GSP subcommittee of the Trade Policy Staff Committee (TPSC) employs to determine whether to accept or reject a GSP petition for review should be public. 

b. Abuse of Continuing Review 

USTR has often put countries under a ‘‘continuing review,’’ a probationary period 

during which the government waits to see whether a country is making sufficient 

progress necessary to retain its eligibility. Using a ‘‘continuing review’’ as a means 

to provoke the improvements necessary to avoid suspension is legitimate. However, 

some reviews have continued for several years while violations of workers’ rights 

continued unabated. Thailand, for example, was under review for nine consecutive 

years while it maintained GSP eligibility. Reviews should rarely, if ever, last for 

more than two petition cycles without a final determination of eligibility. No country 

will undertake needed reforms if it believes that there is no real chance that market 

access could be limited, suspended or withdrawn. 

c. Executive Branch Fails to Limit, Suspend or Withdraw Preferences, even in Clear 

Cases 

GSP does provide the President some discretion to continue to extend preferences 

even if the country fails to meet the worker rights eligibility criteria. Section 

2462(b)(2)(G) of the GSP provides that ‘‘The President shall not designate any country a beneficiary developing country under this subchapter if any of the following 

applies: such country has not taken steps to afford internationally recognized worker rights to workers in the country (including any designated zone in that country.’’ 

Section 2462(b)(2) does provide, however, that subparagraphs (G) and (H)(to the extent that the work ‘‘by its nature or the circumstances in which it is carried out, 

is likely to harm the health, safety, or morals of children’’) ‘‘shall not prevent the 

designation of any country as a beneficiary country under this subchapter if the 

president determines that such designation will be in the national economic interest 

of the United States and reports such determination to the congress with the reasons therefore.’’ (emphasis added). 

Despite this limited grant of discretion, several country practice reviews over the 

last 25 years have been closed with no action taken (limitation, suspension or withdrawal) and with no apparent steps taken by the foreign government to afford 

IRWR. Given the complete lack of transparency, it is impossible to ascertain the 

basis for inaction and determine whether it is rooted in the clear statutory language 

outlining the scope of presidential discretion or whether other extra-statutory factors are considered by subordinate committees such as the TPSC when making a 

recommendation to the President.10 The discretion exercised by the TPSC in practice and afforded the President under the statute is so broad that it could form the 

basis for inaction on almost every petition. 

6. Country v. Industry-Level Enforcement 

Nothing currently prevents USTR from suspending trade preferences with regard 

to a specific industry or industries where rampant violations occur (rather than susVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00151 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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11 Note: We believe that beneficiary countries must also meet eligibility criteria with regard 

to human rights, rule of law and good governance and the environment. Those criteria are not 

spelled out here. 12 In 2009, this list included: Burma, Iran, North Korea, Syria, Chad, Kuwait, Papua New 

Guinea, Zimbabwe, Cuba, Malaysia, Saudi Arabia, Eritrea, Mauritania, Sudan, Fiji, Niger and 

Swaziland. 

pending or withdrawing preferences at the country level). With very rare exceptions, 

such as Pakistan, where USTR suspended preferences in the 1990s for carpets, surgical instruments and soccer balls, USTR has not exercised this flexibility and has 

instead limited itself to a determination as to whether to suspend or withdraw trade 

preferences for an entire country. The targeted limitation of preferences should be 

used more frequently. 

B. A BETTER WAY 

Below is a comprehensive set of proposals to reform both the labor eligibility criteria as well as the process for reviewing complaints, remediating violations and 

making determinations as to whether to suspend preferences in whole or in part.11

These recommendations could be applied to reform of any or all of the extant preference programs, or lay the foundation for a new, unified preference program. 

1. Eligibility Standard(s) 

Establishing new eligibility criteria for a broadly revamped preferences scheme requires several related choices. For example, tiers of development and levels of market access could be uniform or layered. For purposes of this testimony, we assume 

three baskets of trade preferences based on a combination of level of development 

and market access. However, should the program evolve and take another shape, 

these suggestions would need to be adapted. 

Also, note that only labor eligibility criteria are discussed here. One would expect 

that other criteria would be required, including those related to good governance, 

human rights, the environment and others. 

a. Basic Preference for Developing Countries 

Assuming levels of market access similar to the current GSP program for developing countries, the following criteria should be met to be or remain eligible. 

Standard 

• The country must make continual progress towards adopting laws consistent 

with core labor rights and must have adopted laws consistent with the ILO 

core labor rights within 3–5 years of the program entering into force to remain eligible. 

• Though the obligation is to make progress during the transition period, the 

country cannot have laws that prohibit (de jure or de facto) the exercise of 

a core labor right (e.g., bar on the formation of unions or a minimum requirement of 100 members to form a union) or fail to have laws governing acceptable conditions of work with respect to minimum wage, hours, and health and 

safety. 

Level of Enforcement 

• During the transition period, the country must make continual progress towards effectively enforcing its laws related to the core labor rights and acceptable conditions of work; once the transition period ends, the country must effectively enforce those laws. 

• Though the obligation is to make continual progress during the transition period towards effective enforcement, the country, at a minimum, must have tribunals for the enforcement of such labor rights and acceptable conditions of 

work, which shall be fair, equitable, and transparent; provide for the possibility of remedies such as fines, penalties, or temporary work closures; and 

allow for the appeal or review, as appropriate, of decisions to impartial and 

independent tribunals. 

• Though a country retains the right to the reasonable exercise of discretion 

and to bona fide decisions with regard to the allocation of its resources, the 

country must, at a minimum, not reduce the percentage of its annual budget 

for labor enforcement and should increase the budget for labor enforcement 

proportionately as the economy expands. 

• The country cannot be on Tier 3 of U.S. State Dept Trafficking Report (those 

countries whose governments do not fully comply with the Trafficking Victims 

Protection Act’s (TVPA) minimum standards and are not making significant 

efforts to do so).12


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b. GSP–Plus 

Currently, the U.S. has no incentive based program that ties greater levels of 

market access to certain vulnerable developing countries to compliance with a higher set of eligibility criteria. The European Union currently has such a program— 

GSP Plus. If the U.S. were to incorporate such an approach, a developing country 

could be eligible to export more goods at a preferential tariff rate than possible 

under the basic GSP. If correctly designed and implemented, an incentive based program that rewarded better labor practices could result in better labor laws and practices. If such a program were to be established, the following eligibility criteria 

would be appropriate. Such countries should also be subject to more rigorous oversight on compliance with the eligibility criteria. 

To be eligible, the country must: 

• have adopted laws and regulations consistent with the core labor rights • must effectively enforce those laws and all other national laws governing 

worker rights and social protection • maintain a functioning tripartite body that meets regularly to discuss labor 

laws, labor relations and social and economic policy generally, if such a structure exists, or otherwise ensure regular and meaningful social dialogue on 

these issues. • ensure that no workers are excluded de facto or de jure from, and that all 

workers are protected equally by, national labor laws, regulations, and policies, including subcontracted workers, temporary workers, migrant workers, 

seasonal workers, part-time workers, project-based workers, informal sector 

workers, etc. Nothing in this criterion shall be construed as prohibiting positive affirmative measures to protect the rights of more vulnerable workers. 

c. Duty-Free/Quota Free for Least Developed Countries 

It has been proposed that Least Developed Countries (LDCs) should now receive 

duty free/quota free preferential tariff treatment. LDCs should also be required to 

meet the basic GSP criteria described herein; however, they should be given a somewhat longer transition period and more resources from a variety of sources should 

be marshaled to help LDCs meet these and other eligibility criteria. This arrangement would strike a balance between the lower level of development on one hand 

and the substantially greater market access afforded on the other. 

2. A New Process 

a. Institutions 

Currently, worker rights country practice petitions are filed with the USTR and 

reviewed initially by the GSP Subcommittee of the TPSC, an inter-agency committee that includes USTR, Treasury, Agriculture, State, USAID, Commerce and 

Labor. The full TPSC includes, in addition, the Council of Economic Advisors, Council on Environmental Quality, Department of Defense, Department of Energy, Department of Health and Human Services, Department of Homeland Security, Department of the Interior, Department of Justice, Department of Transportation, Environmental Protection Agency, National Economic Council, National Security Council, Office of Management and Budget and the U.S. International Trade Commission 

(non-voting member). 

It is understandable that a wide range of agencies may have an interest in a decision regarding country eligibility to receive trade preferences. However, as to whether the petition (1) on its face alleges a violation of the worker rights criteria and 

should therefore be accepted and (2) whether, following an investigation, those 

claims have been substantiated by the evidence, it appears that those decisions are 

wholly within the competence of DOL, and specifically ILAB. Thus, as to the first 

two aforementioned questions, ILAB’s findings and conclusions should be given substantial deference, if not be determinative. The ultimate issue, whether a country’s 

benefits should therefore be suspended because of those violations, or what the 

scope of the suspension should be, could be a determination that requires input from 

a broader inter-agency committee—though the scope of their review should be circumscribed. 

b. Procedures 

1. Public Petitions 

The USG should provide for the receipt of public petitions from any person at any 

time on labor rights matters under a new trade preference scheme. This could be 

accomplished either by establishing an open petition process or by maintaining a 

fixed annual review process, at which time petitions would be encouraged, but with 

the possibility of filing a petition out-of-cycle. Elements of a basic petition should 


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13The USG should develop a methodology setting forth clear and consistent procedures for the 

conduct of investigations, the criteria used to determine whether a violation of the labor clause 

has occurred, how such factors are weighed, and how a final determination is made. The methodology should also set forth procedures for drafting and implementing a remedial work plan, 

if applicable, and oversight of the implementation of such a plan. This proposed methodology 

should be published in the Federal Register for public comment. 14 If the industry does not benefit from preferences, violations would have to be viewed in the 

context of a broader, country practice petition. However, this does not preclude the USG from 

developing a remediation plan that addresses concerns in that industry. The limitation would 

be in that benefits would have to be withdrawn for the entire country, rather than the specific 

industry. 

include: name and contact information of petitioner (which should remain confidential if requested), a summary of the relevant facts, if possible the specific domestic 

laws or international labor rights alleged to have been violated and the relief 

sought. No additional information should be required at the initial stage. 

The petition shall be accepted for review if the statements contained in the petition, if substantiated, would constitute a failure of the country to comply with the 

obligations or commitments under the preference program. ILAB should announce 

its determination within 30 days of the receipt of the petition. If the information 

provided is insufficient to make an initial determination, ILAB should notify the petitioner within 30 days of the receipt of the petition and request any information 

needed to make a determination. The petitioner should have 60 days from receipt 

of the notification to supply the requested additional information. ILAB shall have 

30 days from the date the petitioner resubmits the petition in order to make its determination. If the petitioner does not supply the requested additional information 

within 60 days, or if the information is still insufficient, then the petition may be 

rejected. 

If accepted, a notice should be published in the Federal Register within 5 days 

that a petition to review the eligibility of a beneficiary country has been accepted 

for review. Specific notice should be given to the foreign government and petitioner(s). The FR notice will start a process not to exceed 120 days. ILAB shall invite the public to submit supplemental written testimony in support of or in opposition to the petition within 30 days. Thereafter, ILAB and any other relevant agencies should conduct an investigation, including interviews with petitioners, government officials, employers or employer associations specifically named or in an industry identified in the complaint, as well as NGOs and other relevant stakeholders. 

As part of its investigatory process, a public hearing should also be held. The investigatory phase should close within 120 days from the filing of the petition. 

Within 60 days from the close of the investigation, a written determination as to 

whether a violation or violations of the labor clause occurred, and the facts and evidence supporting that determination.13

2. Levels of Review 

Unlike the existing petition process (in practice), petitioners should be able to request action taken at the country and/or industry level. Indeed, almost all past petitions have raised concerns at both levels, but the only remedy available in practice 

has been a complete suspension of preferences to an entire country. The availability 

of targeted remedies may provide the USG the flexibility to address the most critical 

problems directly. 

For example, a situation could arise in which a petitioner alleges: (1) that the government has failed to enact laws consistent with the country’s preference program 

obligations, has failed to maintain those laws, and/or in a systematic way has failed 

to enforce them; (2) alleges rampant violations in a specific industry, with illustrative cases with regard to specific firms that represent the worst actors within 

that industry. A petitioner should be able to request (and the U.S. government provide) action be taken at one or both levels. In cases where laws and regulations fall 

short of core labor standards, where there is a widespread failure in the administration of labor justice (ministry, inspectorate, courts), and/or where the government 

as employer is violating worker rights, the U.S. government should consider application of country-level remedies. Where worker rights violations are especially concentrated in a particular industry, the U.S. government should consider remedies 

that target the products of that industry.14

3. Remediation & Suspension 

a. Country Level 

The primary purpose of enforceable labor rights criteria is to improve working 

conditions, not to suspend tariff preferences for the sake of it. Thus, the approach 

taken to labor violations should be cooperative, at least initially. If ILAB were to 


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15 In many cases, a firm or group of firms may be responsible for giving the entire sector a 

bad reputation. If an entire sector were under review, it would be advantageous for the better 

actors to put pressure on the bad actors to avoid having the relevant product losing preferential 

treatment. However, if a firm within an industry continues to commit serious violations of worker rights, the USG should seek ways, where possible, to deny benefits to that firm or firms. 

determine based upon a petition or a biennial review (see below) that the beneficiary country is not in compliance with the labor eligibility criteria, then it should 

enter into consultations with the beneficiary country (with the participation of worker and employer representatives) to develop a work plan with clear benchmarks 

that, if met, would bring the country into compliance with the eligibility criteria. 

Such a work plan should usually be no longer than one year in duration, with a 

mid-point review. 

If, after such consultations, a work plan cannot be developed, eligibility should be 

terminated. If such a plan is not fully implemented after the year, ILAB shall consider what progress has been made toward fulfilling the work plan. If the country 

has demonstrated sufficient political will and has taken substantial steps towards 

implementing that plan, the USG should extend the period for an additional period 

not to exceed one year. If, however, the country has not demonstrated the requisite 

will or has made insufficient progress, the preferences shall be limited, suspended 

or withdrawn. 

As noted above, the TPSC is responsible for making a recommendation to the 

President to limit, suspend or withdraw preferences. Although the statute gives the 

President the discretion to factor in other considerations, i.e. the national economic 

interest, it is clear that members of the TPSC are factoring in additional non-labor 

considerations at the time the recommendation is being formulated. Further, the 

TPSC does not now appear to be constrained by any timelines whatsoever in making 

their decision. 

The TPSC should be constrained to make its recommendation to the President 

within 60 days from ILAB’s recommendation. Further, TPSC may reject ILAB’s determination and recommend no action be taken only on the basis of an affirmative, 

consensus opinion based on evidence that suspending the preferences would either 

cause serious harm to the U.S. economy or jeopardizes the national security of the 

United States. If the TPSC recommends limitation, suspension or withdrawal of 

preferences, the President should notify Congress of his (or her) intent to limit or 

suspend the country’s eligibility for preferential trade treatment within 30 days (unless the president independently determines that suspending preferences would 

cause serious harm to the economy or jeopardizes the national security of the 

United States). The final decision, either in the affirmative or negative, must be in 

writing with a full explanation for the reasons supporting that decision. 

b. Industry Level 

If a petition targets a particular industry or industries, or ILAB otherwise determines that violations described in a country practice petition are concentrated in a 

specific industry or in industries, it should develop a special work plan (or sub plan) 

with specific recommendations to address violations in the identified industry or industries. Of course, persistent worker rights violations in any industry are the responsibility of both the employers (who violate the law) and the government (which 

fails to enforce the law), so a sectoral approach will necessarily have to set forth 

specific benchmarks in a work plan that are directed to both the government and 

to the employers. As with the country-level work plan, government, employers and 

workers should all be engaged in developing that plan. 

If the country and employers have demonstrated the will and have taken substantial steps towards implementing that plan, the president should extend the review 

period for an additional period not to exceed one year. If, however, the country has 

not demonstrated the requisite will or has made insufficient progress, and the violations are especially concentrated in an industry or industries, the president shall 

notify congress of intent to terminate the preferential treatment for the products in 

the identified industries.15

4. Reinstatement of Eligibility 

The President may reinstate the eligibility for preferential treatment of a country 

(or sector) whose eligibility has been terminated if it is determined that the qualified beneficiary country has fully implemented the work plan. 

Countries seeking reinstatement should file a written request with USTR. Notice 

of the request shall be published in the Federal Register. Any interested party shall 

have 60 days to provide information in response to the notice as to whether the 

country has implemented its work plan and/or any new additional information postVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00155 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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16This section would of course need to be amended to refer to the core labor rights assuming 

our recommendations herein are adopted. 

suspension with regard to the country’s compliance with the labor clause generally. 

A public hearing should be held within 30 days after comments are due. ILAB shall 

review the evidence and conduct such investigations as necessary and make a determination within 90 days whether the beneficiary country has complied with the 

work plan. The preferences shall remain limited or suspended unless ILAB makes 

a finding that the beneficiary has fully complied with the work plan (and has not 

engaged in subsequent violations that justify the continuation of the suspension). If 

so, it would make a recommendation of reinstatement to the TPSC. If not, preferences shall remain suspended until such time that the beneficiary country can 

demonstrate full compliance through the process described above. 

There may be some cases where a country seeks reinstatement of eligibility after 

several years out of the program, at which point the work plan would no longer be 

relevant. In such cases, a new assessment would need to be undertaken to ascertain 

whether the country meets the relevant eligibility criteria. 

5. Regular Biennial Monitoring 

In conjunction with civil society partners with demonstrated expertise in labor 

rights matters and together with other relevant international organizations, USTR, 

DOL and State shall work together to assess compliance by beneficiary countries 

with core labor rights and acceptable conditions of work, in law and practice. Such 

assessments shall be based on information available from the annual IRWR reports 

required under 19 USC § 2464,16 the International Labor Organization, other interested parties, country and worksite visits that include confidential worker and worker representative interviews, meetings with management, visits to workplaces, collection and review of relevant documents. The U.S. government would not be required to develop yet another report but rather to survey information already in 

hand or readily available, and any additional information provided by civil society 

organizations and collected in the course of ongoing information gathering from the 

labor attache ́s and labor reporting officers. 

In recognition of the limited resources, the U.S. government should be allowed to 

exercise discretion and self-initiate reviews of those countries that present the worst 

cases of non-compliance. 

C. Capacity Building 

Substantial funding will be required to make this program reach its desired goal. 

We will need to be creative in pursuing a consistent stream of funding. It is important, too, that we undertake a serious assessment of the efficacy of past labor capacity building programs. While some were well tailored to address properly diagnosed 

problems, others were not designed to address the most critical problems. Coordination among the several agencies at times seemed poor, with multiple projects receiving funds to do largely the same work. In other cases, organizations that received 

funding to carry out labor capacity building programs have had little expertise in 

labor relations and/or are unfamiliar with the region. In some cases the local partners designated by US-based organizations are unknown to or do not have the complete trust of labor organizations. Finally, there appears to be little accountability, 

particularly with regard to government institutions that continue to receive funds 

for workshops, training and equipment year after year despite showing little will 

to actually improve the quality of their work. 

f 


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Chairman LEVIN. Thank you very much. 

Mr. Reinsch, please. 

STATEMENT OF WILLIAM A. REINSCH, PRESIDENT, NATIONAL 

FOREIGN TRADE COUNCIL (NFTC) 

Mr. REINSCH. Thank you, Mr. Chairman and Members of the 

Subcommittee. Thank you for the opportunity to appear. I am Bill 

Reinsch, I am president of the National Foreign Trade Council, a 

trade association of some 300 U.S. companies that are engaged in 

international trade and investment. 

We support trade preference programs that eliminate tariffs in 

order to provide cost effective inputs to U.S. manufacturing, thereby enhancing U.S. jobs and competitiveness. Studies by the GAO 

and private sector think tanks show that preference programs have 

a small effect on the overall U.S. economy, and the tariff relief they 

provide benefits small and medium sized companies as much as it 

does large corporations. This tariff elimination also reduces costs to 

the U.S. consumer. 

In the historic economic downturn we are experiencing, these 

multiple domestic benefits can be significant. Let me mention a few 

examples. The U.S. appliance makers imported $70 million worth 

of air conditioning machinery parts duty free last year that were 

used in making appliances here in the United States. Those same 

parts not covered under GSP would have a 1.4 percent tariff, so 

these manufacturers realized a $1 million savings on these components, which came mostly from Thailand. $430 million worth of 

ferrosilicon was imported last year under GSP, mostly from South 

Africa and Georgia, at a $17 million savings, increasing the competitiveness of domestic steel exports and reducing the cost of U.S.- 

made steel that was sold here. 

The U.S. imported $80 million worth of marble sawn into slabs 

for the construction industry, mainly from Turkey, India, and 

Egypt, where GSP removed a 5 percent tariff, resulting in a $4 million benefit to this industry. About $10 billion worth of oil, mainly 

from Iraq, enters the U.S. under GSP. AGOA, in turn, waived tariffs on about $50 billion of oil from Nigeria, Angola, and Equatorial 

Guinea, and $13 billion worth of Colombian oil enters the U.S. 

under ATPA. 

These are very low tariff products that Americans would buy 

anyway, but on each barrel there are 5 cent or 10 cent duties. All 

together, the savings comes to about $40 million. 

Beyond this domestic benefit, we believe in the value of a stable 

system of trade preferences as a tool to provide broad and deep 

benefits to some of the world’s poorest countries. This is not only 

a moral obligation, but also in our national, economic, and security 

self-interest. 

The eligibility criteria inherent in all U.S. preference programs 

have led to economic and legal reforms which have made a real difference in building and strengthening a home grown entrepreneurial class, which allows economies to diversify and move beyond 

dependence on preference programs for growth. For example, the 

NFTC strongly believes that a strong IPR regime in developing 

countries is a key component in creating an indigenous class of entrepreneurs and innovators. Many cite the eligibility criteria in 


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GSP as contributing to Brazil moving forward to increase its IPR 

protections, and that is paying off for domestic innovation. 

However, when beneficiary countries move away from the rule of 

law, such as Ecuador’s withdrawal from the International Center 

for Settlement of Investment Disputes, and diminishing the independence of the judiciary, it is important that the eligibility criteria 

provide leverage for an appropriate response. Instituting across the 

board eligibility criteria mandating a strong rule of law and respect 

for an independent judiciary combined with adequate capacity 

building assistance will serve to separate countries who are moving 

forward from those like Ecuador who are moving away from international norms. 

In April of this year the NFTC joined a diverse group of 29 organizations in sending a letter to Ambassador Kirk and to Congress 

outlining our consensus agreement on what improvements to the 

preference programs would be most beneficial. This group consists 

of broad based trade associations and bilateral business councils 

and NGOs focusing on international economic development, poverty, and hunger eradication and other international aid issues. 

Since then, facilitated by the Trade Aid and Security Coalition of 

the Global Works Foundation and the trade partnership, we have 

continued to meet, including other faith-based, labor, and food security NGOs, and major corporations and other experts to find common ground on the details while communicating regularly with 

Congressional staff, including the staff of this committee. 

We are united in the belief that Congress should make tangible 

improvements to the preference programs. A progress report on our 

work will be forthcoming soon, but our experience has shown that 

the main things Congress should do are, first, move toward a unified set of preferences, harmonizing the elements of GSP and regional programs over a short timeframe. Crafting a program that 

is certain, reliable, predictable, and long term is the most powerful 

thing Congress can do to ensure that preferences work for those 

they are intended to help. 

Second, provide permanent, 100 percent duty free and quota free 

benefits for eligible least developed countries. This bold move provides the commitment and leadership that will serve as the foundation for all of the other work needed to make sure that the poorest 

nations begin to integrate preferential access to the U.S. market 

into their broader development plans. 

Third, end the short and uncertain renewals. Waiting until a 

month or days or even after the expiration of a program to renew 

it makes it difficult to use the programs. For importers, stability 

is probably the most important issue. Investing in developing countries and building strong sourcing relationships requires time and 

money. Companies are reluctant to spend these resources if the 

preferences constantly start and stop, or if it seems like a product 

might lose GSP benefits, just as the investment begins to pay for 

itself. 

Fourth, simplify the rules. Integrating the multiplicity of rules of 

origin, eligibility requirements, and product graduation requirements will increase use of the program. 

Finally, tie renewal eligibility and graduation more completely to 

capacity building. While preferences can serve as a potent catalyst 


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for economic, regulatory, legal, and political reform, the capacity to 

build the infrastructure and the understanding of what is needed 

to utilize the programs and what is expected to maintain this privilege are all crucial to success. 

In conclusion, I want to make clear that we understand that 

preferential access to the U.S. market is a privilege, not an entitlement, and along with it go responsibilities. Countries who receive 

these preferences must demonstrate the vision to undertake other 

efforts to improve their citizens’ livelihood. Preferences are only one 

tool to spread economic opportunity globally. 

We believe that U.S. leadership is finding a way forward to conclude the Doha Round is of paramount importance. Clearly articulating and implementing a comprehensive forward looking national 

trade policy that opens markets for U.S. business, workers, farmers, and ranchers must go hand and hand with the important effort 

to update and modernize the system of U.S. trade preference programs, and we look forward to working with Congress and the Administration in this effort. 

Thank you Mr. Chairman. 

[The prepared statement of Mr. Reinsch follows:] 


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Chairman LEVIN. Thank you very, very much. 

Ms. Broadbent. 


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STATEMENT OF MEREDITH BROADBENT, TRADE ADVISOR, 

THE GLOBAL BUSINESS DIALOGUE 

Ms. BROADBENT. I appreciate the opportunity to discuss U.S. 

trade preference programs. I am a trade advisor to the Global Business Dialogue, an association that focuses on international trade an 

investment matters. In that GBD does not lobby and our members 

have not considered this issue as a group, the views expressed here 

today are my own. They are based on my practical experience administering the GSP program at USTR from 2003 to 2008. 

Although several key changes are needed, I would caution 

against a wholesale rewrite or consolidation of the separate U.S. 

trade preference programs. Rather, I am very positive about the 

track record of Congress for revising and improving these programs 

in a more iterative manner, as necessary, to reflect current foreign 

policy realities, the interests of U.S. industry, and current U.S. objectives in multilateral trade negotiations, and development priorities. 

Under the single lens of any one of these concerns, U.S. trade 

preference programs are far from ideal. But taking into account the 

whole set of objectives, the current structure of the preference programs gives USTR the flexibility to effectively tailor U.S. trade policy toward 131 different developing countries, a group that spans 

a very wide spectrum in terms of per capita income and capacity 

to implement trade reforms. 

Because of the wide differences in the capacities of beneficiary 

countries to comply, trade preference eligibility criteria in the statute should not be one size fits all. USTR has been successful in 

bringing about positive changes in beneficiary countries based on 

the existing conditionality criteria. Historically, the goal of gradually integrating advanced developing countries into a reciprocal 

trade relationship with the United States under the disciplines of 

the WTO or in the context of a free trade agreement has been important for Congress and for both Republican and Democratic administrations. 

Over the past 30 years, the United States has enacted five preference programs targeting specific regions of the world for deeper, 

more generous benefits. Each of these regional programs has its 

own history, national security, and foreign policy context. Aimed at 

providing economic alternatives to drug crop production, the Andean trade preference program lent itself well in the case of Colombia 

and Peru to encouraging a transition from unilateral trade preferences to a willingness and ability to undertake the reciprocal and 

binding obligations of free trade agreements. Recently, Ecuador has 

been reviewed under ATPA for breaches of rule of law that have 

affected U.S. investors, raising the question of whether unilateral 

trade preferences in this case are serving U.S. interests, but it is 

my view that the statute has been working. 

There are leaders in Congress who have championed and fought 

for expanding trade ties with separate regions, which I believe has 

had a tremendously positive impact on U.S. trade relations with 

these areas of the world. Chairmen Rangel and Archer and Levin 

and Congressmen McDermott and Crane worked tirelessly to establish the AGOA program. I believe AGOA led to a sea change improvement in U.S. trade relations with Africa, and was responsible 


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for creating government mechanisms for coordinating with the continent on common objectives for the Doha negotiations in the WTO. 

The flexibility in the current preference structure makes GSP an 

effective tool for USTR. USTR is in a better position to encourage 

beneficiary countries to eliminate market access barriers for U.S. 

exports and respect worker rights, for example, because U.S. trade 

negotiators can engage the target developing country both under 

GSP and under the regional program. Proposals to streamline and 

consolidate programs should be considered, but not at the expense 

of reducing the status of regional groupings that the countries 

themselves view as important, and which provide a framework and 

incentives for USTR to promote regional economic integration, an 

important development objective in and of itself. 

There are improvements in these programs that Congress should 

consider. U.S. importers and potential investors in many developing countries have legitimate concerns about the complications 

and costs associated with the exceedingly arcane rules of origin 

that apparel products must meet in order to receive duty free treatment. The effectiveness of U.S. preference programs is undermined 

by detailed and complicated restrictions related to requirements to 

use U.S. fabric, yarn, and finishing processes. No other sector of 

trade is so tightly controlled and micromanaged. I urge the Subcommittee to look at these rules of origin in a fresh light to see 

what can be done to simplify and eliminate burdensome complications that have the effect of undermining the value of the duty savings to the developing countries that the United States is trying to 

help. 

I’m sorry to say that in terms of the Doha Round trade agenda, 

the Committee will also have to wrestle with reconciling the goal 

of helping developing countries and the perverse and damaging incentive trade preferences create for countries to oppose multilateral 

trade liberalization in the WTO. Once developing countries become 

vested in their preferences, they often fight multilateral reductions 

and tariffs, creating a difficult negotiating dynamic for the United 

States in Geneva. For example, many preference receiving developing countries continue to pose cuts in developed country apparel 

tariffs. 

This inclination by some preference beneficiaries to oppose any 

trade liberalizing proposal that could be characterized as causing 

‘‘preference erosion’’ is having serious deleterious effects on the 

Doha negotiations. This is not the most important obstacle to 

reaching an agreement, but it is an issue that WTO countries will 

have to face when larger issues in the Doha Round are solved. 

In conclusion, Mr. Chairman, preferences are a flexible and effective mechanism for furthering the U.S. trade policy agenda. They 

establish market-based incentives for developing countries to open 

their markets. These programs will be enhanced by amendments 

that help make the programs simpler and more user friendly, but 

which also preserve USTR’s ability to tailor its approach to the different circumstances facing developing countries. 

Thank you. 

[The prepared statement of Ms. Broadbent follows:] 


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f 

Chairman LEVIN. Thank you very, very much. 

Ms. Rangnes. 

STATEMENT OF MARGRETE STRAND RANGNES, DIRECTOR, 

LABOR, WORKERS’ RIGHTS & TRADE PROGRAM, SIERRA CLUB 

Ms. RANGNES. Thank you. Thank you Chairman Levin, ranking 

member Brady, and Members of the Subcommittee. On behalf of 

the Sierra Club’s 1.3 million members and supporters, I want to 

thank you for the opportunity to address this issue. I am here primary as a representative of the Sierra Club, but I am also speaking 

on behalf of a broad array of organizations, including the Center 


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for Biological Diversity, the Center for International Environmental Law, Defenders of Wildlife, Demos, Environmental Investigation Agency, and Friends of the Earth. 

The United States has long granted trade preferences to developing countries that meet various criteria. These have changed 

with time, reflecting U.S. economic and foreign policy priorities. 

However, the GSP does not currently include environmental criteria. Now is the time to correct that omission, and the environmental community looks forward to working with this committee 

and Congress to include meaningful environmental language to our 

GSP system. 

This hearing could not be more well timed. In just a few weeks, 

world leaders will gather in Copenhagen to address the critical 

issues of climate change. A quick snapshot of the state of the global 

environment tells a sobering story. We are facing a collision of crises ranging from alarming rates of biodiversity loss, deforestation, 

vanishing fresh water supplies, and pervasive chemical pollution. 

Sadly, it is in the developing world that is at risk for suffering the 

greatest harm for these environmental threats. 

Climate change is also an economic development issue since it is 

projected to reduce gross domestic product by up to 10 percent in 

the developing world. Conversely, sound environmental policies can 

lead to sound economic growth. A prime example of this can be 

seen in Africa, where an agreement to reduce or end commercial 

trade in elephants allowed populations that were crashing towards 

disappearance to rebound to healthy levels. 

This action cut off huge amounts of corrupt payment that weakened governments throughout sub-Saharan Africa, helped to simplify and improve enforcement activities, protected the broader ecosystems, and paved the way for massive increases in tourism, revenue, and assisted local employment. Tanzania’s 2008 tourism income, for example, was over $1 billion, and is centered on the wildlife in its national parts. 

As detailed in my written testimony, we believe that there are 

two central components that must be addressed in a revised GSP. 

The first is the inclusion of meaningful environmental standards. 

The second focuses on the process and implementation of these. 

On the substantive end, it is important to make clear that there 

is no environmental equivalent to the core labor standards found 

in the ILO. Thus, ratification and implementation of critical multilateral environmental agreements, also known as MEAs, can be 

used as a benchmark. MEAs aim to protect the very fabric of the 

planet’s ecology and address different dimensions of the environmental challenges we face, ranging from climate change and protection of the ozone layer to protecting endangered species. 

While some are regional in scope, many are global agreements 

that are signed by a majority of countries, including our GSP partners, and a revised GSP should demonstrate the expectation that 

countries live up to their MEA obligations as well as effectively enforce their domestic environmental laws and regulations. However, 

even the best intended provisions will have little impact if there is 

not also a clear process around implementation. 

We believe a number of improvements can be made to the current petition system, making it more accessible and transparent. 


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Specifically these include allowing for more frequent opportunities 

for the submission of petitions, establishing clear timelines for the 

review and investigation process, and accepting both country and 

sector-based petitions. 

Including environmental criteria in the GSP is not intended to 

lead to the exclusion of beneficiary countries, but rather improve 

environmental conditions while still helping to expand trade. A 

phase-in period should be established during which countries bring 

their actions into accordance with the environmental standards. 

This transition phase should include capacity building, technical 

support, and financial assistance. Least developed countries should 

be allowed more time to come into compliance. 

On the question of resources needed to enable countries to meet 

these obligations, we believe it is important to look at a variety of 

possibilities in addition to any direct assistance from the United 

States. A number of the major MEAs, for example, do offer financial mechanisms as well as technical assistance and capacity building. In the American Clean Energy and Security Act, there are 

funds set aside for developing countries to adapt and mitigate the 

impacts of climate change, and working with other countries with 

GSP programs, such as those found in Europe, also offers opportunities to more effectively coordinate on the multilateral level. 

It is time to revisit our policies to create an avenue for increasing 

environmental protection, and thus, sustainable development. We 

look forward to working with this committee and Congress to include meaningful environmental criteria in the GSP. 

Thank you. 

[The prepared statement of Ms. Rangnes follows:] 

Prepared Statement of Margrete Strand Rangnes, Director, Labor, Workers’ 

Rights & Trade Program, Sierra Club 

Chairman Levin and Members of the Subcommittee, on behalf of the Sierra Club’s 

1.3 million members and supporters, I want to thank you for this opportunity to address the critical issue of environment, development and trade in the context of the 

review of U.S. trade preference policy. 

My name is Margrete Strand Rangnes, and I direct the Sierra Club’s Responsible 

Trade Program. I am here primarily as a representative of the Sierra Club, but I 

am also speaking on behalf of a broad array of organizations, including the Center 

for Biological Diversity, the Center for International Environmental Law, Defenders 

of Wildlife, Demos, Environmental Investigation Agency and Friends of the Earth. 

The United States has long granted trade preferences to developing countries that 

meet various criteria. These criteria, which are stipulated by the Generalized System of Preferences (GSP), have changed with time—reflecting U.S. economic and 

foreign policy priorities. While the criteria include non-support for terrorism, enforcement of intellectual property rights, and respect for internationally recognized 

worker rights, the GSP does not include environmental criteria. With the current 

U.S. GSP program set to expire at the end of December and environmental issues 

taking on growing urgency, now is the time to correct that omission. 

Trade policy is one means by which the United States expresses its values and 

advances both foreign and domestic policy goals. The evolution of the GSP criteria 

has reflected this and revising the GSP to include environmental criteria would be 

consistent with the law’s history and intent. The stated purpose of the GSP is to 

promote economic growth in the developing world. Environmental sustainability 

underlies economic growth and development. As we discuss U.S. trade preference 

policy, the world faces the interwoven challenges of alleviating extreme poverty and 

protecting our natural environment. Achieving these goals in unison is the only way 

to improve human development while ensuring the continued prosperity of future 

generations. 

This hearing could not be more well-timed; in just a few weeks, world leaders will 

gather in Copenhagen, Denmark, to address the critical issue of global climate 


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1 United Nations Environmental Program, UNEP (2007): Geo-4. Global Environmental Outlook. Environment for Development. 2 Nicholas Stern et al, Stern Review on the Economics of Climate Change: Summary for Policymakers (London: HM treasury, 2006), 9. 3 Etiosa Uyigue, ‘‘Climate Change in the Niger Delta,’’ Community Research and Development 

Center, 1. 4 Ibid. 

5 Ibid. 

change. The science is clear. Climate change is happening, and those hit hardest 

are those who are least responsible for causing it—the developing world. The question now is whether we can avoid planetary tipping points that once crossed, will 

lead to catastrophic impacts for all nations. While there is no silver bullet that offers a simple and immediate fix to these challenges, amending the GSP to include 

environmental criteria is one of the tools we have available. Preserving the planet’s 

ecosystem is becoming a primary domestic and global priority for the United States. 

Trade policies must be updated to reflect this goal. 

Positive changes are already under way. Recent bilateral U.S. trade agreements 

have included progressively stronger environmental provisions, and I want to thank 

Chairman Levin and members of this committee for their leadership on this front. 

The intent of these provisions is not simply to strengthen environmental protections 

by U.S. trading partners, but also to reassure American citizens and workers that 

these partners are not cutting ecological corners as they compete with the United 

States. Moreover, such provisions provide important leverage for environmentalists 

in developing countries as they fight entrenched interests. However, since bilateral 

trade agreements cover only a limited number of countries, including environmental 

criteria in the GSP would greatly reinforce the ways that trade policy supports the 

U.S.’s environmental goals. 

A Backdrop of Environmental Crises 

A quick snapshot of the state of the global environment tells a rather grim story 

of which climate change is only one aspect. We are facing a collision of environmental crises ranging from alarming rates of biodiversity loss, to vanishing fresh 

water supplies, to pervasive chemical pollution. The combination of these crises has 

led scientists to warn of planetary boundaries that, if passed, will cause irrevocable 

harm to both the developing and developed world. Sadly, today it is the developing 

world that is at risk for suffering the greatest harm. 

The world water crisis is one of the largest public health issues of our time. According to the World Health Organization, nearly 1.1 billion people (roughly 20 percent of the world’s population) lack access to safe drinking water, which in turn is 

estimated to kill almost 4,500 children per day. In fact, the World Health Organization reports that out of the 2.2 million unsafe drinking water deaths in 2004, 90 

percent were children under the age of five, nearly all in the developing world. The 

current rate of species extinction is hundreds of times higher than the natural rate 

of extinction.1 If climate change continues unchecked, the Intergovernmental Panel 

on Climate Change predicts we are likely to lose another 30 percent of remaining 

species, primarily in tropical countries in the developing world. Finally, the World 

Resources Institute estimates that more than 80 percent of the Earth’s natural forests have already been destroyed, a natural resource upon which the developing 

world is heavily dependent. 

Climate change is also an economic development issue since it is projected to reduce gross domestic product by up to 10 percent in the developing world, greatly 

reducing the ability of countries to respond to these monumental challenges.2 In 

order to minimize the worst impacts of climate change, we must take action now. 

We must use all tools available to us, including the access to our markets we grant 

through preference programs and trade agreements. 

A country example of how climate change and resulting environmental threats 

can impact development, can be found in the Niger Delta, which spans more than 

20,000 square kilometers and is home to approximately 25 percent of Nigeria’s population, diverse plant and animal species, and natural resources.3 Niger Delta inhabitants rely heavily on economic activities closely tied to the vitality of their environment, such as fishing, farming and trading.4 These resources and economic activities are threatened by a myriad of impacts caused by rising sea levels brought 

on by climate change. It is projected that nearly 15,000 square kilometers of land 

in the Niger Delta could be lost over the course of the next century if there is a 

one meter rise in sea level.5 Rising sea levels are already causing coastal flooding 

and erosion, damage to coastal vegetation such as mangroves, and saltwater intruVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00172 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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6 Ibid. 

7Dickens Kamugisha, ‘‘Lake Victoria Extinction and Human Vulnerability in Uganda,’’ Africa 

Institute for Energy. 8 Ibid., 1. 

9 Ibid., 2. 

10 Ibid., 3–4. 11 Ibid., 4. 12 Neme, Laurel. 2009. Animal Investigators. Scribner. 13 ‘‘Tanzania tourism revenue to hit $1,35 billion next year.’’ Reuters, 22 June 2008. 

sion of freshwater water supplies, all of which could lead to the forceful relocation 

of nearly 80 percent of the Niger Delta population.6

Uganda provides another example of the impacts of climate change and development. Uganda relies heavily on the water resources of Lake Victoria’s basin; however, lake levels have decreased due to high evaporation rates.7 Of particular concern is the impact of low water levels on hydroelectric power in Uganda, which is 

‘‘central to the economic prosperity’’ of the country.8 Uganda recently invested over $260 million in the Nalubale/Owen Falls and Kiira Dams to produce upwards of 380 

MW of electricity; however, low water levels have led to power generation far short 

of predicted numbers—a mere 120 MW.9 Such low levels of power generation have 

resulted in a situation where the dams cannot provide enough electricity for domestic and industrial needs, leading to increased electricity costs for a population of 

people where more than 37 percent live below the poverty line.10 These higher costs 

have ‘‘restrict[ed] access’’ and ‘‘affect[ed] the well being and economic activities’’ of 

the Ugandan people.11

The Proposal for Including Environmental Provisions in GSP 

Substantive Provisions 

In the absence of a set of internationally agreed upon environmental standards 

(akin to the internationally recognized worker rights standards currently included 

as a criterion in the U.S. GSP program), ratification and implementation of Multilateral Environmental Agreements (MEA) that the United States has also ratified 

and implemented can be used as a bench mark. While some MEAs are regional in 

scope, a number of global MEAs are signed by a majority of countries, including our 

GSP partners. MEAs aim to protect the very fabric of the planet’s ecology and address different dimensions of our urgent environmental challenges; they deal with 

issues ranging from climate change and protection of the ozone layer to protection 

of endangered species. 

An example of a critical MEA can be seen in the Convention on International 

Trade in Endangered Species of Wild Fauna and Flora (CITES), which aims to ensure that international trade in specimens of wild animals and plants does not 

threaten their survival. 

Wildlife trade is a booming global activity which generates significant income for 

numerous local, regional, national and international communities. Illegal wildlife 

poaching and resultant international trade is also a massive and destructive activity, ranking behind only drug and human trafficking and ahead of arms in annual 

value.12 Recognition that the extinction of valuable plant and animal species from 

the wild would represent both a natural tragedy and an economic travesty—both for 

resource-dependent communities and commercial traders—led to the ratification of 

CITES. The Convention requires countries to base decisions about commercial trade 

in such species on rational, scientific criteria, and creates mechanisms so that countries struggling to reduce trafficking and poaching crimes receive support from their 

trading partners. Implementation of CITES requirements on a national level requires strengthened natural resource and enforcement institutions. 

A prime example of CITES’ positive impact on development in poor nations can 

be seen in Africa, where the international community’s agreement through CITES 

to reduce or end commercial trade in elephants (1989) allowed populations that were 

crashing towards disappearance from over-hunting for ivory to rebound to healthy 

levels today. This action, within a short time, cut off huge amounts of corrupt payment that weakened governments throughout sub-Saharan Africa; helped to simplify and improve enforcement activities; protected the broader ecosystems around 

elephant populations, and paved the way for massive increases in tourism revenue 

and associated local employment. Tanzania’s 2008 tourism income, for example, was 

over $1 billion dollars, and is centered on the wildlife in its national parks.13

Many countries ratify MEAs but do not successfully implement them. The Convention on International Trade in Endangered Species of Wild Fauna and Flora 

(CITES), which includes 175 countries and which aims to ensure that international 

trade in specimens of wild animals and plants does not threaten their survival, proVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00173 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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vides one example. The CITES ‘‘National Legislation Project’’ shows that 51 of the 

countries currently in the GSP program are within Category 1 or 2, lacking or with 

inadequate national implementation. Including compliance with MEAs as an environmental criterion in the GSP will provide increased incentive for countries to implement MEAs. Furthermore, the United States should provide adequate technical 

and capacity building assistance as well as financial assistance for countries that 

are currently unable to bring themselves into compliance. This support can be effectively channeled through the institutional structures established in the MEAs, as 

well as through the capacity-building initiatives of the UN Environment Programme. 

Countries may have national laws that accomplish similar levels of protection as 

the MEAs. Essentially, beneficiary countries should either be a party to MEAs or 

have enacted domestic legislation that provides similar protections of the same form. 

Furthermore, the revised GSP statute should also require countries to effectively 

enforce their domestic environmental laws. 

Process and Implementation 

The eligibility criteria of the GSP, such as in the area of labor standards, are currently enforced through a petition system. That is, any person can petition the 

United States government to remove the trade preferences granted to a Beneficiary 

Developing Country (BDC) based on its violation of GSP criteria. Every year, eligibility issues are reviewed by the Trade Policy Staff Committee (TPSC) during the 

Annual GSP Product and Country Eligibility Review. The TPSC is made up of trade 

practices experts from 19 different government agencies, including departments related to environmental standards (i.e. the Council on Environmental Quality, Department of Agriculture, Department of Energy, and Environmental Protection 

Agency). The inclusion of these departments as members of the TPSC means that 

it is in a good position to judge the relevance of potential environmental petitions, 

and adequately assess the eligibility of countries in this area. 

A number of improvements can further enhance the petition process, making it 

more accessible and transparent. There should be more frequent opportunities for 

the submission of petitions, rather than in limited filing windows as is currently the 

case. Furthermore, clear timelines should be established for the review and investigation processes. Another important reform is the acceptance of both country and 

sector-based petitions. That is, environmental standards that are being broken in 

one sector should not necessarily mean that the entire country loses its GSP privileges. Limitation or suspension of GSP privileges should be applicable by sector as 

well as by country. Finally, countries found in violation of environmental criteria 

should have the opportunity to develop a National Plan of Action rather than suffer 

the loss of preferences. All final decisions should be in writing and be made public. 

Including environmental standards in the GSP Program, and thus bringing MEAs 

into the petition system will help to promote and enforce compliance with those 

agreements by empowering a range of actors to draw attention to compliance failures. This is especially helpful for countries that may need additional outside assistance in enforcing their environmental laws. Often, there is desire to comply with 

these agreements, but limited capacity to do so. The United States should work with 

countries that are named in petitions to establish National Plans of Action and help 

bring them into compliance with the GSP criteria. 

What will happen to countries that are currently granted GSP preferences 

but do not meet the new environmental standards? 

The objective of preference programs is to expand trade and enhance development. 

Thus, including environmental criteria in the GSP is not intended to lead to the exclusion of beneficiary countries from preferential treatment. Rather, eligibility criteria are meant as a way to help ensure that expanded trade can actually promote 

sustainable development, instead of provoking a race to the bottom through weak 

and unenforced labor and environmental standards. The ultimate aim of these new 

standards is to help improve environmental conditions in developing countries while 

still helping them to expand trade. 

A phase-in period should be established during which countries that received GSP 

benefits prior to the revised environmental criteria going into effect would be allowed a set period of time during which they must bring their actions into accordance with those standards. This transition phase should include capacity building, 

technical support and financial assistance. 

Least developed countries should be allowed more time to come into compliance 

with the new standards. Failure to comply with the environmental criteria will be 

examined on a case by case basis. The United States (through the TPSC) should 

work with these countries to develop National Plans of Action, and provide financial 


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14Multilateral Fund for the Implementation of the Montreal Protocol. 15Multilateral Fund for the Implementation of the Montreal Protocol. 

assistance if necessary to assist in reaching environmental standards. LDCs that 

work with the United States to develop these National Plans of Action and then 

work to implement them should continue to be granted GSP preferences. 

How will developing countries meet the costs associated with compliance 

with environmental standards? 

The initial phase-in period should be accompanied by adequate technical and capacity building assistance, as well as financial assistance for countries that are unable to bring themselves into compliance with the new environmental criteria. 

Furthermore, a number of the major multilateral environmental agreements are 

supported by financial mechanisms through the agreement themselves. That is, developing countries are afforded financial assistance to meet compliance standards 

when they sign/ratify the treaty itself. For example, as part of the Montreal Protocol, a Multilateral Fund was set up to assist developing countries whose annual 

per capita consumption and production of ozone depleting substances (ODS) is less 

than 0.3 kg to comply with the control measures of the Protocol. Currently, 146 of 

the 194 Parties to the Montreal Protocol meet these criteria. The fund is financed 

by 49 industrialized countries (including some countries with economies in transition).14 The Global Environmental Facility (GEF) provides funding for developing 

nations to meet their obligations under the Stockholm Convention, Convention and 

Biological Diversity, Cartagena Protocol on Biosafety and the UN Framework on 

Climate Change Convention.15 CITES largely relies on funding from governments, 

international agencies and the private sector, but generally does not provide substantial assistance for developing nations. 

Countries that make reasonable strides towards compliance but cannot realistically be expected to meet the environmental standards without additional financial 

assistance (beyond that which is provided through the individual agreement), should 

be provided a grace period during which they will be given provisional preferential 

treatment. 

Coordination with Other GSP Granting Nations 

The United States should not be alone in requiring environmental standards to 

be met as a condition for GSP eligibility. A multilateral effort would not only be 

much more effective, but it would also send a strong message that maintaining the 

integrity of the environment is a vital component of development and needs to be 

more adequately addressed. There are currently 13 national GSP schemes in place 

according to the UNCTAD secretariat. The following countries grant GSP preferences: Australia, Belarus, Bulgaria, Canada, Estonia, the European Union, Japan, 

New Zealand, Norway, the Russian Federation, Switzerland, Turkey and the United 

States of America. Only the European Union’s GSP + program currently include environmental criteria. 

Conclusion 

The U.S. GSP is set to expire on December 31, 2009. This means that unless Congress passes legislation to renew it, the U.S. Customs and Border Protection will 

begin to collect duties on imports from GSP countries on January 1, 2010. Ideally, 

Congress would renew the GSP program with these additional environmental standards before the legislation expires at the end of this year. However, more often than 

not the GSP has been allowed to expire and then is later renewed retroactively. This 

places developing countries at a huge financial disadvantage, especially in light of 

the current economic downturn. If the GSP is allowed to expire, BDCs will be forced 

to pay customs duties on exports to the United States starting January 1, 2010. Although these funds would be returned retroactively when the program is ultimately 

renewed, this places a large financial burden on firms in these poor countries. Uncertainty about the renewal of GSP can have the effect of discouraging its use because it makes sourcing plans uncertain and potentially costly. Furthermore, while 

exporters may be reimbursed for the duties accrued, American consumers are not 

reimbursed for the higher costs of imported goods. 

It is time to revisit U.S. trade preference policy to create an avenue for increasing 

environmental protection and thus sustainable development. The climate change crisis has highlighted the need for the international community to work together on 

environmental issues; this coordination must extend into the trade arena. This moment of crisis provides an opportunity to rethink patterns of growth, ways of measuring progress, and the means to build more resilient systems. Environmental sustainability underpins economic growth and development. If development is to be 


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sustainable, economy, society and the environment must be interconnected in ways 

which are mutually reinforcing. 

We look forward to working with this Committee and the U.S. Congress to include 

meaningful and binding environmental criteria in U.S. trade preference policy. 

f 

Chairman LEVIN. Thank you very much. 

Mr. Yager. 

STATEMENT OF LOREN YAGER, DIRECTOR, U.S. GOVERNMENT 

ACCOUNTABILITY OFFICE (GAO), INTERNATIONAL AFFAIRS 

AND TRADE 

Mr. YAGER. Mr. Chairman, ranking member Brady, and Members of the Subcommittee, I am pleased to appear in front of the 

subcommittee again, this time to report on our work on U.S. trade 

preference programs. 

GAO has completed three in-depth studies of U.S. preference programs for the Committee on Ways and Means and the Finance 

Committee and we are involved in an additional study at this time. 

The Committee has already heard testimony from many experts 

today, so let me summarize just a few key points from my written 

statement. 

Mr. Chairman, the opening statements for the hearing, the testimony from members sponsoring legislation, the government and 

private sector officials all demonstrate that the design of preference 

programs is a difficult balancing act. 

If you make the programs more generous for some groups, you 

often make them more difficult for others. We outlined a couple of 

these key tradeoffs in our earlier report. And let me go through 

these very briefly. One example is that the programs are designed 

to offer duty-free access to the U.S. market, but only to the extent 

that they do not harm U.S. industries. As a result, the programs 

exclude certain products from duty-free status, including some that 

preference countries are capable of producing and exporting successfully. 

A second trade-off involves deciding which developing countries 

can enjoy preferential benefits. For example, legislation has been 

proposed to provide Bangladesh and Cambodia access to preferential benefits for their apparel exports to the United States. On 

the other hand, as we’ve heard today, the African private sector 

spokesman and other experts on the AGOA program caution that 

giving preferential access to Bangladesh and Cambodia for apparel 

might endanger the apparel export industry that has grown up 

under that program. 

This same trade-off involves decisions regarding the graduation 

of countries or products from the program. Although the intent of 

country and product graduation is to provide greater benefits to 

poor countries, we repeatedly heard concerns that China, rather 

than less developed nations, would be most likely to gain U.S. imports, as a result of a beneficiary’s loss of preferences. 

Policy makers face a third trade-off in setting the duration of 

preferential benefits and authorizing legislation. Preference beneficiaries and U.S. businesses that import from them agree that 

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able, while others point out that periodic program expirations can 

be useful as leverage. 

Members of Congress have recognized this trade-off with respect 

to Africa. Congress renewed AGOA’s general provisions until 2015 

to provide an incentive for long-term investment. While in ATPA, 

where there are concerns about responses from Ecuador, Congress 

has shortened the renewal period to six months to maintain and 

retain that leverage. 

Mr. Chairman, I have also outlined a number of recommendations to improve preference programs, both in my written statement and in GAO’s earlier reports. I would be happy to summarize 

those in the question and answer period, but at this time let me 

conclude my oral statement and allow the subcommittee to engage 

in questions and answers. Thank you, Mr. Chairman. 

[The statement of Mr. Yager follows:] 


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f 

Chairman LEVIN. Well, thank you. Dr. Yager, I think maybe it 

was well that you went last, in this sense: I do think you lay out 

the various facets that have to be considered as we look at this 

issue. And I do think today’s hearing has had a basically constructive atmosphere to it, and a recognition that, as we endeavor to expand trade, there really is a need to consider various ingredients, 

and to really try to shape its course. And you can’t simply let it 

proceed, willy nilly. 

So, let me just encourage, for example, Ms. Rangnes, I know that 

you have begun to work on environmental issues. And your statement acknowledges that there isn’t a standard like the ILO labor 

standard, which lays out five or four, depending on how you define 

it, criteria that have some historical development to them. 

And what you suggest really somewhat reflects the way the environmental issues were confronted in the U.S.-Peru free trade 


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agreement where, in the end, the standard was MEAs plus something else. And, as we know, in the issue of reforestation or deforestation, there are some very additional and strong provisions. And 

so, I think coming especially with this last panel, is a recognition 

that we all have to very actively dig in and have a lot of discussion 

and dialogue as we make decisions. 

Those factors include, for example, length. And if we are not 

going to reform these provisions in the next six weeks, I think we 

will have to face issues, for example, of length of continuation of 

benefits. So, some of the factors mentioned relate not only to a 

longer term reform, if we cannot do it in the short term, but also 

as to what we do in the short term. 

And I would like to, Mr. Brady, encourage us to have—as I think 

the staff has commenced—a lot of discussion about how we proceed. 

And, if possible, to have these discussions go on between the House 

and the Senate. Because, otherwise, we could be faced with passing 

legislation here which could get hung up in the Senate. And I think 

the preferable course, since we face some deadlines here, some important deadlines, if we could, find some common basis for action 

involving both the majority and minority in the House, and the majority in the Senate and the White House. 

Now, I acknowledge that’s a tall order on anything. But I think 

it’s worth a try. I think it’s worth a try. So, let me leave it at that, 

and ask Mr. Brady if he would like to inquire. 

Mr. BRADY. Chairman, again, thank you for holding this hearing. These have been very informative panels on a number of 

issues. Thank you. You all brought something different to the table. 

Let me just ask some quick questions. 

Mr. Love, the reason you—the sourcing from Colombia plummeted from 60 million units to 1 or 2 was what? 

Mr. LOVE. Really, the unpredictability of what lay ahead. We try 

to engage with strategic players over the long term, and that—we 

were not able to continue those relationships in Colombia because 

of the economic impact due to that uncertainty. So we revisited our 

sourcing strategy on that basis. 

Mr. BRADY. Got it. So stability, predictability is the key factor. 

Mr. LOVE. Yes. You know, cost is a big factor in supply chain 

sourcing. But predictability and reliability are the key factors, you 

know. Your product doesn’t show up on time, it has a pretty significant economic impact. 

Mr. BRADY. Thanks, Mr. Love. Dr. Yager, I agree with your recommendation that we ought to have systemic regular oversight 

over the preference programs. But is—are you recommending that 

we collapse these preference programs into a unified approach? 

Mr. YAGER. Ranking Member Mr. Brady, it’s not necessarily the 

case that you have to combine the programs in order to have a 

well-aligned review process. And I think one of the options would 

be to ensure that all of the countries within the five different preference programs do get reviewed on a fairly regular basis. 

The situation that exists right now is that, within certain regional programs like the AGOA program, there is a very regular 

review process on an annual basis. On the other hand, within the 

GSP program—which admittedly has a much larger number of parVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00190 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ticipants—; about 131—the review process is not regular. And, in 

fact, there was a 17-year period between overall GSP reviews. 

So, I think one of the recommendations that we made had to do 

with the frequency and the regularity of the review process, moving 

closer to a situation where there is a guaranteed review for all 

countries. And I think that could be combined with, or it could be 

separate from the petition-driven process, which has also been an 

issue today. 

Mr. BRADY. Thank you. Mr. Reinsch, you made a number of 

points about unifying and simplifying. Have you taken a position, 

has the council taken a position on Mr. McDermott’s bill at this 

point? Or are you still looking at it? 

Mr. REINSCH. I understand that he is on the verge of introducing—— 

Mr. BRADY. I am sorry, yes, but—— 

Mr. REINSCH [continuing]. A version. I believe they are giving 

us material on it this afternoon. So I can’t answer your question 

now, but I probably can answer it tomorrow morning. 

Mr. BRADY. Great, thanks. Ms. Broadbent, welcome back. Glad 

you have you here. 

Obviously, preference programs, for many of us, are a starting 

point, you know, and a way to start that process of transition ultimately to a full partnered free trade agreement. A legitimate question is, during the preference program, what is America receiving 

for our market access? 

And when it comes to eligibility criteria, can you cite examples 

where that has prompted policy changes within that host country? 

Ms. BROADBENT. In general, it is my view that the eligibility 

criteria in GSP acts to incentivize better policies in developing 

countries. To pick out a few examples:—improved labor rights in 

Swaziland, Liberia, and Uganda, and intellectual property rights 

improvements in Brazil, Ukraine, Kazakhstan, and Pakistan. 

There are really good success stories and not many cases where 

petitioners are frustrated with USTR. I think that USTR is viewed 

as responsive to problems raised by petitioners, and has been able 

to move the ball forward in several of these countries, based on the 

leverage of the conditions in GSP. 

Liberia, for example, is a big success that sticks in my mind. In 

2006, President Ellen Sirleaf was able to make enough progress in 

coming into compliance with GSP conditions that GSP was restored 

to Liberia after many years of not having GSP. She received GSP 

benefits based on a willingness to invite the ILO in to work with 

them to figure out how Liberia could establish an environment in 

which unions could organize. 

Mr. BRADY. Great, thank you. I really mean it, this is a very 

informative panel, all across the board. Thank you, Mr. Chairman. 

Chairman LEVIN. Mr. Doggett. 

Mr. DOGGETT. Thank you, Mr. Chairman. Mr. Vogt, what type 

of problems have you experienced in filing petitions at USTR? 

Mr. VOGT. Actually, I’ve written a law review article on this, so 

I can send that along to your office. 

Mr. DOGGETT. I would appreciate getting that. 

Mr. VOGT. It’s looking at—that period as a 20-year review as a 

use of the GSP petition process. 


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Part of the problem is that if you file a complaint with the USTR, 

there is no criteria articulated as to what they use to determine 

whether to accept a complaint or not. When decisions are made, 

there is no written rationale, so you have no idea why that particular petition has been accepted or rejected. 

Mr. DOGGETT. So you could go months without even knowing 

whether the petition you filed was being reviewed? 

Mr. VOGT. Years, in some cases. So, I mean, that’s part of it. 

Sometimes petitions are actually accepted. There could be informal conversations between the U.S. government and the foreign 

government. No real kind of dialogue with the petitioners. That, 

too, can drag on for years without any demonstration of meaningful 

progress on the issues that have been raised in the complaint. 

Mr. DOGGETT. Let me ask you specifically about the Uzbek 

child labor case. I find it difficult to justify why we would grant any 

preference to one of the most thuggish governments in the entire 

world. But since we do, what happened with that case? 

Mr. VOGT. Right—about two years ago, the International Labor 

Rights Forum filed a petition with regard to Uzbek cotton. That’s 

the case in which the government, as a state policy, is forcing children to leave school for months at a time to pick cotton, some of 

which is exported to the United States. That petition was accepted, 

but it has been under review for a couple of years now. 

I know there is a vigorous interagency discussion on this petition. But on the merits, on the labor merits, I mean there is no 

question. And I don’t think anybody is questioning whether the allegations in the complaint are true or not. In fact, you know, the 

Uzbek Government, in a couple of opportunities, refused to even 

show up at the hearings on—— 

Mr. DOGGETT. So when USTR had a hearing, the Uzbeks didn’t 

even show up to offer any rationale at all for their use of child 

labor? 

Mr. VOGT. Right, right. 

Mr. DOGGETT. And how long has that case been pending over 

there? 

Mr. VOGT. I think at least a couple of years. 

Mr. DOGGETT. Thank you. I will look forward to reading your 

law review article. 

And I would like to ask Ms. Rangnes a couple of questions. This 

morning you heard Mr. Reif respond to me that he felt that the 

GSP requirements on labor standards had led to changes in the 

laws in several African countries, and the provisions on intellectual 

property had led to changes in the law in several Asian countries. 

What are we losing out on? What is the effect of totally disregarding the need to do the same thing for environmental protection, as you have advocated? 

Ms. RANGNES. Well, I think an example here could be seen in 

the connection between trade and illegally harvested timber and 

wood products. That is—deforestation contributes 20 percent of 

global greenhouse gas emissions. There is very little regulatory 

framework to stem the import of illegally harvested wood. 

Under GSP programs we are importing a fair amount of wood 

and timber products from countries like Brazil, from Indonesia, 

very high rates of deforestation. Much of that suspected also to be 


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illegally harvested. It’s hard to put an exact number on the illegal 

logging. 

And so, if you had any criteria in the GSP to enforce forestry 

laws, enforce compliance with MEAs, for example, you could use it 

as a way to then petition and make sure that those laws are 

upheld. We often find that there are good laws on the books that 

are not being enforced. We know it’s a develop issue. The World 

Bank estimates that developing countries are losing some $15 billion annually in revenue because of illegal logging. 

So I think that’s a really concrete example. We try to address 

that as a term and noted in the Peru FTA, looking very specifically 

at a trade-related issue. So, that would be one example of how we 

could see those provisions being used. 

Mr. DOGGETT. And I know you mentioned the very critical matter of climate change. And I share your commitment to addressing 

global warming. But just to be clear with reference to any renewal 

of the GSP regime, climate change is really not directly a factor 

there, because we don’t really have a multilateral environmental 

agreement dealing with that. Maybe some day before the planet 

burns up. 

But to look at modest change that might be made without slowing down the renewal of GSP, what about just the modest step of 

requiring countries to do what they have already committed to do, 

with reference to the enforcement of their environmental laws, as 

we did in Peru, and perhaps enumerating some of the major environmental multi-lateral agreements that they have either signed 

on to, or the majority of the world has, like the trade and endangered species, which is a real serious problem in a number of the 

African and Asian countries that benefit from GSP. 

Ms. RANGNES. Absolutely. And when I listed the group of organizations that are working on these kinds of proposals, that is the 

type of thing that we would like to be able to come back to this 

committee with, and work out some language that would incorporate both a reference to the MEAs, and to obligations that countries have already signed on to. 

One hundred and seventy-five countries around the world have 

signed the Convention on International Trade in Endangered Species, for example. And so having an expectation that those obligations are being met, as well as enforcing domestic and environmental law, that is what this broader coalition of environmental 

groups are working on to develop for this process. 

Mr. DOGGETT. And then, finally, mention was made this morning, ‘‘Well, if you add too many requirements here, we will get way 

behind our trading competitors.’’ I believe you note in your written 

testimony that, actually, the European Union already has some environmental criteria for its own GSP program. 

Ms. RANGNES. They have included in what they call as a GSP 

Plus, in terms of giving—for countries going above and beyond 

their basic program, which is another way of looking at these questions, as well, and, you know, rewarding sustainability policies, as 

well. 

You could do that, for example, under—in logging, and look at 

certified timber, and giving that preference, for example. There is 

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mittee and that—we want to be working with this committee in 

thinking through and developing. 

Mr. DOGGETT. Thank you very much. Thank you, Mr. Chairman. 

Chairman LEVIN. Mr. Doggett, we can look to the Europeans on 

that. I wish they would look to us on some other things. Mr. Davis? 

Mr. DAVIS. Thank you. Since Mr. Doggett decided to give the introduction for my remarks, for my comments this morning, I will 

just pick right up on that point. 

I would probably disagree with the European statements of their 

principles versus what they actually do. You can walk through the 

francophone countries in western Africa and watch EU policies in 

perfect harmony there, as they steal contracts from—or have contracts stolen from other lower-priced bidders. 

There is an interesting commerce that takes place. The United 

States actually upholds a vastly higher standard in terms of Foreign and Corrupt Practices Act, and things like that, that make 

many of the discussions on standards that we’re having here seem 

rather mute. I’ve seen that firsthand. 

And I think that we play ourselves again right back into that 

question of creating double standards by having too many. It’s no 

different than dealing with a federal bureaucracy for somebody who 

is running a manufacturing business. You can end up complying 

with one bureaucracy’s regulations and then automatically place 

yourself in violation of another standard. 

And this is not to say that this discussion is not very important, 

that we don’t want to be good stewards. But I am very concerned 

about the left and right hand not knowing what the other is doing. 

And we’re seeing the potential for that in this discussion. 

You know, my case in point, when Mr. Reinsch made the comment that Ecuador is moving away from this standard right here, 

you know, I might suggest, you know, language the panel wouldn’t 

use, but perhaps we’re seeing sort of this retrograde Socialist movement take place that—obviously, people have a right in a sovereign 

nation to do what they want to do. They can make that choice. But 

we don’t have to underwrite that. 

But at the same time, I come back to my comments on Colombia 

this morning, who I personally witnessed, in a generation, go 

through dramatic and remarkable changes, moving hugely in the 

right direction. Are there labor concerns there? Perhaps there are, 

depending on the standard we want to apply. We could say that 

here, in the United States. We could say that in many countries 

in the world. 

But at what point do we say, ‘‘Okay, we’re not going to move you 

to the next step in the preference program,’’ assuming that’s to lift 

us up. And the whole aspect of this is to move us towards a place 

of harmonizing our economies so that we can work effectively together. 

My question is, don’t we actually create a situation where we create a default double standard? We punish those, potentially, who 

might be—it might be politically helpful for us to do, like Colombia, 

who is at vastly greater risk than simply a question of labor preferences, frankly, when they’ve made these huge strides in the right 

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We have a legitimate and very real national security threat in 

the northern half of South America right now that is progressively 

growing. And, as this spreads, if we abandon those who have 

shown good intent, who have moved in the right direction, tell me 

how we’re not going to be creating that double standard and punishing the folks who want to be allied with us? 

I had the chiefs of staff of a number of South American countries 

personally tell me—not Colombia’s, I might add—that their biggest 

strategic concern, from an economic policy, was not understanding 

why the U.S. wouldn’t approve the Colombia Free Trade Agreement, because of their concern of what all of that means, in terms 

of second and third order effects. And I don’t think that’s a Democrat or Republican issue. But I think looking at it beyond our individual silos of interest, you know, I have some concern. 

And I would throw it open to anybody on the panel to answer 

that question. I mean, it creates a legitimate moral dilemma, I believe. What Ecuador is doing is unconscionable. They are violating 

all possible contracts for investment, and I don’t think it’s a good 

place to invest, based on what we’re seeing. Colombia has moved 

in the right way. Their own labor organizations, in fact, have asked 

us for passage of this agreement, but we’re not moving on. 

I know it’s not—Chairman, I understand that we’re talking about 

preferences. But I really want to frame this in that bigger picture, 

that we don’t over-complicate this at the next step. 

Mr. VOGT. I will take a shot at that. I mean, we can have perhaps a debate on the Colombia Free Trade Agreement and the 

labor standards. I don’t want to go into that at the moment. 

But I do think it is not overburdening the preference programs 

to have meaningful labor rights standards included. Because, from 

our point of view, having labor standards, the ILO core minimum 

standards, is essential if these programs are to have a development 

effect. I mean, just opening up preferences could mean that there 

is a flow of—— 

Mr. DAVIS. Let me—I know I’m running out of time here. I just 

need to ask you a question. 

Mr. VOGT. Yes, yes. 

Mr. DAVIS. Would you agree with me that the European—in 

terms of the European Union aspects of standards in Africa with 

labor standards, and the agreements that both of us know that 

they have—— 

Mr. VOGT. Right. 

Mr. DAVIS [continuing]. With many countries there, do they hold 

as high a standard as the United States does in actual operation? 

Are you actually seeing the operation of their businesses over there 

to see that? 

Mr. VOGT. I don’t have experience—— 

Mr. DAVIS. I can tell you they don’t. And that’s my big concern 

here, is there is a double standard between—we can’t lift the Europeans up—and I agree with you. We should have a legitimate aspect of social justice. I think it’s something that’s missed in many 

of the messages that we convey. But I’m concerned that we can 

hurt the people that we say that we’re trying to help by creating 

a situation where it’s not tenable to do business in the long run. 


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Chairman LEVIN. Well, your time is up. If somebody wants to 

answer Mr. Davis, I didn’t take five minutes, and I would like us 

to end with a sense of common purpose. 

I don’t think it’s a double standard to say that because another 

country has a lower standard than we do, that we have a double 

standard. There are lots of double standards in the world. And the 

question is what standard we should build into our trade agreements. And what’s built into the trade agreements that we have in 

recent times enacted are the basic ILO standards. And if one reads 

the State Department documents themselves, they indicate some of 

the ways in which Colombia falls short in terms of labor standards. 

We will discuss Colombia some other time. I think we need to be 

careful. The only issue is not violence. But we don’t kill labor leaders and workers in this country. 

Mr. DAVIS. Mr. Chairman, could I clarify my remarks briefly? 

Not so much on Colombia. 

Chairman LEVIN. Okay. 

Mr. DAVIS. Let me put this in a context of not dealing with violence. We know that it’s dropped dramatically, and that’s a good 

thing. It may not—we may have different standards to what that 

is. It’s never right, if a person has a crime committed against him. 

I want to put this more in a regulatory context, from the perspective of economic entities and countries and businesses that are investing with each other. And one would hope that, eventually, we 

would be able to invest both ways, and be even more effectively integrated. 

Just in America, if we go from state to state—and I think Mr. 

Love could probably confirm this—OSHA is not the best loved organization that’s out there in the manufacturing world. And I’m not 

talking about safety standards. Over half of the regulations in 

OSHA that can be used to shut down a business have nothing to 

do with safety whatsoever, but their paperwork compliance measures. 

And my biggest concern is, as we address this, I think the preferences are very important. I think that any time we can revisit 

and scrub regulations to make them more relevant, more proactive, 

I’m all there on that, and will work with you on any way possible. 

It’s simply that I don’t think that we add value necessarily if we 

take it so far that it gets very complicated, and then suddenly it 

becomes a matter of political preference, as opposed to clear and 

simple objective criteria. 

Chairman LEVIN. All right. Mr. Blumenauer is here. I don’t 

think the issues relating to Colombia are basically issues of political preference. They are issues of standards, not political preference. What has motivated people on this committee is not political preference. And there can be legitimate differences of opinion 

about the implementation of standards, but I think we won’t make 

much progress if we simply write off the other person’s point of 

view as political preference. I don’t claim that your positions are 

basically positions of political preference. I don’t think Mr. Brady 

has ever heard me say that. 

Mr. Blumenauer has been very patient. You want to join in? It’s 

your—no, Ms. Sa ́nchez. That is right, it is your turn. I’m sorry. 

Mr. BLUMENAUER. I will be a little more patient. 


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Chairman LEVIN. No, no. We started the other way around the 

last time, and so I skipped over. But Ms. Sa ́nchez? 

Ms. SA ́ NCHEZ. And before I even launch into questions, just 

preference with I have certainly a perspective to add on the Colombian debate, having visited down there and met with labor union 

leaders down there that tends to contradict some of what the other 

opinions on this dais are. And—but I will reserve that debate for 

another day. 

I want to start with Mr. Vogt. In your written testimony you provided some really great detail about the limited filing period with 

which to file petitions with USTR, noting specifically that the petition windows for the various programs are not coordinated, nor are 

they fixed, meaning that the petition window can and does often 

change from year to year, and that, in 2003, the petition window 

was never, in fact, even opened. Is that—— 

Mr. VOGT. Right, right. 

Ms. SA ́ NCHEZ. Having sort of an arbitrary window of filing—in 

some cases, one that’s not even open from time to time—has your 

experience confirmed that that sort of is a big deterrent towards 

even trying to file petitions? 

Mr. VOGT. It’s—it can be a problem. I mean, I think we don’t 

have—where it can become an issue is that you may have a petition window opening up in June of one year. You have about a 

month to file a petition. You could have a major labor rights violation happen in October. Then there is nothing formal you can do 

about it until you loop around to June of the following year. 

Ms. SA ́ NCHEZ. The following year. 

Mr. VOGT. But obviously, we would raise it with the State Department, with the Department of Labor, and try to address it in 

informal means. 

But, you know, there are examples where countries have, you 

know, wholesale suspended labor rights for some crisis or another, 

a major strike is put down, you know, some egregious violation, 

and there is simply no meaningful way to address it, using the 

preference lever until, sometimes, months after the fact. 

Ms. SA ́ NCHEZ. When petitions are rejected, are reasons generally given for the rejection of those petitions? Or can they be rejected and then you never even really know why? 

Mr. VOGT. Yes, there is a—you get an email from USTR with 

a list of petitions that have been accepted for that cycle. That’s it. 

So, you—if you call up and talk to the labor office at USTR you 

sometimes may get some rationale. But it’s nothing systematized. 

Or sometimes you will get a rationale that makes absolutely no 

sense. You know, a few years back a petition was filed against both 

El Salvador and Guatemala around 2003, 2004, during the CAFTA 

debates. And I was told, ‘‘Well, you know, we just can’t take two 

petitions from Central America, so we’re going to just—we’re not 

going to take El Salvador this year.’’ I mean, there is nothing in 

the petition that was—— 

Ms. SA ́ NCHEZ. Was deficient? 

Mr. VOGT. Yes. 

Ms. SA ́ NCHEZ. They are just—— 

Mr. VOGT. Right. It’s like, ‘‘Well, we are going to do just one 

Central American one this year.’’ 


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Ms. SA ́ NCHEZ. Right. So, I mean, would you say that sort of the 

crazy time lines for even—well, the fact that most of the review is 

petition-driven, to some extent I think probably limits the number 

of violations that are actually dealt with, not to mention the fact 

that there is not really any transparency, in terms of rejection of 

petitions. 

I mean, do you get the sense that because the rules are so restrictive and there is no transparency that there were probably 

hundreds, if not thousands of violations that occur that the USTR 

doesn’t know about, or doesn’t even want to know about? 

Mr. VOGT. I mean, I—obviously, we can wait that period of time 

and get a referral back to violations over the previous year or previous years, and that often happens. 

I think the real problem is that, with the absence of transparency, that it creates an environment where you have total discretion to decide whether you’re going to accept a complaint. If you 

accept it, what you’re going to do. And, without communication 

with the petitioners, with workers in the relevant countries on a 

regular basis, you really have no idea what’s going on until you get 

to the email from USTR saying, ‘‘We accepted your petition,’’ or, 

‘‘We’ve accepted it, we’ve had a hearing, and we’ve decided not to 

take any action this year.’’ 

Ms. SA ́ NCHEZ. Okay. Ms. Broadbent—and this is sort of in another direction, but much has been mentioned about Ecuador. But 

in determining the factors that Congress should consider when we 

consider whether or not to extend trade preferences, do you think 

that a country’s refusal to dismiss a private lawsuit that is currently pending in civil court should be one of the factors that we 

look at in determining whether or not a country is worthy of extension of trade preferences? 

Ms. BROADBENT. I’m not sure that I can address that, per se. 

I was responding in my testimony to the President’s review of what 

was going on in Ecuador, and just my sense of a pretty long list 

of investment disputes that are going on there with the Government—of Ecuador. 

Ms. SA ́ NCHEZ. I understand there are investment disputes. 

Ms. BROADBENT. Yes. 

Ms. SA ́ NCHEZ. But I am asking a very specific—— 

Ms. BROADBENT. Yes. 

Ms. SA ́ NCHEZ [continuing]. Question about private lawsuits 

pending in civil courts, and whether or not those should be a factor 

in determining whether or not trade preferences should be extended for a particular country. 

Ms. BROADBENT. Your question is? Could you just say it—I’m 

sorry, I’m not—— 

Ms. SA ́ NCHEZ. Sure. Should a particular government, their refusal to dismiss or quash a private lawsuit that’s currently pending 

in civil court, should that be a factor to determine whether or not 

that country’s trade preferences should be extended? Should Congress consider that? Is that relevant information for Congress? 

Ms. BROADBENT. I think it depends on the specific case. And, 

you know, all information ought to be looked at that is relevant to 

the dispute. 


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Ms. SA ́ NCHEZ. But a private civil case that the government is 

not involved in? 

Ms. BROADBENT. Yes, I just don’t really want to go much farther than that. I don’t really—— 

Ms. SA ́ NCHEZ. Have an opinion on it? 

Ms. BROADBENT [continuing]. Have a view at this point, yes. 

Ms. SA ́ NCHEZ. Okay. Sorry to hear that, because it strikes me 

as innately absurd that we would try to punish a government for 

a civil lawsuit that is currently pending in court, where there has 

not been an outcome, and try to leverage trade preferences as a 

way to try to make that case go away. Call me crazy. I’m an attorney by training, and I think that the rule of law should exist, and 

that political efforts should not be made to undermine that. 

Very last question, again to Mr. Vogt. In your written testimony, 

you mentioned the possibility of adopting any U-style GSP Plus 

policy. Could you describe how that system would help protect 

working families against unfair competition by countries that actively repress labor movements, while helping build up the least 

developed countries? 

Mr. VOGT. It is—I put the GSP Plus language in there as—I 

mean, it is—at this point we have no idea which country—I mean, 

how we’re going to shape any future preference program, whether 

it will be a unified program, whether it will be duty free, which 

countries are in which category. But I think it is something that 

is worth considering, depending on which countries we’re talking 

about, the level of market access, and whether that makes sense 

to create some sort of incentive benefit scheme like the European 

system. 

So, I’m not saying that it’s a critical element of a preference program. But depending on how the market access and the constellation of countries line up, it could be something that could be considered. 

Obviously, I think with the EU program, they condition greater 

market access on having even more rigorous standards, ratification 

of all the core conventions, and effectively enforcing those. We include some ideas as to what could be kind of a high bar program 

for those countries that really want to go the extra mile, and really 

do right by workers—— 

Ms. SA ́ NCHEZ. So, in essence, sort of a carrot to incentivize behavior—— 

Mr. VOGT. Right. 

Ms. SA ́ NCHEZ. Versus a stick which, on an earlier panel, they 

said, ‘‘Trade really shouldn’t be used as a stick, we should try to 

provide incentives for the right kind of behavioral changes.’’ 

Mr. VOGT. Right. For those who have exemplary, you know, 

practices and laws on a range of issues, labor being one of those. 

Ms. SA ́ NCHEZ. Thank you. Thank you, Mr. Chairman. 

Chairman LEVIN. Mr. Blumenauer has the last word. 

Mr. BLUMENAUER. I hope not the last word, Mr. Chairman. 

Chairman LEVIN. Oh, you do. 

Mr. BLUMENAUER. I appreciate—— 

Chairman LEVIN. It’s most fitting. 

Mr. BLUMENAUER. I appreciate the opportunity to eavesdrop 

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sponsibilities that took me away. I’ve got lots of interesting material to try and digest here. 

I would like to just go back to where—a point our friend, Mr. 

Doggett, mentioned in terms of the role that environmental, and 

particularly climate change, is going to play, going forward. 

I feel good about the time and energy we spent on the annex 

with the Peru Free Trade Agreement. I think it made a difference 

for that country. I also think that it broadened the support for the 

legislation, made it a better agreement, made it easier to move forward. 

Having spent a fair amount of time in recent years dealing with 

illegal logging, we finally got those provisions tucked into the farm 

bill. But it was interesting, watching as people dove into it, that 

it actually made a big difference, not just for the protection of indigenous people, protecting scarce environmental resources, but it 

did make a difference in terms of the rule of law, fighting corruption, and it made a big difference to American producers, who 

didn’t have to have a depressed price and extended supply. 

I am curious about ideas going forward. And this is at the end 

of a long day, and you have been very patient. But I would posit 

for the committee members any offer for thoughts that they might 

want to supply to us at their leisure about ways that we can make 

a difference, moving forward. 

We have had some progress on a bilateral basis, what happens 

in a multi-lateral context. I am interested in the GSP Plus, in 

terms of how it relates specifically to environmental provisions. If 

any of you have a brief comment here, I would welcome it. But I 

would be very interested in your reflections at a later date about 

things that we should look at to be able to move forward. 

I appreciate—we don’t want to make this hopelessly complex. I 

appreciate we want to be surgical. But it seems to me that this is 

an area that we have not given appropriate attention in the past. 

It has great potential for the challenges that we face. 

Some of these poor countries are at risk because of the exploitation of their environmental resources. One’s heart just breaks 

about what’s going on now in Madagascar, for instance. 

But getting a sense from you, going forward, I would be very interested in thoughts or observations you have. And, since my time 

has not yet expired, if there are any brief comments that any of 

you would wish to offer, as long as the chairman is willing to be 

patient, I would—— 

Mr. YAGER. Yes, Mr. Blumenauer, I can make a couple of comments. 

One of the things we’ve found from the work that we have performed, both on preference programs and on FTAs, is that it’s not 

just what’s written into the program, but it’s the level of involvement by U.S. agencies in following up on those programs. And I 

think that when we took a look at the preference programs, we did 

find some issues where there were significantly different programs, 

review structures, and transparency between one program and another. 

And I think one way to ensure that both the Congress and the 

public have a better chance to participate and be aware of the decisions that are being made is to take a look at the reporting process 


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and the review process that’s built into the different preference 

programs, and make the selections on how frequently those programs in individual countries need to be reviewed, what are the 

graduation rules, the components, whether there are rules of origin, and finally, a number of the review features having to do with 

determination for inclusion, whether it’s a petition-based or a government review, and a large number of other, let’s say, design features that should be considered in the more systematic review that 

I know will be going forward over the next years. 

Mr. BLUMENAUER. Ms. Rangnes. 

Ms. RANGNES. Yes. You know, on behalf of the environmental 

community, we do want to say thank you, because there is hardly 

a champion in Congress as you have been, in looking at the illegal 

logging issue, for example, the Lacey Act, and so forth. 

You know, what’s clear is that there is no silver bullet for any 

of these problems that we’re facing. This is one tool. We are trying 

to explore other ones. I think for us, you know, we want to make 

sure that we lift standards generally, in finding some language 

that does that. And I think then also looking at other ways than 

rewarding additional policies or initiatives, but look at the span of 

countries that enjoy GSP access, you’re talking about such a high 

difference of development levels, as well. 

And so, we need to be mindful of that, and that’s where perhaps 

a GSP Plus, or some sort of model, whether it is for certified timber 

products coming in, whether it’s more access for clean energy products, you know, these kinds of things that we can think about that 

helps both foster development on the ground, as well as rewarding 

those practices. 

That being said, finding some baseline that applies for all, as 

we’re trying to lift the standards, also makes sense. And that is, 

I think, the challenge that we’re facing as we’re trying to address 

some of these questions now. 

Mr. BLUMENAUER. Thank you. Thank you, Mr. Chairman. I 

would invite, at some point, if any of our other panelists have some 

thoughts, I would welcome just brief notes. I would appreciate it. 

Chairman LEVIN. Well, we are going to do, Mr. Blumenauer, exactly that. So I think your comments are really a fitting place to 

end this, I think, exceptional day. 

It is interesting how, when it comes to preference programs, 

there is a basic, I think, agreement that there need to be standards 

built into these preference agreements. There may be differences as 

to what they are, as to their extent, et cetera. But we start from 

that rather common place, which isn’t always true in trade issues. 

So now, the challenge is for us to tackle how we proceed with 

these preference programs. And the environmental issue is a relatively new one that we very much are working on, and the staffs 

are talking about. And so, I would encourage all of you, regardless 

of your particular perspective, to join in on that and every other 

issue that we have talked about today. 

Because without—it’s not for me to state anything definitively, 

this is going to be up to discussion on a bipartisan basis in the next 

days. We will face this issue of the deadline on two of these sets 

of preferences. And we are going to—I think there is agreement— 

have to do something. 


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And so, we are going to face this question as to the timeline for 

extension and the timeline for reforms. And I think we will want 

more input on every issue that we have talked about today. 

So, we urge you to send us materials. They don’t even have to 

be short. 

[Laughter.] 

Chairman LEVIN. And if you don’t want them on the record, 

they won’t be on the record. 

So, thank you so much for your patience. I think for you, Mr. 

Brady, and for me, you have been an exceptional panel, even more 

brilliant than you’ve been patient. 

So, thank you very much for coming. We are now adjourned. 

[Whereupon, at 4:48 p.m., the subcommittee was adjourned.] 

[Questions for the Record from Mr. Brady follow:] 


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[Submissions for the Record follow:] 


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Statement of VF Corporation 

VF Corporation appreciates this opportunity to submit comments for the record 

in conjunction with the November 17, 2009, Trade Subcommittee hearing on the Operation, Impact, and Future of the U.S. Preference Programs. As the Committee deliberates the many complex facets of reforming U.S. trade preference programs, we 

ask that in the immediate future the Committee support the renewal of the Andean 

Trade Preference Act (ATPA), which is set to expire on December 31. VF, like other 

U.S. companies that import products under the ATPA, cannot afford a lapse in benefits as we approach 2010. Specifically, we request that the Congress extend the program for eligible countries for at least two years. In particular, we hope that the 

Congress will not remove Peru from the ATPA program. 

VF Corporation is a global leader in lifestyle apparel with a diverse portfolio of 

jeanswear, outdoor, imagewear, sportswear and contemporary apparel brands. Our 

principal brands include Wrangler, Lee, Riders, The North Face, Vans, Reef, 

Eagle Creek, Eastpak, JanSport, Napapijri, Nautica, Kipling, John 

Varvatos, 7 For All Mankind, lucy, Splendid, Ella Moss, Majestic and Red 

Kap. 

We have also developed a special relationship with Colombia and the Andean Region since the beginning of ATPA. ATPA has been a successful economic partnership, not only for our company but for U.S. businesses in general and the people 

of the Andean region. The Andean region has become a steadily growing market for 

U.S. exports and almost 2 million jobs there depend on ATPA preferences. In fact, 

U.S. exports to the region have more than tripled since ATPA was expanded in 

2002, and last year exports to the region totaled $31.6 billion. 

Our economic success has also translated into better quality jobs for workers 

abroad. All VF authorized factories are required to follow our Global Compliance 

Principles (GCP), whether they are operated by us directly or by our suppliers and 

vendors. Established in 1997 and consistent with internationally recognized labor 

standards, GCP requirements insure that work environments are safe and responsibly managed. In addition, we require that our owned facilities be certified by 

Worldwide Responsible Accredited Production (WRAP), an independent, non-profit 

organization dedicated to ethical manufacturing throughout the world. 

A long-term extension of at least two years for ATPA is absolutely necessary to 

ensure its continued success. Short-term extensions create a frustrating environment of extreme unpredictability for us and many other U.S. companies invested in 

the region or companies planning to start new operations. The current economic 

downturn, together with the uncertainty of trade preference extensions, has already 

brought down all trade indicators between the U.S. and the Andean region to worrisome levels. Faced with the uncertainty of continued trade benefits, some apparel 

production has shifted to Asia, and we expect this trend to increase significantly if 

ATPA is not renewed. As a result, U.S. cotton growers and U.S. textile workers are 

being deprived of valued customers for their products and much-needed jobs in the 

region are being lost. 

ATPA continues to be critical to our successful partnership with the Andean region; however, this preference program is only temporary and excludes some products and services. Further, unilateral preferences do not grant any benefits to U.S. 

products exported to beneficiary countries. The pending free trade agreement with 

Colombia, however, would provide permanent, reciprocal treatment for products 

traded between the United States and Colombia. We look forward to the eventual 

implementation of that agreement but will depend on ATPA to continue our trade 

flow within the Hemisphere before the FTA is in place. 

Due to the delay in the implementation of the Colombia FTA, we also request the 

U.S. Congress to continue including Peru as part of the ATPA program. Our company makes knitted products in Peru with non-originating elastics, which are eligible for duty free under ATPA but not under the Peru FTA. Moreover, we need the 

ATPA accumulation provisions because we input Colombian yarn and fabrics for our 

products made in Peru. This same concern is shared by other U.S. companies doing 

business with the Andean region. In fact, almost 75 percent of Peru’s apparel exports to the United States in the first eight months of this year entered duty-free 

under the regional yarn provision under ATPA. This trade may disappear if the program is allowed to lapse. Peru’s inclusion in ATPA is needed until the Colombia 

FTA is passed. 

Conclusion 

ATPA continues to be an important source of economic growth for the U.S. and 

the Andean region. Benefits of this program can only be maximized if businesses 

have stable and predictable rules of engagement. Implementing the Colombia FTA 


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will be one way to ensure this. In the meantime, renewal and extension of ATPA 

for two more years, and the continuation of Peru as a member country, will help 

us maintain our successful business partnership with the Andean region. 

Sincerely, 

Candace Cummings 

Vice President—Administration and General Counsel VF Corporation 

f 

Statement of U.S. Preference Reform Working Group 


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f 

Statement of African Cotton and Textiles Industries Federation 

The African Cotton and Textiles Industries Federation (ACTIF) appreciate the opportunity to submit the following comments to the House of Representatives Committee on Ways and Means Trade Subcommittee in connection with its November 

17, 2009 hearing on U.S. trade preference programs, dealing in particular with the 

impact on the African Growth and Opportunity Act (AGOA). 

The world of textiles has changed dramatically with the expiry of the Multi Fiber 

Arrangement (MFA) and post safeguard measures and as such, re-alignment of the 

industry is inevitable. ACTIF members have been impacted negatively as can be observed in export sales decline of over 30% to-date and this decline continues to be 

envisaged. In consideration, ACTIF members feel the AGOA trade preference program needs to be reinforced to respond to these new trade realities. 

Africa and AGOA 

• AGOA’s greatest success story has been the blossoming of African exports of apparel to the United States. Subsequent modifications to this trade arrangement, 

contained in the recently passed Africa Investment Incentive Act of 2006, together with future improvements, will maintain critical mass in the apparel industry, and encourage greater vertical integration, which is essential to the 

long-term competitiveness of the African fibre-textile-apparel value chain in the 

post-MFA environment. 

• AGOA significantly enhances and liberalizes U.S. market access for Sub-Saharan African countries; it offers tangible incentives for Sub-Saharan African 

countries to continue their efforts to open their economies and build free markets. It is designed to promote prosperity, develop economies, and ultimately 

create new markets for U.S. goods and services. It recognises that trade is an 

engine of economic growth, and through AGOA, it is helping to provide new opportunities for the people of Africa, and is helping to eliminate poverty. 

• However, in light of the dramatic market changes since the end of the MFA, 

it is imperative that measures must be taken to avoid a setback to the objectives of AGOA, and a reversal of the positive economic transformations that 

have arisen so far out of the passage of AGOA. Equally important, it is critical 

that any changes to U.S. trade preferences for other countries and regions do 

not undermine AGOA further. 

SSA Potential 

We also notice in the USTIC report (ITC–PUB 4078) that SSA has tremendous 

potential to develop cotton and cotton yarn, which could produce denim and midto-heavier weight fabric and circular knitted fabrics for woven/knitted apparels. 

These fabrics can be utilised by the SSA garment industry, for local, regional, or 

international export orders for denim, twill or poplin pants, work wear, industrial 

wear, and corporate wear, in 100% cotton or blended fabrics, or in knitted fabrics. 

The report has detailed the potential of each country, and challenges that have 

made it difficult to exploit this potential. 

Challenges 

The biggest challenge for the SSA apparel and textile industry was post MFA. As 

the quotas were removed on the apparels from established and subsidized markets, 

which have similar or lower wages in most of the African countries, the competitiveness of SAA diminished by over 22%. The initial impact of this was that many of 


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the garment companies had been attracted to SSA by AGOA’s DFQF, opted to move 

their production to Asian countries that provided lower production costs and subsidies for development of the textiles and garment sector. 

Over the last 4 years, the textiles and garment industries in SSA have been trying hard to survive. The exciting growth rate experienced in 2000–2004 has diminished in terms of export to U.S. markets 

The second biggest challenge, if enacted, is the DFQF U.S. market access provision to Asian LDCs; this would put the last nail in the coffin for the textile and 

garment industry in SSA. These Asian countries have had a developed and mostly 

integrated industry and sector over the last several decades. Unlike Sub Saharan 

Africa, Bangladesh and Cambodia do not need trade preferences to be competitive. 

Their apparel exports to the U.S. have grown significantly since the end of the MFA, 

whereas SSA’s are declining sharply as shown in the table above. This decline would 

be amplified if the proposed DFQF were extended to Asian LDCs, leading to the 

total demise of the textile and garment industry in Africa, with the consequence 

being insurmountable negative economic and social impact. Bangladesh, for example, exported apparel worth US$10.1 billion in 2007 accounting for 2.9% of the 

world’s apparel exports, while Africa as a whole exported US$4.8 Billion accounting 

for 1.4% of the world’s exports. 

The apparel industry today requires shorter lead times, and buyers are looking 

for those markets, which can deliver ‘‘Just- in- time’’ supply sources. The factories 

dependent on third country fabrics can only do replenishment orders or programming orders, which today are offered to the lowest bidders. Buyers are sourcing 

these apparels from the cheapest region like China, Vietnam, Cambodia, and Bangladesh, and SSA is hard pressed to compete on price. SSA needs to have its own 

supply sources of fabric and trims within the region, if not in the country, to overcome this handicap. In addition, the cost of the raw materials has to be competitive 

and quality should be of an international standard. This may not be possible in the 

near future, unless we have a booming apparel industry to create enough demand 

for investors to upgrade present textile and spinning facilities, and establish new 

ones, in order to provide the raw material at competitive prices and quality acceptable to international standards. 

The present provision under AGOA 

a. Third country fabric provision until September 2012. 

b. AGOA valid until September 2013. 

Proposed Modifications 

To rejuvenate and provide stimulus to the sector and to have a level playing field 

the Sub-Saharan Africa textile to apparel value chain requires: 

1. Single Rule of Origin 

One single rule of origin for all AGOA eligible countries, to promote the development of regional value chain, integration, and sourcing; i.e. elimination of the distinction between LDCs and non-LDCs under AGOA. 

2. AGOA on permanent relationship basis 

AGOA needs to be a more permanent relationship. This would create confidence 

for the investor to develop the depleted cotton and textile sector and at the same 

time, this will ensure certainty in the mind of the U.S. buyer. 

3. Inclusion of Mill Fabrics 

The inclusion of textile mill products under AGOA to provide the much needed 

access to an extensive and much wider market, which in turn will encourage the 

development and expansion of the textile sector to reduce dependent on the third 

country fabric. 

4. Third country fabric provision extension indefinitely 

Third country fabric provision needs to be extended indefinitely, but to encourage 

domestic/regional vertical integration, a new credit system be defined as mentioned 

hereunder item 5b—At present, the availability of fabrics and textiles for use within 

the SSA region is exceptionally limited, with only a few countries having limited 

backward linkages. The SSA region has actually seen a decrease in the number of 

textile operations/factories and a subsequent decrease in the availability of supply 

as the cost is not competitive with the supply source from Asia; and therefore garment manufacturers use third country fabric in order to meet the price demands 

of the Buyer. It has therefore been very difficult for the industry to develop its local 

or regional source. The provision of third country fabrics is necessary to keep the 

existing industry operational until such time that the local and regional supply 


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source is developed to produce various types of fabrics for export with an acceptable 

quality at internationally competitive prices. 

5. Increase Buyer Interest 

Buyer interest in sourcing apparel from the AGOA countries has decreased continuously since the expiry of the MFA, and even more sharply in recent times due 

to the world economic crisis. In order for AGOA to continue to be a success, instilling buyer interest in sourcing from AGOA is imperative. ACTIF supports amending 

AGOA so that those U.S. buyers who source from AGOA are rewarded with the opportunity to import apparel from other non-AGOA LDC countries duty free. We suggest as follows: 

a) Fashioned after the ‘‘Earned Import Allowance Programs’’ (EIAP), already in 

effect under CAFTA–DR and the Hope Act for Haiti, the proposed EIAP for 

AGOA allows qualified U.S. importers/buyers to earn duty credit by 

authorising duty-free importation of a square metre equivalent (SME) of apparel from non-AGOA LDCs for every importation of apparel from AGOA 

made with third country fabric. 

b) Furthermore, in order to encourage vertical integration of the textile/apparel 

industry on the African continent, qualified U.S. importers/buyers would 

double their earned credit by importing apparel from AGOA using AGOAorigin fabric. 

6. Encourage U.S. Investors 

ACTIF proposes that encouragement should be given to U.S. investors in J.V or 

Technical/Market Access partnerships, if they come to develop the existing cotton, 

textile, and apparel sector, which has tremendous potential in SSA. Interest in the 

CTA sector is not instilled due to limitation of finance and market access. Therefore, 

local investors are not investing unless they have some commitment for market access and assistance in technical and/or financial needs. 

7. Trade remedies for unfair practices of competitors 

ACTIF further suggests that the U.S. should employ trade remedies to address 

unfair practices of competitors that may indirectly affect the competitiveness of SSA 

textile and apparel production, and prompt relevant discussions at the WTO. Options considered under this were to: 

• Expand monitoring and enforcement actions regarding export subsidies and 

other unfair trade practices related to textile and apparel imports 

• Apply pressure to deter Chinese and other Asian countries, intellectual property violations related to African ethnic textile designs 

8. Exclude all other textile and apparel products from the DFQF initiative 

ACTIF recommends that textile and apparel products should be excluded from the 

preference reform initiative in order to avoid undermining the infant textile and apparel industry in Africa, which has been developed in response to AGOA. 

U.S. Government strategy for SSA 

Under the new Millennium Challenge Co-operation (MCC), U.S. Government has 

developed a strategy for SSA regional integration, which follows U.S. government 

suggestions and options considered under this issue area: 

• Support regional economic communities to help enhance the vertical integration and competitiveness of Cotton Textile Apparel (CTA) Sector regional 

chains. 

• Place a higher priority on support of regional economic programmes in U.S. 

development programmes 

• Place a higher priority on regional efforts under U.S. development programmes, such as the African Global Competitiveness Initiative and to encourage economic integration 

• Create incentives for countries to participate in regional economic communities 

• Support a general capital increase for the African Development Bank 

• Options to support regional integration stem from recognition that each SSA 

country is unlikely, by itself, to achieve full vertically integrated production 

with linkages throughout the supply chain 

• SSA countries must be able to work together to develop an efficient, competitive textile and apparel industry 


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In Conclusion 

It is the considered opinion of ACTIF that: 

• These modifications and proposed changes: 

• Are consistent with the original aims and objectives of AGOA, and will 

enhance the continuing benefits of trade that the U.S. currently has with 

Africa 

• Will promote economic diversification and sustainable development as an 

engine for poverty alleviation 

• Will have a consequential positive impact on the standards of living for 

many thousands of households and for women in particular 

• Should maintain the critical mass necessary in the apparel industry and 

provide an environment to encourage and induce textile development 

• By including textile mill products under AGOA, it will provide much 

needed access to an extensive and much wider market, which in turn will 

encourage the development and expansion of the textile sector 

Failure to reinforce these provisions: 

• will call into question all of the goals of AGOA, including the desire to 

alleviate poverty, create employment and improve living standards 

• will inadvertently remove any possibilities for industry growth 

• will doom any attempt to develop new industries since such development 

must rely on infrastructure and external economies created by these activities, induced by AGOA 

• will discourage potential new investors from risking funding, particularly 

in the capital intensive textile sector, not to mention the unemployment, 

discontent and unrest that will be created in the wake of any failure 

Finally, we would like once again to thank U.S. Government for giving the SubSaharan Africa AGOA, it recognises that trade is an engine of economic growth and 

through AGOA; it is helping to provide new opportunities for the people of Africa 

and is helping to eliminate poverty. 

Jaswinder (Jas) Bedi 

Chairperson 

f 


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Statement of Albaugh, Inc. 


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f 

Letter from United Scientific Supplies, Inc. 

December 1, 2009 

The Honorable Sander M. Levin, Chairman House Ways and Means Committee 

Subcommittee on Trade 

1102 Longworth House Office Building 

Washington, D.C. 20515 

Re: Comments in Support of Continuation of U.S. Generalized System of Preferences 

Program 

Dear Chairman Levin, 

In accordance with the November 10, 2009 press release of the House Ways and 

Means Committee, we are submitting the following comments in support of extension of the Generalized System of Preferences (GSP) program for consideration by 

the Committee. We understand that on November 17, 2009, the Committee held a 

hearing to evaluate the operation and impact of the United States’ preference program, as well as opportunities for improvement moving forward. As you are aware, 

the GSP program is currently scheduled to expire on December 31, 2009. We assert 


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that if the GSP program were allowed to lapse as scheduled, it would place United 

Scientific Supplies, Inc., (‘‘United Scientific’’) and other U.S. manufacturers at a 

competitive disadvantage, increase costs of scientific equipment to schools and students, and undermine development efforts of foreign industries. 

Our company, United Scientific, started in 1984 as a family owned and operated 

business involved in the wholesaling of imported science education equipment to 

dealers who sell to primary, secondary, and higher education institutions throughout the United States. United Scientific has been in business about 20 years, and 

currently employs about 15 people. There are approximately 10 large, and more 

than 150 smaller, U.S. dealers of scientific education supplies, with total industry 

sales of $300–400 million per year. Sales of supplies and equipment vary from year 

to year, depending on new science curricula adopted by states and budgetary constraints for public and private educational institutions. 

The founder of United Scientific began production of science education materials 

in India in the 1950s, and exporting to the United States and other markets in the 

1970s. Import sourcing of science education products started at least 25 years ago 

and currently accounts for the vast majority of the products sold. This has enabled 

U.S. dealers to control product costs and assure that public schools can maintain 

access to replacement and updated science education equipment. Such articles include microscopes, balances, biology and chemistry products, physics apparatus, laboratory supplies such as beakers, cylinders, goggles, safety apparatus, thermometers, magnets, scales, stoppers, porcelain ware, bench meters, glassware, magnifiers, and other general lab supplies. The majority of the imported supplies are 

sourced from producing countries which benefit from GSP status. 

In addition to the developmental and trade policy reasons for the program, we 

note that expiration of the GSP program would impose significant new costs on 

science education programs and schools at all levels. Apart from the financial harm 

it might do to small, family-owned companies like ours, the loss of GSP status would 

effectively impose significant new taxes on science studies across the country at a 

time of serious budget cuts, reductions-in-force, and elimination of even basic 

science programs. The country’s school districts can ill-afford such new burdens as 

states and counties struggle to maintain science studies and families struggle to pay 

for their children’s education. The expiration of GSP would be tragically inconsistent 

with the legislation under consideration by Congress designed to promote education. 

For the above reasons, we strongly urge the Committee to introduce and pass legislation which would allow for continuation of the GSP program. Should you have 

any questions or require additional information, please contact the undersigned. 

Sincerely, 

Brian F. Walsh 

Matthew T. McGrath 

Counsel to: 

United Scientific Supplies, Inc. 

f 

Statement of American Apparel & Footwear Association 

Thank you for providing this opportunity to submit a brief statement in connection with the Subcommittee’s hearing on trade preference programs. 

By way of background, the American Apparel & Footwear Association (AAFA) is 

the national trade association of the U.S. apparel and footwear industries, and their 

suppliers. Our members make and market apparel and footwear around the world, 

including in many developing countries. 

The AAFA favors a long-term approach to expanding global trade like that envisioned in the current multilateral trade round (DOHA) of negotiations whereby all 

countries would lower their remaining tariff levels on manufactured goods. However, as an interim approach, we wish to stress our very strong support for maintaining, reforming, and expanding U.S. trade preference programs. 

U.S. companies, including many of our members, have, over the years, made sizeable investments and built key relationships centered on the intended rules and regulations envisioned in respective trade programs. The underpinning of those investments and partnerships are supported by the advantage of the duty free market access provided by these programs to produce products in the preference countries and 


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1Similar programs of other developed countries provide comparable access to those developed 

country markets. 2These numbers also include countries with which the U.S. has a Free Trade Agreement 

(FTA). Excluding FTAs, the percent is far smaller. 3Moreover, preference programs with longer durations also make the conditionality aspects 

of the program more effective, significant, predictable, and practical to implement. 4 Under current rules, for example, inputs from one preference beneficiary or free trade agreement (FTA) partner country often end up disqualifying the finished products of another beneficiary or FTA partner country. 

sell them in the United States and throughout the world.1 In so doing, these companies have created thousands of jobs in developing countries and in the United 

States, assisted in poverty alleviation, stimulated economic growth in the United 

States and abroad, fostered political stability in many developing countries, and 

supported key U.S. bilateral partnerships. 

As you know, our association has been intimately involved in the design, development and implementation of most U.S. trade preference programs in operation 

today. We have worked with the legislative and executive branch to help craft programs, and then worked with the implementing agencies, such as Customs and Border Protection (CBP) or the U.S. Commerce Department, to ensure companies understood how best to utilize and comply with the programs. 

Notwithstanding our support for U.S. trade preference programs, we believe a 

Congressional review and reform of these programs is long overdue. While the current system attempts to recognize unique market and manufacturing capabilities 

that can help drive U.S. exports and partnerships in respective regions, the result 

is a patchwork of programs that expire at different times, feature diverse and sometimes complex rules of origin, contain inconsistent product and country coverage, 

and rely upon inconsistent conditionality requirements. As a result, even though 

U.S. trade preference programs have been greatly expanded during the past 10 

years, the utilization of these programs has dropped as the amount of apparel imported from countries that benefit from these programs has actually declined during 

that period. In turn, U.S. yarn and fabric exports—a requirement for the rule of origin for several of these preference programs—have also dropped in recent years to 

key markets in Central America, the Caribbean Basin, and the Andean region. For 

footwear, the situation is even worse because the trade preference programs that 

cover footwear do not even apply to many of those countries that produce shoes. 

Currently, less than 20 percent of all apparel and less than 2 percent of all footwear 

is imported into the United States from countries that have duty free status.2

This underutilization means missed opportunities for U.S. companies and their 

partners in the developing world. 

We look forward to working with this Committee and other stakeholders in Congress, the Executive Branch, the non-governmental organization (NGO) community, 

the private sector, and the developing world to craft a fresh approach to ensure 

greater use of these programs in the coming years. With that in mind, we would 

like to offer several suggestions. 

First, the duration of preference programs should be sufficiently long enough to 

provide predictability for the users to encourage long term trade and investment. 

Current programs are often authorized for a few months or a year or two. This time 

period is inadequate for the programs to generate long term sustained interest, especially because it takes so long for the implementation procedures (implementing 

regulations, entry procedures, etc) to be promulgated. These short durations negatively affect the ability of U.S. companies to export to, import from, or invest in preference beneficiary countries. If the programs are authorized for at least 10 years 

with predictable continuity at the conclusion of that 10 year period (we note the 

original Caribbean Basin Initiative (CBI) is permanent), companies are able to make 

long term investment and trade plans with knowledge of how the programs work, 

and without fear that these plans may be suddenly disrupted.3

Second, it is imperative that programs are implemented in a manner that encourages trade and investment to take place. Excessive paperwork and documentation, combined with complicated and restrictive rules of origin or burdensome conditionality requirements, often act as disincentives for the wide use of these programs. 

Delayed and inconsistent application of the regulations by CBP, even when Congress has articulated that the programs should be implemented in a trade conducive 

manner, has further eroded the use of these programs. We favor an approach that 

simplifies and harmonizes (where possible) these rules and ensures that complicated, subjective, and costly compliance schemes not undermine these programs. 

U.S. trade programs, including the system of preferences, should be designed to 

work together, rather than as separate programs.4 In concert with this reform, we 


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5Of course, we would strongly object to the inclusion of any preferences for countries, such 

as Burma, with whom we have an import ban. 

would urge that CBP shift to an account approach, instead of a shipment-by-shipment approach, to foster sustained development of and use of these programs. 

Third, we urge that country and product coverage be expanded to create more 

opportunities than those that currently exist. Such an expansion would also ensure 

a more consistent application of preference programs, and would cover more of the 

developing world,5 in a manner comparable to what is provided by other developed 

countries. Such an expansion would also help ensure that U.S. companies are able 

to strengthen existing investments and take advantage of South-South trade flows, 

which are accounting for an increasing share of global trade. It would also ensure 

that developing countries are included for the products that are their chief exports. 

For example, even though Bangladesh and Cambodia have access to the U.S. market under the Generalized System of Preferences (GSP), neither of these countries 

have duty free access to the U.S. market for textiles or apparel. This is because the 

programs that provide duty free access for clothing are all based on regions—Africa, 

Central America and the Caribbean Basin and Andean region. Because Bangladesh 

and Cambodia, and about a dozen other countries, lie outside those regions, their 

apparel exports are excluded from preferential treatment even though apparel is 

among their top exports. 

Fourth, we believe the Committee should explore how the preference programs 

interact with the system of Free Trade Agreements (FTAs)—particularly those with 

developing countries—that the United States has negotiated. While a traditional 

view holds that countries graduate from trade preference programs once an FTA 

takes effect, we would urge the Committee to explore whether certain preferences 

can be left in place, at least as a transitional measure, with respect to those FTA 

partner countries. For some countries, such as Jordan, Mexico, and the Dominican 

Republic, preference programs and FTAs exist side by side. The Committee should 

also examine whether it makes sense to ensure that FTA partner countries have 

interim access to the U.S. market that is as preferable to that which is accorded 

to preference beneficiary countries. This would ensure that FTA partners, who negotiated permanent and reciprocal agreements with the United States, do not see their 

access eroded by countries that did not engage in such negotiations. 

Finally, preference reform should be accompanied by significant reforms in the 

areas of trade finance and capacity building. It is deeply problematic that U.S. trade 

and investment credit agencies—such as the ExIm Bank, the Overseas Private Investment Corporation (OPIC), and the Trade and Development Agency (TDA)—are 

not better aligned with U.S. trade preference or FTA policies. It is almost ten years 

since Congress approved duty free access for garments imported from Central America, yet these export credit agencies still find themselves restricted from offering 

their financial products and services in that region. Similarly, sustained economic 

development in sub-Saharan Africa, and many other parts of the developing world, 

will only gain momentum once the proper infrastructure and economic policies are 

in place. Proper funding for trade capacity building—whether in the form of capital 

improvements or training—is critical for this to occur. 

Over the past few years, AAFA has also been working with a coalition of business 

groups, non-governmental organizations, and other stakeholders to address preference reform issues. The product of those discussions so far, a white paper entitled, 

‘‘Consensus Recommendations for U.S. Preference Program Improvements,’’ has also 

been submitted to the Committee. We look forward to working with this Committee 

and others in Congress, the Executive Branch, the non-governmental organization 

(NGO) community, the private sector, and the developing world to draw upon these 

recommendations and work toward greater use of these programs in the coming 

years. 

f 

Statement of American Fiber Manufacturers Association 

Mr. Chairman, Members of the Subcommittee, 

These comments on the pending renewal of the Andean Trade Preference & Drug 

Eradication Act (ATPDEA) are submitted by the American Fiber Manufacturers Association (AFMA). AFMA is the U.S. national trade association representing the interests of domestic fiber manufacturers. We have strongly supported all free trade 

agreements and preferential trade arrangements deployed in the Americas, stretching back to the U.S.-Canada Free Trade Agreement, through NAFTA, all unilateral 

regional arrangements, and the recent FTAs with CAFTA–DR, Peru, Panama, and 


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Colombia. We are convinced FTA expansion is the most effective U.S. trade policy 

available to maintain regional competitiveness. 

We reaffirm our commitment to this goal as ATPDEA stands for renewal. In particular, as noted below, we believe its renewal presents a significant opportunity to 

advance a consistent vision for hemispheric trade policies, as important to U.S. 

trade policy as it would be for American elastomeric fiber producers, their workers, 

and the communities where they operate. 

In our Association’s member base this includes significant elastomeric manufacturing facilities in North Carolina (RadiciSpandex Corp.), Alabama (RadiciSpandex 

Corp.), and South Carolina (Asahi Kasei Spandex America). An additional major 

producer, INVISTA, subsidiary of privately owned Koch Industries of Wichita, Kansas, operates a major spandex plant in Waynesboro, Virginia. 

With that as background, AFMA offers the following comments for the Subcommittee’s consideration: 

1. The Andean Trade Preference Arrangement (ATPDEA) Should Be Renewed As Soon As Possible To Avoid Disrupting Established Trade Relationships 

This position is not just ours—- it has extraordinary support among U.S. textile 

sector producers and customers. Important trading patterns established and expanded in recent years are at risk if the needed renewal flounders. 

For the U.S. manufactured fiber industry, the Andean region holds growing commercial significance. Prompt renewal of the long-standing unilateral duty-free treatment that ATPDEA provides is a significant economic incentive for our customer 

base. Early enactment will help U.S. manufactured fiber producers sustain and 

strengthen market share in the region. 

2. ATPDEA’s De Minimis Rule for Textile Product Fiber Content Should Be 

Made Consistent With Recently Negotiated U.S. Regional FTAs 

The expiring ATPDEA contains an outdated de minimis fiber content standard 

that conflicts with all recent regional FTAs negotiated by USTR. These include nine 

trading partners: the 6-country CAFTA–DR, Peru, Panama, and Colombia. 

Each of these negotiations took note of the fact that the de minimis approach employed in the earliest accords (notably NAFTA) was flawed regarding application of 

its 7% ‘‘non-originating’’ fiber exemption to elastomerics. For products employing 

them, elastomerics are their highest value, most innovative components, generally 

imparting their significant benefits at low content percentages. Thus, a 7% exemption excludes most elastomeric applications from the yarn-forward origin rules that 

constitute the core textile sector equity in FTAs and other trade arrangements. 

All recent U.S. regional FTAs correct this by placing elastomeric fiber beyond the 

reach of their de minimis content exemptions. In tandem, the modified de minimis 

exemption is adjusted up to 10%. Accordingly, ATPDEA is a regional content rule 

outlier. Perpetuating its outdated de minimis structure and standard in its renewal 

stands in the way of consistent region-wide trade policy and administration. 

Use in ATPA’s extension of an origin rule fully consistent with Peru’s FTA would 

be a positive anticipation of an implemented U.S.-Colombian FTA, since that pact 

also places elastomerics outside the de minimis authority. The pending U.S.-Colombia FTA and the U.S.-Peru FTA now in force have identical elastomeric fiber origination provisions*—a version, as noted above, consistent with all recent regional 

U.S. FTAs. 

3. Two-Country ATPDEA/Peru Trade Should Be Accommodated By Upgrading ATPDEA to the Current Hemisphere De Minimis Standard—Not By 

Revision of a Fully Implemented U.S./Peru FTA. 

Several business organizations have recommended including Peru within the authorities of a renewed ATPDEA to accommodate continuation of existing two-country trade. The shape of this trade needs verification to fully understand the challenge to be met. To the extent it exists for elastomeric products, AFMA recommends 

it be addressed by bringing ATPDEA’s origin rules to the regional standard, and not 

by breaking open the integrity of an enacted, implemented free trade agreement to 

fit temporal renewal of a unilateral arrangement. 

‘‘9. Notwithstanding paragraph 8, a good containing elastomeric yarns in the 

component of the good that determines the tariff classification of the good shall 

be originating only if such yarns are wholly formed in the territory of a Party.’’ 

AFMA believes bringing ATPDEA’s de minimis alongside the other FTA accords 

in the region is the most rational and consistent trade policy. It directly would contribute to desirable regional trade rule unity while avoiding unnecessary damage to 

U.S. elastomeric fiber producers’ established business activity in the area. 


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Thank you for your attention to this important issue. We would be pleased to provide any additional information you desire. 

Paul T. O’Day 

President & Counsel f 

Statement of the U.S. Chamber of Commerce 

Tuesday, November 17, 2009 

The U.S. Chamber of Commerce welcomes the opportunity to present written testimony on the future of U.S. preference programs, including the Generalized System 

of Preferences, the Andean Trade Preference Act, and other current and possible 

programs. The Chamber is the world’s largest business federation, representing 

more than three million businesses and organizations of every size, sector, and region. 

Generalized System of Preferences 

The U.S. Generalized System of Preferences (GSP) program is a trade preference 

program that extends duty-free treatment to selected goods imported from more 

than 130 specified developing countries. Its purpose is to promote economic development in developing countries by expanding their trade with the United States. Congress established GSP in 1974, and legislation authorizing the program has been 

renewed on many occasions since then. The current program expires on December 

31, 2009. In recent years, U.S. imports under GSP have regularly surpassed $30 billion annually. 

In November 2006, the U.S. Chamber released a study entitled Estimated Impacts 

of the U.S. Generalized System of Preferences to U.S. Industry and Consumers. According to the study, GSP boosts the competitiveness of American manufacturers 

and lowers the cost of consumer goods for American families. The study found that 

GSP has become an important component of the competitiveness of American manufacturers and an integral part of sourcing for firms selling a range of consumer 

goods to American families. 

The study found that GSP helps keep U.S. manufacturers and their suppliers 

competitive. Approximately three-quarters of U.S. imports using GSP are raw materials, parts and components, or machinery and equipment used by U.S. companies 

to manufacture goods in the United States for domestic consumption or for export. 

Electrical equipment and parts and transportation vehicle parts are significant imports under GSP. The products coming in under GSP generally do not compete with 

U.S.-made goods in any significant way. 

The Chamber study also presented these findings: 

§ American families also benefit from GSP. Finished consumer goods sold by 

U.S. retailers account for about 25 percent of GSP imports. Relatively inexpensive jewelry was the most significant item. 

§ GSP is particularly important to U.S. small businesses, many of which rely 

on the program’s duty savings to compete with much larger companies. 

§ In addition, GSP imports support U.S. jobs. Moving GSP imports from the 

docks to the retail shelves supported nearly 82,000 U.S. jobs in 2005, according to the Chamber’s report. 

Andean Trade Preference Act 

Since its enactment in 1991, the Andean Trade Preference Act (ATPA) has been 

an effective tool to generate trade, growth, and jobs among the beneficiary countries. 

Data from the U.S. International Trade Commission show that U.S. imports from 

the beneficiary countries have quadrupled from $5 billion in 1991 to $28.5 billion 

in 2008. Additionally, according to estimates issued by the governments of the four 

beneficiary countries—Colombia, Peru, Ecuador and Bolivia—ATPA and the industries it supports have led directly to the creation of approximately two million jobs 

in the region, with more than 75 percent of these jobs in Colombia and Peru. 

As a result, ATPA has been a singularly effective alternative development program in the Andean region. ATPA-related jobs tend to pay above-average wages and 

often serve as a gateway for workers to enter the formal sector, where they pay 

taxes and receive health care benefits. The benefits for society are considerable. 

ATPA provides local citizens with long-term alternatives to narcotics trafficking and 

illegal immigration. 

While much discussion of ATPA centers on the Andean countries, the program 

also benefits U.S. businesses by allowing them to import components and materials 

as well as labor-intensive consumer goods on a duty-free basis, enhancing their comVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00227 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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petitiveness and their ability to create jobs. For example, the cut flower industry 

in Colombia employs approximately 100,000 workers directly and an additional 

90,000 Colombians indirectly. However, an additional 225,000 U.S. jobs depend on 

imports of Colombian flowers, largely in the transportation, distribution, and retail 

industries. This is a good example of how ATPA provides American consumers with 

more choices at better prices for an array of products. Goods imported under the 

program generally do not compete directly with U.S. products. 

Since Congress first approved ATPA in 1991, the statute has included a number 

of eligibility criteria relating to fair treatment of U.S. companies and other priorities. For instance, the statute indicates that a country may not qualify as a beneficiary if its government expropriates property belonging to a U.S. citizen or corporation or if it takes steps to repudiate or nullify any existing contract or agreement 

with a U.S. citizen or corporation. The Chamber considers adherence to the rule of 

law, respect for private property and investment, and the sanctity of contract to be 

cornerstones of U.S. international commercial policy, and these conditions are entirely appropriate in the context of the ATPA program. 

Colombia 

The Chamber offers unreserved and enthusiastic support for the extension of 

ATPA for Colombia pending entry-into-force of the critically needed U.S.-Colombia 

Trade Promotion Agreement. Colombia has consistently met eligibility criteria while 

benefiting from participation in ATPA. 

In the case of Colombia, the Chamber believes that ATPA has played a useful role 

in U.S. efforts to promote sustainable economic growth through trade expansion. 

ATPA-related job creation has helped the Colombian government isolate violent extremist groups, restore economic growth, and increase investment in education, 

health, and infrastructure. 

In a letter sent on October 27, 2009, to Senate Finance Committee Chairman Max 

Baucus (D–MT), Ranking Member Senator Charles Grassley (R–IA), Ways and 

Means Committee Chairman Charles Rangel (D–NY) and Ranking Member Congressman Dave Camp (R–MI), dozens of U.S. textile and apparel companies and associations called for approval of the U.S.-Colombia Trade Promotion Agreement as 

a way to end the uncertainty created through short-term extensions of ATPA. The 

letter noted that ‘‘imports of textile and apparel products from the Andean region 

dropped by more than 10 percent from 2007–2008 and have dipped another 30 percent in the first eight months of this year.’’ The letter goes on to add that ‘‘U.S. textile exports to the region in 2008 were down over 10 percent from 2006 and have 

fallen another 35 percent in just the first eight months of this year alone.’’ 

This decline reflects the commercial partnership between the U.S. textile and apparel industries, which supply fabric and other inputs, and businesses in Colombia. 

It suggests difficulties for America’s 500,000 textile and apparel workers as a critical foreign market ceases to purchase their products. Many analysts believe U.S. 

companies are likely to phase out their investments in Colombia and shift operations to Asia, undermining the gains the program has achieved over the years. 

The Chamber agrees emphatically that a more robust trade framework is needed 

to unleash the full benefits of trade and investment between the United States and 

Colombia. In particular, the pending U.S.-Colombia Trade Promotion Agreement 

will provide far more extensive benefits to workers, farmers, consumers, and companies in both the United States and Colombia. However, it is imperative that Congress move swiftly to extend ATPA beyond December 31, 2009, to help avoid trade 

disruption and job losses pending congressional consideration of the agreement with 

Colombia. The Chamber urges Congress to continue this important program as it 

applies to Colombia. 

Peru 

The U.S.-Peru Trade Promotion Agreement entered into force in early 2009, leading most observers to conclude that Peru no longer needs ATPA benefits. However, 

due to shared production of some apparel products by Colombia and Peru, it is also 

important that ATPA be extended to Peru as such products would otherwise face 

steep U.S. tariffs, despite entry-into-force of the U.S.-Peru Trade Promotion Agreement. In fact, 75 percent of all U.S. apparel imports from Peru in the first nine 

months of this year entered under the regional fabric provisions under the preference program, not the U.S.-Peru Trade Promotion Agreement. 

Bolivia 

While successive administrations in Colombia and Peru significantly improved 

their compliance with the statute’s eligibility criteria over the past decade, Bolivia 

has recently moved in the opposite direction. As a result, the U.S. administration 

ceased to provide these trade preference benefits to Bolivia. 


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During the past three years, more than half a dozen of the largest business enterprises in Bolivia have been expropriated. Most of these firms are in the oil and gas 

sector, but the largest telecommunications company in the country was also expropriated. While U.S. companies and citizens were not involved in all of these cases, 

they were in some. With international companies’ technical know-how and capital 

now largely absent, Bolivia’s oil and gas production has fallen to the point that the 

country can no longer fulfill its contract to sell natural gas to Argentina. Indeed, 

production is barely sufficient for domestic consumption. 

In a referendum held January 25, 2009, Bolivian voters approved a new constitution. The new constitution may allow the government to assert greater state control 

over the economy, with articles that appear to forbid foreign companies from repatriating profits or resorting to international arbitration to resolve nationalization 

disputes (as permitted in the U.S.-Bolivia bilateral investment treaty). 

Ecuador 

In recent years, questions have also been raised about Ecuador’s compliance with 

the ATPA’s eligibility criteria relating to the fair treatment of U.S. companies and 

counter-narcotics efforts. Respect for property and concession rights is at times absent, particularly in the oil and gas sectors. Notably, Ecuador’s government in 2004 

terminated a 19-year-old contract with Ecuador’s largest foreign investor, Occidental 

Petroleum Corporation, and expropriated the firm’s assets in the country. Now being 

considered under international arbitration, this was one of the largest expropriations in the world in a generation. 

This is part of a pattern in which Ecuador’s judicial system has failed to provide 

adequate protection from unlawful expropriations or provide investors and lenders 

with prompt, adequate, and effective compensation for expropriated property. In addition, U.S. citizens have had their assets seized because of judgments against their 

Ecuadorian partner in cases having no connection with the U.S. investor. 

An additional important problem facing U.S. companies operating in Ecuador is 

systemic weakness and susceptibility to political or economic pressures in the rule 

of law. The Ecuadorian judicial system is plagued by processing delays, unpredictable judgments in civil and commercial cases, inconsistent rulings, and limited access to the courts. Criminal complaints and arrest warrants against foreign company officials have been used to pressure companies involved in commercial disputes. There have been cases in which foreign company officials have been prevented by the court from leaving Ecuador due to pending claims against the company. Ecuadorians involved in business disputes can sometimes arrange for their 

opponents, including foreigners, to be jailed pending resolution of the dispute. The 

executive branch has used the media to insert itself in judicial disputes and has dissolved or reorganized judicial bodies to advance its goals, depriving judicial proceedings of transparency and integrity. 

Ecuador’s actions have brought investment in the vital energy sector to a halt, 

and state-owned Petroecuador’s production continues to decline. With oil and gas 

prices at historically high levels as late as the summer of 2008, Ecuador was nonetheless unable to increase investment in the hydrocarbon sector, in part because of 

legal uncertainties, highly unfavorable tax policies, environmental liability concerns, 

and lack of a coherent energy policy. Today, with prices much lower, the policy environment has not improved and has arguably deteriorated further. 

Future of U.S. Preference Programs 

The Chamber applauds this Committee for taking a closer look at how our preference programs are working as well as ways to improve their effectiveness. Expanding coverage—in terms of product coverage, geography, and duration of benefits—is worth considering. 

In the case of GSP, the Chamber supports renewal preferably for a period measured in years rather than months. To their detriment, Chamber members have 

found that short-term renewals tend to disrupt existing commercial relationships 

and make the establishment of new ones more difficult. 

In addition, it is notable that most of the benefits described in the previously cited 

Chamber study on the economic impact of GSP arise from trade relationships with 

relatively advanced developing countries such as Brazil and India; consequently, the 

Chamber views their continued eligibility as particularly important to U.S. manufacturers and consumers. Enhancing trade preference benefits for the world’s least 

developed countries should not come at the expense of American jobs, industrial 

competitiveness, or consumer welfare. The Chamber urges Congress to preserve 

these existing trade ties and extend the GSP program without eliminating the participation of the advanced developing countries. 


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Beyond these longstanding issues, the Chamber has worked in recent months 

with leading business and non-governmental organizations in an effort to build a 

consensus on a unified, coherent trade preference program that can enhance their 

effectiveness as a development tool and build on their benefits for the United States. 

Such reforms would aim to ensure that these programs more effectively meet the 

development challenges of countries facing extreme poverty in ways that are consistent with U.S. economic needs, including the needs of our companies and workers. 

The Chamber looks forward to working with the various Members of Congress 

who have introduced legislation that would expand existing preference programs. 

For example, Congressmen Eliot Engel (D–NY) and Dan Burton (R–IN) have introduced H.R. 1837, the U.S.-Paraguay Partnership Act of 2009, which would add 

Paraguay to the list of ATPA beneficiary countries. The Chamber supports H.R. 

1837, and its Senate companion bill S. 780, because it would further promote ATPA 

objectives of fostering economic development and promoting legitimate alternatives 

to narcotics production in South America. 

The Chamber is also supportive of efforts to create Reconstruction Opportunity 

Zones (ROZs) in Afghanistan and some areas of Pakistan. However, we are deeply 

concerned with the labor provisions included in H.R. 1886, the Pakistan Enduring 

Assistance and Cooperation Enhancement Act of 2009 (PEACE Act of 2009), which 

the House approved on June 11, 2009. H.R. 1886 rejects longstanding eligibility provisions on labor rights employed in the GSP program, substituting instead the requirement that the countries comply with ‘‘core labor standards’’ and set up an 

International Labor Organization (ILO) monitoring program to ensure that producers comply with ‘‘core labor standards.’’ 

Adopting such new and restrictive eligibility criteria in this legislation would be 

particularly harmful, as it would seriously complicate the ability of the ROZ program to attract investment in this region and thus generate new sources of employment. Particularly given the unique security issues in this region, this approach 

would undermine the primary goals of the legislation. 

The approach taken by S. 496, sponsored by Senator Maria Cantwell (D–WA), is 

by far a better solution for the inclusion of labor criteria in a preference program. 

It incorporates the criteria for determining eligibility, including with respect to the 

countries’ commitments to internationally recognized labor rights, consistent with 

GSP and other preference programs that have been repeatedly reviewed and approved by Congress on a bipartisan basis. These criteria have been successfully employed by successive administrations to promote labor rights in numerous developing countries. 

As the Chamber and seven other business organizations explained in a June 22 

letter to the Senate Finance Committee (appended), a successful ROZ program 

would also need to extend broader product coverage and extend to additional geographic areas in Pakistan than granted under these bills. Legislation that fails to 

do so, and that includes onerous and untested labor conditions, would be a hollow 

gesture that would do little or nothing to foster economic development in Afghanistan and Pakistan. 

Additionally, the Chamber supports the African Growth and Opportunity Act 

(AGOA), which expires in 2015. We urge the Committee to consider ways to improve 

AGOA, for example, by creating new incentives for U.S. importers to source apparel 

from Africa, by allowing them to receive a duty credit which can then be applied 

to products purchased from qualified non-African LDCs, and by expanding product 

coverage to include critical African agricultural products such as sugar, peanuts, 

cotton, and processed cocoa products. To help address Africa’s capacity constraints, 

the Chamber supports efforts to build trade capacity in Africa with a focus on infrastructure development, elimination of non-tariff barriers, and support for small and 

medium-sized enterprises. Trade capacity building should be pursued on a regional 

basis, encouraging deeper and faster regional integration—a stated goal of African 

nations and the United States. 

Finally, as noted in our discussion of Colombia’s ATPA benefits, the American 

public has made clear its preference for fair trade based on reciprocal market openings. Bilateral and regional trade agreements can unleash growth and development 

in ways that unilateral trade preferences cannot. But while the United States pursues reciprocal trade accords, we should continue to secure the benefits of these 

longstanding preference programs. 


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Conclusion 

While a broader reform may have to wait, Congress must act swiftly to extend 

preference programs expiring on December 31. The Chamber supports extension of 

GSP, which has been an effective trade tool bolstering domestic manufacturing, expanding consumer choice, and promoting economic growth in developing countries. 

Allowing GSP to expire could lead to months of significant trade disruption. Not 

only will GSP beneficiary countries suffer losses of important export orders, but 

American companies that rely on lower-cost preference program inputs will see their 

costs escalate and their competitiveness decline. 

The Chamber offers unreserved and enthusiastic support for the extension of 

ATPA for Colombia pending entry-into-force of the critically needed U.S.-Colombia 

Trade Promotion Agreement. Due to shared production of some apparel products by 

Colombia and Peru, it is also important that ATPA be extended to Peru as such 

products would otherwise face steep U.S. tariffs, despite entry-into-force earlier this 

year of the U.S.-Peru Trade Promotion Agreement. 

Although citizens and companies in both the United States and beneficiary countries derive benefits from participation in ATPA, there are serious concerns about 

the continued deterioration in the basic rule of law occurring in Ecuador and Bolivia. The President’s June 30, 2009, report to Congress on Ecuador’s and Bolivia’s 

ATPA eligibility noted several issues of serious concern, as does the U.S. Department of State’s 2009 Investment Climate Statements with respect to Ecuador and 

Bolivia. Other international reports continue to highlight similar problems. 

We urge Congress and the administration not to reward Bolivia and Ecuador 

through renewal of the ATPA. If Congress does extend the ATPA with respect to 

these countries, it should be a short, six-month extension and should provide ATPA 

benefits only to products from non-state dominated sectors. 

Finally, we look forward to working with Congress in the months ahead to pursue 

measures to improve our preference programs. Doing so will not only benefit developing countries, but will also help U.S. companies and workers to remain competitive in the global economy. 

Thank you. 

American Apparel & Footwear Association (AAFA) 

Fashion Accessories Shippers Association (FASA) 

National Foreign Trade Council (NFTC) 

National Retail Federation (NRF) 

Retail Industry Leaders Association (RILA) 

Travel Goods Association (TGA) 

U.S. Association of Importers of Textiles and Apparel (USA–ITA) 

f 

United States Chamber of Commerce 

June 22, 2009 

Dear MEMBERS OF THE SENATE FINANCE COMMITTEE: 

We write to express our strong support for meaningful trade preferences for Afghanistan and Pakistan. However, we are deeply disappointed with H.R. 1886, the 

Pakistan Enduring Assistance and Cooperation Enhancement Act of 2009 (PEACE 

Act of 2009), which the House passed on June 11th to create Reconstruction Opportunity Zones (ROZ) along the Pakistan-Afghanistan border. When the Senate takes 

up this legislation, we strongly urge that the Senate start with S. 496, introduced 

by Senator Maria Cantwell, and expand and revise it in several areas to ensure that 

the ROZ program is not a hollow gesture to the people of Afghanistan and Pakistan. 

The ROZ program represents a critical opportunity for the United States to foster 

economic development and social stability in the region and to make good on the 

promise of a closer economic relationship with Pakistan and Afghanistan. As currently drafted in both the House and the Senate, however, the ROZ program represents only symbolic assistance for Pakistan and Afghanistan. 

Much has changed both politically and economically since the ROZ program was 

first crafted by the Bush Administration more than two years ago. Yet the pending 

legislation is essentially unchanged, gerrymandering coverage to match a China 

quota agreement that no longer exists, and blocking benefits for those products that 

Pakistan is best positioned to produce. The Congress should update the proposal to 

reflect the world today, where there are no quotas, Asian suppliers are in fierce 


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competition for sales to the U.S. market and security conditions in the region have 

grown worse. 

For the ROZ initiative to be effective, duty-free treatment must be extended to 

all textile and apparel products, and especially to cotton trousers and shorts and 

cotton knit tops. These products are most likely to generate employment opportunities. Cotton knit shirts and cotton trousers are vitally important to Pakistan, yet 

these products face U.S. duties that average around 17 percent. Configuring the 

ROZ program to include these items will give Pakistan a fighting chance in this 

competitive industry. Moreover, U.S. producers are not at risk from apparel exports 

from Pakistan; it is the other Asian producers who compete with Pakistan. Cotton 

knit shirts and cotton trousers from Pakistan represent a mere 3.6 percent of total 

U.S. imports of these products. 

We also urge Congress to revisit the limited areas in Pakistan that are eligible 

to use the ROZ program. Limiting ROZs to extremely remote areas that are experiencing intense conflict and are not yet mature for industrial growth would only 

delay job creation. Therefore, we encourage you to consider expanding the geographic areas in Pakistan to include areas that are currently capable of production. 

All of Pakistan, not just the tribal areas on the Northwest Frontier, is being targeted by extremists. 

Another area of concern in S. 496 is the disclosure requirements. We agree that 

transshipment is a legitimate concern, and we support the effective and time-proven 

anti-transshipment provisions that exist in other trade preference programs like the 

African Growth and Opportunity Act (AGOA). However, S. 496 goes way beyond 

those provisions and requires extensive disclosure of sensitive and proprietary information. For example, the legislation requires the disclosure of the names of all owners, directors, officers, suppliers, and U.S. customers of ROZ entities. This raises significant proprietary information concerns because companies do not want to reveal 

their sourcing strategies to competitors. 

S. 496 also requires Pakistan and Afghanistan to compile a list of names and addresses of all participating entities. Such a list would surely become a target list 

for America’s enemies in the region. S. 496 incorporates key criteria for determining 

eligibility, including countries’ commitments to internationally-recognized labor 

rights, consistent with the Generalized System of Preference (GSP) and other preference programs repeatedly reviewed and approved by Congress. Unlike S. 496, 

however, the House bill seeks to impose highly onerous labor criteria that would undermine the ability of this program to produce the much-needed economic growth 

in this region. The labor provisions in the House bill go far beyond the GSP program, are unworkable, particularly given the unique security considerations that 

will be encountered in the region, and will only serve as a further disincentive for 

companies to use this program. Therefore, we strongly urge that S. 496 be the model 

for any labor provisions included in the final legislation. 

Moreover, the pay-for mechanism in the House-passed bill would actually increase 

the cost of doing business in non-ROZ areas of Pakistan. This is contrary to the goal 

of bringing greater job creation to this critically important region, and would raise 

questions about possible conflict with World Trade Organization rules regarding 

most-favored-nation treatment for those areas of Pakistan that are not eligible for 

ROZ investment. Penalizing one part of Pakistan to benefit another is a terrible 

precedent in a trade preference program. 

The United States has an important opportunity to send a tangible message to 

the people of Afghanistan and Pakistan with this initiative. We have a chance to 

create real employment that counters the recruitment efforts of extremist groups in 

both countries. But that is possible only if the product scope, geographic coverage, 

disclosure, labor, and pay-for provisions of the ROZ program reflect the realities in 

the region. We encourage you to make these important revisions so we can translate 

the U.S. vision into real economic development to support U.S. and regional stability. 


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Thank you for your time and consideration in this matter. 

Sincerely, 

American Apparel & Footwear Association (AAFA) 

Fashion Accessories Shippers Association (FASA) 

National Foreign Trade Council (NFTC) 

National Retail Federation (NRF) 

Retail Industry Leaders Association (RILA) 

Travel Goods Association (TGA) 

U.S. Association of Importers of Textiles and Apparel (USA–ITA) 

f 

United States Chamber of Commerce 

Statement of American Sugar Alliance 

The American Sugar Alliance (ASA) appreciates the opportunity to submit these 

comments for the record of the House Ways and Means Trade Subcommittee Committee’s November 17, 2009, hearing on U.S. trade preference programs, specifically 

on proposals to extend duty-free, quota-free treatment (DFQF) of all imports, including sugar, from Least Developed Countries (LDCs) and certain other developing 

countries. The ASA is the national coalition of American sugarbeet and sugarcane 

growers, processors, and refiners. 

The ASA opposes any proposal to extend DFQF treatment to sugar. Such action 

would threaten the viability of U.S. sugar policy and of the U.S. industry. 

The United States is the world’s fifth largest producer and consumer of sugar and 

the second largest importer. The U.S. sugar-producing industry generates 141,000 

American jobs in 19 states and $10 billion in annual economic activity. Sugar is a 

basic food ingredient found in approximately 70 percent of food products. 

For the food security of our nation, it is critical to maintain a strong and healthy 

domestic sugar industry to ensure customer needs are met for a broad array of high 

quality products. Maintaining a domestic sugar policy is essential to sustaining a 

viable industry that faces unfair production and predatory trading practices by virtually every sugar exporter. In order to operate the current sugar policy at no cost 

to the taxpayer, as the Congress intended, supply and demand must be delicately 

balanced. DFQF treatment for sugar would pose a direct threat to the U.S. sugar 

policy and industry and would ultimately harm taxpayers and consumers. 

As the result of commitments made in the WTO, NAFTA, and other Free Trade 

Agreements (FTAs), imports already account for a large share of U.S. sugar use. 

Over the past five years, this share has averaged 25 percent; in the just completed 

2008/09 crop year the import share reached just under 30%. The 38 developing 

countries which currently enjoy access to the U.S. market under these agreements 

benefit from access to the U.S. market because prices here reflect the cost of producing sugar. Their alternative is to sell to the grossly distorted and depressed 

world market, where prices have tended to be well below the costs of production of 

nearly all developing countries. 

Sugar (along with a number of other agricultural products) has been excluded 

from the various preference programs operated by the U.S. for the benefit of developing countries because the inclusion of sugar in these programs is incompatible 

with the sound operation of the domestic sugar program. As a result of the existing 

trade commitments referred to above, the U.S. market is likely to be oversupplied 

in most years, rendering operation increasingly difficult. 

The potential oversupply situation is exacerbated by the complete opening of the 

U.S. market to Mexico as of January 2008 and the large degree of uncertainty that 

exists with respect to Mexican export capabilities and intentions. In the 2008/09 

crop year, USDA first forecast imports of sugar from Mexico at 500,000 metric tons 

but the eventual total for the year was two-and-one-half times that amount—over 

1.27 million metric tons. 

Proposals to extend DFQF to sugar, which find their most concrete form in H.R. 

4101 introduced by Congressman McDermott on November 18, 2009, would damage 

the U.S. sugar industry, result in increased and unnecessary government expenditures, and could, ultimately, jeopardize the viability of both the domestic sugar program and the U.S. sugar industry. Such an outcome, by erasing the value of the 

U.S. market to the many developing countries now supplying it, would also cause 

these countries substantial financial loss and imperil economic development in the 


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many countries highly dependent on their sugar industries and on access to the U.S. 

market. 

Damage to U.S. Sugar Industry 

The countries officially designated as LDCs by the United Nations produce in 

total about 3.5 million metric tons of sugar and export over a million tons of sugar. 

H.R. 4101 would provide DFQF to most of these LDCs. As indicated in the attached 

table, these proposed beneficiary LDCs produce nearly 2.5 million tons of sugar and 

export over 700,000 tons. But the McDermott bill would also extend DFQF for sugar 

to non-LDC African countries, including such major sugar producers as South Africa, Mauritius, Swaziland, and Kenya. Thus, in total, the bill would extend DFQF 

to countries producing nearly 7 million tons of sugar and exporting nearly 3 million 

tons. 

Even these figures do not fully indicate the magnitude of the potential threat to 

the U.S. sugar program. Beneficiary countries could use subsidized imported sugar 

to meet their own domestic consumption needs and, thus, free up their domestic production (meeting the rules of origin) for export to the United States; there is nothing 

in H.R. 4101 to prevent such substitution. Mexico is already doing so under a 

NAFTA substitution loophole. 

Worse yet, transshipment of subsidized sugar from non-beneficiary countries 

through the long list of countries covered by the McDermott bill could occur. Unlike 

substitution, the bill does not allow transshipment, but such illicit trade activity 

would be difficult to monitor. 

Both of these practices significantly inflate the volume of potential exports to the 

United States, and the potential danger. 

Granting of DFQF for sugar would, therefore, likely result in the flooding of the 

U.S. market—a market, as noted above, already oversupplied in many years as a 

result of existing trade commitments. It would magnify the already high degree of 

uncertainty that USDA administrators of the domestic program face as a result of 

the unfettered access of Mexico to the U.S. market. 

The result of the excessive oversupply generated by DFQF for sugar would be depressed U.S. sugar prices and large government expenditures for the conversion of 

surplus sugar into ethanol (as required by the 2008 Farm Bill). Ultimately, the 

granting of DFQF on top of existing trade commitments (and those contemplated 

in the Doha Round) could make operation of the domestic sugar program unmanageable and jeopardize the viability of the U.S. sugar industry. 

DFQF for sugar would also damage developing countries 

As noted earlier, some 38 developing countries already benefit greatly from their 

existing access to the U.S. market through the TRQs established under the WTO 

or the access granted through NAFTA or other FTAs. Most of these suppliers recognize the adverse effects on their own interests that the oversupply generated by 

DFQF would cause. 

In separate submissions in March 2007, two large groups of developing countries, 

29 countries in all, expressed to the U.S. government their opposition to including 

sugar in a DFQF program: 

• The CBI Sugar Group: Barbados, Belize, the Dominican Republic, Guyana, 

Haiti, Jamaica, Saint Kitts and Nevis, Trinidad and Tobago; plus Mauritius 

and the Philippines. 

• Comesa (Common Market for Eastern and Southern Africa): Burundi, 

Comoros, D.R. Congo, Djibouti, Eritrea, Egypt, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, 

Zambia, Zimbabwe. 

Comesa reiterated its opposition to inclusion of sugar in any DFQF scheme at the 

November 17, 2009, hearing on preference reform. We understand that other developing-country sugar producers have submitted comments in opposition to sugar’s inclusion: 

• The International Sugar Trade Coalition, a large group of developing-country 

sugar producers that also have shares of the U.S. sugar import quota. The 

ISTC includes Barbados, Belize, the Dominican Republic, Fiji, Guyana, Haiti, 

Jamaica, Malawi, Mauritius, Panama, the Philippines, Saint Kitts and Nevis, 

Swaziland, Trinidad and Tobago, and Zimbabwe. 

• The Sugar Alliance of the Philippines, a national collation of sugarcane planters, millers, refiners, and traders. 


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Other Concerns with H.R. 4101 

The bill would establish common rules of origin, in many cases differing from 

those established in existing agreements and programs, for countries benefiting 

from the various U.S. preference programs and introduce a new procedure for the 

designation of articles as eligible for preferential treatment. 

We believe the existing, long-standing rules of origin and procedures used for the 

Generalized System of Preferences (GSP) and other preferential programs are quite 

adequate and that new rules of origin and procedures are unnecessary. Furthermore, it is critical that the primary consideration in making any changes to rules 

of origin or procedures for designations should continue to be whether additional imports would cause, or threaten to cause, material harm to domestic producers. 

Doha Round Considerations 

At the 2005 WTO Ministerial in Hong Kong, the U.S. committed to the granting 

of DFQF treatment to LDCs for 97% of tariff lines. This limited commitment clearly 

reflected, among other concerns, U.S. negotiators’ recognition of the adverse impact 

such access could have on the U.S. sugar program and market—as attested in numerous statements by then-USTR Rob Portman and then-Agriculture Secretary 

Mike Johanns to private sector advisors, Congressional staff, and the press. 

Moreover, the 2005 limited commitment was only to be put into effect as part of 

the successful completion on the Doha Round. Congress needs to consider carefully 

the effects of the unilateral granting of DFQF, and the expansion of its application 

beyond LDC’s (to countries such as South Africa), on the willingness of DFQF beneficiary countries to negotiate constructively in subsequent Doha negotiations. 

f 

Statement of the Association of Colombian Flower Exporters 

ASOCOLFLORES is a non-profit trade association established in 1973 to represent and support the Colombian flower grower-exporter industry in its efforts to 

achieve sustainable and competitive development. ASOCOLFLORES currently represents 272 companies who account for 75 percent of the total volume of all Colombian cut flower exports. In 2007, Colombia exported $1.1 billion worth of flowers, 

82 percent ($933 million) of which were sold in the United States. ASOCOLFLORES 

member companies sustain 98,000 direct jobs and support nearly 83,500 indirect 

jobs. It is estimated that Colombian flower imports support nearly 225,000 jobs in 

the United States. 

The Association’s objective is to promote international exports of Colombian flowers and to ensure the flowers are produced in an environmentally sustainable manner and with social responsibility towards its significant workforce. 

ASOCOLFLORES supports Florverde, one of the most advanced, comprehensive 

environmental programs in Latin America to sustain renewable agricultural resources. The Colombian flower industry is the most highly unionized of any Colombian private sector, and much higher than the U.S. floral industry. 

To ensure the well being of its workforce, ASOCOLFLORES members invest some 

$28 million per year on numerous social programs for the direct benefit of its 

workforce and their families. In particular, the employment by the flower sector of 

large numbers of women workers (nearly 60 percent of the total workforce) have 

helped to spur the industry to create major social programs for workers and their 

families—progressive services such as housing, nursing, day care, subsidized schooling, subsidized food and nutrition programs—that help set a model for the private 

sector throughout the Latin American region. 

ASOCOLFLORES Supports the ATPA and Enactment of U.S.-Colombia 

Trade Promotion Agreement 

Since 1991, U.S. trade policy toward Colombia—particularly the ATPDEA and its 

precursor, the Andean Trade Preference Act (‘‘ATPA’’)—has focused on efforts to 

spur legitimate employment in Colombia through U.S. investments in Colombia’s 

economy. By that measure, the Colombian flower industry represents one of the 

great success stories of U.S. trade policy toward Colombia. 

The fact that the Colombian flower industry has grown from some 20,000 direct 

employees in 1991 to 181,500 today demonstrates that ATPA/ATPDEA are clear examples of the success—on national security, economic, and social grounds—of an enlightened and responsible program of U.S. trade benefits that have made a real difference on the ground in Colombia. The U.S.-Colombian TPA will solidify the major 

progress made under ATPDEA and lay the groundwork for growth of other sectors. 


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Many Thousands of U.S. Jobs Depend on Duty Free Flowers from the Andean Region 

It is estimated that 225,000 U.S. jobs depend on the free flow of Colombian floral 

imports. These jobs are in sectors such as transportation, import brokerage, wholesale operations, retail florist shops, internet providers, supermarkets and convenience stores. Major U.S. retailers such as Wal-Mart, K-Mart, Costco, and major supermarket chains, and their workers and customers across the United States, depend on Colombia to supply their flower and floriculture needs. 

The U.S. Floral Industry Depends on Duty-Free Flowers From the Andean 

Region 

The tariff preferences for Colombian flowers provided by the United States are 

vital to the U.S. floral industry because it depends on flowers from Colombia. It is 

estimated that over 4.2 billion flowers are imported into the United States on an 

annual basis with 60 percent of them coming from Colombia. The global flowers industry is an intensely competitive business that keeps margins very thin—the estimated operating profit for most businesses is only 2–3 percent. Thus, the imposition 

of import duties on flowers from Colombia, even modest ones, can have a devastating impact on the entire industry. 

Recent history demonstrates the point. In 2002, the U.S. flower industry incurred 

6–7 percent duties (on average) on all flower imports from Colombia due to an eightmonth lapse in ATPA tariff preferences. Due to the large volume of imports during 

that period, which covered Valentine’s Day, Easter and Mother’s Day, U.S. importers paid an estimated $2.5 million per month on flower imports from Colombia and 

Ecuador during this period. Given the small operating margins of the industry, even 

that modest level of duties had a disruptive, harmful impact on the industry—both 

in the United States and in Colombia. This difficult period for the flower industry 

demonstrates the necessity of locking in duty free flower imports from Colombia 

under the U.S.-Colombia TPA. 

In the alternative, ASOCOLFLORES would urge a longer and more predictable 

time frame for ATPA, which has been extended numerous times, though often for 

very short periods of time. In addition, Congress has typically extended ATPA ‘‘at 

the last minute.’’ The unpredictability and volatility surrounding ATPA renewal is 

a cause for major concern, not just by ASOCOLFLORES, but by the many U.S. and 

Colombian economic sectors that provide the bulk of employment opportunities generated by ATPA. 

The Colombian Flower Industry is a Leader in Promoting Environmental 

and Socially Responsible Economic Growth in Colombia; it is a Model 

Trading Partner of the United States 

The Colombian flower industry is on the leading edge of environmental protection. 

In 1991, the industry was the first to undertake an environmental impact study at 

sector level in Colombia. As a result of the study, the flower industry created 

Florverde, a program to promote respect for and conservation of Colombia’s natural 

resources. Nowadays, Florverde constitutes one of the strictest and most comprehensive Certification systems for agriculture, including environmental as well as 

social matters. A majority of the flower producing farms, representing nearly 72 percent of total flower growing companies, participate in this project. At least 40 percent of them are currently certified. These actions ensure the sustainability of the 

industry and surrounding environment for years to come. To date, the industry has 

spent more than $2 million on the Florverde program, which was designed and implemented at the industry’s own initiative. 

The industry has also taken a courageous stand against violence in Colombia and 

worked toward building peace in the nation by designing and instituting a conflict 

resolution program for all of its workers to better teach them how to ‘‘Cultivate 

Peace in the Family.’’ Given the dramatic success of this groundbreaking program, 

which may be replicated in other Colombian industries, USAID directly supported 

the program with a $1 million grant, from 2005 until 2007. As of 2008, the program 

is supported by GTZ from Germany. 

In addition, the Colombian flower industry has created the program School of Floriculture in order to give social and economic stability to families displaced by violence in Colombia’s rural areas. To date, the school has trained several thousand 

displaced persons, who have become permanent employees, thus providing them 

with the opportunity to begin a new, peaceful life in the flower growing business. 

Recognizing the severe problem of a lack of affordable housing in Colombia, the 

flower industry has created and implemented the ‘‘Flowers are Home’’ housing program, which seeks to provide subsidies for 20,000 workers in three main areas: acquisition of new housing; improvement of existing housing; and support in land title 


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issues. So far, ASOCOLFLORES members have contributed some $7 million toward 

helping its workforce to meet their housing needs. 

The Colombian Flower Industry Provides Job Security, Good Pay and Benefits 

100% of ASOCOLFLORES member company workers are hired with legal contracts. 86% of these workers have labor contracts, while the remaining 14% are 

hired under other types of contracts. The average employment period of a worker 

in a flower farm is five years (75% of workers have been in the same company for 

up to ten years, and 15% over 10 years) and 75% of ASOCOLFLORES member companies pay salaries up to 28% above the minimum wage. All of them meet other 

legal requirements such as social security payments (health, pension, and bonuses) 

and the provision of working uniforms. In addition, workers also receive other forms 

of assistance from their employers, including the provision of transportation and 

meals; wedding, maternity and death allowances; and an education subsidy for their 

children. 

Colombian Flower Workers Are Protected by Colombian Law and Benefit 

From Strong Union/Collective Bargaining Agreement Representation 

Women that work on ASOCOLFLORES’ member farms do not perform duties related to pesticide storekeeping and application because Colombian labor law explicitly bans women from carrying out this type of activity. In line with Florverde

standards, it is expressly prohibited to run a pregnancy test during the hiring process, as well as exhibit any form of discrimination against pregnant women or any 

worker for any cause, under any type of employment. Forced child labor is explicitly 

prohibited and no minor under the age of 18 is permitted to work. The average work 

shift on farms under the auspices of Florverde is 46.5 hours per week, less than 

the legal limit of 48 hours. 

Union membership in ASOCOLFLORES’ member companies is approximately 

16%, which compares favorably with the national average of 5% among total workers. Importantly, floriculture has the highest level of unionization in Colombia’s private sector, and has a higher unionization level compared to the flower industries 

of Holland (approximately 8%) and the United States (approximately 3%). Approximately 45% of workers in ASOCOLFLORES’ member companies who are not union 

members are covered by collective bargaining agreements, which are negotiated between workers and employers to establish compensation during an agreed time period (generally three years). None of ASOCOLFLORES member companies hire 

workers under 18 years old, even though Colombian law allows 16 year-olds to work 

with parental permission. 

The Colombian Flower Industry Is A Strong Ally of the United States 

The Colombian flower industry has played a key role in furthering U.S. national 

security interests in the Andean region by utilizing U.S. trade benefits to provide 

a major, stabilizing force in Colombia’s economy, particularly in critical area surrounding the capitol of Bogota. In addition, at considerable human and economic 

cost, the Colombian flower industry has been a courageous partner with U.S. law 

enforcement to fight the illegal narcotics trade. 

The Colombian flower industry has been recognized by the U.S. Government—including the Department of State, Drug Enforcement Administration, and the Customs and Border Protection Bureau—as an important ally in efforts to combat the 

illegal drug trade. 

The industry has worked closely with U.S. law enforcement to establish extensive 

anti-smuggling programs by spearheading design and implementation of a state-ofthe-art security system that the Colombian growers are developing and financing to 

protect their shipments from contamination by narcotics traffickers. The industry’s 

close cooperation with these law enforcement agencies has been recognized by those 

agencies as a model for other industries. 

Colombian Flower Imports Benefit U.S. Consumers 

As with the ATPDEA, the U.S.-Colombia TPA should continue to benefit U.S. consumers. The mature and highly integrated relationship between Colombian flower 

producers and U.S. end-users have provided benefits to U.S. consumers, including 

greatly increased availability of a wide variety of better quality flowers. This has 

been achieved in large part through the duty free treatment of Colombian flowers 

since 1991. As the International Trade Commission noted in its Eleventh Report 

(2004) on ‘‘The Impact of the Andean Trade Preference Act, ‘‘Previous analyses in 

this series have shown that since ATPA went into effect, U.S. consumers have benefited from lower prices and higher consumption . . . ’’ As a representative example, 

in the Commission’s 1999 report, the ITC determined that ATPA preferences saved 


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U.S. consumers nearly $12 million on fresh cut roses and $8.5 million on other popular flowers in 1998 alone. 

Key Elements of the U.S. Floral Industry Support ATPA and the TPA; the 

Colombian and U.S. Floral Industries are Highly Integrated 

The U.S. and Colombian floral industries have consolidated and become highly integrated over the past few years. This explains why important U.S. floral industry 

players, including the Association of Floral Importers of Florida (AFIF), support the 

U.S.-Colombia TPA and continued duty free treatment of Colombian flowers. This 

support demonstrates the cooperative and increasingly integrated relationship between Colombian suppliers and the U.S. flower retail industry. This relationship 

has evolved from one of adversity to cooperation and joint promotional efforts to increase flower consumption in the United States. In fact, in 2004, U.S. and Colombian flower producers renewed a ground breaking agreement—the Flower Promotion 

Organization (FPO)—that seeks to broadly promote increased flower consumption by 

U.S. consumers. 

Conclusion 

The Association of Colombian Flower Exporters strongly supports the Andean 

Trade Preference Act and the U.S.-Colombia Trade Promotion Agreement. 

ASOCOLFLORES urges Congress to enact a predictable ATPA program that provides a bridge to the Trade Promotion Act to allow the industry to continue to build 

on its successful track record of protecting Colombia’s environment, supporting its 

significant workforce through a broad range of progressive programs, and support 

the peace process in Colombia. 

f 

Statement of the U.S. Association of Importers of Textiles and Apparel 

Laura E. Jones 

Executive Director 

Julia K. Hughes 

Senior Vice President 

On the Operation, Impact and Future of U.S. Preference Programs 

Before the House Committee on Ways and Means 

Subcommittee on Trade 

Tuesday, November 17, 2009 

The U.S. Association of Importers of Textiles and Apparel, USA–ITA, appreciates 

this opportunity to present its views and recommendations on reform of the U.S. 

unilateral preference programs. 

USA–ITA’s member companies include manufacturers, distributors, retailers, importers of apparel and textile home furnishing products and related service providers, such as shipping lines and customs brokers. Like other industries involved 

in consumer goods, U.S. importers and retailers of textile and apparel products have 

been significantly and negatively impacted by the global economic crisis. With all 

the attention paid to manufacturing, the reality is that there has been a disproportionate impact on one of the few industries that has not asked for a bailout—retailing, and apparel retailing in particular. According to the Bureau of Labor Statistics 

(BLS), as of September 2009, overall retailing has lost 809,000 jobs since September 

2007, a direct result of the downturn in the economy and steep decline in consumer 

spending, especially on discretionary items like clothing. Of those lost retail sector 

jobs, 152,000 of them were in clothing, accessory and department stores alone. 

U.S. apparel importing and retailing is a vital component of the U.S. labor force. 

According to the Bureau of Labor Statistics, as of September 2009: 

• Total retail trade employment was estimated at 14,699,000 workers—about 

11 percent of the American work force (138.9 million). 

• Ten percent of these retail-related workers were associated with clothing and 

clothing accessory stores, 1,408,700 workers. 

• Department stores accounted for another 10 percent, 1,525,900 people. Together, these two portions of the U.S. retail sector accounted for 2.9 million 

workers. 

• In addition to these retail related jobs, there are transportation, warehousing 

and longshoreman jobs that account for significant additional employment in 

the U.S. 


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As of the third quarter of 2009, there were 247,700 textile workers and 163,900 

apparel workers in the U.S.—411,600 all together. Unfortunately, the BLS data 

does not identify how many of those apparel workers are serving the commercial 

market versus the procurement market. 

U.S. preference programs offer an opportunity for U.S. importers and retailers of 

consumer goods to save duties and therefore pass along savings to U.S. consumers, 

a particularly important benefit when consumers are feeling uncertain about their 

futures and closely watching their spending. The reality, however, is far more complicated. USA–ITA’s member companies have substantial experience with the many 

unilateral preference programs that apply to imported consumer goods. Based upon 

that experience, including the application of regional preference programs for apparel that began in 2000, with the enactment of the Caribbean Basin Trade Partnership Act and the African Growth and Opportunity Act, USA–ITA has concluded 

that U.S. preference programs are too limited, too complicated, and insufficient to 

act as a primary motivator for the placement of business. Substantial reforms are 

necessary to ensure that U.S. preference programs serve their development objectives. 

Since at least 2005, when USA–ITA’s then Chairman of the Board testified before 

the Trade Policy Staff Committee’s subcommittee on the Generalized System of 

Preferences (GSP), USA–ITA has been urging the Administration and the Congress 

to rationalize the many individual U.S. preference programs into a single preference 

program. Our recommendation is to follow four criteria: 

1) base the preference program upon the GSP program, 

2) expand the product coverage to include apparel and home furnishings, 

3) apply to all covered products the rule of origin established under the GSP 

program; and 

4) substantially expand funding for capacity building to address deficiencies in 

productivity and infrastructure. 

We discuss each of these points in detail below. 

Establish One Unified Preference Program 

If providing a basis for the developing countries to attract investment, produce 

competitive goods, and evolve into more sophisticated economies is truly the objective, the answer is to establish a single uniform program that is more user- and 

business-friendly. 

USA–ITA envisions a single GSP program that includes apparel and textile home 

furnishings in place of the diverse regional preference programs that currently provide duty-free treatment. These various regional programs, which include CBTPA, 

AGOA, the Andean Trade Preferences Act, as currently amended by the Andean 

Trade Promotion and Drug Eradication Act (ATPDEA), and the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE), apply varying rules and are scheduled to be in effect for varying periods of time. All of that 

undermines the ability of both less sophisticated and highly experienced companies 

to ensure that they are complying with the rules and preparing the proper documents, and to do so efficiently. 

The current regional and product segregated approach also means that each regional grouping of countries and their potential customers expends considerable energy and funds lobbying the U.S. Congress for amendments and extensions and 

competing with one another for Congressional attention and approval for programs 

aimed only at narrowly defined regions. That is counter-productive. A single consolidated U.S. preferences program is more manageable and sensible would more efficiently and effectively serve trade development objectives. 

Expand Product Coverage To Include All Consumer Goods, Including Apparel 

A single unified preference program must include all of the products that the beneficiary developing countries are best able to produce. The manufacture of apparel 

products, as well as home furnishings, are among those products that have served 

as the first rung on the ladder of development, yet they have been expressly excluded from consideration for benefits under the U.S. GSP program since its inception in 1975. As originally drafted, the U.S. GSP law barred benefits for products 

‘‘subject to textile agreements.’’ In 1996, with the international quota program 

scheduled to expire at the end of 2004 and the reference to ‘‘textile agreements’’ 

therefore about to be rendered meaningless, the Congress amended the exception for 

textiles and apparel to say that the President may not designate any textile or apparel article as an eligible article if it was not eligible on January 1, 1994, the year 

before the quota phase out process began. The result is that even though textile and 

apparel products are now truly inside the World Trade Organization and no longer 


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the awkward exception to WTO rules, the most important program the United 

States has to help developing countries further their economic development remains 

out of reach. Instead, these products are subject to far more limited and complicated 

preference programs, as discussed in greater detail below. 

There is no longer any justification for excluding apparel and home furnishing 

products from a single U.S. preference program like the GSP program. Currently, 

16 industrial countries have GSP programs. Other major developed countries, particularly the European Union, but also Japan, include textile and apparel products 

in their GSP programs. 

Some in the U.S. textile industry have been quoted as saying they want to help 

the developing world maintain their share of the international production of textile 

and apparel products. The simplest and most effective way is to support an expansion of a single preference program to include apparel and home furnishings. Indeed, including apparel and home furnishing manufactures as eligible articles under 

an expanded GSP program represents the positive approach to supporting the ability of developing countries compete following the end of the international quota program, as opposed to the protectionist approach. 

Importantly, the assumption that the reduction or elimination of apparel tariffs 

for all beneficiary developing countries will erode the preference currently provided 

to less and least developed countries who benefit from programs such as the AGOA 

is also misplaced. In the absence of quota restrictions that tightly limited access for 

suppliers with the capability to provide the quality, efficiency and value demanded 

by the U.S. market, preference programs like AGOA alone are insufficient to induce 

U.S. buyers to do business in countries that are beneficiaries under those programs. 

To the contrary, the generally more onerous origin rules that apply under U.S. preference (and to some extent, some free trade agreements) programs, including the 

increased risk of non-compliance, have offset some, if not most, of the supposed duty 

benefit in any event. 

A User-Friendly Rule of Origin Is Key 

Simply consolidating U.S. preference programs into a single unified program that 

includes apparel and home furnishings is not enough, however. Reform also must 

address the confusingly complex array of origin rules that have evolved in each of 

the various preference programs established for apparel. USA–ITA firmly believes 

that the GSP origin rules are appropriate for apparel and textile home furnishings 

and should be applied in place of far more complex and confusing rules that have 

been developed to date. Under the GSP origin rules, there must be a substantial 

transformation, 35 percent value added within the beneficiary country or countries, 

including up to 15 percent value added from United States components, and direct 

shipment to the United States. 

In the context of apparel, this origin rule would likely mean that a ‘‘double substantial transformation’’ must occur, if fabric is sourced from other than a GSP eligible beneficiary supplier. Fabric invariably accounts for the overwhelming value of 

an apparel product—typically the fabric accounts for as much as 60 percent of the 

cost of a garment. Under existing rulings issued by U.S. Customs and Border Protection, to meet the GSP origin rules, fabric must be cut in a beneficiary developing 

country, which would constitute one substantial transformation, making that cut 

component a product of that beneficiary developing country. However, a second substantial transformation, in the form of sewing/assembly manufacturing operations, 

also must occur. These are significant manufacturing processes and clearly should 

be recognized as origin conferring for purposes of a preference program. 

U.S. officials often talk about our preference programs as providing trade liberalization, but the reality is that the United States often negates that supposed expanded market access with complex and business-inhibiting origin rules that substantially restrict that access. This is particularly true in the apparel sector. It is 

time to stop giving on the one hand and taking away on the other. 

The variances in the rules of origin among the various preference programs that 

apply to apparel under the regional programs are daunting, for all parties: for manufacturers in beneficiary developing countries, for input suppliers—which include 

U.S. manufacturers, for U.S. importers, and even for U.S. government officials responsible for implementing these programs. The result is that these programs create 

significant risks for participating companies, who have to be sure that they are in 

compliance, and that means additional costs. 

For example, U.S. buyers considering sourcing product under preference programs 

must take into account: 

• whether there are higher costs for the qualifying inputs, 

• the initial (and continued) training involved to identify the relevant rules and 

processes, 


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• the additional paperwork necessary to demonstrate compliance, 

• the additional staff required to oversee and handle the compliance issues, and 

• the legal fees associated with ensuring and confirming compliance. 

The plethora of different rules of origin under the different unilateral apparel 

preference programs (as well as those under the negotiated free trade agreements) 

only multiples these costs and often compels companies to limit the number of programs in which they participate. They must do so in part as a risk management 

measure, to reduce the potential for error (which can carry significant consequences 

in terms of a company’s overall compliance record with U.S. Customs and Border 

Protection). 

USA–ITA believes that these issues have actually discouraged participation in the 

preference programs, undermining their potential. What this means, ironically, is 

that because of the difficulty of these rules, including their limited flexibility, U.S. 

producers of fibers, yarns and fabrics are actually losing business. With a more 

flexible rule, such as the GSP rule of origin, U.S. manufacturers would win more 

business—including business they are steadily losing today. 

U.S. preference programs need to match business realities rather than try to manipulate or steer business to particular manufacturers. A review of the data for the 

existing apparel preference programs makes clear that with each passing year, the 

case for reform along these lines has only grown stronger. 

October 1st of each year marks the beginning of new quota periods for the Tariff 

Preference Levels (TPL) created in the four U.S. trade preference programs: AGOA, 

ATPDEA, CBTPA, and HOPE. While the first regional preference programs for apparel began in 2000, four additional TPLs have been created as recently as October 

2008. Following are the original start dates for each of these preference program 

TPLs: 

• AGOA Regional Fabric and Third Country Fabric Quota—October 1, 2000 

• AGOA Third Country Fabric Quota—October 1, 2000 [breakout created in 

2002] 

• ATPDEA Regional Fabric Cap—October 1, 2002 

• CBTPA Knit Apparel Regional Fabric Cap—October 1, 2000 

• CBTPA T-Shirt Regional Fabric Cap—October 1, 2000 

• HOPE Apparel—December 20, 2006 

• HOPE Woven Apparel—December 20, 2006 

• HOPE Knit Apparel—October 1, 2008 

Analyzing trade data since these preference programs began, U.S. apparel imports 

from each originally grew with the introduction of duty-free benefits. In the early 

years, many of the limits filled by fifty percent or more. The CBTPA T-Shirt Regional Fabric Cap was completely used in 2002, 2004, and 2005. But there is a 

steady decline in recent years. The 2009 quota period ended with none of the limits 

even close to filling. 

The only exception to the downward trend in TPL usage is Haiti, which has the 

newest preference program. The utilization of the HOPE Woven Apparel TPL has 

risen steadily since its creation in 2006. This TPL provides duty-free access to the 

U.S. market for woven apparel assembled in Haiti from fabric of any origin, a flexible and user-friendly rule of origin. There are no restrictions on the origin of the 

yarn or fabric, or on cutting or finishing. This TPL expires on September 30, 2018. 


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Year-by-Year Utilization Rates for U.S. Apparel Preference Programs 

Percent 

Fill 

September 30, 

2009 

September 30, 

2008 

September 30, 

2007 

September 30, 

2006 

September 30, 

2005 

September 30, 

2004 

September 30, 

2003 

September 30, 

2002 

Septem

20

AGOA Regional 

Fabric and 

Third Country 

Fabric Quota 15 .75% 16 .37% 21 .03% 23 .06 34 .28% 37 .96% 38 .38% 58 .39% 1

AGOA Third 

Country Fabric 

Quota 30 .50% 30 .91% 36 .68% 43 .36% 64 .40% 69 .02% 62 .59% 

ATPDEA 

Regional Fabric 

Cap 7 .37% 11 .40% 14 .44% 18 .01% 26 .69% 33 .14% 28 .14% N/A N/A 

CBTPA Knit 

Apparel 

Regional Fabric 

Cap 14 .81% 14 .43% 14 .98% 43 .17% 63 .58% 46 .11% 51 .73% 51 .78% 2

CBTPA 

T-Shirt 

Regional Fabric 

Cap 63 .34% 56 .84% 71 .60% 99 .67% 100 .07% 100 .05% 84 .82% 100 .00% 7

HOPE Apparel 4 .09**% 4 .95**% 3 .68*% N/A N/A N/A N/A N/A N/A 

HOPE Woven 

Apparel 22 .81% 14 .37***% 4 .30*% N/A N/A N/A N/A N/A N/A 

HOPE Knit 

Apparel 2 .07% N/A N/A N/A N/A N/A N/A N/A N/A 

Quota period from 3/20/2007–12/19/2007. **Quota period from 12/20/2007 & 2008–12/19/2008 & 2009. ***Original quota period of 12/20/2007–12/19/2008 changed 

10/1/2008. Previous quota data period of 12/20/2007–10/1/2008 ended with the limit 14.37% filled. New quota period is October 1, 2008–September 30, 2009. 


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Ultimately, it must be recognized that preference programs are a factor but not 

a motivator for most sourcing decisions by U.S. buyers. To ensure that the preference factor is a positive and not a negative, it is apparent that the rules must 

be universally understood and manageable. That is not the case today. 

Funding for Capacity Building Is Essential 

Ultimately, though, broad product coverage, user-friendly rules of origin and even 

lower wage rates cannot entice a U.S. retailer to source product in a particular factory if there are not also skilled workers who can produce quality products in the 

time and quantities necessary to meet the demands of the U.S. market. Instead of 

relying upon duty advantages, and the commitment of U.S. buyers to corporate social responsibility goals, these suppliers ultimately will achieve meaningful and 

long-lasting success only if they can provide the necessary quality, efficiency and 

value, including being able to transport those goods. That requires capacity building. 

Therefore, reform of the U.S. preference program system must include a significant 

investment in capacity building to provide developing countries the opportunity to 

create the infrastructure, manufacturing capacity, and trained workforce to meet 

the quality and compliance demands of U.S. companies. 

Conclusion 

USA–ITA strongly supports preference programs to help the less and least developed countries help themselves move up the development ladder and evolve into 

truly competitive suppliers of manufactured goods. But having a plethora of programs, with differing rules of origin requirements, with product exclusions and exceptions, and with differing expiration dates, and each program requiring separate 

legislation from the Congress to approve and renew them, has proven to be an unproductive means to achieve that objective, undermining the confidence of the U.S. 

business community in pursuing opportunities under these programs. Now is the 

time to reform these programs to create a single, comprehensive and user-friendly 

program. 

USA–ITA looks forward to working closely with the Committee over the next 

months to reform and rationalize U.S. preference programs to make it a more vibrant part of U.S. trade policy to assist developing countries. 

f 

Statement of the Republic of Mauritius 

For the past decade, the Africa Growth and Opportunity Act (AGOA) has been a 

central element of the United States’ trade and investment policy towards Sub Saharan Africa (SSA). AGOA provides unprecedented market access opportunities to 

SSA exporters with the ultimate objective of facilitating the integration of one of the 

poorest regions in the global economy. 

Through its various provisions, the AGOA legislation aims at creating a more robust manufacturing sector in the SSA region through regional integration. However, 

since the enactment of AGOA, although exports to the U.S. have been rising in overall terms, due primarily to petroleum exports, manufactured exports have not been 

doing very well. The second largest export category from SSA to the U.S.—namely 

textile and apparel—has suffered from the adverse global economic conditions in the 

post Multi-Fibre Arrangement (MFA) era. 

African countries have been exposed to overwhelming fierce competition from bigger developing countries in Asia with lower-cost labour and already well-developed 

textile and apparel sectors. Exports of textile and apparel from AGOA countries to 

the U.S. have declined by 25% (value) and 30% in volume between 2005 and 2008. 

Incidentally, exports of textile and apparel items from significant LDC apparel producers have increased by some 45% for the same time period. This has happened 

even without the same duty-free benefits enjoyed by SAA countries. It is a clear and 

undisputable fact that these countries have been the biggest beneficiaries of the 

MFA phase-out, while the SAA countries have been the biggest losers. 

Moreover exports from the SSA region to the U.S. remain largely undiversified 

despite the vast market access opportunities brought in by AGOA. Numerous reasons account for this, among others poor infrastructure, lack of buyer-seller information, strict requirements for agricultural exports as well as stringent rules of origin 

requirements in certain cases. 

In this perspective Mauritius fully supports providing development assistance to 

non-AGOA LDCs, but only on the condition that the price of such assistance not be 

borne by the AGOA beneficiaries through diminished opportunities for SSA exports. 

Accordingly, it is imperative for any preference reform proposal by the U.S. Congress to include improvements to the existing AGOA legislation so as to enable benVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00243 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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eficiary countries to continue to develop and integrate their economies and at the 

same time not to indirectly undermine existing AGOA preferences. 

Consequently, the Preference Reform Program should take into consideration the 

following crucial elements: 

(I) Make AGOA permanent with a view to providing greater predictability to 

investors. 

The lack of predictability and stability created by the expiration of 

AGOA will drive investors/buyers away from Africa. Moreover, the uncertainty over whether AGOA non-LDCs will have apparel benefits after 

2015 will drive buyers to other competitive LDCs outside Africa. In the 

event that different programs are applicable to LDCs and non-LDCs within Africa, regional integration will be undermined on the African continent. 

(II) Renewal of the third country fabric provision till AGOA countries become 

competitive enough in textile production. 

(III) Exclude from the Preference Reform Proposals those AGOA apparel categories which are very sensitive for Sub Saharan African countries, namely knit tops, woven shirts, sweaters and trousers. 

These products account for 90% of Sub Saharan African countries’ exports to the U.S. An alternative could be the adoption of an Earned Import Allowance Program (EIAP) whereby every garment made in AGOA 

countries and sourced by U.S. importers would give them the right to import an equivalent amount of apparel from the LDCs not part of AGOA. 

A higher ratio in favour of AGOA regional fabric would give an incentive 

to garment producers in Sub Saharan Africa and would also ensure that 

they do not deviate from the vertical integration process. 

(IV) Relax rules of origin for canned tuna. 

At present, the 35% value addition requirement coupled with the criteria of wholly obtained for the fish is too restrictive for AGOA countries 

which do not have a national fleet. We propose lowering the value addition to some 15% or to consider a change in tariff heading as originating 

criteria. Consideration could also be given to allow use of third country 

tuna in the production of canned tuna for some specified volume (e.g., 

30,000 tons) for AGOA beneficiaries. 

(V) Expand trade-related technical assistance and trade capacity building to 

encourage product diversification. 

27 November 2009 

Embassy of the Republic of Mauritius 

Washington, D.C. 

f 

Statement of the Bangladesh Garment Manufacturers and Exporters 

Association 

Bangladesh is one of the few Least Developed Countries (LDC) which has effectively pursued export-led industrialization since the early 1980s that enabled an increase in her exports from less than a billion U.S. dollars in early 1981 to more than 

US$15 billion in 2009. During the fiscal year 2008–09, 56% of Bangladesh’s economy 

was involved in the global economy, which was only 21% in FY 1980–81. Export, 

import and remittance are the major sectors of Bangladesh’s openness to 

globalization contributing 17.41%, 25.18% and 10.84% respectively to the country’s 

GDP. Significantly enough, the share of manufacturing sector to GDP has been 

growing successively over the last decade, recorded at 17.2% of GDP in FY 2008– 

09. This clearly shows the economy’s move to industrialization (manufacturing) 

which is significantly fueled by the Readymade Garment (RMG) industry in Bangladesh. As a consequence, per capita GDP is also on a rising trend which was recorded as US$621 in FY 2008–09. 

From an almost unknown entity in the early 1980s, the RMG sector became a 

major share of exports in the mid-1980s and has strengthened its base in the country’s export structure over time. There is no denying the fact that the Multi-Fibre 

Arrangement (MFA) quota system was a major factor which contributed to such 

achievement, while the policy supports by the Government of Bangladesh and the 

availability of a highly adaptive work force have also immensely helped the sector 

to groom-up to the present stage. 

The rise of the RMG industry in Bangladesh is closely linked to its export penetration to the U.S. market. The U.S. is the major trading partner of Bangladesh and 

the single largest export destination. U.S. imports from Bangladesh are dominated 


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by the RMG products (HTS 61 and HTS 62), constituting 89.52% of U.S.’s total imports from Bangladesh in 2008 (USITC Dataweb). Currently Bangladesh is the third 

largest apparel exporting country to U.S. (after China and Vietnam) with an export 

figure of US$3.35 billion in 2008, making up 4.59% of U.S.’s total apparel imports 

in the same year. While USA has ratified a number of international agreements 

calling for enhancement of the role of trade in development and invests heavily in 

development programs in Bangladesh, it maintains strict import measures for 

Bangladeshi goods. Under the current U.S. customs law, only about 0.8% of goods 

coming from Bangladesh qualify for duty free import. This leaves the RMG items, 

the most significant export products of Bangladesh, paying a hefty average tariff 

rate of 16.67% (2008). The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the government have been trying to obtain Duty Free and 

Quota Free (DFQF) access for apparel exports to the United States for many years. 

A number of trade preference bills took several years to become law, but no such 

bill could reach the floor of the House or Senate. 

a) Contribution of the Apparel Industry to Economic Development 

The RMG industry is at the backbone of the Bangladesh economy. Some of the 

significant contributions of the sector to the socio-economy of the country are: 

• The apparel export earnings of Bangladesh increased from US$31.57 million 

in FY 1983–84 to US$12.35 billion in FY2008–09, which is 79.33% of the 

country’s total export earnings in the same year. 

• Employment in RMG sector stands at 3.5 million at the present, 80% of them 

are less privileged women. 

• Female labor force participation in the country was only 8% in 1983–84 which 

increased to 18.1% in 1995–96 and 29.2% in 2005–06 (BBS), where they are 

to be primarily found in garment manufacturing industries. 

• Fostering forward and backward linkage activities (e.g. fabric, yarn, professional services, bank and insurance services, real estate services, storage, machinery and cotton cultivation). 

• The poverty level in Bangladesh has dropped from 49.8% in 2000 to 40% at 

present, and the contribution of the RMG sector to this reduction was one 

third. 

• The readymade garment industry has been playing a vital role to move the 

economy out of aid dependency to trade dependent. The AID–GDP ratio of the 

country started to decline as soon as the Export-GDP ratio started to increase 

(visible difference since FY 1993–94 when the Aid-GDP ratio was 6.65 and 

Export-GDP ratio was 7.48, and these ratios are recorded as 3.48 and 17.87 

respectively in FY 2007–08). 

• The industry in Bangladesh has led to the development of the entrepreneurial 

spirit, allowing the individual to come to the forefront and develop individual’s potential. 

• The sector is contributing significantly to achieve the Millennium Development Goals. In a moderate Muslim country like Bangladesh, the garment industry has brought a social revolution to the country: 

» In the last two decades, the country has seen women’s empowerment; 

» Poverty has been declining and primary education has increased; 

» Fertility rate has been declining and longevity of women has increased; 

» Child and women mortality rate has dropped. 

Competition in the Post-MFA Market: 

The 1 January 2005, abolition of the Multi-Fiber Arrangement (MFA) quota was 

a watershed event for this sector. Though Bangladesh did extremely well after the 

phase out of MFA, it is generally credited for the take-off of the Bangladeshi apparel 

industry in the 1980s and 1990s. The main beneficiaries of the MFA’s demise are 

the developing country producers that enjoy economies of scale, productive labor, 

vertical integration, and underutilized capacity. However, the success of Bangladesh’s RMG industry during the post MFA period was cushioned to a significant 

extent by the safeguard mechanism on China imposed by the U.S. and European 

Union. This safeguard mechanism was also lifted by EU from January 2008 and by 

U.S. from January 2009. As a result China’s apparel exports started to surge in U.S. 

since the beginning of this year and threatening the market share of Bangladesh. 

Apart from facing high tariffs in U.S. market, producers in Bangladesh face significant structural impediments like inadequate infrastructure and power supply in the 

country. 


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Impediments to Economic Development 

Bangladesh has been on the official United Nations list of LDCs ever since inde- pendence in 1971. With gross national income per capita of US$621, around 40% 

of the population live below the national poverty line. Despite growth in exports, 

the country struggles with a persistent merchandise trade deficit and infrastructure 

bottlenecks. Bangladesh is subject to recurrent and often devastating floods and 

tidal waves; natural disasters periodically wreak havoc on the economy in general. 

These constraints make it imperative that producers in Bangladesh not be further 

hindered by the barriers that their trading partners might erect. These problems, 

in one way or another, constrain the development prospects of Bangladesh. 

On this note, the economy of Bangladesh depends greatly on its access to foreign 

markets. The United States also offers special treatment to many LDCs, but the 

preferences extended to Bangladesh are not as generous as those granted to most 

U.S. partners. Bangladesh and other LDCs in the Asia-Pacific fall outside the scope 

of these regional preference programs, as far as the following points are concerned: 

• Of the LDCs, only those located in Asia and the Pacific are outside the geographic scope of special preference programs such as the AGOA and the CBI. • The average tariff on all imports from LDCs was 3.8% in 2006. While this 

was high compared to the average tariff on imports from OECD countries 

(0.8%), it was low compared to the average 14.9% tariff on imports from Bangladesh. • The average tariff on imports of apparel from Bangladesh was 16.67% in 

2008, compared to similar products imported from Haiti (a CBI beneficiary) 

and Lesotho (an AGOA beneficiary). 

The denial of duty-free access to major exports from Bangladesh to the U.S. market is a constraint on the socio-economic development of Bangladesh. Export-led 

growth, and especially exports of labor-intensive goods such as apparel, has long 

been a path out of poverty for developing countries. Trade in general, and especially 

exports of apparel, is a central element in the Bangladeshi development strategy. 

This sector provides employment for millions of poor and less skilled women, for 

whom work in apparel factories offers a means to provide for their families. The degree of access to the world’s largest market is a key factor in the extent to which 

Bangladesh can produce these goods and provide jobs for these women. 

The U.S. Tariff Policy and Its Implications for the Apparel Industry of Bangladesh: 

U.S. Imports from Bangladesh 

U.S. imports from Bangladesh totaled US$3.75 billion in 2008. It can be seen in 

the Annex 1, that the top ten imported products of U.S. constituted 99.37% of its 

total apparel imports from Bangladesh. Of the total U.S. imports from Bangladesh, 

only 0.58% imports (in dollar value) could avail the GSP benefit and the rest 99.42% 

(worth of US$3.72 billion imports) were denied the preference (table 2) and was subject to pay 15.32% tariff on average which is one of the highest amongst the top 

tariff paying countries to U.S. 

Some Notes on the U.S. Tariff Policy: 

Although quotas are no longer an issue for U.S. imports from Bangladesh, the 

same cannot be said for tariff. While the United States does extend preferential 

treatment to most LDCs through a variety of programs, there are substantial gaps 

in the coverage of duty-free treatment for both countries and products. The import 

tariff of U.S. raised about $25.79 billion in 2008 against its US$2.09 trillion imports 

(table 1). And a look at the revenues and the products reveals three basic points 

about the present U.S. tariff system: 

• Tariffs are higher on consumer goods than on industrial goods. • Within the consumer goods category, tariffs are low for luxuries and high on 

cheaper goods. • The bulk of tariff revenue comes from two types of products: shoes and 

clothes. From table 1, out of U.S.’s 2.09 trillion dollars worth of imports, the 

clothing imports paid US$73 billion which is 3.49% of total imports. However, 

this scenario is opposite in the case of tariff earning. The revenue raised from 

the clothing import tariff was 34.88% of the total tariff revenue collected in 

2008. • Tariffs are lowest on luxury goods and highest on cheaper goods that poor 

families buy. 

Far from receiving DFQF treatment in its access to the U.S. market, exclusion 

of apparel items in the U.S. GSP is the reason why Bangladesh (and other LDCs 


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depending on clothing industry) is amongst the top tariff paying countries among 

all U.S. trading partners. Table 2 shows that U.S. imports of apparel from Bangladesh during the same year was worth US$3.35 billion which is 89.52% of total 

imports from Bangladesh. In 2008 United States collected US$573.76 million worth 

of tariffs on goods imported from Bangladesh, of which $558.32 million was accounted for by clothing imports (HTS61 & HTS62). 

Why Trade Preferences Are Essential for Bangladesh 

The country depends greatly on its access to foreign markets. The clothing industry has remained the driving force behind Bangladesh’s exports, accounting for over 

77% of total exports during this decade. 

Bangladesh Faces Higher Tariffs 

The average duty on all imported products from Bangladesh was amongst the 

highest in 2008, and import tariff on clothing items from Bangladesh was even higher. The tariff collected by U.S. from Bangladesh in 2008 is equivalent of imposing 

US$3.98 in taxes on every person in the country, a country with per capita income 

of just US$621. On the other hand, in 2007 Bangladesh’s exports to U.S. paid 

US$522.91 million worth of tariff and in the same year received US$49.14 million 

in Official Development Assistance from USA (more than ten times). 

The Need for Access to Foreign Markets 

In today’s context, the market access issue bears utmost importance for 

strategizing sustainable economic growth of LDCs, particularly Bangladesh. Why? 

Because—firstly, the share of industry to GDP, particularly manufacturing sector, 

is increasing over other sectoral share. This indicates that the country’s economy is 

rapidly heading toward industrialization. The Government of Bangladesh does have 

the vision to increase industry’s share to GDP from 29% at present to 40% by 2021. 

Secondly—the export oriented industries have a greater role to play as the economy 

of Bangladesh has been getting increasingly exposed to globalization. Thirdly—our 

exports remain overwhelmingly concentrated to USA and EU. As Bangladesh is one 

of the highest tariff paying countries in USA, a preferential market access would 

help the country immensely to develop its industry and economy. 

The Existing Preferential Programs for LDCs Are Inadequate 

The United States has extended preferential access to developing countries ever 

since the Generalized System of Preferences (GSP) entered into effect in 1976, but 

excludes the commercially viable products of Bangladesh. Other programs that offer 

preferential access to the LDCs, as well as other developing countries, include the 

Caribbean Basin Initiative (CBI), which came into effect in 1984; the African 

Growth and Opportunity Act (AGOA), which came into effect in 2001; and the Haitian Hemispheric Opportunity through Partnership Encouragement Act, which came 

into effect in March 2007. Bangladesh must now compete in a market where some 

providers enjoy the advantage of duty-free access to the U.S. market (especially FTA 

partners of the United States), while others have massive economies of scale and 

ready access to low-cost fabric. 

Lack of Backward Linkage Supports 

Bangladesh does not grow cotton; neither is it an integrated producer of textiles 

and apparel. The country is primarily an assembler of imported inputs into finished 

garments. With the abolition in January 2005 of the Multi fiber Arrangement 

(MFA), the prime necessity was to develop backward linkage facilities (spinning, 

weaving, knitting, and dyeing-finishing) to ensure local supply of quality fabrics for 

the RMG industry, where the knitwear sector has already become quite self sufficient. However, U.S. knitwear imports from Bangladesh comprise around 25% and 

the other 75% goes for woven garments. Bangladesh has to compete in a market 

where some providers enjoy massive economies of scale and ready access to low-cost 

fabric. 

Bangladesh Is Not a Threat to U.S. Producers 

The U.S. apparel industry is in a process of contraction and consolidation, and 

this process has been underway for decades. Import penetration of clothing by U.S. 

is increasing than local production. That process would continue regardless of any 

changes that might be made in the market access granted to LDCs. From the available evidence, it seems too unlikely that elimination of remaining tariffs on 

Bangladeshi apparel will have any discernible effect on these trends. The U.S. industry has redirected itself to higher ends of the market. Producers of textiles and 

textile products have shifted towards segments in which they serve niche markets 

profitably. Bangladesh caters to the low end of the clothing market, and the real 


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competition in that segment is not with U.S. producers but among the Asian producers. 

Satisfying the Lower Income Consumers 

Imports of apparel from LDCs benefit U.S. consumers, and especially those lowerincome consumers for whom clothing and other essentials comprise a major share 

of expenses. As the apparel items face the highest tariffs, inclusion of these items 

in the U.S. GSP scheme will bring in a win-win scenario for both U.S. consumers 

and LDC exporters, and thus allow the United States to do well by doing good. 

Commitment through WTO 

The decision taken at Hong Kong for industrialized countries to provide duty-free 

access to at least 97% of their tariff line, the developing countries could ensure that 

the duty-free initiative is meaningful to LDCs. Take apparel and accessories from 

LDCs (i.e., the sector subject to the highest average tariffs). In 2006, this sector accounted for $6.2 billion worth of U.S. imports from the LDCs. The first twenty 8- 

digit items in this category accounted for $4.6 billion (i.e., 74.7% of U.S. imports 

from the LDCs in this sector). An exclusion for 3% of all tariff lines can be translated, if one wished to do so, into something effectively approaching a 100% exclusion for the apparel and accessories sector. 

Non-discriminatory Treatment Is Essential for LDCs 

LDCs have been identified as a separate category on the basis of certain pre-defined criteria and indicators. Thus, making sub-categories within this group goes 

against the principle of non-discrimination among LDCs. Bangladesh (and Cambodia) deserve parity treatment with SSA LDCs. On top of it, only five African countries benefit from apparel exports to the U.S. Of these five countries, three are not 

Least Developed Countries, while Bangladesh and Cambodia are LDCs. The only 

country with a lower per capita income than the Asian LDCs is Madagascar. Even 

Lesotho has a higher per capita income. If the U.S.’s goal is to address poverty 

through trade preference programs, it hardly makes sense to exclude poor countries 

such as Cambodia and Bangladesh. 

Need for a Humane Trade Reform 

However, while discussing about the trade policy matters, this is not just about 

the statistics, it is more about livelihoods. It is not just about export earning and 

GDP, it is also about the millions of people producing these goods to lead productive 

lives and providing opportunities for future generations. The U.S. President has reaffirmed his commitment to using trade policy to promote sustainable economic 

growth in developing countries. Bangladesh’s apparel industry is empowering 

women, which has had broader benefits for the society. Trade has been a good way 

for the developed countries to play a more proactive role in advancing the agenda 

for economic development of the poorer countries and it is time for the U.S. to play 

a more proactive role in this regard. 

Toward a More Development Oriented Preference Program 

Many significant trade preference programs take several years to become reality. 

The repeated introduction of the TRADE Act and the NPTDA has made significant 

progress in building support for the possibility of DFQF. There is a larger conversation going on with respect to preference programs in general and using a re-write 

of the GSP as the means by which DFQF status is given to the LDCs. This is by 

far the best bill we’ve ever seen as far as preferences reform. 

A Comprehensive Trade Preference Program 

We are expecting a comprehensive trade preference reform where the United 

States can meaningfully contribute to the development of the poorer countries. 

Though the Generalized System of Preferences or ‘‘GSP’’ scheme of the U.S. offers 

duty-free market access for 4800 products from qualified developing countries, including Bangladesh, it excludes the ready-made garment products which are of crucial commercial importance for countries like Bangladesh. 

The U.S. should provide through its GSP schemes DFQF market access for all 

products originating from all LDCs as accorded in the Hong Kong Ministerial Declaration, or at least to ensuring commercially meaningful market access for the 

LDCs. We appreciate that the U.S. has offered through WTO a list of products (apparel items) for faster tariff reduction which covers 29 apparel items, LDCs have 

to long for the conclusion of Doha Round for its implementation. 

Bangladesh’s competitiveness in the U.S.’s apparels market would increase quite 

substantively if its apparel items are able to enter at zero duty. This was likely to 

increase Bangladesh’s export of apparels to the U.S. by more than a billion U.S. dolVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00248 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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1 In Harmonized Tariff Schedule, Knitwear falls under Chaptered HS 61. 

2 Compiled from data of Export Promotion Bureau of Bangladesh. 

lar. The U.S. apparel market is worth about US$80 billion, where Bangladesh’s 

market share at present is about 4.59%. Bangladesh, thus, has a very good opportunity to increase her market share and foreign earnings from exporting apparels 

in the U.S. market, by taking advantage of the U.S. GSP. 

Conclusion 

Bangladesh is a democracy and special attention should be paid to advancing policies that spur economic development in this country. The industry has been progressing on all counts ranging from capacity strengthening to improvement of social 

and environmental standards. In September 2009 the U.S. Department of Labor 

(USDOL) published a survey report that found the garment industry of Bangladesh 

absolutely free of child labor. In order to encourage such progresses in LDCs, a U.S. 

GSP scheme allowing DFQF for apparel items would be immensely motivating and 

practical approach of U.S. 

f 

Statement of Bangladesh Knitwear Manufacturers & Exporters Association 

Bangladesh Knitwear Manufacturers & Exporters Association (BKMEA) represents the knitwear 1 sector which is the largest export earning sector of Bangladesh. It is a national association for this sector recognized by the Government 

of the People’s Republic of Bangladesh. Starting from 1996, BKMEA is now an association of more than 1593 members (October 2009). Knitwear contributes more than 

41% share in the national export earnings with an amount worth of US$6.4 billion 

in 2008–09. Besides primary activities, BKMEA continuously is working for the development of this sector in the form of Research & Development, market promotion, 

Social Compliance, Productivity Improvement and other functions. 

BKMEA always keeps close contact with the government of Bangladesh, Associations and Chambers, Non Government Organizations and others in policy making 

initiatives, development works and others. 

Duty Free-Quota Free (DFQF) Access: Why Bangladesh Needs It? 

Generally the least developed countries like Bangladesh’s export basket is not diversified like that of the developed countries. Textile & Clothing is a dominating export sector in Bangladesh and RMG (HS 61 & HS 62) alone constitute 79.33% (FY 

2008–09) of total export. Knitwear (HS 61) has the major share (41%) in the export 

pie of Bangladesh. Bangladesh Knitwear’s more than 76% goes to the EU, about 

15% to the USA and the rest to other markets. Woven garments about 50% goes 

to the USA and the rest to the EU and other countries. 

Bangladesh mainly needs DFQF market access in the USA to reduce huge unemployment problem, poverty alleviation, increase women empowerment most importantly to ensure socio economic development. This sector is playing one of the most 

important roles to reach the goals of National Strategy for Economic Growth, Poverty Reduction and Social Development (PRSP). This access can facilitate Social 

Compliance initiatives of government and private bodies in the factory level through 

the factory owners own initiatives. 

Contribution of Apparel Sector in economic development of Bangladesh: 

The knitwear along with woven sector of Bangladesh is contributing not only in 

export earnings, but also employment generation, poverty alleviation, removing social and economic disparity, industrial development, development of financial sectors 

and others. More than 2.8 million people are directly working in this sector. More 

than 70% of them are women. The spillover impact of the direct employment generation and economic activities of this sector are quite large and this sector becomes 

the primary sector for further industrial development of Bangladesh. The share of 

apparel export value in GDP of Bangladesh is more than 13% in FY 2008–2009. 

Recession and Bangladesh Apparel Export: 

After October 2008, Bangladesh apparel sector observes the recessionary impact 

with a negative export growth of ¥7.5% (month to month). In the first three months 

of FY 2009–2010, Bangladesh apparel sector experienced ¥9.71% 2 growth which is 

alarming for our future development. Small and medium firms are mainly affected. 

Some of the factories had closed and there are many examples of job cut in this sector. Many firms are now in uncertainty with their future plans and employed labor 


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3 Compiled from USITC Data. Calculated on the basis of Customs Value and Total Calculated 

Duties. 4Ghana, Kenya and Nigeria are classified as Low-income economies by the World Bank (July 

2006); in the same classification Cameroon, Congo, Namibia, and Swaziland are classified as 

Lower-middle-income economies and the rest are classified as Upper-middle-income economies. 

All these countries are from Sub-Saharan Africa. 5 Aruba, Bahamas, and Netherlands Antilles are High-income-economies. Barbados, Belize, 

Costa Rica, Dominica, Grenada, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the 

Grenadines, and Trinidad and Tobago are classified as Upper-middle-income economies and Dominican Republic, El Salvador, Guatemala, Guyana, Honduras, Jamaica, and Nicaragua are 

classified as Lower-middle-income economies. Except Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama all are Small Island Developing States. 6http://www.highbeam.com/doc/1P2-16742985.html, downloaded on December 1, 2009. 

force. DFQF access to Bangladesh will help Bangladesh to recover from the current 

crisis and thus the USA can be a part of our development partner. 

Being a low exporter, Bangladesh is one of the highest duty paying countries in the USA: 

Bangladesh is the 10th largest duty paying country staying at the 54th position 

in terms of export value to the USA in 2008.3 Bangladesh paid, in terms of duty, 

US$573.75 million by exporting only US$3.74 billion in 2008 of which US$3.35 billion was RMG, so it is evident that duty burden is heavy on RMG and so on to Bangladesh. Whereas France paid only US$391.23 million duty against export of 

US$43.37 billion and for England it is US$399.75 million against US$58.42 billion 

export to the U.S. market for the year 2008. The overall duty paying situation is 

almost similar for other developed countries. For a country like the USA with the 

size of the economy US$13.00 trillion the duty loss from Bangladesh means almost 

nothing, but this small opportunity will help Bangladesh to expand its business and 

increase foreign exchange earning which has huge socio-economic impact in the 

country. 

Bangladesh receives about US$151 million foreign aid from USA in 2008 whereas 

we pay duty more than US$573 million in the same period. As a LDC with a 76% 

dependence on a single sector, Bangladesh believes these types of discrimination 

should be recovered or relaxed in order to expedite the development of export sectors of Bangladesh. 

Status of LDCs in the U.S. Market and the Position of Bangladesh? 

26 LDCs from Africa are getting preferential access to U.S. market under the African Growth and Opportunity Act (AGOA). Besides, 14 more countries are also getting the preferential access under AGOA but they are not LDC, they are 4: Ghana, 

Kenya, Nigeria, Botswana, Cameroon, (Republic of) Congo, (Republic of) Cape 

Verde, Gabonese, Mauritius, Namibia, Seychelles, South Africa, and Swaziland, 

(United Republic of) Tanzania. 

Again under the Caribbean Basin Initiative (CBI) 23 countries are getting preferential access to U.S. market, they are: Aruba, Bahamas, Barbados, Belize, British 

Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, 

Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, 

Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, 

and Trinidad and Tobago. Among these countries only Haiti is a LDC, 3 are Highincome-economies and 17 are Middle-income-economies.5

Whereas Bangladesh is not getting such benefit despite being a LDC with per capita income of US$599 only.6 This picture should be changed and the country shall 

have 100% duty and quota free entry in the U.S. market for a better and equitable 

play ground with respect to other beneficiary countries. 

What Will Be the Effect on U.S. Local Industry? 

Bangladesh basically produces low value items where low cost labor is required 

and the process is in general not high tech or automated. These items are not feasible to manufacture in the U.S. where the labor cost is much higher compared to 

that of Bangladesh, so there is no question of disruption of local market. Moreover, 

the top 20 HS 8 digit level items have more than a 90% share of the total apparel 

export value of Bangladesh. It is an indication of how concentrated and how limited 

our export basket is. In such a position, it is not possible for Bangladesh to dominate U.S. apparel production houses. 

Rather there is a high potential of growth in export of U.S. cotton, yarn, and fabric to Bangladesh as the country still has to import a large amount of raw materials 

for its RMG industry. It is worthy to mention here that the U.S. already is a major 

supplier of cotton (HS52) to Bangladesh and ranked 6th in 2004, with US$75.54 


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7 Based on data downloaded from Trade Map on December 1, 2009. 

8For 90% of these women this is the first wage job (International Trade and Gender Equality—Has trade benefited female workers in developing countries?, Gurushri Swamy.) 9The case of Readymade Garment Industry in Bangladesh, Gurushri Swamy, June 2006. 

10 ibid. 11Women who joined RMG after marriage (at age 16) given birth to 1st child at 17; on the 

other hand, who joined unmarried, generally marry at 20 and have their 1st children at 21. This 

development must be seen as positive and supportive to women’s health. Women have also 

gained respect in their families. (ibid). 

million, ranked 5th in 2005 with US$42.73 million and 6th in 2007 with US$64.05 

million.7

Social Effect in the U.S.: 

Most of the Bangladeshi products’ price are by far lower than that of the major 

competitors, so the U.S. lower end consumers will be able to buy quality products 

at a cheaper price if Bangladesh is allowed DFQF in the U.S. market; as is mentioned earlier apparel products from Bangladesh will be at least 16% cheaper than 

that of competitors because of the zero duty effect. At the same time, these products 

cannot be manufactured in the U.S. locally because of the much higher wage in the 

labor market. So, there is clear benefit for the U.S. lower end consumers who want 

to buy quality apparel products at a cheaper price. For them Bangladesh offers the 

solution. That is the social effect on lower end consumers is positive. We also do not see any disruption in the employment level. Available data from 

the Bureau of Statistics, U.S. Department of Labor shows that the unemployment 

level in all industry in the U.S. has fallen significantly after MFA phase out and 

before recession. The quota removal from the WTO member countries cannot have 

a dint in the employment condition, then allowing DFQF to Bangladesh should not 

have a negative impact on the U.S. employment condition. 

Social Effect in Bangladesh: 

The RMG sector employs more than 2.8 million workforces out of which roughly 

70% are women.8 Such a huge magnitude of women labor force has been able to 

engage in a formal sector through the RMG. In fact, RMG is the 3rd main sources 

of employment for women in the country after agriculture and domestic services. 

70% of the total female employed in the country’s manufacturing sector engaged in 

RMG.9 Before the emergence of RMG in Bangladesh women generally worked in 

non-formal sectors. The majority of the female RMG workers come from households 

of lower socio-economic status and has fewer attractive economic opportunities.10

The sector contributed a lot in the human development particularly for women in 

the following areas: 11 Women empowerment, Gender equality, Improved health & 

nutrition, Reduced child marriage, Reduced infant mortality, etc., all of which have 

profound socio-economic effect in the context of Bangladesh. 

The more market access for the sector means a lot more improvement of the 

women of Bangladesh. U.S. must not deny these unprivileged women from having 

a better way of life. Besides, the development in the sector also contributed a lot 

in the growth and development of the backward linkage industry of the country that 

also created a lot of jobs in the country. 

Spirit of Hong Kong Ministerial: 

The basic spirit of Hong Kong Ministerial on 97% duty free entry was to facilitate 

LDCs export to the developed nations. But in the U.S. market, most of our textile 

and apparel products are out of the 97% list of the USA and falls under 3% criteria. 

That’s why, it is important for us to have the DFQF market access in all products 

including textile and clothing. 

DFQF Market Access will Reduce Aid Dependence: 

By this facility, Bangladesh will be able to increase trade in the USA which ultimately will help us to reduce foreign aid dependence and increase financing for development from our internal source. 

Concluding Remarks: 

The potential effect of providing DFQF market access to the local U.S. industry 

is positive, U.S. low end consumers will be benefited, and there is no negative impact foreseen on the U.S. employment level as well. The potential revenue loss to 

the USA will be minimum, direct revenue loss from loss of Duty can be offset by 

increase in cotton export from the USA. 

On the other hand the DFQF opportunity will give Bangladesh to increase its export that has profound socio-economic impact on the country. It also will help us 

to recover from the current crisis in export due to recession. The facility will help 


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Bangladesh to integrate more in world trade. Therefore, BKMEA, on behalf of the 

garments manufacturers and millions of workers working here, urges the USA to 

provide the Duty Free-Quota-Free access to Bangladesh and help to grow and eradicate poverty. f 

Submission by the Centre for Policy Dialogue 

Need for Inclusion of Apparels in the Revised US–GSP Scheme 

Over the past several decades the U.S. Generalized System of Preferences scheme 

(US–GSP scheme) has served an important role in advancing the interests of trade 

and development of low income and developing countries. Preferential treatment accorded to these countries allow their exports to enter U.S. market at less than most 

favoured nation (MFN) tariffs which provide exports of those countries substantial 

competitive edge. This has helped the recipient countries by way of enhanced export 

earnings, more employment, higher investment and greater socio-economic well 

being. 

Regrettably, the US–GSP scheme, as it stands today, does not include most of the 

apparels items, which are major exports for many least developed countries (LDCs) 

of Asia and Africa. Whilst the concerns of African LDCs have been addressed 

through African Growth and Opportunity Act (AGOA) and of the Caribbean countries through Caribbean Basin Initiative (CBI), since 2002, whereby the apparels exports of these countries receive duty-free, quota-free (DF–QF) treatment, the 15 Asia 

Pacific LDCs are yet to receive similar treatment for export of apparels. A revised 

US–GSP scheme that provides DF–QF treatment to all apparels items originating 

from all LDCs will provide parity treatment to AP–LDCs (after seven years). It may 

be noted that a comprehensive US–GSP scheme will also benefit African/Caribbean 

LDCs which will have preferential market access under a more secured and predictable arrangement compared to initiatives such as the AGOA or CBI which have an 

element of uncertainty inherent in such bilateral initiatives. Providing DF–QF 

treatment to AP–LDCs will also benefit U.S. retailers and consumers who will have 

access to apparels at relatively lower prices. 

Arguments Favouring Inclusion of Apparels Exports from AP–LDCs 

It is often said that AP–LDCs such as Bangladesh and Cambodia are performing 

well in the U.S. market even without DF–QF treatment under US–GSP scheme and 

hence there is no need to bring apparels items within the ambit of US–GSP scheme. 

To this our response is thus: 

An LDC is an LDC according to certain criteria of low per capita income, 

overall underdevelopment of manufacturing sector, and susceptibility to various 

vulnerabilities including environmental. An LDC can not be similar to developed/developing countries in one particular sector, and LDC in all other respect! 

LDCs such as Bangladesh have had to put in a lot of effort to help graduate 

their export-oriented apparels sector to where it is today, and have to continue 

to support this sector even at present, through various fiscal, financial, institutional and policy support! Bangladesh had to have allocate her scarce resources 

to this sector, through zero/lower taxes, reduced interest rate, infrastructural 

support, compliance assurance, support for workers so that wages could remain 

low and various other allocations. Often this has meant depriving other sectors 

from financial and other resources which could have contributed to the development of those sectors. A low income country such as Bangladesh is doing everything to ensure that this one sector, apparels, that contributes about 80.0 per 

cent of her total global export, and about 90.0 per cent of her export to U.S., 

continues to perform well. If this support was not given this sector would not 

have been competitive—many people would not get jobs, many would fall below 

the poverty line and Bangladesh will be more entrenched in the poverty trap. 

Supporting competitiveness of this sector of Bangladesh through DF–QF treatment will allow Bangladesh to remain competitive and allocate some of her resources to other sectors which it can not do today. Thus, Bangladesh should not 

be penalised for her (limited) success in apparels. A revised GSP scheme that 

includes apparels will help Bangladesh in her efforts to improve her economic 

situation and help her graduate from the ranks of LDC, which is one of the 

major objectives of U.S. preferential scheme under the GSP. 

It is pertinent to recall here that in 2008 average tariffs on Bangladesh’s apparels 

in USA ranged from 12.0 per cent to 32.0 per cent (average 15.7 per cent), whilst 

the African/Caribbean LDCs have been entering the U.S. market at zero-tariff since 

2002. In 2008 import duties imposed on Bangladesh’s apparels at U.S. customs 


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points was $558.0 million ($405.80 million for Cambodia). Preferential access will 

provide AP–LDCs competitive edge which will help them to compete primarily with 

China and Vietnam which enjoy larger market share in U.S. Indeed, Bangladesh 

and Cambodia do compete with certain items of apparels exported by 2⁄3 African 

LDCs. However, what is being suggested is only similar treatment (after seven 

years). Besides, apart from providing DF–QF treatment under AGOA/CBI, USA also 

has a host of other support mechanisms in place to help African LDCs, which are 

also receiving substantial financial assistance from other sources. African LDCs can 

be supported through other additional measures as well. 

Financial Crisis and Its Impact on Apparels Exports of Bangladesh 

As is known, the other routes through which AP–LDCs could potentially receive 

more preferential treatment than now, for apparels, don’t look promising at present. 

Progress in the Doha Round negotiations have been rather slow, and the possibility 

of receiving preferential treatment for apparels under the multilateral trading system is bleak. Bangladesh’s good performance in terms of apparels export during the 

global economic crisis (in 2008) came at a high cost and was not easy. Bangladesh 

government had to allocate substantial amount of resources from its stimulus package to support her export-oriented apparels sector, taking resources away from other 

possible candidates and going for higher deficit finance this year, with possible economy-wide adverse consequences. Whilst apparels export growth has been sustaining, 

thus far, for Bangladesh, the lagged response of the ongoing financial crisis is becoming increasingly visible. Growth of export of apparels from Bangladesh in the 

first quarter of Fiscal Year 2009–10 (July-September) was (¥) 9.68 per cent compared to matching period of FY2008–09 with apparels export for September, 2009 

being particularly bad (posting a negative growth of (¥) 26.74 per cent). 

Bangladesh should not be punished because of her hard-earned, limited success in apparels 

In view of the above, we strongly feel that the U.S. GSP scheme which has served 

the objective of assisting low income and developing economies, needs to be further 

revised to allow countries such as Bangladesh to enable them to make better use 

of the scheme towards their socio-economic development. It is to be noted that in 

2008 only about less than 1.0 per cent of export value of Bangladesh to U.S. market 

was able to enjoy GSP treatment. It will be pertinent to remember that when the 

Doha Round negotiations are complete and implemented, tariff peaks (on apparels) 

will come down substantially (16 per cent tariffs will come down to about 5.5 per 

cent), and the value of preferential margin will come down significantly. It is thus 

important that apparels be included in US–GSP scheme now since the window of 

opportunity to benefit from US–GSP scheme will be fast shrinking in view of the 

expected fall in tariff rates. 

It is also relevant to recall here that Bangladesh has been identified as one of 

the most vulnerable countries in terms of climate change adding to the complexity 

of the challenges she is facing and the need to allocate resources for attendant tasks 

of mitigation and adaptation. 

In view of the above, we strongly urge the Ways and Means Subcommittee on 

Trade to kindly consider including apparels items in the revised US–GSP scheme, 

and thereby assist LDCs such as Bangladesh to address the challenges of developing 

their economies in an increasingly competitive global market. 

f 

Statement of International Sugar Trade Coalition 

Granting DFQF Status to Sugar From LDCs Would Do More Harm Than 

Good to Developing Countries 

The International Sugar Trade Coalition (ISTC) respectfully submits these comments for the record of the November 17, 2009 hearing by the House Ways and 

Means Trade Subcommittee on U.S. trade preference programs. ISTC urges that 

sugar be excluded from any reform of U.S. trade preference programs. 

ISTC is a non-profit association representing sugar industries in developing countries from Africa, the Caribbean, Central and South America, Asia and the Pacific 

that are traditional suppliers of sugar to the U.S. market under the raw sugar tariff 

rate quota (TRQ), including: Barbados, Belize, the Dominican Republic, Fiji, Guyana, Jamaica, Malawi, Mauritius, Panama, the Philippines, St. Kitts and Nevis, 

Trinidad and Tobago, and Zimbabwe. ITC’s members represent approximately onehalf of the raw sugar TRQ allocations. 


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*Drought-induced damage to the cane crop in India caused world-market prices in 2009 to 

double and rise above the world average cost of production for the first time in more than 30 

years. Raw cane sugar, which accounts for the great bulk of world sugar trade, is currently 

priced around $500 per metric on world markets and around $600 on the U.S. market. Sugar 

is traded on New York and London exchanges and is historically more volatile in price than 

crude oil. 

U.S. industrial users of sugar (such as chocolate and candy manufacturers) and 

certain free-trade think tanks and NGOs have suggested that least developed countries (LDCs), especially those in Africa, would benefit by extending duty-free, quotafree treatment (DFQF) to sugar imports to the United States from LDCs. Experience with the reform of the EU sugar regime has proven, however, that including 

sugar in DFQF initiatives actually does more harm than good to developing countries. For that reason, in its testimony presented at the November 17, 2009 hearing, 

the Common Market for Eastern and Southern Africa (COMESA) recommended that 

sugar should be excluded from DFQF initiatives. ISTC agrees. 

1. Access to the U.S. Sugar Market Is Valuable Because of the U.S. Sugar 

Program. 

In considering whether sugar should be included in DFQF for LDCs, one has to 

start with the question why LDCs want to export sugar to the United States in the 

first place. According to the International Sugar Organization (ISO) the vast majority—roughly 80%—of the sugar produced in the world is consumed within the country of origin. Most sugar-producing countries, including some LDCs, maintain the 

viability of their sugar industries through measures (including TRQs, subsidies, etc.) 

to ensure that the price of sugar in their internal markets is above their local cost 

of production. 

There are only two major import markets where, over the past half century, sugar 

prices have been consistently above the world average cost of production: the EU 

and the United States. The EU price was traditionally significantly higher than the 

U.S. price, which made access to the EU market the most sought-after by sugarexporting countries. But as a result of a WTO challenge brought by Brazil, Australia 

and Thailand, coupled with the impact of the EU’s Everything But Arms (EBA) initiative, which extended DFQF to LDC sugar, the EU reduced its sugar reference 

price by 36%. Today, the U.S. and EU market prices are the closest they have been 

in decades. Depending on currency exchange and freight rates, the U.S. price may 

actually provide greater returns for some exporters from time to time. As a result, 

access to the U.S. market today is relatively even more attractive than ever before. 

In addition to the premium-priced EU and U.S. markets, sugar is also traded on 

the so-called ‘‘world market,’’ where prices are typically well below the world average cost of production.* Only the lowest cost sugar producers, Brazil, Australia and 

Thailand, intentionally target the world market. Other countries may occasionally 

dispose of surplus production on the world market, which only further depresses the 

world market price. No LDCs and no African countries (with the possible exception 

of South Africa) produce sugar with the intention of exporting to the world market 

precisely because the price is usually below their cost of production. 

The U.S. sugar program ensures that the market price is above the cost of production through a combination of (1) TRQs on imports from traditional suppliers; (2) 

domestic marketing allotments to control the amount of domestic sugar in the market; and (3) ‘‘nonrecourse’’ loans to domestic sugar producers. Through these measures, the U.S. Department of Agriculture (USDA) balances the interests of domestic 

sugar producers, U.S. consumers, and traditional foreign suppliers, with the goal of 

maintaining a stable market. The resulting U.S. market price is in the mid-range 

of internal market prices around the world. 

A total of 39 countries, all but two of which are developing countries, hold allocations under the U.S. raw sugar TRQ. (Australia and Taiwan are the developed quota 

holders.) The developing-country quota holders include four LDCs: Haiti, Madagascar, Malawi and Mozambique. Consistent with GATT Article XIII, quota shares 

under the TRQ are assigned on the basis of actual exports to the United States during a representative base period. Countries not assigned quota shares are not traditional suppliers to the U.S. market. 

Sugar exports are the life’s blood of many of these developing-country quota holders. Sugar exports represent as much as 24% of total GDP (e.g., Swaziland) and up 

to 93% of agricultural revenues (e.g., Fiji) for many these developing-country quota 

holders. Literally millions of farmers and workers earn their livings in the sugar 

industries of these developing-country quota holders. The non-LDC developing-country quota holders are significantly more dependant upon sugar exports than are the 


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LDCs (i.e., sugar exports are a larger percentage of total exports for the non-LDC 

developing countries). 

The U.S. sugar program is beneficial to developing-country quota holders because 

it provides them with access to a market where the price is consistently remunerative, i.e., above their cost of production. Uncontrolled increases in the flow of sugar 

into the U.S. market risk undermining the U.S. price, reducing the revenues upon 

which developing-country quota holders rely. Developing-country sugar exporters 

need a balance between the volume of access and the value of that access, because 

increased access at a price that is below the cost of production is worthless. 

2. Granting DFQF to LDC Sugar Risks Destroying the U.S. Sugar Program, 

Which Is Already Vulnerable Because of NAFTA. 

The U.S. sugar program has remained in effect since 1982 with only relatively 

minor changes precisely because it has been effective in balancing the interests of 

domestic producers, U.S. consumers and traditional foreign suppliers—all at no 

budgetary cost to the U.S. taxpayer. This balance of interests has been seriously disrupted by the North American Free Trade Agreement (NAFTA), which gave Mexico 

DFQF access to the U.S. market. U.S. sugar imports from Mexico have sky-rocketed 

from 7,258 metric tons (MT) before NAFTA to 1.3 million MT during the just-ended 

2008–09 quota year. In the meantime, U.S. sugar imports from the 39 traditional 

suppliers have fallen to the minimum level bound in the Uruguay Round (approximately 1.1 million MT), and the U.S. market price has become more volatile, jeopardizing sugar export revenues for the developing-country quota holders that depend 

on access to the U.S. sugar market. 

The U.S. Administration learned its lesson from NAFTA. No subsequent FTA negotiated with a sugar-producing country has included DFQF treatment for sugar. 

Rather, all U.S. FTAs since NAFTA have strictly limited the volume of sugar to be 

imported duty-free under the FTA. The reason is simple: DFQF treatment for sugar 

is incompatible with maintaining a premium price. 

Adding another major source of DFQF sugar to the U.S. market would seriously 

depress the U.S. market price, thereby further reducing sugar export revenues by 

all developing-country quota holders. Even worse, extending DFQF treatment to 

sugar from LDCs could collapse the sugar program completely, which would benefit 

neither current developing-country quota holders nor LDCs. Rather, the only beneficiaries of such an outcome would be (1) the U.S. industrial sugar users, who would 

then be able to source sugar at the lowest possible price; and (2) the lowest cost 

exporters of sugar, none of which are LDCs, primarily Brazil, Australia and Thailand. 

Twenty-four LDCs are significant sugar producers. Of these, five are currently 

major exporters: Malawi, Mozambique, Myanmar, Sudan and Zambia. These five 

LDCs export an average of 1.1 million MT of sugar annually. 

[The information was not received at time of printing.] 

Total annual U.S. sugar consumption is about 9.5 million metric tons. Domestic 

producers by law are guaranteed the opportunity to supply 85 percent of that total. 

Traditional suppliers are guaranteed the opportunity to supply 1.1 million metric 

tons, about 11 percent, under WTO agreements. Mexico faces no limits and supplied 

about 1.3 million MT, over 12 percent of the market, in the 2008–09 marketing 

year. Massive oversupply and a price collapse is a serious risk. It has been reported 

that Malawi, Mozambique and Sudan are already expanding their sugar production 

dramatically (doubling it according to some sources) to take advantage of their new 

DFQF access to the EU under EBA. With the recent reduction in EU sugar prices, 

a result of EU sugar market reforms, some or even all of these increased LDC exports—as much as another 1.4 million MT, almost 15 percent of U.S. consumption— 

might be diverted to the U.S. market under DFQF. Supplies could equal over 120 

percent of consumption, making it impossible to maintain the sugar price required 

by law without government purchases of sugar on an unprecedented and extremely 

costly scale. 

But even that is not the worst case scenario. A newly-introduced bill, the New 

Partnership for Trade Development Act, H.R. 4101, would extend DFQF status to 

all AGOA beneficiaries, as well as the non-African LDCs. This group of 29 countries 

exports on average 2.8 million MT of sugar annually. 


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Sugar Producing Countries Included in H.R. 4101 

DFQF Access for Sugar to U.S. Market 

(Thousand metric tons, most recent three-year average) 

Production Imports Consumption Exports Net Exports 

LDCs 

Angola 30 270 305 

Bangladesh 125 1,067 1,219 

Benin 11 43 39 9 

Burkina Faso 32 36 66 

Burundi 20 20 

Chad 34 18 50 

DR Congo 75 73 137 10 

Ethiopia 307 127 443 17 

Guinea 28 75 95 20 

Haiti 1 185 185 

Madagascar 25 150 172 

Malawi 297 1 180 137 136 

Mali 37 40 75 

Mozambique 297 169 175 296 127 

Nepal 150 17 150 10 

Niger 15 50 65 

Sierra Leone 62 15 34 41 26 

Somalia 22 70 93 

Tanzania 278 185 457 17 

Togo 5 40 45 

Uganda 285 15 250 15 

Zambia 320 1 157 155 154 

LDC Subtotal 2,456 2,648 4,413 727 443 

Non-LDCs 

Congo (Brazzaville) 58 15 34 41 26 

Kenya 529 234 724 45 

Mauritius 482 41 42 477 437 

Nigeria 53 1,295 1,150 150 

Senegal 100 75 170 7 

South Africa 2,363 180 1,638 1,018 838 

Swaziland 657 306 350 350 

Non-LDC Subtotal 4,243 1,840 4,064 2,088 1,651 

Grand Total 6,698 4,488 8,477 2,815 2,093 

(Source: USDA, Foreign Agricultural Service, November 11, 2009.) 

There can be no serious debate over whether the U.S. sugar program could withstand additional imports of that magnitude. At a minimum, the U.S. sugar price 

would fall significantly, probably below the cost of production in almost all developing-country quota holders, thereby immediately slashing sugar export revenues by 

those developing countries that are already dependent upon exports to the United 

States. The sugar program would no longer be tenable. 

As was experienced by the African, Caribbean and Pacific (ACP) countries in the 

reform of the EU regime, sugar export earnings by the developing country quota 

holders would plummet, tens of thousands of sugar workers would lose their jobs, 

and in some countries (Trinidad & Tobago and St. Kitts & Nevis in the case of the 

EU reform) the entire sugar sector would shut down, causing major economic dislocation and social upheaval. 

Another policy option would be to replace the current U.S. sugar program with 

a more traditional commodity program (e.g., deficiency payments). Under this 

model, U.S. sugar producers would be guaranteed a certain price, but imported 

sugar would trade at the so-called world market price, which as noted above is typically below the cost of production of all but a handful of countries. The result would 

be the loss of sugar export revenues by both current quota holders and LDCs, as 

sugar trade would be dominated by in Brazil (the world’s largest and lowest-cost 

producer), and to a lesser extent Australia and Thailand. The only winners would 

be the large corporate sugar users, commodity speculators, and the handful of nonLDC lowest-cost sugar exporters. 

The outcome would be a classic case of ‘‘robbing Peter to pay Paul,’’ as existing 

trade by the developing countries that are already dependent on their sugar exports 

to the United States would be destroyed to make room for new imports from LDCs. 

The United States sugar program, which sustains a premium price for sugar by limiting supply, would likely be overwhelmed. Increasing poverty in one group of poor 

countries in the hopes of reducing poverty in another group of poor countries is not 


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a worthy policy goal. Indeed, there is a serious risk that even the LDCs would lose 

out, being replaced by the small group of super-competitive non-LDC sugar producers. The result would be increased sugar exports by Brazil, and increased poverty in almost all other sugar exporters, including the LDCs the DFQF initiative 

is intended to help. 

For all these reasons, ISTC respectfully requests that sugar should be excluded 

from DFQF treatment in any preference reform legislation. 

Respectfully submitted, 

Harry Kopp 

Vice President 

November 30, 2009 

f 

Statement of the Bangladesh Secretariat 

1. Bangladesh is one of the LDCs, making serious efforts for graduating from its 

present economic status within shortest possible time. Its efforts need to be supplemented by development partners so that the process can be expedited. Trade is used 

by Bangladesh as one of the tools for reducing poverty and ensuring economic 

growth. 

2. Our development efforts however, have been facing enormous challenges due 

to global financial meltdown. It is apprehended that the current financial crisis 

would adversely affect the livelihoods of our poor people. The crisis has been affecting various sectors of our economy including exports, imports, remittences, portfolio 

flows, FDI and foreign aid. But, the severity of the effect seems to be more devastating for the relatively poor people who have less resources to face the crisis. 

3. In this context, it is to be noted that a number of developed and developing 

countries have already come up with huge stimulus packages to overcome the 

present crisis. Since the poor countries do not have enough resources, they cannot 

support their enterprises to survive in the present crisis, even though this crisis was 

not generated by them. The stimulus packages in the developed countries have been 

reducing the competitiveness of the small exporters of the poor countries in the global market and posing further challenges for us. The present crisis along with the 

high import prices of food, fuel and fertilizer persisting since 2006 pose enormous 

challenge to our economy. 

4. Bangladesh has already been experiencing about 12% down trend in its export 

growth compared to the last three months of the previous financial year. Even more 

worrying is the fact that the export of textile and apparels which account for 80% 

of our exports, has declined by 27% in the month of September for which we have 

the latest data, compared to September, 2008. The cumulative effect of all these 

issues have been pushing a huge number of people to severe poverty, and threatening the achievement of MDGs which the global community had committed on the 

eve of this millennium. In this context, an improved market access is extremely important to face the current crisis and continue the on-going development efforts. 

5. The export basket of Bangladesh is extremely narrow and has only a few items 

in it. The duty-free and quota-free market access in the U.S. market, particularly 

for textile and apparels, is extremely important for Bangladesh. During 2008–09, export from Bangladesh was US$15,565.19 million of which RMG export accounted for 

US$12,737.6 million. The export of textile and apparels constitute about 81% of our 

exports. 

6. The United States of America (USA) is one of the major trading partners of 

Bangladesh. About 26% of our export is destined to USA. During 2008–09, Bangladesh exported US$4052 million worth of products to USA, and RMG export constitute about 90% of the total export to USA. The major export item, textile and 

apparels, accounts for more than 90% of our export to the U.S. market. However, 

all these items fall in the tariff peaks, and Bangladesh pays around 16% duty in 

U.S. market, which is much higher than many OECD countries. 

7. The tariff on apparels (as on other industrial goods) is expected to gradually 

come down under the Non-Agricultural Market Access (NAMA) negotiations in the 

WTO. This would mean that the gains from the duty-free market access for Bangladesh’s apparels would erode over time. If USA doesn’t provide zero tariff market 

access now, then such preferential market access would become less significant in 

the near future due to global reduction of tariffs. So, it is important that this facility 

is accorded as soon as possible so that countries like Bangladesh can be benefited 

from such scheme. 


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8. A further analysis of our export to USA shows that Bangladeshi apparel items 

compete mainly in low cost production for the lower end of the U.S. market. 

Bangladeshi exporters do not appear to compete with U.S. producers. Expansion of 

our export of RMG is directly linked with poverty reduction and women empowerment. A total of 2.8 million workers are directly employed in the RMG sector, of 

which more than 80% are female workers. A better market access for RMG products 

in U.S. market will undoubtedly help reduction in poverty and further empowerment of women as envisaged in Millennium Development Goals (MDGs). 

9. The United States offers special treatment to most of the LDCs, but the preferences extended to Asia-Pacific LDCs including Bangladesh are not as generous as 

those granted to other regions. About 93% of all U.S. imports from Bangladesh are 

dutiable, and the average duty on all imports in 2008 was about 16%. 10. It is worth mentioning that Bangladesh paid $525 million duty on its export to the United States in 2008. That is equivalent of imposing $3.5 in taxes on every 

person in Bangladesh. When one considers that 29% of the Bangladeshi population 

subsists on less than $1 per day, such tax appears to be especially inappropriate. 

11. By granting Duty Free Quota Free (DFQF) treatment to Bangladesh for its 

major exportable items, the United States would not only support Bangladesh, it 

will also benefit U.S. consumers, especially those low-income persons for whom 

clothing is a major item in the family budget. Moreover, trade with Bangladesh also 

benefits U.S. exporters. It may be mentioned here that during 2003–2007, the apparel industry of Bangladesh imported US$297.28 million worth of cotton from the 

United States. Bangladesh also imported fabric, textile machinery, buttons and 

other inputs. The beneficiaries include not only those producers who contribute to 

the Bangladeshi garment industry, i.e., cotton growers and manufacturers of textile 

machinery, but also farmers and other producers whose sales can rise in tandem 

with the rise of Bangladeshi people’s purchasing power. Given the size of Bangladesh’s industry, further opening of the U.S. market will have little impact on the 

U.S. apparel industry. American producers abandoned the low-end of the commodity 

clothing market years ago. 

12. It is apprehended by some quarters that the developing countries and LDCs 

who are covered by the African Growth and Opportunity ACT (AGOA) and Caribbean Basin Initiative (CBI) would be harmed once Asia-Pacific LDCs are granted 

DFQF treatment. In reality, African and Caribbean countries would face fierce competition from India, China and Vietnam as they have strong backward linkages and 

export in bulk quantities. Moreover, not all AGOA and Caribbean countries are involved in textile and apparels sector. A closer scrutiny is thus required instead of 

considering all the AGOA and CBI beneficiaries in the same way thereby depriving 

the Asia-Pacific LDCs from their due. 

13. Bangladesh has been putting enormous efforts to integrate itself to the global 

economy and has taken several important steps towards a more market-oriented 

economy. It still needs some flexibility and supports to overcome its supply-side bottlenecks and turn its comparative advantage into competitive advantage. A small 

gesture from U.S. by providing DFQF market access will not only enhance our export, it will ultimately help the millions of our poor workers and their families to 

earn a livelihood and come out of the vicious circle of extreme poverty. 

14. Another issue, which is extremely unfair to Bangladesh, is the Annex 4 of the 

NAMA modalities of the WTO. As it stands now, in the context of Annex-4, Bangladesh, Cambodia and Nepal, would receive less favorable treatment than two developing DACs in terms of access for apparels in the U.S. market. As a result, Bangladesh, Cambodia and Nepal will need to pay about 6–8 percentage higher duties 

for the seven items included in the Annex-4 compared to the two developing DACs. 

These items cover more than 60% of export of Bangladesh to the U.S. market; export competitiveness of these items will be seriously undermined as a result of such 

treatment. 

15. Bangladesh likes to reiterate once again that it should not be punished for 

its hard-earned and limited success in the export of apparels. In this time of crisis 

and hardship, the country has allocated precious resources to maintain the market 

share in the only sector where it has achieved some comparative advantage through 

painful efforts. While giving assistance to this sector, the country has to deprive a 

host of other sectors. It is fair that we would not be treated as a developed country 

for our success in a particular sector. We should be considered as an LDC because 

all our economic and social indicators clearly identify us as such. 

Permanent Secretary 

Ministry of Commerce 

Bangladesh Secretariat 

f 


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1 U.S. Government Accountability Office, U.S. Trade Preference Programs Provide Important 

Benefits, but a More Integrated Approach Would Better Ensure Programs Meet Shared Goals, 

Report No. GAO–08–443, (Washington DC: Government Accountability Office, 2008), p. 19–20. 

Statement of the Chevron Corporation 

Pursuant to the notice on November 17, 2009, announcing the Subcommittee on 

Trade Hearing on the Operation, Impact, and Future of the U.S. Preference Programs, Chevron is pleased to submit comments for the record. Chevron commends 

the Subcommittee for its timely hearing. The United States has never before engaged in an in-depth review of its trade preference regime and this is an important 

initiative. The Generalized System of Preferences (GSP) was first enacted in 1974, 

and over the past 35 years four programs have been added: the Caribbean Basin 

Initiative (CBI—1983), the Andean Trade Preference Act (ATPA—1991), the African 

Growth and Partnership Act (AGOA—2000), and the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE—2006). 

Chevron strongly supports the preference programs, which promote trade with developing countries, help diversify their economies, and create a foundation for sustainable growth lifting millions out of poverty. Chevron is one of the largest investors in sub-Saharan Africa and has partnered with nations there for 70 years now. 

It has been a particularly strong advocate for AGOA, where it was one of the founders of the business coalition that pushed for the original passage of the program. 

The company has seen the real difference trade-enhancing programs can make in 

the region, particularly those like AGOA that are targeted toward small and medium-sized enterprises. 

AGOA, ATPA, CBI, GSP and HOPE together represent a successful effort by the 

United States to open its market to over 130 countries around the world in the belief that trade expansion is a stairway to development. The programs have resulted 

in trade growing faster with countries that participate in the programs as compared 

with those that do not.1 And, through various eligibility criteria, they have in turn 

helped to further U.S. policy goals such as improving protection of labor, human and 

intellectual property rights, combating illegal narcotics, and strengthening the rule 

of law and good governance. 

Two of the programs—ATPA and GSP—expire at the end of 2009. Chevron believes they should be extended to ensure that those whose livelihoods depend on 

them continue to enjoy their benefits while Congress and the Administration undertake a review of these programs. As Congress examines reforms, Chevron urges it 

to consider changes that would strengthen the programs, ensure that that they support longstanding U.S. efforts to promote the rule of law and good governance, and 

limit the ability of governments with sustained records of behavior inconsistent with 

standard international norms to reap trade preference benefits. Chevron also believes it is critical that there be differentiated treatment for countries such as Ecuador that have flouted international standards on rule of law, investment disciplines, 

and investor protections. This differentiated treatment should involve, among other 

things, shorter extension periods and consideration of limited product coverage. 

Chevron’s experience in Ecuador is one example of why an increased emphasis on 

rule of law is appropriate, particularly with respect to ATPA. Chevron is involved 

in a long-standing dispute with the Government of Ecuador over responsibility for 

environmental impact in Ecuador’s Amazon region. In Chevron’s view, entities 

owned or controlled by the Government of Ecuador inappropriately continue to enjoy 

ATPA trade preferences despite that government’s behavior in this case and its 

broader efforts to undermine the rule of law and investment protections for U.S. 

companies. 

As brief background, in the nineteen seventies, eighties and early nineties a Chevron subsidiary was a minority partner in a consortium with Ecuador’s state-owned 

oil firm Petroecuador to develop energy resources in Ecuador. When the consortium 

ended in the early nineties, Chevron’s subsidiary remediated oil sites proportional 

to its share in the consortium, as agreed with the Government of Ecuador. The Government of Ecuador and Petroecuador thereafter signed agreements acknowledging 

that the subsidiary had successfully completed the remediation and fully released 

it from any further environmental liability related to the consortium. 

After the partnership ended, Petroecuador continued to operate the project by 

itself for years with a well-documented record of oil spills and other serious environmental mismanagement, both in the sites that the Chevron subsidiary had remediated and in others where Petroecuador had responsibility for remediation but did 

not do so. In 2003, private plaintiffs filed a lawsuit in Ecuador against Chevron 

alone—not Petroecuador—for environmental remediation of the entire former concession area, seeking retroactive application of a law enacted in 1999. Chevron acVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00259 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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knowledges that there are environmental impacts in the former concession area, but 

it believes that the environmental condition is the direct result of Petroecuador’s 

failure to fulfill its remediation obligations and not operate in an environmentallysound fashion. 

Chevron was prepared to see this dispute litigated. There have, however, been 

consistent efforts by the Government of Ecuador to interfere with the litigation and 

to direct a judgment against Chevron, including such actions as: 

• Ecuador’s President publicly committing to support the plaintiffs; • Representatives of the Attorney General’s office conspiring with plaintiffs’ 

lawyers to undermine the integrity of the 1995 Settlement Agreement and the 

1998 Final Release; • Ecuador’s Prosecutor General manufacturing illegitimate criminal indictments against Chevron counsel and others involved in the previous release 

agreements. 

Chevron believes the actions of Ecuador’s Executive and Judicial branches disregard Ecuadorian law, international obligations and norms, and Chevron’s basic 

right to a fair hearing. It is sufficiently concerned about its inability to receive due 

process that on September 23, 2009, it filed an arbitration claim under the U.S.- 

Ecuador Bilateral Investment Treaty, investment agreements and international law. 

Ecuador’s continued disregard for the rule of law and due process extends well 

beyond Chevron’s case and is recognized by many in and out of the U.S. government. The U.S. Department of State, the Office of the U.S. Trade Representative, 

Transparency International and the World Bank all have noted that there are serious concerns with Ecuador’s judicial system and that rule of law in Ecuador is 

weak. Most recently, President Obama’s June 30, 2009, report to Congress evaluating Ecuador’s compliance with ATPA eligibility criteria noted continued concerns 

over the investment climate in Ecuador and the politicization of legal proceedings 

there. 

Yet despite continued U.S. expressions of concern about Ecuador’s actions and intentions, the Government of Ecuador appears determined to stay on its current 

course. At the end of October, Ecuador announced its intention to withdraw from 

13 bilateral investment treaties, including the U.S.-Ecuador Bilateral Investment 

Treaty. This announcement builds on its earlier statement of intent to withdraw 

from the globally respected International Center for the Settlement of Investment 

Disputes (ICSID), where it has been a respondent in 13 cases. Ecuador is only the 

second country, out of 156 ICSID signatories, to do so; Bolivia is the other. 

ATPA Reforms to Better Promote Development and Reinforce Support for 

Rule of Law 

Despite its behavior, Ecuador continues to enjoy trade benefits under ATPA. 

Chevron supports ATPA’s goal of assisting the people of Andean countries to develop 

their own export-related industries, and Ecuadorian businesses in many product 

areas, such as cut flowers and tuna, enjoy ATPA benefits. Ironically, however, a 

principal ATPA beneficiary is the Ecuadorian government itself. In 2008, petroleum 

products accounted for more than 94 percent (by value) of Ecuador’s exports to the 

United States that were eligible for preferential treatment under ATPA. While a 

small number of private oil producers remain in Ecuador, state-owned Petroecuador 

is by far the largest producer and exporter. In 2008 alone, the Ecuadorian government saved an estimated $4.3 million in duties that would otherwise have been 

owed on Petroecuador’s exports. 

In the case of ATPA and Ecuador, the very government that renounces its international legal obligations is the prime beneficiary of ATPA. Chevron believes that 

any renewal or reform of ATPA therefore should increase the emphasis on the need 

for beneficiary countries to follow the rule of law, to better target benefits to private 

enterprise in beneficiary countries, and to require periodic reviews to ensure that 

the strengthened eligibility criteria are actually being met. Chevron also believes 

that given growing challenges facing U.S. companies in Ecuador that Congress 

should recognize these problems by differentiating ATPA extension for Colombia/ 

Peru and Ecuador. 

In particular, Chevron urges that Congress consider the following: 

• Add A Criterion on ‘‘Rule of Law.’’ Progress toward establishing and abiding by the rule of law, due process, and an impartial judiciary is mixed among 

the Andean countries. Adding an eligibility requirement to ATPA that beneficiary countries must adhere to international norms regarding the rule of law 

could help encourage those countries that are lagging behind to undertake 

much needed reform, and it would reinforce the interest of the administration 

and the Congress in ensuring fair and equitable treatment of U.S. firms and 


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workers around the world. The President should have the flexibility to withdraw or limit a country’s benefits for conduct that violates core U.S. principles 

even if not otherwise specifically covered in the legislation. Chevron recommends the following new eligibility criterion: 

‘‘The President shall not designate any country a beneficiary country 

under this chapter if such country fails to adhere to international norms on 

the rule of law and due process, including respect for an independent judiciary, and the fair administration of justice to U.S. citizens and corporations.’’ 

• Give the President the Discretion to Deny Benefits that Flow Primarily 

to the State. Ninety-four percent by value of Ecuador’s ATPA-eligible exports 

to the United States are petroleum products, delivering a significant direct 

benefit to Ecuador through exports by Ecuador’s state-owned oil company. 

While the President currently has the ability to limit ATPA benefits for any 

article, Chevron believes the Congress should make explicit the President’s 

discretion to withdraw or limit benefits that flow primarily to the State, and 

that given Ecuador’s flouting of U.S. concerns with its behavior, Ecuador 

should have its benefits so limited. Chevron is unaware of any U.S. company 

producing oil in partnership with Ecuador, so this action would not impact 

any U.S. company, and it would not affect the price of Ecuador’s petroleum 

products to U.S. consumers, which is set in world markets. Chevron recommends the following provision: 

‘‘The President may by proclamation limit or suspend the duty-free treatment provided by this chapter with respect to any eligible article if the majority of the total value of the article produced in the beneficiary country 

is produced by the state or a state-owned entity.’’ 

• Congress Should Note Ecuador’s Continuing Problematic Behavior. In 

the last year, both Congress and the administration have recognized problematic behavior on the part of Ecuador. The bill that extended the operation of 

ATPA through the end of 2009 segregated Ecuador for special scrutiny, and 

the President issued a report on ATPA in June of 2009 which noted concerns 

with Ecuador’s behavior, including its politicization of a lawsuit against Chevron, its withdrawal from the International Centre for Settlement of Investment Disputes, and its imposition of higher tariffs and quotas on a large 

number of imports. Ecuador continues to flout these concerns by continuing 

to politicize the lawsuit against Chevron and vowing to defy arbitration decisions in favor of foreign investors and adverse to the government, with President Correa even stating that ‘‘[W]e are not going to let these multinational 

companies continue to treat us like colonies.’’ Any preference program reform 

or extension should acknowledge these ongoing problems to avoid the appearance of rewarding Ecuador despite its lack of progress on these areas of Congressional and Administration concern. 

• Require Comprehensive, Periodic Reporting. The Congress should require 

consistent, periodic reporting every six months on the operation of ATPA. 

Such reporting will give added importance to monitoring compliance with eligibility criteria as well as provide information on the impact on the program 

on local economies, including promotion of export diversification. 

The U.S. trade preference programs are successfully helping to lift people out of 

poverty around the world. They represent the United States extending a helping 

hand, not a hand-out, to those who want a better life, and Chevron remains committed to supporting the programs. As the Subcommittee examines trade preference 

reform, Chevron urges it take into account how these programs may more effectively 

address the increasingly important issues of respect for rule of law and due process 

globally by beneficiary governments. Chevron appreciates this opportunity to provide input to the Subcommittee and would welcome further dialogue. 

f 

Statement of the African Coalition for Trade, Inc. 

Preference Reform Must Not Be Allowed To Destroy AGOA 

The African Coalition for Trade, Inc. (ACT) appreciates the opportunity to submit 

these comments for the record of the November 17, 2009 hearing on U.S. trade preference programs held by the Trade Subcommittee of the House of Representatives 

Committee on Ways and Means. 


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ACT is a non-profit association of African private sector groups involved in trade 

with the United States, especially under the African Growth and Opportunity Act 

(AGOA). ACT’s members come from the private sectors in Botswana, Kenya, Lesotho, Madagascar, Mauritius, Swaziland, South Africa, Tanzania, Zambia and 

Zimbabwe. ACT has been a leading spokesperson for the African private sector 

throughout the development, enactment, implementation and amendment of AGOA. 

AGOA has been the United States’ most successful program for encouraging economic development and poverty reduction in Africa. Since its enactment in 2000, 

AGOA has been the cornerstone of U.S. economic policy concerning Africa. Although 

U.S.-Africa trade has grown in virtually all sectors, apparel trade has been AGOA’s 

biggest success. In response to the trade preferences created by AGOA, African apparel exports to the United States nearly tripled during AGOA’s first five years in 

effect, 2000–2004. An estimated 300,000 new jobs were created in the African textile 

and apparel sector, providing livelihoods for nearly two million people, many of 

whom were sustained by subsistence agriculture before AGOA. 

But this dramatic and widely-acclaimed success proved to be fragile. With the end 

of the Multi-Fiber Arrangement (MFA) system of quotas in 2005, the infant African 

textile and apparel industry was subjected to unprecedented competition from much 

larger and well-established apparel producers in Asia, especially China, Bangladesh, 

Cambodia and Vietnam. With the end of the MFA quotas, U.S. imports from these 

Asian apparel giants skyrocketed. On the other hand, AGOA apparel exports to the 

United States have fallen by 30% since 2005, and an estimated 100,000 AGOA-created jobs have been lost in Africa. 

By contrast, Asian least developed countries (LDCs) that would benefit from preference reform proposals, especially Bangladesh and Cambodia, have fared much better. As illustrated by the following graph, since the end of the MFA, U.S. apparel 

imports from Bangladesh have surged by 50%, and imports from Cambodia are also 

up 40%. While apparel imports from Cambodia have declined somewhat during 

2009, Cambodia remains a significant net winner from the expiration of the MFA 

quotas. U.S. apparel imports from Cambodia for the 12 months ending September 

2009 are up 21% from 2004 levels. By contrast, Africa is one of the primary losers 

from the restructuring of global apparel trade that followed the expiration of the 

MFA. ACT’s members in the textile and apparel industry in Africa report that much 

of the business they have lost since 2005 has shifted to Bangladesh and to a lesser 

extent Cambodia. 

Accordingly, it must a bedrock principle that any general action on preference reform must: (1) do no further harm to AGOA; and (2) strengthen and extend AGOA 


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to make Africa more competitive. To that end, ACT respectfully recommends that 

any general preference reform legislation should: 

a. Renew AGOA on a permanent (or at least long-term) basis comparable 

to the permanent Caribbean Basin Initiative (CBI) program to provide greater stability and predictability sought by investors and U.S. buyers. By contrast, the recently introduced New Partnership for Trade Development Act 

(NPTDA), H.R. 4101, would allow AGOA to expire in 2015 (or 2019 if there 

is a successful conclusion to the Doha Round), thereby sending the exact opposite message to investors and buyers and discouraging them from continuing to do business with Africa in the interim. 

b. Renew on a permanent (or at least long-term) basis the AGOA thirdcountry fabric provision, which has been the key to AGOA’s success. On 

the other hand, the NPTDA would create a new rule of origin for non-AGOA 

LDCs that would allow them to use fabric from any origin, provided it is cut 

and sewn in an LDC beneficiary. This generous rule of origin is the de facto 

functional equivalent of AGOA’s third-country fabric provision. Extending it 

to already-competitive LDC apparel giants like Bangladesh and Cambodia 

will seriously undermine AGOA and further accelerate the exodus of the apparel industry from Africa to Asia. 

c. Eliminate the distinction between LDCs and non-LDCs under AGOA. 

Greater regional integration is another key to the future success of AGOA. 

Accordingly, the AGOA distinction between LDCs and non-LDCs should be 

eliminated so that all AGOA beneficiaries would have access to third-country 

fabric and the provision for non-apparel textile products. The LDC/non-LDC 

distinction under AGOA discourages regional integration and is counterproductive. As a corollary, any preference reform initiative should provide 

full benefits to all AGOA beneficiaries, including those that do not meet the 

UN LDC definition, such as inter alia Ghana, Kenya, Mauritius, Nigeria, 

South Africa and Swaziland. Again, the NPTDA takes the opposite tack and 

would eliminate all benefits for AGOA’s non-LDCs when AGOA expires in 

2015 (or 2019). The uncertainty that would be created by the NPTDA would 

drive investors and U.S. buyers away from AGOA’s non-LDCs and would seriously handicap Africa’s efforts at regional integration. 

d. Expand AGOA to encompass all currently-excluded agricultural 

products other than sugar. Sugar trade is a special case and requires special treatment, as was recognized by the Deputy Secretary General of the 

Common Market for Eastern and Southern Africa (COMESA) in his testimony at the November 17, 2009 hearing. The International Sugar Trade Coalition (ISTC) has submitted a statement for the record of the Ways and 

Means Trade Subcommittee’s hearing that explains in detail the need for excluding sugar from duty-free, quota-free (DFQF) treatment in any preference 

reform legislation. ACT endorses ISTC’s statement. 

e. Revise the AGOA rule of origin for canned tuna. A number of African 

countries (including Ghana, Kenya, Mauritius and Senegal) export canned 

tuna to the EU, but exports to the United States are extremely small even 

though canned tuna is already theoretically eligible for duty-free under 

AGOA. This is because the applicable rule of origin is too restrictive. Relaxing the rule of origin would create a new product likely to be successful 

under AGOA. The current 35% value-added requirement could be replaced 

with a simple tariff shift requirement or reduced to 10% value added, coupled 

with a tariff shift. This change is necessary because the cutting, processing 

and canning that is done on-shore in Africa typically adds only about 10%- 

15% of the final value of the canned tuna. It is impossible to meet the current 35% requirement without a substantial local-flag fishing fleet, which no 

country in Africa has. (Africa meets the 35% requirement for exports to the 

EU by cumulation with the value created by catching the fish on EU-flag 

ships. This works for exports to the EU because there is a large EU-flag fishing fleet that serves Africa, but there is no comparable U.S.-flag fleet.) 

f. Any preference reform initiative should also include significant support for 

trade-related infrastructure development and trade capacity building in Africa. 

But even these AGOA enhancements will not be sufficient to save the African textile and apparel sector if already-competitive Asian LDCs like Bangladesh and Cambodia are given DFQF access to the U.S. apparel market. Indeed, consideration of 

providing DFQF benefits to LDCs must start with the premise that trade preferences are intended to help uncompetitive countries become more competitive. But 


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extending duty preferences to already-competitive industries is contrary to the policy justification for trade preferences. 

The NPTDA recognizes the serious threat that extending DFQF to apparel from 

Bangladesh and Cambodia would pose to AGOA. To try to minimize that threat, the 

NPTDA would impose a tariff rate quota (TRQ) on imports from Bangladesh and 

Cambodia of key apparel product categories that are of critical importance to the 

survival of the AGOA: cotton or manmade fiber (MMF) trousers and slacks (Categories 347, 348, 647, 648); cotton or MMF knit shirts and blouses (Categories 338, 

339, 648, 649); cotton and MMF non-knit shirts and blouses (Categories 340, 341, 

640, 641); and cotton and MMF coats (Categories 333, 334, 335, 633, 634, 635, 643, 

644). These product categories represent approximately 90% of apparel imports 

under AGOA and roughly 50% of apparel imports from Bangladesh and Cambodia. 

ACT does not believe that the NPTDA’s proposed TRQ will prevent the decimation 

of AGOA. This seems self-evident from the fact that U.S. imports of these products, 

especially from Bangladesh, are currently increasing even on a duty-paid basis. Giving in-quota duty-free status to these key products will only provide further encouragement for U.S. buyers to shift their orders from Africa to Bangladesh and Cambodia. 

Two witnesses at the November 17, 2009 hearing testified that all textile and apparel products from already-competitive LDCs (i.e., Bangladesh and Cambodia) 

should be excluded from DFQF eligibility to prevent preference reform from destroying the AGOA apparel industry. (See testimony presented by the National Council 

of Textile Organizations and COMESA.) An alternative would be to exclude those 

key textile and apparel products identified above from already-competitive LDCs 

from DFQF eligibility. 

Another alternative approach, however, would link the availability of DFQF treatment for apparel from already-competitive LDCs to the survival of the AGOA apparel sector, thereby creating a win-win for Africa, Bangladesh and Cambodia. To 

encourage greater sourcing of apparel from Africa under AGOA, an Earned Import 

Allowance Program (EIAP), similar to those already in effect under DR/CAFTA and 

the Haiti Hope program, would apply to allow U.S. importers to import apparel from 

already-competitive LDCs on a duty-free basis. By importing garments made in 

AGOA countries, U.S. importers would earn the right to import an equivalent volume of sensitive apparel duty-free from Bangladesh and Cambodia. In order to encourage vertical integration, which is critical to the future competitiveness of the African textiles and apparel industry, the EIAP would include double duty credit for 

garments imported from Africa that are made from African-origin fabric. 

By including the foregoing measures in any preference reform legislation, Congress can simultaneously strengthen AGOA and provide benefits to non-AGOA 

LDCs. ACT would be pleased to provide any further information or assistance the 

Trade Subcommittee may require. 

Respectfully submitted, 

Paul Ryberg 

President f 

Statement of the Coalition for GSP 

The Coalition for GSP is pleased to have the opportunity to provide the following 

views to the Ways and Means Committee on the operation of U.S. preference programs. In particular, we intend to focus our comments on the importance of preference programs to American competitiveness, and on ways in which U.S. preference programs can be improved so that their contribution to American competitiveness is maximized. 

The Coalition for GSP is an ad hoc group of U.S. companies and trade associations 

that use the Generalized System of Preferences (GSP) program to improve their 

competitiveness, as farmers, manufacturers, and suppliers of consumer goods to 

American families. Over the years, GSP has become an integral part of our businesses. Our members import a wide range of goods under GSP, from auto parts to 

jewelry to plywood to batteries to spices. We therefore have first-hand knowledge 

about how preference programs works—and don’t work—in U.S. company raw material and finished good sourcing plans. 

Preference Programs Matter—to Americans 

When thinking about whether or not U.S. preference programs ‘‘work,’’ one’s focus 

tends to be on whether they work for the beneficiary countries. This of course is 

appropriate as preference programs are designed to promote poverty-eradicating development in poor countries. 


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1The list of products in Table 1 is by no means exhaustive, nor does it always show the highest tariff rate in a given product grouping. 2See http://tradepartnership.com/pdf_files/2009_GSP_Update.pdf. p. 12. 3The Trade Partnership, ‘‘Estimated Impacts of the U.S. Generalized System of Preferences 

on U.S. Industry and Consumers,’’ prepared for the U.S. Chamber of Commerce, November 1, 

2006, http://www.tradepartnership.com/pdf_files/2006NOV_GSP_Impacts.pdf. 

Less common is a related consideration: how do they work for the American farmers, manufacturers, retailers and other importers who also use them? Preference 

programs succeed in their primary goal—promoting growth in developing countries 

through trade—only if U.S. companies find them attractive to incorporate into their 

sourcing and investment/production plans. U.S. companies will do so only if the benefits of the preference programs contribute positively to their ‘‘bottom lines,’’ if the 

programs can be relied upon, and if the rules and regulations associated with claiming program benefits are not so complicated as to be more trouble than the benefits 

are worth. 

Preference Programs Reduce Costs 

U.S. preference programs extend duty-free treatment to imports of selected products from selected beneficiary countries. Although on average U.S. most-favored-nation duty rates are among the lowest in the world, for many individual products 

they can be quite high (see Table 1) 1. The U.S. market is very competitive, so any 

program that saves U.S. farmers, manufacturers, retailers and other importers 

money—even pennies—can be highly attractive. GSP alone saved U.S. importers 

nearly $850 million in duties in 2008.2 The motivation to source from a preferenceeligible country can therefore be strong. 

Preference Programs Improve U.S. Competitiveness and Support U.S. Jobs 

A study conducted by The Trade Partnership for the U.S. Chamber of Commerce 

found that the impact of GSP on a variety of sectors of the U.S. economy is significant.3 It concluded: 

• GSP keeps American manufacturers and their suppliers competitive. In 2005, 

three quarters of U.S. imports using GSP were raw materials, parts and components, or machinery and equipment used by U.S. companies to manufacture 

goods in the United States for domestic consumption or for export. Electrical 

equipment and parts, and transportation vehicle parts are significant imports 

under GSP. 

• American families also benefit from GSP. Finished consumer goods typically 

sold by retailers accounted for 25 percent of GSP imports in 2005. Jewelry 

sold at lower price points was the most significant item. 

• GSP is particularly important to U.S. small businesses, many of which rely 

on the program’s duty savings to compete with much larger companies. 

• Annual sectoral benefits to consumers of GSP products range up to $273 million. 

• GSP imports support U.S. jobs. Direct and indirect jobs associated with moving aggregate GSP imports from the docks to farmers, manufacturers and ultimately to retail shelves totaled nearly 82,000 in 2005. 

RECOMMENDATION: In addition to thinking hard about ways in which U.S. 

preference programs might be changed to achieve certain policy goals, U.S. policy 

makers need to consider closely the impacts of changes on American companies and 

their workers. 

Preference Programs Can Be Improved 

As key as duty savings can be, however, our preference programs suffer from 

some important flaws that can lessen the enthusiasm for their use, and consequently limit their effectiveness in contributing to U.S. competitiveness and in 

promoting development that ultimately opens new markets for U.S. exports and investment. These include their stop-and-start nature, their inapplicability to many 

of the products made by developing countries, and their complicated nature. 

The Frequent Expirations of Preference Programs Discourage Importers 

and Investors From Using Them 

American companies’ ability to use the duty-free benefits available under U.S. 

preference programs is most effective when they know those benefits will be available by the time they need to import the products of interest to them. While the 

time from design to order to importation varies for each company, for some it can 

be quite long. For example, some products take as long as one year from design to 

importation. For others, the products are advertised in catalogues with a shelf life 


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4Office of the U.S. Trade Representative, ‘‘2007 Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth and Opportunity Act,’’ May 2007, p. 27. 

of at least six months. In all cases, U.S. importers need to know what the duty-status will be for the imported product at the very beginning of that process. 

If American companies can count on receiving duty savings under a preference 

program, they can incorporate those important cost savings into their pricing. But 

if the program expires mid-stream in the order-to-delivery process, importers can be 

caught with a serious financial burden. They cannot always adjust prices to customers to pass on the unexpected duties. So American companies have to evaluate 

the risk of losing the preferences mid-stream against the benefits of the duty savings. If the program is likely to expire, they often cannot incorporate the duty savings into their sourcing plans, and prices to customers will need to be higher to offset the risk. 

The damage frequent program expiration causes to investment decisions can be 

just as great, if not greater. Needless to say, the pay-back from a foreign investment—e.g., opening a new factory, ensuring that there is adequate infrastructure 

to support it, training workers—can take several years to happen. U.S. companies 

would thus be reluctant to begin new sourcing relationships that require such investment if they are predicated on the need for duty-free benefits under a preference 

program that may expire. 

With those planning constraints in mind, it is not surprising that the short-term 

renewals of GSP in the 1990s, compared to the long-term period from 2001–2006, 

affected usage of that program. From July 1993 through September 2001, Congress 

renewed GSP in fits and starts (largely due to the need to meet ‘‘pay-go’’ constraints). Planning sourcing using GSP was difficult if not impossible. Over this period, from 1994 to 2001, U.S. imports under GSP actually declined an average 2.2 

percent annually. But in 2001 Congress renewed GSP for six years, and as a result, 

imports from GSP beneficiary countries to the United States increased by an average of 13.2 percent annually. 

A long term for any preference program (the ideal of course would be permanence) 

is therefore important in encouraging sourcing from countries that do not yet have 

the infrastructure or production capability to be competitive suppliers of preferenceeligible products. The Chart below shows how the long-term renewal of GSP increased interest in sourcing from beneficiary countries. To the extent that some of 

Coalition members are interested in investing in new overseas production relationships, they need time to grow these suppliers. Short-term renewals of the program 

do not encourage this, and keep them focused on existing sources, whether they are 

GSP beneficiaries or not. 

RECOMMMENDATION: Make U.S. preference programs permanent. 

The Inapplicability of Preference Programs to Important Products Made by Poor 

Countries Encourages Sourcing from More-Competitive Suppliers in Asia 

One of the greatest frustrations for both developing country producers and U.S. 

purchasers is that the longest-lived and biggest U.S. preference program—GSP— 

does not cover imports of products best produced by labor-intensive developing countries. Most notably, these products include apparel and footwear. 

Bangladesh—a ‘‘least-developed country’’ by any measure—offers the best example. U.S. GSP benefits applied to just 0.6 percent of Bangladesh’s total exports to 

the United States in 2008, while 90 percent of Bangladesh’s total exports to the 

United States are dutiable apparel products. Similarly, only 0.2 percent of Cambodia’s total exports received GSP duty-free treatment, with 98 percent of the total 

exports to the United States being dutiable apparel products. Despite their classification as least-developed beneficiary countries, Bangladesh and Cambodia face 

trade-weighted tariffs averaging 15 and 17 percent, respectively, compared to an average of 0.7 percent on imports from the United Kingdom. As a result of these high 

tariff rates, the United States collected more duties on imports from Bangladesh 

($574 million) and Cambodia ($407 million) in 2007 than it did on imports from the 

United Kingdom ($400 million) or France ($391 million). 

The benefits of extending preferences to products developing countries are best positioned to make are demonstrated by the impact of the African Growth and Opportunity Act (AGOA). AGOA provides U.S. duty-free treatment (under stringent conditions, see below) to apparel imported from beneficiary countries. AGOA is widely 

viewed as responsible for the development of tens of thousands of jobs in apparel 

production in Lesotho, for example. The 2007 U.S. Trade Representative report on 

the operation of AGOA listed five new textile or apparel-related investments motivated by AGOA benefits, in Lesotho, Malawi, Mali, Swaziland, and Uganda.4


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5For the excruciating details, see . 

From the U.S. perspective, Members of the Committee should consider that an 

importer considering whether to source apparel with duties applied will evaluate the 

costs and benefits offered by Bangladesh, for example, compared to China or Vietnam, for example. For many apparel products, China or Vietnam offer cost, quality 

and/or delivery advantages Bangladesh cannot replicate. A savings of the 15 percent 

average duty on imports from Bangladesh therefore would be meaningful, increasing 

the incentive to source from Bangladesh rather than China or Vietnam. 

RECOMMENDATION: Extend permanent preference benefits to all products 

made by developing countries. 

Complicated Rules of Origin Frustrate the Use of Preferences 

Another problem with U.S. preference programs is the variety of rules of origin, 

some of which can be quite complicated, particularly for new-to-export foreign producers. The simplest of all rules of origin is GSP’s 35 percent value added rule. To 

qualify for benefits, a product must be the growth, product or manufacture of a beneficiary country and the sum of the cost or value of materials produced in the beneficiary country plus the direct costs of processing must equal at least 35 percent of 

the appraised value of the good. 

But the rules get much more complicated for apparel imported under AGOA or 

the Caribbean Basin Trade Partnership Act (CBTPA) preference program. (Remember that apparel generally is not eligible for GSP benefits.) Under AGOA, for example, U.S. importers must ensure that apparel meets 11 separate detailed requirements. 5 Because these rules of origin are so restrictive, a special—but limited— 

more liberal rule of origin had to be established (the so-called ‘‘third country fabric’’ 

rule). It is that rule that has promoted the development of apparel sourcing in subSaharan Africa. 

The documentary evidence required by the various rules of origin requirements 

can be burdensome. It is not uncommon for U.S. importers to conclude that the paperwork involved in ensuring that a product complies with the preference program’s 

rules of origin represents a ‘‘cost’’—and a risk if U.S. Customs finds the evidence 

insufficient—that is not worth the effort. When the whole cost package is evaluated—purchasing from a preference country with duty savings but risk associated 

with demonstrating that the rules of origin have been met, versus purchasing from 

a non-preference country that offers less risk, higher cost (from duties) but better 

quality or delivery certainty—the latter supplier often wins the order. 

RECOMMENDATION: Simplify the rules of origin used to qualify for preferences. 

Conclusion 

GSP is a preference program that generally works. It works for very poor countries and it works for American farmers, manufacturers and consumers. There are 

changes the Committee could enact to make preference programs work better, for 

beneficiary countries and for their U.S. customers. In evaluating those changes, 

Members should consider their impacts not only on beneficiary countries but also 

on U.S. companies and workers. 

f 

Letter from the Sugar Alliance of the Philippines 

November 30, 2009 

The Sugar Alliance of the Philippines (the Alliance) respectfully submits these 

comments for the record of the November 17, 2009 hearing by the House Ways and 

Means Trade Subcommittee on U.S. trade preference programs. The Alliance asks 

that sugar not be accorded duty-free, quota-free treatment in any reform of U.S. 

trade preferences. 

The Sugar Alliance of the Philippines is an umbrella group of national and regional associations of Philippine sugarcane planters, millers, refiners, and traders. 

The Alliance is a member of the International Sugar Trade Coalition (ISTC), which 

has separately submitted comments to the Subcommittee for the record. The Alliance endorses those comments. 

The Philippines holds the third-largest share, after Brazil and the Dominican Republic, of the U.S. tariff-rate quota for raw cane sugar. The Philippine share of the 

minimum quota, which the U.S. is committed to provide under agreements negotiated in the World Trade Organization, is about 142,500 metric tons per year, valued in most years at around $60 million. Exports to the United States account for 

about six percent of Philippine sugar production. 


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*World Bank Atlas method, 2008. The Philippines per capita income is below that of one LDC 

(Angola), and below that of the following countries that would receive duty-free, quota-free treatment under HR 4101: Republic of Congo, Mauritius, South Africa, Swaziland. 

The World Bank calls the Philippines a low-middle-income country, with a 2008 

population of about 89 million and a per capita income under $1,900 per year.* The 

sugar industry is one of the country’s largest employers, providing about 500,000 

jobs (most of them seasonal) in the fields and another 100,000 jobs in mills and refineries, or in the trade. 

The plantation image that many people have of sugar in the Philippines is false. 

Land reform put an end to the reign of the sugar barons. Almost all sugarcane 

farms in the country are small, and many are tiny. There are about 61,000 sugar 

farms in the Philippines. More than three fourths (47,000) are five hectares (about 

12.5 acres) or less; these account for about 20 percent of production. At the other 

end of the scale, less than one percent of the farms have more than 100 hectares, 

and these also account for about 20 percent of production. Employment is high (1.3 

workers per hectare) because productivity is low. Small scale pushes up costs, as 

does the relatively high cost of fertilizer. Nevertheless, the industry assesses producers a fee on each bag of sugar to fund social programs through the Sugar Industry Foundation (www.sifi.org.ph). 

The comments from ISTC explained that the world market price is almost always 

below the average global cost of production. That condition can persist because 

sugar markets are deeply distorted by trade barriers, subsidies, taxes, and other 

policies maintained by many producing countries to protect rural employment, farm 

income, and food security, or to serve other social and economic purposes. For the 

Philippines as for many other producing countries, the world market is a residual 

market, used only after domestic markets and premium-price export markets have 

been fully supplied. Even though Philippine production costs are below global averages, they are not low enough to make sales to the world market profitable in normal times. 

The Sugar Alliance of the Philippines is concerned that, as ISTC explained, granting additional suppliers unrestricted access to the U.S. sugar market will erode the 

system of supply management on which the premium U.S. price depends. Without 

a premium price, the U.S. market holds little or no value for the Philippines, or for 

most developing-country sugar exporters. For this reason, the Sugar Alliance of the 

Philippines asks that sugar not be accorded duty-free, quota-free treatment in any 

reform of U.S. trade preferences. 

Respectfully submitted, 

Harry W. Kopp 

f 

Washington Representative 

Statement of the Ecuadorian-American Chamber of Commerce 

I. Introduction 

The Ecuadorian-American Chamber of Commerce of Quito (AMCHAM Quito) is an 

organization whose Mission is to foster commerce and investment between the 

United States and Ecuador. We are a non-partisan organization that bases its advocacy efforts on technical criteria and a core commitment to rule of law and corporate 

social responsibility. 

The growing importance of foreign trade in the Ecuadorian economy has become 

its engine of growth and development. Without preferential market access conditions in stable markets, Ecuador would have experienced a much more profound impact from the global economic crisis. Of all the preferential trade arrangements in 

which Ecuador is involved, the Andean Trade and Drug Eradication Act (ATPDEA) 

has become the corner stone of an export promotion policy used by the private sector. The ATPDEA has helped Ecuadorian private industry craft a major policy 

mechanism to achieve the law’s fundamental objective: curbing the production, 

transportation, and sale of controlled narcotic substances. 

Since its enactment in 1991, the ATPDEA, and its predecessor the ATPA, have 

become a significant U.S. foreign policy success story. Their impact has had tremendous importance for both Ecuador and the United States in the commercial, employment, migratory pressure, social well-being, and war on drugs arenas. 

ATPDEA has promoted investment, export-oriented production, and the development of regional and intraregional supply chain integration, all of which have stimVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00268 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ulated employment growth both in Ecuador and in the United States. The USITC 

estimates that 225,000 direct and indirect jobs in the U.S. are dependent on imported flowers. As the second largest exporter of flowers to the U.S. in the world, 

a large portion of these jobs can be attributed to Ecuador. 

In addition, given the integration of various production chains throughout the Andean region, it is important that all countries currently benefitting from ATPDEA 

maintain their ATPDEA beneficiary status. This is particularly true in areas such 

as textiles and apparel, where materials are imported intra-regionally and included 

in apparel that is ultimately exported to the U.S., and holds regardless of other 

trade agreements that do not necessarily make allowance for norms related to accumulation of origin that ATPDEA clearly includes. Ecuador’s exports to the United States totaled $8.4 billion in 2008, a 37% increase 

over 2007. During the first 10 months of 2009, Ecuadorian exports to the U.S. market have decreased significantly in dollar terms, largely because of a drop in commodity prices and, to a lesser degree, to the reduction in demand due to the effects 

of the world economic crisis. Most Ecuadorian products exported to the U.S. entered 

the country duty free under the ATPDEA. In addition to traditional exports such 

as petroleum, bananas, shrimp, coffee and cocoa, over $300 million of exports to the 

U.S. came from newer, non-traditional ATPDEA-dependent industries such as fresh 

cut flowers, broccoli, wood articles, tropical fruit (e.g., mangoes, pineapples), tuna, 

and textiles during the first semester of 2009. These industries alone have created 

over 400,000 jobs in Ecuador. These jobs are located in the Northern provinces near 

the border with Colombia, a region known for both its poverty and its susceptibility 

to drug cultivation. As the benefits of ATPDEA take root in Ecuadorian export industries, benefits spread to newer sectors, a larger number of products benefit from 

the scope of items covered by the preferences system, and still more jobs are created. 

II. Trade between the U.S. and Ecuador under ATPDEA and under the Context of 

the Current Global Economic Crisis 

Trade Figures and Balance of Payment Issues 

The Ecuadorian export sector has seen and experienced serious repercussions derived from the current global economic crisis, resulting in a substantial reduction 

of international trade generally and, to a much lesser degree, in bilateral trade flow 

between Ecuador and the U.S. The reduction in the volume of Ecuadorian exports 

to the United States during the first semester of 2009 has been minimal. In terms 

of value, however, the impact has been significantly greater as a function of the 

drop in the price of oil and other commodities. 

The United States continues to be Ecuador’s largest trading partner. The U.S. accounted for just under half of Ecuador’s 2008 total exports, and for 19% of Ecuador’s 

total imports. This trend held in the first semester of 2009, with the difference that 

the U.S. share of Ecuador’s exports dropped to 36%, while the share of total imports 

actually increased by about a third to 25%. The trade surplus that existed for Ecuador for the first six months of 2008 has been significantly reduced from $3.3 billion 

to $471 million for the same period in 2009. More, all of this happened in spite of 

the Balance of Payments safeguard measures taken by the Government of Ecuador 

(GOE) early in the year, the United States remaining the Ecuador’s largest trading 

partner. 

Ecuadorian exports to the U.S. covered by ATPDEA have grown continually during the past years. Since 2005, as a result of the numerous short term extensions 

and the recent economic crisis which affected demand in U.S. markets, the trend 

initially stagnated and then saw a sharp drop in the first nine months of 2009. Nevertheless, we expect that, as new trade data become available, it will show that this 

contraction could have been much worse had it not been for the benefits of the 

ATPDEA. 

United States/Ecuador trade figures continue to show a robust, mutually beneficial bilateral trade relationship despite the economic crisis and the sharp drop of 

export commodity prices. Despite the significant decrease in Ecuador’s exports in 

the first six months of 2009, due mainly to the sharp decline of oil prices, the balance of trade between the two countries for the same period favored the United 

States by $914 million. It is important to remember that, in an attempt to improve 

the competitiveness of its industries, the Government of Ecuador enacted a unilateral tariff reduction in 2008, eliminating tariffs for over 3000 products used as raw 

materials and capital goods. Despite the pressure on its balance of payments, Ecuador’s commitment to maintaining a zero tariff for these goods has remained 

unaltered. U.S. exports have benefited greatly from these tariff reductions, especially when most countries feel pressure to revamp protectionist practices because 

of the global economic recession. From this perspective, it is understandable that 


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the non-petroleum trade balance between the two countries has not only remained 

positive for the U.S., but also has improved year after year. 

As one of the most open economies in the region (close to 70%), Ecuador’s exposure to the world market is extremely high. Further, its dollarized monetary economy makes Ecuador even more vulnerable to changes in international markets. 

With this in mind, it is not hard to see that the global economic crisis has had a 

significant impact on the generally positive trends noted above. Having adopted the 

U.S. dollar as its national currency, Ecuador is unable to manipulate its monetary 

policy by printing money—external sources become the primary points of origin for 

getting money into the country. As a result of this factor, the major decreases in 

exports and in remittances from Ecuadorian citizens living abroad have resulted in 

a significant contraction in liquidity levels. These liquidity issues have generated potentially severe consequences in the Ecuadorian economy overall, leading to recent 

increases in unemployment and an overall drop in the well-being of the general population. 

Under the circumstances, Ecuador’s management of its Balance of Payments becomes a crucial element in dealing with the local impact of the global economic crisis. The government of Ecuador has chosen to mitigate these impacts by adopting 

safeguards to restrict imports in an effort to sustain liquidity levels and minimize 

potential negative impacts. AMCHAM Quito has invited the Government of Ecuador 

to consider additional measures, actions focused on the capital account of the balance of payments, as alternative mechanisms that would allow the economy to 

maintain liquidity levels required to assure the maintenance of the monetary and 

exchange systems and a money supply that will lessen the negative effects of contracting external demand. It should be recognized that just as the Ecuadorian Government presented a strong case for these measures to the World Trade Organization (WTO) Committee on Balance of Payments in June 2009, the GOE has also considered all recommendations made by the WTO membership. This has led the GOE 

to amend its original measures to fully comply with its WTO obligations. Despite 

the macroeconomic difficulties experienced by Ecuador, the Government has observed the procedures and content of WTO rules and has shown a high degree of 

transparency regarding the measures taken to face the problems generated by the 

global economic crisis. 

The Ecuadorian government has focused current measures on final consumer 

goods and made an effort to maintain its policy of keeping liberal tariff lines for raw 

materials and capital goods to support local industry competitivity, a position that 

benefits the U.S. since the majority of products exported to Ecuador are raw materials and capital goods. 

We are convinced that if the Ecuadorian economy begins to show signs of recovery, these will come, to a great extent, from external sources, particularly exports. 

In this sense, the renewal of ATPDEA preferences will play an important role, a 

role that is consistent with G–20 commitments to avoid reducing market access opportunities that could worsen the global economic crisis or hinder the prospects of 

recovery. 

Employment Generation 

The intent of the ATPA passed by the U.S. Congress in 1991 was to spur the development of alternative industries to assist Ecuador and other Andean countries 

in the war against drugs. Because of this Act, numerous non-traditional ATPDEA 

dependent industries have flourished in Ecuador, industries that are labor intensive 

and, in many cases, involve worker compensation that is better than in coca-leaf cultivation. 

The economic growth stimulated by ATPA/ATPDEA beneficiary industries has enabled Ecuador to generate employment for over 400,000 workers, representing about 

8% of the total working population. This makes the ATPA/ATPDEA related employment rate in Ecuador the highest in the entire Andean region. In addition, the majority of jobs are held by women who are the primary breadwinners in many Ecuadorian households. In short, the ATPA/ATPDEA has had a tremendous impact in 

reducing extreme poverty and improving living standards in Ecuador by providing 

attractive labor alternatives to coca leaf cultivation, alternatives taken advantage of 

by the local population. 

It is also important to note that most ATPDEA-dependent industries are located 

in the northern highland provinces near the border with Colombia. The alternative 

represented by these industries has not only deterred the spread of coca-leaf production, but has also served to provide employment opportunities for the up to 500,000 

Colombians, many of them refugees, who have crossed the border into Ecuador. Finally, these industries have also helped reduce both legal and illegal emigration to 


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the U.S., contributing to another important foreign policy objective of all three countries. 

Compliance with ATPDEA eligibility criteria 

Although AMCHAM Quito is well aware that conditions to attract Foreign Direct 

Investment (FDI) in Ecuador cannot be portrayed as ideal, it is also true that accomplishing this is even more complex under the current circumstances where the 

country’s legal framework needs to be restructured in light of the adoption of a new 

Constitution. Nevertheless, we have to acknowledge that, at this juncture, we do not 

see fundamental circumstances that could compromise Ecuador’s compliance with 

the ATPDEA’s eligibility criteria. As the country evolves in the restructuring of its 

legal framework, we hope that the investment climate will follow a more positive 

path. 

We see the development of a bilateral dialogue between both governments as extremely positive and constructive, and that a broad and mutually agreed upon agenda including topics related to security, trade and investment, immigration and cooperation has been structured. The development of these conversations at a very important diplomatic level gives us hope that the Ecuadorian Government is willing 

to improve and preserve the longstanding positive relationship that Ecuador has 

had with the United States. This process is extremely conducive to addressing any 

differences in a proactive and positive manner, allowing room for discussion of topics 

that may be of interest to either party. 

AMCHAM Quito applauds the significant steps taken by the GOE to improve conditions for worker rights. These efforts comply with international standards established by the International Labor Organization conventions signed by Ecuador. Improvements are clearly visible regarding efforts to reduce and eventually eradicate 

all forms of illegal child labor conditions, directly attributable to the government’s 

strict policy of inspection and verification of working conditions, an effort implemented by a large team of inspectors with access to appropriate resources necessary 

to carry out such a difficult task. 

Industries that have flourished thanks to ATPDEA have created businesses that 

are competing successfully in the global economy. They have adopted rigorous international standards related to environmental practices and labor standards in order 

to comply with import requirements, particularly in the U.S. and in the European 

Union. They have also developed a strong commitment to Corporate Social Responsibility strategies, a commitment that has extended ATPDEA further through corporate construction of schools and health facilities that have improved the standard 

of living for workers and their families, as well as for the communities in which they 

operate. 

We understand the concerns of the U.S. Administration regarding the compliance 

of ATPDEA eligible countries with international protection standards for intellectual 

property rights. U.S.T.R. 2009 Special Report 301 states that ‘‘Ecuador’s Intellectual 

Property Institute continued to make progress in 2008 towards eliminating its backlog of pending patent applications. Further, Ecuador has established special IPR 

units for investigations and seizures of pirated and counterfeit products.’’ These are 

just some of the efforts made by Ecuadorian authorities to improve the business environment and strengthen the rule of law in a vital sector of the economy, efforts 

that have the full support of the private sector. 

On October 23 of this year, the government of Ecuador enacted a Presidential Decree declaring access to medicines in the ‘‘public interest,’’ authorizing the issuance 

of compulsory licenses for any and all medicines, with the exception of ‘‘cosmetic, 

beauty, and personal hygiene medicines and in general all those that are not for 

treating diseases.’’ This decree impacts issues of Intellectual Property Rights and is 

of concern to many of AMCHAM’s members. 

The WTO establishes legal requirements for the process of requesting and issuing 

compulsory licenses. Compulsory licenses, through which a government allows someone else to produce a patented product or process without the consent of the patent 

owner, are limited exceptions to patent rights that should only be used in extraordinary circumstances (WTO TRIPS Art. 31). The Government of Ecuador has indicated that it will respect WTO and other international standards in the application 

of this decree before granting any compulsory license. AMCHAM will continue to 

monitor developments on this front closely to ensure that the government complies 

with all this commitment regard compulsory licensing. 

Counternarcotics Efforts 

Ecuador has enjoyed an extremely positive track record in terms of drug eradication, seizures and interdiction. The 2007 U.N. World Drugs Report ranked Ecuador sixth in the world in terms of drug seizures. The recent report on International 


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Narcotics Control Strategy issued by the U.S. Department of State also notes the 

Ecuadorian government’s accomplishments in ‘‘the discovery and destruction of nine 

cocaine producing laboratories, 182 FARC facilities (bases, houses, camps), the 

eradication of 10 hectares of coca, and the confiscation of weapons, communications 

equipment, and other support equipment.’’ 

The same document reports on corruption issues, stating that ‘‘as a matter of policy, the GOE does not encourage or facilitate the illicit production or distribution 

of narcotic or psychotropic drugs or other controlled substances, or the laundering 

of proceeds from illegal drug transactions.’’ In addition, the report discusses alternative development and notes that the U.S. Agency for International Development 

(U.S.AID) continued to work to support Ecuadorian government efforts to provide 

social and productive infrastructure, strengthen local government, and open opportunities to expand licit economic activity as part of its northern border development 

master plan. 

In this regard, it is also important to mention that Ecuador received full certification through 2008 with the United States on counternarcotics issues under the 

Foreign Assistance Act, as described in the ‘‘International Narcotics Control Strategy Report’’ of February of this year. Additionally, in recent days the Governments 

of Ecuador and the United States have signed new bilateral cooperation agreements 

to jointly pursue efforts to fight illicit drug trafficking. These agreements renewed 

commitments to share information, coordinate actions and provide assistance to 

meet a commonly defined objective. The implementation of the ATPDEA preferences 

is precisely the recognition of a successful partnership in the war on drugs. 

The Ecuadorian private sector is also doing its part in regional efforts against 

narcotics trafficking. The Business Alliance for Secure Commerce (BASC) has spearheaded a initiative to implement security procedures in order to ensure that trade 

is free of illegal drugs, terrorism, or any other illicit activity. BASC is a not for profit organization made up of some 200 companies that participate actively in BASC’s 

training, auditing, and capacity building programs whose systems are being continuously evaluated to maximize effectiveness. BASC members have considerable investments in security equipment, and have generated employment for personnel skilled 

in the use of sophisticated systems. Activities that BASC members have undertaken 

include: 

1) audits—over 400 from 2007 to date; 

2) in-house capacity building programs—on average 20 per month, and 

3) the investment of considerable sums to ensure the transparency of the logistics chain. 

Rule of Law and Government Procurement Issues 

Rule of Law remains an important topic. AMCHAM Quito has always actively 

supported the principles of rule of law and corporate social responsibility in both 

private and public institutions. We have consistently taken direct action to urge the 

Ecuadorian government to resolve business disputes within the mechanisms established in contractual agreements, and to abide by the corresponding orders from 

designated Tribunals and Arbitration Courts. To our knowledge, contractual disputes between the GOE and U.S. companies have either been submitted to arbitration under the provisions of the Convention for the Settlement of Investment Disputes, or adequate, mutually agreed upon and effective compensation arrangements 

made under the applicable provisions of international law, such as in the case of 

City Oriente. 

AMCHAM Quito is concerned about, and has weighed in on, government actions 

that weaken Ecuador’s legal investment framework and its ability to attract foreign 

investors, including the government’s recent decision to withdraw from its bilateral 

investment treaties (BIT) with the U.S. and other countries. We understand, however, that this action is expected to be the first step in a renegotiation of the bilateral investment treaties that Ecuador has with the U.S. and other key trade partners. Our organization will continue to monitor discussions on this issue and to actively support an open and stable investment structure that is attractive to foreign 

investors. 

We are also aware that the application of transparent, nondiscriminatory, and 

competitive procedures in government procurement is one of the ATPDEA’s eligibility criteria. In this sense, the GOE has worked toward the improvement of procedures and greater transparency in government procurement through the creation of 

a new official body charged to execute legislation in this area, and through the implementation of open, electronic bidding mechanisms to increase levels of transparency. 


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III. Conclusion 

We believe that the vision held by U.S. policymakers when enacting ATPA/ 

ATPDEA has unquestionably yielded positive results, particularly in the case of Ecuador. Although ATPA/ATPDEA has a minimal effect on the overall U.S. economy, 

it has certainly contributed to securing fundamental foreign policy objectives of mutual interest to both countries and should be continued. 

The data show that the short-term renewals of the preferences, while continuing 

the support from one perspective, also destabilize impacted industries and reduce 

the effectiveness of the initiative. Many of the industries that benefit from ATPDEA, 

including, but not limited to apparel, flowers and certain agricultural products, require predictability and planning to be able to set production levels and export targets. In some instances, these lead times are as much as twelve to eighteen months 

and have a significant impact on ability to maintain employment levels. From this 

perspective, it is important that the ATPDEA be extended for a longer period than 

has been the case in recent years if the preferences are to have the full extent of 

their intended impact. Proposals providing for extensions of two or more years provide various ATPDEA dependent industries with the ability to plan their investments, increasing employment stability and the benefits of the program in Ecuador’s 

counternarcotics efforts. f 

Statement of the Embassy of the Kingdom of Lesotho 

The Honourable Chairmen Levin and Rangel, 

On behalf of the Embassy of the Kingdom of Lesotho, I have the pleasure to submit these comments for the record of House Committee on Ways and Means, Trade 

Subcommittee’s hearing on U.S. Trade Preference Program, which was held on November 17, 2009: 

Introduction 

The Embassy of Lesotho is pleased to present its comments for this important 

hearing on the operation, impact, and future of U.S. trade preference programs. The 

government and the people of Lesotho are major beneficiaries of the U.S. African 

Growth and Opportunity Act (AGOA) and remain deeply grateful for the United 

States’ commitment to expanding U.S. and sub-Saharan African economic relations. 

As Congress considers reforming U.S. preference programs, the Government of Lesotho stands ready to assist in providing clarification on our own experiences with 

AGOA and recommendations on how other developing country partners may benefit 

from U.S. trade preference schemes. 

Lesotho’s Experience with AGOA 

From the perspective of Lesotho and the rest of Africa, any review of U.S. trade 

preference programs must begin with AGOA, which has been the foundation of U.S. 

trade and economic policy concerning Africa for the past decade. AGOA has been 

perhaps the United States’ most successful trade preference program, and this can 

be well illustrated with the case of Lesotho. 

Following its qualification under AGOA in 2001, Lesotho’s garment industry grew 

by leaps and bounds. By 2004, Lesotho’s apparel exports to the United States had 

grown to US$456 million, and the apparel industry workforce had grown to 53,000, 

making it the largest formal sector employer in the nation. In fact, the textile and 

garment sectors in Lesotho account for 50% of total national employment. Some 85% 

of the workers in Lesotho’s apparel industry are women, many of whom are the solebreadwinners of their household. Lesotho has also developed strong labor unions 

and labor enforcement institutions, and boasts higher wages for apparel workers 

than in most major apparel exporting countries, ensuring that the prosperity of the 

apparel industry impacts the lives of Basotho workers. These positive developments 

were echoed throughout Africa, with apparel exports to the U.S. almost tripling and 

more than 300,000 new jobs created, supporting an estimated 3 million people 

across the continent. 

Lesotho’s experiences with U.S. preferences center on special benefits under 

AGOA relating to the apparel sector known as AGOA’s ‘special rule for least developed countries’ or the ‘third country fabric rule’. Thanks to AGOA’s simple rules of 

origin and generous tariff line access, Lesotho was able to attract foreign investment 

into its small existing textile and apparel sectors, including a US$120 million denim 

fabric mill. However, despite significant foreign investment with an aim towards 

creating vertically integrated textile and apparel export industry, Lesotho remains 

dependent on AGOA’s generous rules of origin for the majority of its exports to the 

US. Because of this ‘special rule,’ the apparel sector grew to become the largest forVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00273 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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mal sector employer in Lesotho, with the majority of production aimed at export to 

the U.S. market. The sector currently employs approximately 39,000 individuals, 

down from the 2004 peak of 53,000. Despite this decline, without AGOA’s special 

rule for African LDCs, this private sector development would not have been possible 

in the first place. 

In addition to direct employment through the textile and apparel sectors, the apparel industry has spurred economic development in related industries, including 

packaging, shipping, and apparel inputs. These sectors represent additional employment above and beyond strict apparel sector employment. Lesotho has also benefited 

from preferential trading arrangements with the EU dating to as early as 1995, but 

AGOA remains the most successful preferential trading arrangement with respect 

to both job creation and export response. 

Sectoral Challenges 

Despite such generous treatment from our major trading partners, these tremendous gains were short-lived, as the expiration of the Multi-Fibre Arrangement 

(MFA) or Agreement on Textiles and Clothing (ATC) in 2005 for the first time exposed the infant garment industry in Lesotho and across Africa to unfettered competition from long-established, super-efficient—and often state-subsidized—Asian 

apparel giants, including China, Bangladesh, Cambodia and Vietnam. Since 2005, 

U.S. apparel imports from Asia have skyrocketed, while those from Africa have fallen sharply. For example, since 2005 U.S. apparel imports from Bangladesh are up 

50% and from Cambodia up 40%, while imports from Lesotho are down 25% and 

from all AGOA countries down more than 30% over the same period. Apparel sector 

employment in Lesotho has fallen to 39,000, a drop of 26%. Across Africa, it is estimated that more than 100,000 jobs have been lost, a decline of fully one-third from 

the employment level in 2005. In short, Africa’s apparel industry is under serious 

threat, and the economic lifeline created by AGOA is in jeopardy. 

Extension of AGOA-like preferences to already-competitive Asian apparel 

powerhouses like Bangladesh and Cambodia as part of a preference reform initiative 

will only accelerate the decline of the African apparel industry and will be the final 

nail in the coffin of AGOA. Development in Lesotho’s apparel sector remains a constant challenge as our producers face fierce competition from these very well established producers. Additionally, vertical integration of Lesotho’s textile and apparel 

sectors has remained slow due to the lack of regional capacity, the competitiveness 

of vertically integrated operations in sub-Saharan Africa, and the slowdown in the 

global economy. The lack of vertical integration in these sectors means that Lesotho 

remains almost entirely dependent on AGOA’s third country fabric provisions for export to the U.S. market. Without this provision, Lesotho’s exporters cannot compete 

with other established global exporters. 

While accounting for Lesotho’s dependence on AGOA for export to the U.S. market, another significant challenge facing Lesotho’s apparel sector relates to developments beyond the scope of AGOA and other preferential trading arrangements. 

Lesotho’s apparel industry has not yet recovered from the 2005 expiration of WTO 

Multi-Fibre Arrangement (MFA) apparel quotas. Lesotho’s apparel exports to the 

U.S. peaked in 2004 at over $455 million, declining sharply to $390 million in 2005 

upon expiration of the MFA. Exports have declined each year since, with sharp declines from 2007 to 2008, and even more substantial losses thus far in 2009 (see 

table 1 below). Competition in the global apparel sector remains fierce, with the 

greatest competition coming from Asia. In fact, since 2005, a number of countries 

in Asia, including China, Bangladesh, Cambodia, and Vietnam, have all witnessed 

substantial increases in their share of the U.S. apparel market, while sub-Saharan 

Africa’s apparel exports have declined. 

AGOA as a Model for Reform 

Despite these challenges AGOA remains a successful model. AGOA’s annual review process has spurred important reforms across sub-Saharan Africa, and the annual AGOA Forum has proved a successful model for advancing implementation 

issues and broader trade facilitation agreements between the U.S. and Africa. While 

the temporary nature and stunted extension of AGOA benefits has limited the investment response achieved under AGOA, Lesotho does remain a case study in how 

simple, generous, and targeted trade benefits may spur industrial development in 

even the most remote and underdeveloped regions. Additionally, it is important to 

note that the Government of Lesotho (GoL) has pursued a variety of additional efforts to support development of the textile and apparel sectors, including the development of industrial infrastructure, discounted rates on factory rent, and a variety 

of labor development and tax incentive programs. These programs have been critical 


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to ensuring investment response from abroad and necessary in terms of facilitating 

export from small and large producers alike. 

Adding EIAP to the U.S. Preference Toolkit 

While granting direct apparel benefits to super-competitive industries in Asia 

would devastate African industry, a means exists to reinforce AGOA while at the 

same time offering limited preferences to Bangladesh and Cambodia. Fashioned 

after the ‘‘Earned Import Allowance Programs’’ (EIAP) already in effect under 

CAFTA/DR and the Hope for Haiti program, the proposed AGOA EIAP program 

would allow U.S. apparel importers to earn the right to import apparel duty-free 

from Bangladesh and Cambodia by continuing to import apparel from Africa under 

AGOA. 

Under the proposed AGOA EIAP, qualified U.S. apparel importers would earn 

credits authorizing the duty-free importation of a corresponding square meter equivalent (SME) volume of apparel from Bangladesh and Cambodia by first importing 

apparel from Africa under AGOA. For apparel imported from Africa made with 

third-country fabric, the corresponding duty credit would be one-for-one. In order to 

encourage vertical integration in the African textile-apparel sector, which will enhance the competitiveness of the industry, the duty credit would be two-for-one for 

apparel made in Africa using regional yarn/fabric. 

This EIAP proposal creates a win-win for Africa and Bangladesh/Cambodia. It rewards U.S. apparel buyers who continue to source in Africa, while at the same time 

providing a corresponding preference for Bangladesh and Cambodia. In addition, the 

EIAP provides an incentive for investment in the upstream textile sector in Africa, 

which in time will enhance Africa’s ability to compete with already-competitive Bangladesh and Cambodia. 

Recommendations for U.S. Policies and Programs 

As Congress considers changes to trade preference programs, the Government of 

Lesotho provides the following key messages for consideration: 

• As a prerequisite for reform, Congress should move in the near term to extend certain key aspects of the current framework of U.S. preferences, including programs such as AGOA, and critical portions of AGOA, such as the special rule for least developed countries, or ‘third country fabric’. This will provide the policy consistency needed to provide for a stable investment environment. By contrast, allowing AGOA to expire in 2015 sends exactly the wrong 

message to investors and buyers and will only exacerbate the closure of factories in Africa. Likewise, continuation of the third-country fabric provision 

is essential to maintaining the critical mass of the African apparel sector that 

is a prerequisite to increasing its competitiveness. • Congress should work to focus benefits more broadly on least developed countries, and specifically on job-creating industries which require assistance in 

these countries. This is the path to real poverty reduction, as Africa has witnessed to an extent under AGOA. 

• Congress should account for the fact that expanding the U.S. trade preference 

scheme will impact current preference program beneficiaries, and work to 

limit any negative impacts. Congress should account for the industrial competitiveness of beneficiary countries which are added to any new preference 

scheme, and ensure that preference benefits are focused on industries which 

require relief in order to gain foothold in the U.S. market. This point is particularly important as Congress considers, as some have already proposed, 

granting apparel preference to the extremely competitive industries of least 

developed countries such as Bangladesh and Cambodia. Should the U.S. confer any new apparel related trade benefits to these already super-competitive 

countries, sub-Saharan Africa and other regions around the world will lose 

market share—in some cases entirely—directly to these new trade preference 

program beneficiaries, resulting in the loss of hundreds of thousands of jobs 

in both LDC and non-LDC countries. 

• In order to create new incentives for trade with all LDCs, without undermining the position of AGOA beneficiaries, Congress should consider the 

above outlined AGOA EIAP program to allow U.S. apparel importers to earn 

the right to import apparel duty-free from Bangladesh and Cambodia by continuing to import apparel from Africa under AGOA. 

• Congress should work to couple trade preference to trade capacity assistance 

and enact new investment incentives to encourage vertical integration of the 

textile and apparel industries in LDC AGOA beneficiary countries. 

• Congress should consider enacting new funding for industrial infrastructure 

related to textile and apparel production and support additional financing 


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mechanisms for private sector investments in the water, power, and transportation infrastructure sectors. The global financial crisis has exacerbated the 

cost of capital for these already capital intensive projects, making government 

intervention or special partnership mechanisms all the more necessary. 

Conclusion 

If urgent measures are not taken to address the above challenges, there is a very 

serious likelihood that in only a few years, sub-Saharan African developing and 

least developed countries like Lesotho will face economic collapse in their nascent 

textile and apparel industries. This would mean the loss of thousands of jobs in the 

world’s poorest region and the unraveling of much of the progress achieved by 

AGOA and other preferential trade programs aimed at encouraging development 

through trade in Africa. We remain hopeful that Congress will not introduce 

changes that will negate achievements attained under preference programs like 

AGOA. 

The GoL welcomes the continued engagement and support from the U.S. to facilitate trade development in Africa, and the opportunity to work with investors and 

our other international partners in trade to facilitate investment in Lesotho’s textile 

and apparel sectors. 

I again thank the Committee on Ways and Means, Subcommittee on Trade for the 

opportunity to contribute to this important hearing. 

Yours sincerely, 

David Mohlomi Rantekoa 

Ambassador of the Kingdom of Lesotho to the United States of America 

f 

Statement of the Emergency Committee for American Trade 

ECAT appreciates the opportunity to provide these comments on the renewal of 

the Andean Trade Preference Act to the Subcommittee on Trade of the House Committee on Ways and Means. 

ECAT is an association of the chief executives of leading U.S. business enterprises 

with global operations. ECAT was founded more than three decades ago to promote 

economic growth through expansionary trade and investment policies. Today, 

ECAT’s members represent all the principal sectors of the U.S. economy—agriculture, financial, high technology, manufacturing, merchandising, processing, publishing and services. The combined exports of ECAT companies run into the tens 

of billions of dollars. The jobs they provide for American men and women—including 

the jobs accounted for by suppliers, dealers, and subcontractors—are located in 

every state and cover skills of all levels. Their annual worldwide sales exceed $2.7 

trillion, and they employ more than 6.4 million persons. ECAT companies are strong 

supporters of agreements to eliminate tariffs, remove non-tariff barriers and promote trade liberalization and investment worldwide. 

ATPA Should Be Renewed for Peru and Colombia 

ECAT strongly supports the Andean Trade Preference Act (ATPA) program, which 

has produced important economic opportunities and diversification in the Andean 

region and strong economic relationships between the United States and Peru and 

Colombia. ATPA has been vital to sustain hundreds of thousands of jobs in the formal private sector of those countries. Both Peru and Colombia have successfully 

used this program to promote economic diversification and new opportunities, while 

also strengthening their own legal systems and respect for the rule of law. 

While ECAT very much wants to see a stronger, more reciprocal relationship with 

Colombia through the passage and entry-into-force of the U.S.-Colombia Trade Promotion Agreement, ECAT strongly supports the continuation of ATPA benefits to 

Colombia and Peru and the continued extension of the ATPA program for these 

countries by Congress. While the U.S.-Peru Trade Promotion Agreement has entered 

into force, it is important to ensure a continuation of benefits to Peru to address 

co-production issues with Colombia. 

As discussed below, however, ATPA should not be extended automatically to countries that are turning their back on respect for the basic rule of law. 

Ecuador Should Not Be Rewarded by Continued ATPA Benefits 

With respect to Ecuador, ECAT is very concerned about continued breaches of the 

basic rule of law that are occurring in Ecuador, particularly with respect to foreign 

investors and foreign investment. These concerns have been amplified and docuVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00276 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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1Country Reports on Human Rights Practices, 2008 Human Rights Report: Ecuador 

(Feb. 25, 2009), at http://www.state.gov/g/drl/rls/hrrpt/2008/wha/119158.htm. 2 Determinations and Report of the President Concerning the Review of Ecuador 

and Bolivia under the Andean Trade Preference Act (June 30, 2009) accessed at http:// 

www.ustr.gov/webfm_send/1184; U.S. Department of State Investment Climate Report: Bolivia (Feb. 2009), accessed at http://www.state.gov/e/eeb/rls/othr/ics/2009/117668.htm. 3 Transparency International Corruption Perceptions Index 2009, at http:// 

www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table; Transparency 

International, Corruptions Perceptions Index—Regional Highlights: Americas, http:// 

www.transparency.org/policy_research/surveys_indices/cpi/2008/regional_highlights_factsheets. 4World Bank, Aggregate Governance Indicators (1998–2008), at http:// 

info.worldbank.org/governance/wgi/pdf/wgidataset.xls. 

mented by numerous independent and authoritative sources, including the U.S. 

State Department, Transparency International and the World Bank. As discussed 

below, Ecuador should not be rewarded for these actions by a continuation of ATPA 

benefits. 

As found by the State Department in its annual human rights report on Ecuador 

released in February 2009, there are major concerns with Ecuador’s government and 

judicial system. 

§ ‘‘. . . there continued to be problems in the following areas . . . corruption and 

other abuses by security forces; . . . and corruption and denial of due process 

within the judicial system.’’ 

• While the constitution provides for an independent judiciary, in practice the 

judiciary was at times susceptible to outside pressure and corruption. The 

media reported extensively on the susceptibility of the judiciary to bribes for 

favorable decisions and resolution of legal cases and on judges parceling out 

cases to outside lawyers who wrote judicial sentences on cases before the 

court and sent them back to the presiding judge for signature. [The Ecumenical Human Rights Commission] CEDHU further asserted that judges occasionally reached decisions based on media influence or political and economic 

pressures.’’ 

§ ‘‘The law provides criminal penalties for official corruption; however, the government did not implement the law effectively. The World Bank’s worldwide 

governance indicators reflected that government corruption was a serious problem.’’ 1

The President’s report to Congress on June 30th and the U.S. Department of 

State’s 2009 Investment Climate Statement 2 both reinforce this finding of the deteriorating rule of law in Ecuador. 

Of particular concern is also Transparency International’s most recent annual report of corruption that puts Ecuador in the category of ‘‘rampant corruption,’’ with 

a score of 2.2 out of 10 on the index. Ecuador is listed at 146 out of 180 worldwide, 

and is identified as one of the most corrupt countries in the Western Hemisphere.3

The World Bank Governance Indicators similarly put Ecuador near the bottom on 

its rule of law measurement, with a rating of ¥1.23 (on a scale of ¥2.5 to 2.5).4

Notably, this rating has declined in recent years, showing that Ecuador is moving 

farther away from a rules-based system. 

In July 2009, Ecuador formally deposited its denunciation of the International 

Center for the Resolution of Investment Disputes (ICSID), the World Bank forum 

established for the impartial and independent resolution of international commercial 

disputes. On October 28, 2009, Ecuador also announced that it would denounce investment agreements with several countries, including the United States, evincing 

a deteriorating situation. 

Numerous U.S. and other foreign businesses have experienced first hand corruption, expropriation, and a lack of governance in sectors that span the Ecuadorian 

economy, including construction, energy and telecommunications. 

Given these basic gaps in the rule of law, ECAT urges a reconsideration of Ecuador’s eligibility when ATPA is extended beyond the end of the year. Congress needs 

to look closely at denying ATPA benefits entirely to Ecuador, suspending those benefits or, at a minimum, ensuring that the Administration has the tools to prevent 

Ecuador’s government from benefiting from any ATPA renewal. That could include, 

in particular, limiting Ecuador’s future ATPA benefits to non-state-dominated sectors, such as light manufacturing and agriculture. 

Bolivia’s Benefits Should Remain Withdrawn. 

With respect to Bolivia, ECAT notes that, like Ecuador, there has been a continued deterioration in the rule of law, as reflected in the President’s June 30th report 

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5 Determinations and Report of the President Concerning the Review of Ecuador 

and Bolivia under the Andean Trade Preference Act (June 30, 2009) accessed at http:// 

www.ustr.gov/webfm_send/1184; U.S. Department of State Investment Climate Report: Bolivia (Feb. 2009), accessed at http://www.state.gov/e/eeb/rls/othr/ics/2009/117852.htm. 1The Center actively engages policymakers and the public, through a combination of research 

and strategic outreach, to influence the policies of the United States, other rich countries, and 

such institutions as the World Bank, the IMF, and the World Trade Organization to improve 

the economic and social development prospects in poor countries. CGD was recently ranked 

among the world’s top think tanks (number 15 out of several thousand such research organizations) in an independent survey-based ranking published in Foreign Policy magazine. 2Kimberly Ann Elliott, Opening Markets for Poor Countries: Are We There Yet? CGD Working Paper No. 184 Washington: Center for Global Development, October 2009. While AGOA 

comes out relatively well in this international comparison, the basic U.S. GSP for LDCs lags 

far behind other high-income OECD members and is ahead of only South Korea’s limited 

program. To encourage early delivery on the MDG commitment to provide DFQF for LDCs, 

CGD created a working group on global trade preference reform earlier this year. For information on the activities of this group, which expects to issue its final report early next year, go 

ment.5 We believe, therefore, that Bolivia’s benefits under the ATPA program 

should remain suspended. f 

Statement of the Center for Global Development 

The Center for Global Development (CGD) 1 is an independent, nonprofit policy 

research organization that is dedicated to reducing global poverty and inequality 

and to making globalization work for the poor. This focus on pro-poor globalization 

is at the heart of my research on trade preference reform. Trade has been a part 

of economic development for centuries. It has the potential to be a significant force 

for reducing global poverty by spurring economic growth, creating jobs, reducing 

prices, and helping countries acquire new technologies. U.S. trade policies can have 

an enormous impact—for good or ill—on developing countries, our own economy, 

and global security. The U.S. has one of the most open markets in the world, but 

remaining trade barriers hit poorer countries especially hard. The special needs of 

the poorest countries should be front and center as Congress debates preference reform. 

And preference reform is not just about doing good for others, it would be good 

for U.S. economic and security interests as well. By opening opportunities for 

growth and development, improved access for exports from poor countries contributes to political stability and, over time, expanded markets for U.S. exports. 

Why U.S. Trade Preference Programs Matter for Poor Countries 

Increased trade and market access help poor countries generate resources, stimulate investment, create jobs, participate in the global economy, and reduce poverty. 

While the U.S. has improved and expanded programs that provide preferential market access for developing countries, notably for Haiti and sub-Saharan Africa, important gaps in product and country coverage remain. For example: 

• Despite broad coverage under the African Growth and Opportunity Act 

(AGOA), important agricultural products, including sugar, dairy, and peanuts, 

are still subject to quantitative restrictions. As a result, Ethiopia and Zambia 

have zero access to the U.S. sugar market. • Least-developed countries (LDCs) in Asia that export labor-intensive manufactured goods, particularly apparel, face an average tariff that is more than 

three times higher than the average tariff on all U.S. imports. • For all beneficiaries, frequent, short-term renewals—and occasional lapses— 

in trade preference programs undermine the incentives for firms to invest in 

potential export sectors in poor countries. 

Leveraging U.S. Reform to Promote Global Preference Reform 

Recognizing the potential for trade to create jobs and reduce poverty, the international community enshrined the objective of duty-free, quota-free (DFQF) market 

access for LDCs in developed countries in the United Nation’s Millennium Declaration in 2000. While substantial progress has been made since then, no country has 

fully delivered on that commitment. The European Union often touts its ‘‘Everything 

But Arms’’ program, which provides nominal access for 100 percent of exports from 

LDCs, but its rules of origin are far more restrictive than the U.S. AGOA program 

and they often block access in practice. No rich country outside Europe has achieved 

100 percent product coverage, though Canada has arguably the best overall program 

because it reformed its rules of origin while also expanding coverage to roughly 99 

percent of imports.2


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to http://www.cgdev.org/section/initiatives/_active/reformingtradepreferences/global_trade_prefer ence_reform. 3See Elliott op cit., and Antoine Bouet, David Laborde, Elisa Dienesch, and Kimberly Ann 

Elliott, The Costs And Benefits Of Duty-Free, Quota-Free Market Access For Poor Countries: 

Who And What Matters, CGD Working Paper, Washington: Center for Global Development, 

forthcoming. 4http://www.igdleaders.org/sections/newsmedia/newsmedia_headlines_4-22-09.asp. 5http://www.house.gov/mcdermott/pr091120.shtml. 

6 Bouet et al., op cit. 

Congressional action on preference reform in early 2010 would strengthen U.S. 

leadership in promoting global change to make trade work for the poorest countries. 

With a strong U.S. reform in hand, President Obama could press his colleagues at 

the G–20 summit in Canada to implement the goal of full market access for LDCs 

prior to the U.S. Summit’s progress review of the Millennium Development Goals 

in September. 

Recommendations for Reforming U.S. Trade Preferences 

The following policy recommendations for reforming U.S. trade preference programs for LDCs and other small poor countries reflect my own research 3 and the 

proposals endorsed by a broad coalition of U.S. business, labor, NGO and research 

groups last spring 4 as well as the legislation recently introduced by Congressman 

James McDermott (D–WA): 5

• Implement 100 percent duty-free, quota-free (DFQF) market access. • Use the Generalized System of Preferences (GSP) rule of origin requiring 35 

percent domestic value-added with the following amendments: 

» as long as there is substantial transformation, allow LDC beneficiaries 

to count inputs sourced from other developing countries, or FTA partners, toward the 35 percent threshold; » define substantial transformation for apparel as cutting and sewing operations. 

• Make all preference programs permanent and predictable, beginning with 

DFQF reform. 

These critical reforms could be implemented either by amending the existing GSP 

program for LDCs, consistent with the U.S. reform coalition proposals noted above, 

or by amending AGOA and creating a new program for LDCs, as recommended in 

Congressman McDermott’s bill. And, as noted above, the international impact of reform would be greatest if this is done in the first six months of next year. 

Preference Reform and American National Interests 

Recent joint research with colleagues at the International Food Policy Research 

Institute (IFPRI) shows that full DFQF market access would have important benefits for LDCs.6 In addition, increased trade with LDCs would have important benefits for U.S. foreign policy by strengthening the development leg of the emerging 

U.S. national security strategy. By increasing investment and creating jobs in poor 

countries, it would contribute to political stability and, over time, expand markets 

for U.S. exports as incomes rise. 

In the United States, the traditional consumer benefits and the adjustment costs 

for U.S. firms and workers would be small. The 49 UN-designated LDCs account 

for approximately one percent of total U.S. imports and only one half of one percent 

of non-oil imports (see attached table). The joint CGD–IFPRI research confirms 

what these numbers suggest: The impact of implementing 100 percent DFQF for 

LDCs would be indiscernible for the U.S. economy as a whole and the effects on 

competing U.S. production would be small, ranging from essentially no impact on 

sugar production to a reduction of roughly one-half of one percent for textiles and 

less than that for apparel. Assuming that the number of jobs falls proportionately 

with the estimated decline in production, and even doubling the estimated decline, 

DFQF for LDCs would result in fewer than 8,000 job losses in these industries. 

Moreover, while a small number of jobs might be lost in those sectors, jobs would 

be gained in other sectors. For example, while sugar cane and beet production is 

mostly mechanized and creates very few jobs, thousands of jobs in the confectionary 

industry have been lost in recent years due to plant closures blamed on high sugar 

prices. 

Another concern about expanded access for Asian LDCs is that it would reduce 

benefits for existing AGOA beneficiaries. The agricultural sector, however, which 

employs the majority of poor Africans, would gain from a DFQF reform that removes remaining restrictions, especially if it is coupled with increased support for 


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1Given the changing composition of CBI beneficiaries during the years of CAFTA’s rolling 

entry-into-force, this statement includes both current and former CBI beneficiaries. Total U.S. 

imports grew every year between 2005 and 2008, for a compound annual growth rate of 3 percent. Jan.-July 2009 data are latest available. 

infrastructure development and technical assistance to help African producers meet 

U.S. food, plant, and animal safety standards. Concerns about expanded preferences 

for non-African LDCs usually center on apparel, while ignoring potential gains from 

improved agricultural access. Moreover, 90 percent of AGOA apparel exports come 

from five countries and are highly concentrated in a relatively small number of tariff lines. If any restrictions are placed on the exports of major apparel suppliers, as 

in the McDermott legislation, they should be drawn as narrowly as needed to shelter core African exports. 

In sum, expanded market access for LDCs would offer opportunities for thousands 

of people, mostly young women, to pull themselves and their families out of extreme 

poverty. Because these countries are small and poor, the short-run impact on the 

U.S. economy would be small. In the long run, however, the benefits of better integrating trade with our broader development policies and helping to lift these countries out of poverty would be far greater. 

f 

Statement of the Government of Trinidad and Tobago 

Chairman Levin, Ranking Minority Member Brady, and distinguished Members 

of the Committee, the Republic of Trinidad and Tobago welcomes this opportunity 

to share with you our views on the operation of the Caribbean Basin Initiative 

(CBI), a program launched in 1983 to facilitate the economic development and export diversification of the Caribbean Basin economies. 

Introduction 

Before addressing the operation of the program, let me begin by stating how 

proud we were to host the Fifth Summit of the Americas in April 2009 and the 

Heads of State and Government of the Commonwealth in November 2009. Several 

Members from the Ways and Means Committee were part of the Congressional delegation that attended the Summit, led by Chairman Rangel and Chairman Engel of 

the House Foreign Affairs Subcommittee on the Western Hemisphere. For us, it was 

an historic event. President Obama set a tone of openness and goodwill that heralds 

the beginning of a new era in inter-American relations. 

This message could not come at a better time given the negative economic and 

social consequences of the current global crisis. After several years of steady, albeit 

modest, growth, total U.S. merchandise imports from the Caribbean Basin countries 

have declined sharply—by 25 percent—so far this year.1 As Prime Minister Manning stressed at the Summit, given the enormity of the crisis, ‘‘Unilateral action 

alone will likely be ineffective. There is a need for even greater economic and commercial ties among the countries of the Americas.’’ Renewal and rejuvenation of the 

CBI program can play an important role in helping to arrest this abrupt decline in 

CBI imports and in continuing to strengthen bilateral trade, as well as regional 

trade among the countries of the Caribbean Basin. 

My submission will focus on four areas. First, I would like to highlight Trinidad 

and Tobago’s recent performance with regard to CBI eligibility criteria. Second, I 

want to emphasize the importance of timely program extension and of retaining 

those program aspects that have done well. Third, I want to stress the need to reinvigorate the program in light of CAFTA–DR’s entry into force. In particular, the 

Government of Trinidad and Tobago is advancing a specific proposal that we respectfully ask be included in any preference program extension that might take 

place later this year or next. Finally, I will explain briefly how our proposal would 

benefit Trinidad and Tobago, our Caribbean neighbors, and the United States of 

America. 

I. Eligibility Criteria 

First, with respect to our recent performance, Trinidad and Tobago has met all 

the CBI eligibility criteria and more. Our government already has the ‘‘Triple 

Crown’’ of a double taxation agreement, a bilateral investment treaty and an intellectual property rights agreement with the United States. In November 2008, we 

took another quantum leap forward in providing TRIPS-plus intellectual property 

protection by acceding to the WIPO Internet Treaties, which update our TRIPS obligations to protect online digital content. 


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2These products are enumerated under Section 211 of the CBTPA. They include imported 

footwear, canned tuna, petroleum and petroleum products, watches and watch pans. handbags, 

luggage. flat goals, work gloves and leather wearing apparel, when qualifying as CBTPA originating goods. A third feature of CBTPA provides duty-free treatment to certain beverages made 

with Caribbean rum. 3Five percent is based on trade statistics compiled by the Ministry of Trade and Industry. 

The Seventh Report to Congress on the Operation of CBERA, prepared by USTR on the basis 

of U.S. trade data, suggests CBERA imports may be as large as 13 percent of U.S. imports from 

Trinidad and Tobago. 4 After Brazil, Jamaica and El Salvador, and ahead of Costa Rica, South Africa and Canada. 

5 If produced from at least 50 percent local feedstock (e.g., ethanol produced from sugarcane 

grown in the CBI beneficiary countries.) Up to 7 percent of the U.S. market may be supplied 

duty-free by CBI ethanol containing no local feedstock (i.e., ethanol from other countries can 

be shipped to a dehydration plant in a CBI country for reprocessing). 

In making the transition from an oil-based economy to one based on natural gas, 

we also have become an even more important source of energy security for the 

Americas and are now the largest supplier of liquefied natural gas (LNG) to the 

United States. We worked closely with the United States in developing the energy 

conservation, renewal and security themes that had such a prominent role at the 

5th Summit of the Americas this spring, and we have advocated for a similar agenda when we hosted the Commonwealth Heads of Government Meeting in November 

2009. 

II. Essential Program Elements 

The Caribbean Basin Initiative is a broad program aimed at promoting the diversification of beneficiary Latin American and Caribbean economies and expanding 

their exports. The CBI program is comprised of two parts, namely: 

a) the Caribbean Basin Economic Recovery Act (CBERA) which offers duty-free 

entry to the United States on a permanent basis for a broad range of items 

from CBI beneficiary countries; and, 

b) the U.S.-Caribbean Basin Trade Partnership Act (CBTPA). The CBTPA is 

the most recent piece of CBI legislation and provides preferential, but temporary, access to the U.S. market similar to Mexico’s under the North American Free Trade Agreement (NAFTA). 

CBTPA became effective on October 1, 2000, and is scheduled to expire after September 30, 2010. It has two key features: 1) it allows specific textile and apparel 

articles to enter the United States free of duty or restrictions on quantity, provided 

certain conditions are met; and 2) it extends NAFTA parity to non-textile articles 

that were previously excluded from duty-free treatment under CBERA.2

Program Participation and Extension—Between 5–13 percent 3 of our exports benefit from duty-free treatment under CBERA. While permanent in U.S. legislation, 

we are very grateful that the Obama Administration recently secured a needed 

WTO waiver until end-2014. CBERA benefits will be even more important to Trinidad and Tobago in the future, as Trinidad and Tobago is slated to graduate from 

the GSP program effective January 1, 2010. 

Even more important in our case, however, are CBTPA’s benefits, as CBTPA extends duty-free treatment to our exports of petroleum and petroleum products. Were 

CBTPA to expire in September 2010 as provided in existing legislation, it could have 

a tremendous negative impact on Trinidad and Tobago’s exports because almost onequarter of all our exports to the United States would be subjected to higher tariffs. 

For all these reasons, it is critical for Trinidad and Tobago to continue to be 

among CBI’s beneficiary countries and for CBTPA be extended in a timely manner 

prior to its scheduled expiration. Expiration of CBTPA would be disadvantageous 

to the United States as well, since without CBTPA the export sales of U.S. textile 

manufacturers to the Caribbean would fall; the cost of many oil-based products 

would rise; and U.S. consumers would no longer benefit from a source of low-cost 

imports for products that otherwise carry some of the highest U.S. tariff rates. 

Ethanol—Trinidad and Tobago is the fourth major supplier 4 of ethyl alcohol to 

the United States. Under current U.S. policy, ethanol imported into the United 

States is subject to two customs duties: an ad valorem tariff rate of 2.5 percent and 

a secondary tariff of 54 cents per gallon. However, under the Caribbean Basin Initiative, ethanol may be imported duty free.5 CBI governments and ethanol producers have worked for years in a bipartisan manner to maintain and support the 

duty free ethanol preference provisions in CBI and to ensure that Congress understands the important and complementary role played by CBI ethanol in U.S. renewable energy initiatives. These CBI duty exclusions have provided opportunities to 


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6The merchandise processing fee (MPF) is 0.21 percent ad valorem on formally-entered imported merchandise, subject to a minimum fee of $25 per entry and a maximum fee of $485 

per entry. 7Selected by the Standing Committee on Business Development (SCBD), a public-private advisory committee to the Cabinet, the seven sectors include: yachting; fish and fish processing; 

merchant marine; music and entertainment; film; food and beverage; and printing and packaging. 8For purposes of determining the value-added requirement § 27030)(1)(13) the term ‘‘beneficiary country’’ includes ‘‘former beneficiary countries’’ but the merchandise must have been 

produced in a current beneficiary country, i.e., substantially transformed into a new or different 

article of commerce in a current beneficiary country. 9 U.S. CBI imports during Jan.–July 2008 were $2.2 billion, and only $1.3 billion during the 

comparable 2009 period. 10 USTR Website, http://www.ustr.gov/trade-topics/trade-development/prefernce-programs/ 

caribbean-basin. 11 CAFTA’s transshipment prohibition precludes packaging CAFTA-originating goods in Trinidad and Tobago because such goods lose their CAFTA-origin. CAFTA states that originating 

goods that subsequently undergo any operation outside of the territories of the Parties to the 

FTA other than unloading, reloading, or other processes necessary to preserve the condition of 

the good will lose their originating status. CBP has long held that under this provision packaging for retail sale deprives otherwise eligible goods of their originating status. 

develop an environmentally friendly industry in the Caribbean which contributes to 

fuel efficiency and less fossil fuel pollution in the United States. 

Given the importance of Trinidad and Tobago to the energy security of the United 

States, the Government of Trinidad and Tobago recommends that the CBI ethanol 

duty-free regime be maintained unchanged so as not to further disrupt our current 

relationship in energy trade, especially as the value of our ethanol exports to the 

United States already has plummeted by almost 70 percent so far this year. This 

important benefit can assist our own recovery once U.S. demand for ethanol returns 

as the U.S. economy rebounds. 

Merchandise Processing Fee—Finally, it is imperative that the CBI program retain its current exemption from Custom and Border Protection’s merchandise processing fee (MPF).6 All of the U.S. free trade agreements currently operating in the 

Americas (NAFTA, Chile, CAFTA–DR, Peru) have this exemption. Without it, dutyfree imports from CBI countries would be at, roughly a 5 percent price disadvantage 

to similar goods from FTA countries. 

III. Creative Thinking for the Next Phase 

The United States is Trinidad and Tobago’s largest trading partner, absorbing approximately 60 percent of our exports and providing 25 percent of our import needs. 

The Government of Trinidad and Tobago is seeking to diversify its economy in order 

to reduce our economy’s dependence on the energy sector and to achieve self-sustaining growth. In this regard, the Ministry of Trade and Industry is leading efforts 

to develop seven sectors which have the potential for significant employment generation and revenue earnings.7 As part of its diversification drive, Trinidad and Tobago is seeking to exploit the production and export potential in the downstream 

energy industries. One of these sectors—printing and packaging—would use our 

natural gas resources to diversify inter alia into products derived from local polypropylene and polyethylene. 

Regrettably, we are seeing these plans dashed. While we applaud the CAFTA– 

DR’s economic reforms and opening to the United States, the ability of these six 

counties to declare CAFTA origination for their production has robbed the operation 

of the CBI program of critical energy.8 If one looks at just duty free U.S. imports 

from the current (remaining) 19 CBERA beneficiary countries, along with preferential U.S. imports from the eight CBTPA beneficiaries, the growth of U.S. imports under the CBI program has been flat since the passage of CAFTA–DR in 2005. 

CBI imports were $3.45 million in 2005 and an almost identical $3.47 in 2008. Even 

more alarming, CBI imports are down 56 percent so far this year, more than twice 

the rate I mentioned at the beginning of my submission for total imports from Caribbean Basin countries.9 It stands to reason that as former CBI beneficiaries have 

more and better options for claiming preferential access to the market for their production there is less opportunity for those remaining to make use of the CBI program for its intended purpose—‘‘to facilitate the economic development and export 

diversification of the Caribbean Basin economies.’’ 10

Only a few years ago, Trinidad and Tobago could have packaged goods for retail 

sale that had been substantially transformed in the CAFTA–DR countries and the 

article would still have qualified as a CBI originating good if it could meet the CBI 

value-added rule. There would have been no concept of transshipment between Central America/the DR and the other CBI beneficiaries.11 Most importantly, while the 


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12Generally 35 percent for items eligible under CBERA and CBTPA’s NAFTA parity articles, 

with a maximum of 15 percent of the appraised value produced in the customs territory of the 

United States. 13 In 2008, goods claiming a CAFTA–DR preference were valued at $9.4 billion, while goods 

claiming a CBI preference were $3.5 billion. 14The first exception is an amendment to CBTPA contained in Public Law 109–53, the 

CAFTA–DR Implementation Act. The intent of the provision is to honor a CAFTA side letter 

that allows articles that were eligible for CBTPA treatment prior to CAFTA, and that are coproduced by enterprises in a CAFTA Party and a CBTPA beneficiary country, to continue to 

be eligible for CBTPA benefits after CAFTA’s entry into force, even though the CAFTA Party 

would no longer be a CBTPA beneficiary. (The actual drafting of the provision limited its application to situations involving Haiti and the Dominican Republic.) The second exception also is 

an amendment to CBTPA, this time in the ‘‘Haitian Hemispheric Opportunity Through Partnership Encouragement Act of 2008’’ (HOPE II). HOPE II permits certain textile and apparel articles to be ‘‘imported directly from Haiti or the Dominican Republic,’’ regardless of which country 

completed the step that conferred origin. 

packaging operation itself would not have conveyed CBI origin, it would not have 

ruled out CBI origin either. Indeed, the packaging materials (if of CBI origin) would 

have counted toward the CBI value content rule just as the CAFTA–DR inputs 

would.12 That is no longer the case. § 2703(a)(2)(a) specifically states that ‘‘mere’’ 

packaging operations in CBI beneficiaries are not sufficient to establish duty-free 

treatment under CBI. Thus, rather than a potential pool of $13 billion of goods to 

package for retail sale and still claim the CBI duty preference, Trinidad and Tobago 

is limited to what is left in the current CBI beneficiaries’ qualifying pool of merchandise, or only $3.5 billion.13

Legislative proposal—We believe this unintended situation, which drastically curtails Trinidad and Tobago’s development opportunities, needs to be addressed as 

soon as possible. Proposed draft language appears in an attachment, and we would 

be happy to work with the Congress and USTR to refine it. But the fundamental 

idea is simple—production that occurs in the six CAFTA–DR countries that would 

otherwise qualify as originating under CAFTA–DR can be shipped to a CBI country 

and count as CBI originating content if the good is packaged in the Caribbean using 

local material. 

Moreover, there are precedents for this approach involving Haiti and the Dominican Republic in the sensitive area of textile and apparel exports.14 Both of these 

precedents are a way around a special trade regime’s prohibition against transshipment, including performing packaging operations in another country. 

Applying this experience to Trinidad and Tobago’s packaging goals, we would propose amending Section 2703 of the Caribbean Basin Economic Recovery Act to permit duty-free treatment to apply to any article that undergoes production in a 

former beneficiary country and packaging for retail sale in a current beneficiary 

country if (1) the article produced in the former beneficiary country would otherwise 

be eligible for duty-free treatment under CAFTA–DR; (2) the packaging materials 

and containers originate in a CBI country; and (3) the product is imported directly 

into the customs territory of the United States from the CBI country that performs 

the packaging. 

We believe our legislative proposal is consistent with the past Congressional finding that ‘‘The Caribbean Basin Economic Recovery Act . . . represents a permanent 

commitment by the United States to encourage the development of strong democratic governments and revitalized economies in neighboring countries in the Caribbean Basin’’ and the policy of the United States is to ‘‘seek the participation of Caribbean Basin beneficiary countries in . . . [a] free trade agreement at the earliest 

possible date.’’ (Both from the ‘‘United States—Caribbean Basin Trade Partnership 

Act’’ at 19 USC 2701.). Further, the term ‘‘former beneficiary country’’ has the benefit of already being defined in the statute at 19 U.S.C. 2702. 

Importantly, our proposal would just restore the status quo ante. Prior to 

CAFTA’s entry into force, an article produced in Central America would not have 

lost its CBI eligibility by virtue of being packaged in Trinidad and Tobago. As such, 

the Government of Trinidad and Tobago respectfully requests that this correction 

be included in any bill to extend U.S. preference programs that might occur later 

this year. Some urgency applies as the Caribbean is being negatively affected by the 

global financial crisis. Real GDP fell sharply in 2008 from 3.4 percent in 2007 to 

1.5 percent in 2008, and the IMF projects a further contraction (-0.2 percent) in 


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15The 2007–2008 Caribbean averages are from the recent ECLAC publication, ‘‘Ame ́rica 

Latina y el Caribe: Series histo ́ricas de estadı ́sticas econo ́micas, 1950–2008,’’ found at http:// 

www.cepal.org/deype/cuaderno37/datos/4.1.2.xls. Projections are from the International Monetary 

Fund, World Economic Outlook, Crisis and Recovery, April 2009, p. 90, and include Haiti and 

the Dominican Republic. Both sources provide the same data for Trinidad and Tobago. 16See, for example, the world-scale Lurgi/Bassell Gas to Polypropylene Complex which is 

under evaluation. 17 All of the 13 member states of the CSME except Suriname are also CBERA-eligible beneficiaries. CBERA beneficiary countries that are not members of the CSME include Aruba, Bahamas, British Virgin Islands, Haiti, Netherland Antilles and Panama. 

2009 before the Caribbean stages a modest recovery in 2010 (1.5 percent).15 Trinidad and Tobago has also been severaly impacted by these developments -. In fact, 

real GDP growth for Trinidad and Tobago has already dropped precipitously from 

13.3 percent in 2006 to 3.4 percent in 2008 and the IMF expects it to fall further 

to 0.5 percent in 2009. We therefore need economic alternatives to help counter 

these disruptive impacts. 

IV. Benefits of Legislative Proposal for the Region 

Our proposal can lead to a deepening of local industry, a greater share of value 

accruing to the Caribbean, and more product diversification in the CBI program. 

Moreover, Trinidad & Tobago is committed to playing a leadership role in combating 

new threats to the stability, rule of law, and democratic process in the Caribbean. 

Direct Benefits for Trinidad and Tobago—The Printing and Packaging Sector is 

one of several that have been selected for further development by Trinidad and Tobago in keeping with its diversification thrust T&T’s printing and packaging industry will get a shot in the arm based on plans 16 to establish a plastics industry 

through complexes for the production of ethylene, polyethylene, propylene and polypropylene. Important downstream polyethylene and polypropylene manufacturing 

opportunities include film sheeting, containers, bottles and caps, bags, bowls and 

cups, future locally-produced inputs for an expanding packaging industry. 

Direct Benefits for the Caribbean—Trinidad and Tobago has fully implemented the 

obligations of the CARICOM Single Market and Economy (CSME) 17 which provides 

for the free movement of goods produced in the region, the free movement of accredited skilled personnel and the provision of services provided through a locally established company. 

Both CBI rules and the Single Market encourage other Caribbean countries to 

participate in this benefit. They may do so in a number of ways. First, they can send 

their own products to T&T for more sophisticated packaging, producing a more competitive product of better quality, price and consumer appeal. Second, they can package CAFTA items locally using T&T materials or other materials produced in the 

Caribbean, e.g., baskets woven from plant reeds. Third, university graduates of any 

Single Market country can take advantage of the increased employment opportunities in Trinidad and Tobago for operators, supervisors and apprentices within the 

local printing and packaging industry, as well as for design artists, advertising and 

marketing specialists. Finally, Caribbean countries may form strategic alliances 

within the printing and packaging industry, with its key linkages to many other sectors. 

Trinidad and Tobago also has active programs that could assist its CARICOM 

partners to take advantage of this new opportunity. The main component of the 

CARICOM Trade Support (CTS) program is a U.S. $16+ million fund established 

by the Government of Trinidad and Tobago, which is to be disbursed as a loan on 

an interest free basis to firms in other CARICOM countries to procure technical assistance for business development projects. The Packaging and Printing Industry 

(PPI) Strategic Plan also calls for enhanced training. For example, last year the 

world renowned Graphic Arts Technical Foundation (GATF) of the United States designed a two-day training program focused on Caribbean printers and graduates to 

help fill the technical expertise and skilled manpower that are critically needed in 

this sector. 

Indirect Benefits for the Caribbean and the United States—The strategic and geographic importance of Trinidad and Tobago within the Caribbean and CARICOM 

cannot be overstated. Trinidad and Tobago has taken a leadership role in advocating 

for stronger economic integration and security measures within CARICOM. Our 

strong economic relationship with CARICOM helps curb illegal immigration to the 

United States in search of better opportunities. Our stable and democratic government provides a role model for other countries. 


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18Fact Sheet on Counternarcotics and Law Enforcement Country Program: Trinidad & Tobago, U.S. Department of State, January 20, 2009, can be found at http://www.state.gov/p/inl/ 

rls/fs113700.htm. 19 H. Res. 865, introduced by Rep. Yvette Clarke (NY–D) in 2007, calls on the United States 

to work with Caribbean countries to address crime and violence in the region. The Resolution 

was highlighted in the House Committee of Foreign Affair’s work on the Merida (Third Border) 

Initiative. 

Further, Trinidad and Tobago cooperates with the United States on a full range 

of issues from drug interdiction and health issues to counterterrorism and security 

affairs: 

• The Caribbean is the midway point between illicit drug producers in the 

South and consumers in the North, with profits from the drug trade often 

dwarfing the legal economies of CARICOM countries. In 2008, the U.S. Drug 

Enforcement Agency and its local counterparts seized over 10 tons of cocaine 

transiting into or through Trinidadian waters.18 To assist in securing the 

country’s coastline, in 2009 the Government upgraded the Coast Guard HQ 

in Chaguaramas; two new marine interceptors will form the back bone of a 

revamped Police Marine Unit, while four more are scheduled; and Trinidad’s 

Coast Guard is expected to receive three of an anticipated six Austal built 30 

meter patrol boats (go fast boats). 

• With drug trade comes guns and violent crime. Trinidad and Tobago is heavily invested in regional security to help address the fact that the Caribbean 

now has one of the highest per capita murder rates in the world.19 To deal 

with this surge, in May 2009, Trinidad and Tobago signed an ‘‘etrace’’ Memorandum of Understanding with the U.S., an innovative program that uses the 

Internet to help combat illicit trafficking in firearms. 

• As a demonstration of Trinidad’s commitment to the region, the CARICOM 

Implementation Agency for Crime and Security is now headquartered in Portof-Spain, and our Prime Minister has portfolio responsibility in the 

CARICOM ‘‘Cabinet’’ for Crime and Security. 

• As the largest U.S. supplier of liquefied natural gas (LNG), Trinidad and Tobago plays an important role in Caribbean energy security. Recognizing this, 

a team of USG experts carried out a vulnerability assessment in 2008 and 

prepared a report with recommendations on critical infrastructure protection 

efforts. 

• In July 2008, Trinidad and Tobago enacted the ‘‘Immigration (Advance Passenger Information) Act, 2008.’’ Further, the Government established the 

Trinidad and Tobago Immigration Document Examination Laboratory to 

counter the fraudulent use of travel and identity documents. 

• The Government of Trinidad and Tobago cooperates in U.S. extradition proceedings. Notably, in June 2008, the Government approved the extradition of 

two Guyanese and one Trinidadian accused of plotting to blow up New York’s 

JFK International Airport. 

Conclusion 

The Caribbean Basin Initiative continues to be of tremendous importance to Trinidad and Tobago. Nonetheless, the advent of CAFTA has left the CBI program as 

less than the sum of its previous parts. We have advanced one thus far one, legislative ‘‘fix’’ to this problem that would support the Government of Trinidad and 

Tobago’s efforts to diversify its economy and increase opportunities to generate employment and new business ventures throughout the region. Given the number of 

U.S. preference programs that are about to expire, it is inevitable that there will 

need to be a bill to renew them. We hope the Ways and Means Subcommittee will 

give our proposal careful consideration and seize the opportunity to restore key aspects of the CBI program. We undertake to add to this dialogue in the coming weeks 

as we seek to partner with the United States Congress in strengthening the commercial relationship between the United States and the Caribbean. 

Thank you for this opportunity to provide our views. 

Attachment: 

ATTACHMENT: PROPOSED LEGISLATIVE CHANGES TO 19 U.S.C. 2703 

Amend § 2703(a) to add: 

(7) Notwithstanding paragraphs I and 2. The duty-free treatment provided under 

(a) shall apply to any article that would otherwise be eligible for duty-free 

treatment under CAFTA–DR if— 


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(A) Such article is packaged for retail sale in a beneficiary country using packaging containers and material that originate under (a); and 

(B) The article is imported directly from a beneficiary country into the customs 

territory of the United States. 

Amend § 2703(b)(5) to add: 

(I) Articles that undergo production in a former CBTPA beneficiary coun- try and packaging in a CBTPA beneficiary country 

(i) Notwithstanding subparagraph (a)(2)(A), duty-free treatment shall apply to 

any article referred to in subparagraphs (A) through (F) of paragraph (1) that 

would otherwise be eligible for duty-free treatment under CAFTA–DR if— 

(A) such article is packaged for retail sale in a beneficiary country using packaging containers and material that originate under (a): and 

(B) the article is imported directly from a beneficiary country into the customs 

territory of the United States. 

f 

Statement of Jamaica Chamber of Commerce 

INTRODUCTION. 

The potential for the following trade recommendations is to support the Caribbean 

designated Third Border of the United States, with the Region’s endeavour to regain 

a level of prosperity in order to monitor effectively the area under its purview, 

through a new enhanced version of the CBI as the best way forward following the 

world recession, to engender a resurgence of Caricom/US trade and investment, particularly in the expanding Services sector, while reducing Jamaica’s trade deficit 

with the US. 

Jamaica has a significant and escalating trade deficit with the US. Briefly in 

2007, the value of imports was US$2.7 billion that has increased in 2008 to US$3.3 

billion, while preliminary returns for 2008 indicate that Jamaica has a trade deficit 

with the U.S. of US$2.3 billion, rising from US$1.9 billion in 2007. In Jamaica’s case 

the U.S. is therefore the primary beneficiary under the CBI. 

The fact that the merchandise trade balance of most Caricom countries with the 

U.S. is negative, though not for Caricom as a whole, should not be surprising for 

a Region in which most member states are competitive in their Services sector rather than goods. This also explains in part, why the CBI has not been fully utilised 

in the past. 

Jamaica and Caricom need to look forward to a beneficial access arrangement 

under the new CBI in perpetuity, so that all Caricom countries could benefit from 

the advantages of CBERA and CPTBA and enhanced tariff and quota concessions, 

in addition to more flexible rules of origin, addressing non-tariff barriers and other 

border measures, that affect effective market access and extending the scope of coverage beyond the trade in goods to include the trade in services, now the fastest 

growing sector in Jamaica and Caricom, with an increase in investment and other 

consequential economic areas. 

Trade and economic co-operation relations between Caricom and the U.S. are currently covered under a narrow range of trade related instruments. The CBERA and 

the CBTPA which enhances CBERA, collectively referred to as CBI, provide unilateral duty free access for nearly all goods, which accounts for a diminishing share 

of the total exports of most Caricom beneficiary countries with rapidly growing export sectors. The U.S. also has Bilateral Investment Treaties with Jamaica, Grenada and Trinidad and Tobago. 

THE CBI BENCHMARK. 

The Caribbean Basin Initiative (CBI) 1983 refers to the following unilateral legislation enacted to promote U.S. trade and investment in beneficiary countries. The 

following are elements of the CBI: 

• 1983 Caribbean Basin Economic Recovery Act (CBERA) 

• 1990 Caribbean Basin Economic Recovery Expansion Act 

• 2000 Caribbean Basin Trade Partnership Act (CBTPA) 

CBERA offers duty free access to the U.S. market for a range of goods from 24 

beneficiary countries. CBERA acquired a waiver under Article XXV of GATT 1947 

valid to December 31st 2014, under which over 90% of Jamaica’s exports of goods 

enter the U.S. market duty-free. CBERA continues to provide duty-free entry to the 

U.S. on a permanent basis that was granted on 30th August 1990 through amendVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00286 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ing the original CBERA 1983 legislation, although a WTO waiver is required for extension of the preferences it provides. These preferences together with additional expected access opportunities that may be granted should be included in the new enhanced CBI that would also apply to services. 

The discretionary nature of both CBERA and CBTPA that together constitute CBI 

does not provide a secure foundation for the future Caricom/US trade relationship 

recommended to be anchored in perpetuity on an enhanced CBI arrangement. Such 

an indefinite arrangement would also be attractive to investors given the market 

access stability that would remove the susceptibility to reversal by Congress or 

through executive stipulation concerning either country of product eligibility. For example, under CBERA, the beneficiary status of a country can be ended or suspended 

by the President at any time. Such an uncertain environment should be varied to 

be attractive for future investors. 

Further, the CBERA rules of origin have impaired the value and effectiveness for 

beneficiary countries. The origin criterion of substantial transformation limits the 

full preference potential for countries whose technological and manufacturing enterprises are still at the developing stage. These countries which comprise the majority 

of Caricom island states, are the smallest economies in the hemisphere, and should 

therefore be viewed asymmetrically. 

Additionally, CBI beneficiaries have consistently referred to the difficulty with the 

excessive, onerous and complex certificate of origin documentation work and customs implementing rules, along with quotas and other non-tariff barriers mainly in 

the area of phytosanitary (SPS) regulations, which constitute significant and increasing entry barriers to goods from Caricom states. As the U.S. progresses with 

third country bilateral trade agreements, the beneficial value and effectiveness of 

the CBI for Caricom states continues to be eroded. Cognisance of the foregoing observations should therefore be seen as necessary to restore the full value and effectiveness of CBI in perpetuity together with the inclusion of services, now the principal sector for growth in the Region. 

SERVICES. 

As mentioned earlier services exports form the bulk of most Caricom countries 

and the sector has the largest potential for growth in the Caribbean. Caricom could 

gain net trade and investment benefits if services were included in the new enhanced CBI. Such gains would depend on the relaxation of the following barriers: 

• Citizenship requirements 

• Residency requirements 

• Different requirements at the state level for professional services 

• Slow processing of U.S. H–1B visas 

• Ownership restrictions 

• Non-mutual recognition of qualifications 

• Capital and security requirements and differential taxation requirements 

The U.S. has advised its domestic industries about the investment opportunities 

available in Caricom. A government sponsored U.S. Trade Mission is due to visit 

the Region shortly to examine the investment opportunities before the end of this 

year. 

In 2004 U.S. services exports valued US$340 billion, with a trade surplus of approximately US$48 billion. Services exports grew almost 100% over the last 10 

years, representing 30% of U.S. exports. According to the office of the USTR it is 

estimated that services such as accounting, finance, insurance, education, medicine, 

engineering, travel, tourism, construction, express delivery, advertising, retailing, 

telecommunications, computer services and environmental services account for approximately 70% of the U.S. economy’s output. 

In Caricom services comprise more than 75% of GDP and 73% of GDP in the case 

of Jamaica. In most of the smaller Caricom states, in many instances a similar percentage exists in terms of overall exports. However, more than 70% of Caricom’s 

services exports consist of tourism or travel services. The range of Caricom’s services 

is however in need of diversification, due to the overdependence on tourism which 

is a very fickle industry vulnerable to unpredictable dislocation by unexpected world 

events. This is particularly true in the case of Jamaica that has created two homegrown world class hotel chains. 

Cross border supply of services offers potential for Caricom providers, given their 

small and limited capital base, which inhibit commercial presence in foreign markets. Caricom service providers currently supply services to the U.S. through electronic media used for example by designers, architects and data processing entities. 

There is room for expansion which could be facilitated by the recognition of qualifications and accreditation of Caricom service providers and their regulation. 


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CONCLUSION. 

It is recommended that a future trade relationship between Caricom and the U.S. 

be considered and built on the acquis of the CBI, including both goods and services 

and incorporating an appropriate level of reciprocity that should be acceptable and 

satisfy both Caricom and U.S. goals. 

The terms of the new arrangement should be indefinite, aimed at expanding 

Caricom exports of goods and services, increasing investment, with protection for Intellectual Property Rights and food security. Improvements should include increased 

tariff and quota concessions, more flexible rules of origin, removing non-tariff barriers, and increased market access. Opportunities to improve the growth of the Region’s trade in services should be given priority as Caricom and Jamaica in particular have a competitive advantage and a strong interest in securing new markets 

for their services exports. As the U.S. is Caricom’s main trading partner, Caricom 

states would benefit significantly from a liberalised services environment that 

should also prompt increased investment in the Region. 

The U.S. continues a policy of negotiating bilateral FTAs with hemispheric and 

other third countries, that to ensure a long term foundation for Regional trade with 

the U.S., it is necessary to secure existing trade benefits for both goods and services 

by establishing a new customised relationship compatible with Caricom’s level of development, resources and capacity to produce both goods and services, commensurate with the obligations to be undertaken in the new trade framework. 

ANTHONY GOMES 

DIRECTOR, JAMAICA CHAMBER OF COMMERCE 

f 

Statement of the International Sugar Trade Coalition 

The International Sugar Trade Coalition (ISTC) respectfully submits these comments for the record of the November 17, 2009 hearing by the House Ways and 

Means Trade Subcommittee on U.S. trade preference programs. ISTC urges that 

sugar be excluded from any reform of U.S. trade preference programs. 

ISTC is a non-profit association representing sugar industries in developing countries from Africa, the Caribbean, Central and South America, Asia and the Pacific 

that are traditional suppliers of sugar to the U.S. market under the raw sugar tariff 

rate quota (TRQ), including: Barbados, Belize, the Dominican Republic, Fiji, Guyana, Jamaica, Malawi, Mauritius, Panama, the Philippines, St. Kitts and Nevis, 

Trinidad and Tobago, and Zimbabwe. ITC’s members represent approximately onehalf of the raw sugar TRQ allocations. 

U.S. industrial users of sugar (such as chocolate and candy manufacturers) and 

certain free-trade think tanks and NGOs have suggested that least developed countries (LDCs), especially those in Africa, would benefit by extending duty-free, quotafree treatment (DFQF) to sugar imports to the United States from LDCs. Experience with the reform of the EU sugar regime has proven, however, that including 

sugar in DFQF initiatives actually does more harm than good to developing countries. For that reason, in its testimony presented at the November 17, 2009 hearing, 

the Common Market for Eastern and Southern Africa (COMESA) recommended that 

sugar should be excluded from DFQF initiatives. ISTC agrees. 

1. Access to the U.S. Sugar Market Is Valuable Because of the U.S. Sugar 

Program. 

In considering whether sugar should be included in DFQF for LDCs, one has to 

start with the question why LDCs want to export sugar to the United States in the 

first place. According to the International Sugar Organization (ISO) the vast majority—roughly 80%—of the sugar produced in the world is consumed within the country of origin. Most sugar-producing countries, including some LDCs, maintain the 

viability of their sugar industries through measures (including TRQs, subsidies, etc.) 

to ensure that the price of sugar in their internal markets is above their local cost 

of production. 

There are only two major import markets where, over the past half century, sugar 

prices have been consistently above the world average cost of production: the EU 

and the United States. The EU price was traditionally significantly higher than the 

U.S. price, which made access to the EU market the most sought-after by sugarexporting countries. But as a result of a WTO challenge brought by Brazil, Australia 

and Thailand, coupled with the impact of the EU’s Everything But Arms (EBA) initiative, which extended DFQF to LDC sugar, the EU reduced its sugar reference 

price by 36%. Today, the U.S. and EU market prices are the closest they have been 


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*Drought-induced damage to the cane crop in India caused world-market prices in 2009 to 

double and rise above the world average cost of production for the first time in more than 30 

years. Raw cane sugar, which accounts for the great bulk of world sugar trade, is currently 

priced around $500 per metric ton world markets and around $600 on the U.S. market. Sugar 

is traded on New York and London exchanges and is historically more volatile in price than 

crude oil. 

in decades. Depending on currency exchange and freight rates, the U.S. price may 

actually provide greater returns for some exporters from time to time. As a result, 

access to the U.S. market today is relatively even more attractive than ever before. 

In addition to the premium-priced EU and U.S. markets, sugar is also traded on 

the so-called ‘‘world market,’’ where prices are typically well below the world average cost of production.* Only the lowest cost sugar producers, Brazil, Australia and 

Thailand, intentionally target the world market. Other countries may occasionally 

dispose of surplus production on the world market, which only further depresses the 

world market price. No LDCs and no African countries (with the possible exception 

of South Africa) produce sugar with the intention of exporting to the world market 

precisely because the price is usually below their cost of production. 

The U.S. sugar program ensures that the market price is above the cost of production through a combination of (1) TRQs on imports from traditional suppliers; (2) 

domestic marketing allotments to control the amount of domestic sugar in the market; and (3) ‘‘nonrecourse’’ loans to domestic sugar producers. Through these measures, the U.S. Department of Agriculture (USDA) balances the interests of domestic 

sugar producers, U.S. consumers, and traditional foreign suppliers, with the goal of 

maintaining a stable market. The resulting U.S. market price is in the mid-range 

of internal market prices around the world. 

A total of 39 countries, all but two of which are developing countries, hold allocations under the U.S. raw sugar TRQ. (Australia and Taiwan are the developed quota 

holders.) The developing-country quota holders include four LDCs: Haiti, Madagascar, Malawi and Mozambique. Consistent with GATT Article XIII, quota shares 

under the TRQ are assigned on the basis of actual exports to the United States during a representative base period. Countries not assigned quota shares are not traditional suppliers to the U.S. market. 

Sugar exports are the life’s blood of many of these developing-country quota holders. Sugar exports represent as much as 24% of total GDP (e.g., Swaziland) and up 

to 93% of agricultural revenues (e.g., Fiji) for many these developing-country quota 

holders. Literally millions of farmers and workers earn their livings in the sugar 

industries of these developing-country quota holders. The non-LDC developing-country quota holders are significantly more dependant upon sugar exports than are the 

LDCs (i.e., sugar exports are a larger percentage of total exports for the non-LDC 

developing countries). 

The U.S. sugar program is beneficial to developing-country quota holders because 

it provides them with access to a market where the price is consistently remunerative, i.e., above their cost of production. Uncontrolled increases in the flow of sugar 

into the U.S. market risk undermining the U.S. price, reducing the revenues upon 

which developing-country quota holders rely. Developing-country sugar exporters 

need a balance between the volume of access and the value of that access, because 

increased access at a price that is below the cost of production is worthless. 

2. Granting DFQF to LDC Sugar Risks Destroying the U.S. Sugar Program, 

Which Is Already Vulnerable Because of NAFTA. 

The U.S. sugar program has remained in effect since 1982 with only relatively 

minor changes precisely because it has been effective in balancing the interests of 

domestic producers, U.S. consumers and traditional foreign suppliers—all at no 

budgetary cost to the U.S. taxpayer. This balance of interests has been seriously disrupted by the North American Free Trade Agreement (NAFTA), which gave Mexico 

DFQF access to the U.S. market. U.S. sugar imports from Mexico have sky-rocketed 

from 7,258 metric tons (MT) before NAFTA to 1.3 million MT during the just-ended 

2008–09 quota year. In the meantime, U.S. sugar imports from the 39 traditional 

suppliers have fallen to the minimum level bound in the Uruguay Round (approximately 1.1 million MT), and the U.S. market price has become more volatile, jeopardizing sugar export revenues for the developing-country quota holders that depend 

on access to the U.S. sugar market. 

The U.S. Administration learned its lesson from NAFTA. No subsequent FTA negotiated with a sugar-producing country has included DFQF treatment for sugar. 

Rather, all U.S. FTAs since NAFTA have strictly limited the volume of sugar to be 

imported duty-free under the FTA. The reason is simple: DFQF treatment for sugar 

is incompatible with maintaining a premium price. 


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Adding another major source of DFQF sugar to the U.S. market would seriously 

depress the U.S. market price, thereby further reducing sugar export revenues by 

all developing-country quota holders. Even worse, extending DFQF treatment to 

sugar from LDCs could collapse the sugar program completely, which would benefit 

neither current developing-country quota holders nor LDCs. Rather, the only beneficiaries of such an outcome would be (1) the U.S. industrial sugar users, who would 

then be able to source sugar at the lowest possible price; and (2) the lowest cost 

exporters of sugar, none of which are LDCs, primarily Brazil, Australia and Thailand. 

Twenty-four LDCs are significant sugar producers. Of these, five are currently 

major exporters: Malawi, Mozambique, Myanmar, Sudan and Zambia. These five 

LDCs export an average of 1.1 million MT of sugar annually. 

Total annual U.S. sugar consumption is about 9.5 million metric tons. Domestic 

producers by law are guaranteed the opportunity to supply 85 percent of that total. 

Traditional suppliers are guaranteed the opportunity to supply 1.1 million metric 

tons, about 11 percent, under WTO agreements. Mexico faces no limits and supplied 

about 1.3 million MT, over 12 percent of the market, in the 2008–09 marketing 

year. Massive oversupply and a price collapse is a serious risk. It has been reported 

that Malawi, Mozambique and Sudan are already expanding their sugar production 

dramatically (doubling it according to some sources) to take advantage of their new 

DFQF access to the EU under EBA. With the recent reduction in EU sugar prices, 

a result of EU sugar market reforms, some or even all of these increased LDC exports—as much as another 1.4 million MT, almost 15 percent of U.S. consumption— 

might be diverted to the U.S. market under DFQF. Supplies could equal over 120 

percent of consumption, making it impossible to maintain the sugar price required 

by law without government purchases of sugar on an unprecedented and extremely 

costly scale. 

But even that is not the worst case scenario. A newly-introduced bill, the New 

Partnership for Trade Development Act, H.R. 4101, would extend DFQF status to 

all AGOA beneficiaries, as well as the non-African LDCs. This group of 29 countries 

exports on average 2.8 million MT of sugar annually. 

There can be no serious debate over whether the U.S. sugar program could withstand additional imports of that magnitude. At a minimum, the U.S. sugar price 

would fall significantly, probably below the cost of production in almost all developing-country quota holders, thereby immediately slashing sugar export revenues by 

those developing countries that are already dependent upon exports to the United 

States. The sugar program would no longer be tenable. 

As was experienced by the African, Caribbean and Pacific (ACP) countries in the 

reform of the EU regime, sugar export earnings by the developing country quota 

holders would plummet, tens of thousands of sugar workers would lose their jobs, 

and in some countries (Trinidad & Tobago and St. Kitts & Nevis in the case of the 

EU reform) the entire sugar sector would shut down, causing major economic dislocation and social upheaval. 

Another policy option would be to replace the current U.S. sugar program with 

a more traditional commodity program (e.g., deficiency payments). Under this 

model, U.S. sugar producers would be guaranteed a certain price, but imported 

sugar would trade at the so-called world market price, which as noted above is typically below the cost of production of all but a handful of countries. The result would 

be the loss of sugar export revenues by both current quota holders and LDCs, as 

sugar trade would be dominated by in Brazil (the world’s largest and lowest-cost 

producer), and to a lesser extent Australia and Thailand. The only winners would 

be the large corporate sugar users, commodity speculators, and the handful of nonLDC lowest-cost sugar exporters. 

The outcome would be a classic case of ‘‘robbing Peter to pay Paul,’’ as existing 

trade by the developing countries that are already dependent on their sugar exports 

to the United States would be destroyed to make room for new imports from LDCs. 

The United States sugar program, which sustains a premium price for sugar by limiting supply, would likely be overwhelmed. Increasing poverty in one group of poor 

countries in the hopes of reducing poverty in another group of poor countries is not 

a worthy policy goal. Indeed, there is a serious risk that even the LDCs would lose 

out, being replaced by the small group of super-competitive non-LDC sugar producers. The result would be increased sugar exports by Brazil, and increased poverty in almost all other sugar exporters, including the LDCs the DFQF initiative 

is intended to help. 


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For all these reasons, ISTC respectfully requests that sugar should be excluded 

from DFQF treatment in any preference reform legislation. 

Respectfully submitted, 

Harry Kopp 

Vice President 

f 

Submission of the National Association of Manufacturers 

The National Association of Manufacturers (NAM) represents the U.S. manufacturing industry and is comprised of thousands of firms of all sizes, in all manufacturing sectors and in all 50 states. We are pleased to have this opportunity to share 

the NAM’s views with regard to the Andean Trade Preferences Act (ATPA), which 

expires at the end of this year, as well as comments on the U.S. Generalized System 

of Preferences (GSP) program, which also expires at the end of this year. 

The NAM supports the U.S. preferences programs, including GSP and ATPA, as 

a means of aiding economic development in emerging economies and encouraging 

those countries to respect important norms of international commerce. This should 

include: due regard for property owned by U.S. citizens; intellectual property protection; equitable and reasonable access both to markets and basic commodity resources; observance of labor and environmental provisions; and actions to reduce 

distorting investment practices and policies. Preferences programs should not be 

viewed as an entitlement. 

Andean Trade Preferences Act (ATPA) 

The National Association of Manufacturers strongly supports renewal and reform 

of the ATPA before the end of the year. We note that President Obama’s Trade Policy Priorities document, issued February 27, 2009, by the Office of the U.S. Trade 

Representative, also spoke of the need for ‘‘renewal and reform’’ of U.S. preference 

programs, including the ATPA. 

Our strong preference is for the Congress and the Administration to work together over the coming month to enact reform of U.S. preference programs to ensure 

they are effectively supporting U.S. economic interests and broader global policy priorities. It is also important that this policy review focus on eligibility for benefits, 

in order to ensure that benefits are going to appropriate developing countries and 

to those partner countries that are playing constructive roles internationally. 

Although the strong preference of the NAM is for the review and reauthorization 

of ATPA to be concluded in 2009, if the press of other business means that Congress 

cannot conduct a careful review and recalibration of the ATPA programs this year, 

the NAM would recommend another short-term (perhaps six or twelve months) extension of the program. This should be combined with a firm commitment from the 

Administration and Congressional leadership to conduct a thorough review and reform of ATPA and other preference programs before the expiration of the extension. 

The track record of countries granted benefits under ATPA is mixed. On the positive side, the NAM believes that Colombia and Peru have consistently upheld their 

responsibilities with regard to the ATPA, and that the growth and development 

through increased trade with the United States as a result of ATPA benefits has 

been strong, positive and integral to both nations’ economic growth. On the negative 

side, both Ecuador and Bolivia have not upheld key requirements of the ATPA program, particularly with regard to respect for foreign investment, and the NAM is 

extremely concerned that blanket extension of ATPA to either country would simply 

reward bad behavior. 

The United States has negotiated bilateral Free Trade Agreements (FTAs) with 

both Peru and Colombia that, once fully implemented, will render their need for 

ATPA benefits moot, as U.S. tariffs will be reduced to zero for nearly every product 

imported from Peru and Colombia. The U.S.-Peru FTA has been implemented, although some Peruvian products face longer phase-in periods of U.S. tariffs that will 

benefit from extension of ATPA benefits. The U.S.-Colombia FTA is pending approval from the United States Congress and, without ATPA, Colombia’s exports to 

the United States will suddenly face tariffs. As a result of the positive growth and 

development provided to both nations by the ATPA, the NAM strongly endorses extending ATPA benefits to Colombia and Peru until such time as both FTAs are fully 

implemented. 

The situation with respect to Ecuador and Bolivia is, unfortunately, very different 

from the favorable developments we see in Colombia and Peru. In Ecuador, we continue to see deterioration in rule of law, judicial independence, corruption and other 

important areas. President Obama’s determination and strong public statements of 


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June 30, 2009, clearly reflect those same concerns. The Government of Ecuador was 

put on very clear notice that its performance under ATPA criteria was inadequate, 

and that improvement would be necessary for Ecuador to retain its ATPA eligibility 

beyond the six-month extension the President approved through December 31, 2009. 

The NAM strongly supported the Administration’s results-oriented approach toward 

Ecuador in the June review and urges the Congress to adopt a similar approach to 

Ecuador in the renewal of ATPA. 

Unfortunately, there has been no improvement from the Ecuadorian Government. 

Indeed, the situation has continued to deteriorate. Since the President’s June 30 

decisions on ATPA eligibility, Ecuador had continued to abuse foreign and domestic 

investors, including using the judiciary and police as harassment arms for the political leadership, rather than independent bastions of and protectors of democracy 

and rule of law. Over the past five months we have also seen the President of Ecuador issue decrees to revoke patent protections for international pharmaceutical and 

agricultural chemical manufacturers and threaten to annul many of Ecuador’s longstanding investment treaties including the Ecuador-U.S. Bilateral Investment Treaty (BIT) which has been in force and benefiting both parties since 1997. 

Some have argued that criticism of Ecuadorian behavior or any questioning of its 

eligibility for ATPA benefits is simply reflecting concerns over one particularly contentious investment dispute. We at the NAM want to be very clear—the NAM is 

indeed very concerned by Ecuador’s abusive treatment of any foreign investor, obviously with special attention to investments by NAM member companies and American companies. There have been some high-profile cases of very disturbing treatment of large American investors; and the NAM and other leaders in the U.S. business community have spoken out and will continue to speak out very strongly. But 

our overall policy approach and our concerns toward Ecuador are far, far broader. 

Ecuador’s established behavior and its credible threats for further abuses endanger 

broad swaths of our member companies, large and small—e.g. pharmaceutical manufacturers, chemical manufacturers, natural resource companies, and anyone who 

has made good faith investments in Ecuador. 

In light of these regrettable but undeniable developments, the NAM strongly recommends that, if the ATPA program is extended in some form beyond December 31, 

2009, Ecuador’s eligibility be suspended based on its failure to meet the eligibility 

criteria. We further recommend that in renewing the ATPA legislation, provision be 

made for the Administration to restore eligibility for ATPA benefits if and when the 

Administration certifies that a country has come back into compliance with the eligibility criteria. 

The case of Bolivia is similar to that of Ecuador. The NAM supported the actions 

of Congress and the Administration over the past year in handling Bolivia’s status 

under the ATPA. On June 30, 2009, President Obama suspended Bolivia’s ATPA eligibility. We believed then, and reaffirm today, that this was the correct decision in 

light of the performance of the Government of Bolivia in important areas including 

rule of law and counter-narcotics. The NAM recommends that Bolivia’s eligibility for 

ATPA benefits continue to be suspended. 

Generalized System of Preferences (GSP) 

GSP is a very important trade preference program created and maintained by the 

United States to promote the economic development of developing countries through 

trade. The program is particularly important for manufacturers who cannot source 

domestically and cannot meet the de minimis requirement for a duty suspension 

bill. 

Although GSP provides preferential duty-free entry for products from 133 designated beneficiary countries, we understand that the vast majority of the benefits 

are enjoyed by only a handful of eligible countries. We also understand that the 

GSP should benefit the countries that need it the most. Thus, we understand that 

this review of the GSP program should find ways to get more countries to benefit 

from the program. 

At the Hong Kong World Trade Organization (WTO) Ministerial in December 

2005, there was a political commitment by Trade Ministers, including the United 

States, to provide duty-free/quota-free market access for at least 97 percent of tariff 

lines from Least Developed Countries (LDCs). Ministers also agreed to take steps 

to progressively expand beyond 97 percent—but to take into account any impact on 

other developing countries at similar levels of development as LDCs. 

The implementation of this political commitment was agreed to be accomplished 

on an autonomous basis, through countries’ respective preferential trade regime, 

such as GSP. The United States certainly needs to live up to the commitment it 

made to LDCs at the Hong Kong WTO Ministerial. 


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Notwithstanding these important considerations, the NAM wants to stress another dimension of the program—its contribution toward reducing costs for U.S. 

manufacturers who utilize inputs that are not produced or available in America. 

This facet of the GSP program helps to improve the competitiveness of manufacturing in America. Eliminating GSP benefits on components that have no U.S. supplier or counterpart will mean that the U.S. manufacturer must pay a higher duty, 

which must then be passed on to its customers through a price increase. 

Thus, we urge you to undertake a careful review of the products that are covered 

by GSP to ensure that we do not raise costs for U.S. manufacturers. While we understand the requirements of the law, we want to ensure that this review of the 

GSP program does not hamper the competitiveness of U.S. firms. 

The NAM looks forward to working with the Administration and Congress to reform and renew American trade preference programs to make them more effective 

and better able to promote U.S. policy objectives. 

f 

Statement of the Lesotho Textile Exporters Association 

The Lesotho Textile Exporters Association (LTEA) wishes to take this opportunity 

to submit written comments for the record following the hearing on November 17, 

2009, on the U.S. trade preference programs. We wish to express our appreciation 

and support for the benefits granted under the African Growth and Opportunity Act 

(AGOA), and inform you about the success of this program and the challenges 

ahead. As the Committee and the U.S. Congress continue their deliberations on reforming preference programs to ensure that they truly work for poor countries, we 

urge that careful focus is placed on making certain that AGOA benefits are not 

eroded. We applaud the United States’ Congressional intent to help all least developed countries; however, we must recognize the limitations and diversity of industry 

development within those individual countries and factor such differences into any 

reforms. 

Proposals to grant significant duty-free access to non-AGOA least-developed countries (LDCs) with highly developed apparel exporting industries would likely result 

in U.S. companies switching their AGOA sourcing to Asia. As the U.S. Congress 

tries to strike a delicate balance between the interests of LDCs from different regions, LTEA hopes to serve as a constructive voice in the process. One creative approach to solve this conflict of interest among LDCs would be for the U.S. Congress 

to ensure textile and apparel imports from AGOA countries maintain a competitive 

position in the U.S. market against prolific producers in other LDCs by establishing 

an earned credit program for imports from such countries. 

WHO WE ARE 

LTEA was established in 1993 with a membership of seven factories. Our membership grew to thirty companies in 2004, when textile and apparel exports under 

AGOA reached their peak. Since then, however, our membership has decreased together with the decrease of AGOA textile and apparel exports. Today, our Lesothobased organization is composed of twenty-one apparel factories and one denim mill. 

In general, these factories produce fleece jackets; knit t-shirts and trousers; twill, 

corduroy and other woven trousers; and denim jeans. Approximately eighty-percent 

of these products are exported to the United States market. 

THE SUCCESS OF AGOA 

AGOA was enacted in October of 2000. Lesotho’s exports to the U.S. that year totaled $140 million. Lesotho saw a large increase in investment following its designation as an AGOA beneficiary country and qualification for apparel benefits in April, 

2001. This investment in turn yielded an increase in exports to the United States, 

as specifically envisioned by the Act. The most significant investment project was 

the construction of a new denim fabric mill, Formosa Textiles at a cost of USD$120 

million. In 2004, Lesotho saw its highest levels of AGOA textile and apparel exports 

to the U.S. at $456 million. Last year, the country’s AGOA exports were approximately $374 million—much lower than 2004 but still considerably higher than before AGOA. 

The apparel industry currently employs over 39,000 people and remains the largest formal employer in Lesotho. These jobs have helped bring stability to a country 

in which the unemployment rate is conservatively estimated at forty-percent. The 

wider economic stimulus provided by the apparel industry has indirectly created 

countless jobs in the communications, transportation, trade, housing, retail, food, 

and other sectors. Furthermore, the majority (eighty-five percent) of workers in the 


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apparel industry are women, many of whom have become their families’ sole breadwinners following the decline of jobs for men in the South African mining industry. 

One of the objectives of LTEA is to ensure its members adhere to the tenets of 

Lesotho’s Labour Code; our association does not accept factories who do not abide 

by these laws. In our industry, factories are required to keep employment records 

and maintain them for periodic inspection by the Ministry of Labour and Employment. Factories must also abide by the codes of conduct of U.S. buyers sourcing 

from Lesotho, who also conduct periodic compliance audits. In fact, the apparel industry has become a standard model for labor practices throughout the country. 

Child and forced labor are not an issue in the apparel industry and we have encouraged the Government of Lesotho to partner with the International Labour Organization (ILO) to develop and enact a Labour Code that criminalizes child and forced 

labor in all industries throughout the country. Starting next year, Lesotho and the 

ILO will put in a place a ‘‘Better Work Program’’ that will enable the country to market itself as an ethical sourcing destination. LTEA has been an active partner in 

the formulation of this program, and will be active in its implementation. 

CHALLENGES AHEAD 

Despite the initial growth of the apparel industry, great challenges remain for Lesotho to bring its people out of poverty. The country’s per capita GDP is among the 

lowest in the world and the prevalence of HIV/AIDS among adults is almost one in 

every four. Estimates indicate that five people in Lesotho depend on the salary of 

one worker. 

These circumstances make it crucial for the U.S. to maintain its support of subSaharan Africa through AGOA and other similar programs. Furthermore, it is imperative that any new preference program rules and beneficiaries do not disadvantage Lesotho and other sub-Saharan countries relative to other exporters to the U.S. 

and risk the loss of the progress that AGOA has brought thus far. 

The continued success of the textile and apparel industry in Lesotho depends on 

avoiding erosion of the small U.S. market share through which the country has 

gained a foothold. Initiatives to grant duty-free access to highly competitive textile 

and apparel industries from Asia will have a disastrous effect on Africa’s apparel 

industry. We have already seen examples of the damage such industries can have 

on Lesotho. In 2005, for example, ten factories were closed in the country and exports dropped fifteen-percent when the U.S. textile and apparel quota system was 

completely phased out. The current global economic downturn has drastically decreased orders, resulting in the closure of five more factories since the end of 2008. 

July 2008 employment figures of 45,310 persons have dropped to 39,229 in July 

2009. Under these circumstances, it is imperative the U.S. Congress help Lesotho 

and other sub-Saharan countries continue on a path of success without further regression. 

As we mentioned in a letter submitted on November 13, 2009, to Ways and Means 

Committee Chairman Rangel, a proposal to grant significant duty-free access to 

non-AGOA LDCs with highly developed apparel export industries we believe would 

result in U.S. companies switching their AGOA sourcing to Asia and result inmass 

closure of factories for LTEA members. As stated previously, in countries like Lesotho where so many jobs depend on the well-being of the apparel and textile sectors, 

such an outcome would be catastrophic. 

SOLUTIONS MOVING FORWARD, EARNED IMPORT ALLOWANCE PROGRAM 

While we maintain the position that offering duty-free status to non-AGOA LDCs 

with highly developed apparel export industries will bring undesired adverse consequences to sub-Saharan Africa, we are conscious of the worsening economic conditions affecting not only our region but all LDCs around the world. Poverty is a monster that must be banished not only from Africa but around the globe. Therefore, 

in the event the U.S. Congress is seriously considering offering duty-free status to 

non-AGOA countries, we urge you to also consider the creation of an earned credit 

program to ensure the well-being of the apparel industry in AGOA countries. 

We suggest creating an earned credit mechanism similar to the type that has 

been successfully implemented in Haiti and the Dominican Republic. This program 

would: 

• Balance the interest of the AGOA countries in maintaining competitive access 

to the U.S. market, 

• Create incentive for further vertical investment in AGOA countries, and 

• Provide benefits to non-AGOA LDCs. 


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Under this program, U.S. importers could earn the ability to import apparel dutyfree from non-AGOA LDCs provided they have imported the same quantity of similar apparel from an AGOA country. The apparel could be made of fabric of any origin to be eligible for this 1 for 1 earned import allowance. This 1 for 1 ratio could 

increase to 2 for 1 in order to create an incentive to use sub-Saharan fabric in 

AGOA apparel production. If a U.S. importer purchased apparel made in an AGOA 

country from AGOA fabric, it would earn credit to import twice as much of a similar 

type of apparel from a non-AGOA LDC. The apparel from the non-AGOA LDC could 

be made of fabric of any origin to be eligible for this 2 for 1 earned import allowance. The earned credits would be in the same product category of apparel sourced 

from the AGOA country. 

We would be pleased to provide our expertise in working in sub-Saharan Africa 

and assist you in the process of developing this credit program. Our association 

could work with other stakeholders to garner additional support for this concept. We 

would also be glad to provide the U.S. Congress with ideas for other initiatives that 

would benefit AGOA countries, such as extending the third country fabric provision 

for the full duration of the AGOA preference program and making certain amendments to the rules of origin. 

CONCLUSION 

We extend once again our deep appreciation and warm support for AGOA and 

other similar U.S. sponsored programs. These programs offer hope for opportunities 

and economic prosperity to millions of impoverished people in sub-Saharan Africa. 

Nevertheless, the economic well-being of Lesotho and others in the region remains 

fragile. We cannot yet compete against the prices offered by LDCs with highly developed apparel export industries. We ask the U.S. Congress to avoid jeopardizing the 

progress made by sub-Saharan textile and apparel producers over the last nine 

years and recognize the need for continued incentives to support our common goals 

of prosperity and stability. We look forward to working with you in this effort. 

Best regards, f 

Statement of the Campbell Soup Company 

Campbell Soup Company (Campbell) appreciates the opportunity to offer these 

comments on the operation and impact of the U.S. preference programs, which are 

currently being reviewed by the House Ways and Means Trade Subcommittee. 

Campbell supports a long-term extension of the Generalized System of Preferences 

(GSP) program to maintain the benefits of the program to the U.S. processed food 

sector, its employees and customers. 

Campbell, headquartered in Camden, New Jersey, is an American manufacturer 

and marketer of branded convenience food products with annual revenues of $7.9 

billion and a workforce of more than 17,000 people. Campbell products are sold in 

120 countries around the globe and include well-known brands like Campbell’s, 

Pace, Prego, Swanson, StockPot, V8, and Pepperidge Farm. 

Campbell urges the U.S. House of Representatives to renew the GSP for an extended period of time. Repeated short-term renewals add uncertainty to sourcing 

and business planning decisions. Campbell does not see a significant need to overhaul the GSP program, but should Congress determine there is a need to further 

study U.S. trade preference programs, it should extend the GSP program without 

amendment for two years (through December 31, 2011) at a minimum. 

II. GSP Extension Critical for U.S. Processed Foods Sector 

As prices for agricultural inputs rise, U.S. processed food companies such as 

Campbell are looking at every available means to contain costs for U.S. consumers. 

The extension of the GSP program beyond December 31, 2009 is an important component to avoiding price increases, since several GSP beneficiary countries, such as 

Argentina and Brazil, are also major suppliers to the U.S. processed food sector. 

A lapse of the GSP program, or a removal of one or more of the major beneficiary 

countries from the GSP program, would harm U.S. companies, their employees, and 

consumers. The GSP program provides an important tool to the U.S. processed food 

industry in its efforts to keep costs down and to strengthen its global standing. An 

increase in input costs would harm the competitiveness of U.S. processed food producers, threatening U.S. exports. 

The GSP program benefits not only U.S. consumers, but also a substantial number of U.S. workers whose jobs are tied to the value-added production, sales, marketing, finance, transportation and customer service of U.S. processed foods. Recent 

calculations place annual GSP-related savings in import taxes at nearly $1 billion. 


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Failing to renew GSP would lead to higher prices for American consumers and 

threaten U.S. jobs. 

III. Limitation of GSP Benefits Would Benefit China, Not Least Developed 

Countries 

Any changes to the GSP program should not limit the eligibility of current beneficiaries. The removal of GSP benefits for major beneficiary countries would in all 

likelihood only benefit non-GSP suppliers such as China. Least-developed countries 

(LDCs) do not have the capacity to meet the demand of most U.S. food processors. 

Studies from the U.S. International Trade Commission (ITC) have highlighted 

how U.S. preference programs help the development of beneficiary countries as opposed to those countries whose exports do not receive special access to the U.S. market. A limitation or removal of GSP benefits for countries such as Argentina and 

Brazil, both major food ingredient suppliers to the United States, would not promote 

additional export competitiveness in other GSP beneficiary markets, but would likely shift sourcing to China. 

As stated in a U.S. Government Accountability Office (GAO) report on U.S. trade 

preference programs, ‘‘[W]e repeatedly heard concerns that China, or sometimes 

other countries, would be most likely to gain U.S. imports as a result of a beneficiary’s loss of preferences.’’ In fact, the ITC has shown that China competes 

against LDCs in 202 products, whereas Brazil’s competition with LDCs is limited 

to only four product categories. 

IV. The GSP Program Is An Important Development Tool 

The GSP program represents good policy because it contributes significantly to 

the economic growth, exporting capacity, and integration of developing nations into 

the world economy. In particular, the GSP program has been instrumental in reinvigorating Argentina’s exports after that country’s 2001–2002 economic crisis. During 2001–2004, Argentine exports to the U.S. grew by 27%, but exports of GSP-eligible products grew by 187% following the designation and re-designation of a variety 

of Argentine products in 2001 and 2002. In the case of Brazil, GSP benefits have 

contributed to the country’s development by promoting more exports. As a result of 

increased GSP exports to the U.S., approximately 300,000 jobs have been created 

in Brazil, according to 2007 figures from the ITC. These positive economic developments would be in jeopardy with the removal of GSP benefits from these countries. 

The United States should be promoting economic ties with these key countries in 

Latin America, not severing them. 

V. Trade-Enforcement Leverage Would Be Lost by Limiting GSP Eligibility 

The GSP program also provides the United States leverage in seeking specific economic liberalization in foreign markets. The ability of the Executive Branch to limit 

or suspend GSP benefits for a country is a powerful tool for the U.S. trade officials 

to seek changes in the practices of a beneficiary country. As noted in a GAO report, 

‘‘. . . the leverage associated with [GSP] preferences creates an opportunity to secure improvements in IPR and labor protections.’’ 

The record of the GSP program has repeatedly shown that ‘‘country practice’’ petitions have afforded the Office of the U.S. Trade Representative (USTR) the leverage 

to encourage developing countries to reduce significant barriers to trade in goods, 

services and investment and to provide enforcement of IPR. This leverage has resulted in increased market access for U.S. exports and improvements in policies of 

importance to the U.S. Government. The removal of GSP preferences would result 

in the loss of this leverage. 

VI. Conclusion 

In summary, Campbell strongly opposes any efforts to limit, suspend, withdraw 

or otherwise amend the current GSP program eligibility list. Letting GSP expire, 

even temporarily, or reducing its benefits in any way, would impose an onerous 

hardship on U.S. companies and impair their competitiveness abroad. It would also 

harm U.S. economic influence. Campbell urges the U.S. Congress to extend the GSP 

program in its current form for an extended period of time. At a minimum, the GSP 

program should be extended for two years until December 31, 2011. 

Kelly D. Johnston 

Vice President, Government Affairs 

f 


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Statement from the Government of Thailand 

Participation in the Generalized System of Preferences (GSP) program is important to Thailand, especially during these times of economic uncertainty. The GSP 

program aims to promote economic growth and development and to improve the living standards of people in developing countries by providing exporters with better 

access to the U.S. market. Participation in the GSP program has enabled many Thai 

businesses and manufacturers, especially small and medium-sized enterprises 

(SMEs), to be competitive in the U.S. market. The Government of Thailand—along 

with Thai manufacturers and businesses—strongly encourages the U.S. Congress to 

renew the GSP program, which is set to expire on December 31, 2009, on a longterm basis that would allow developing economies like Thailand to continue to grow 

and become more competitive. 

As a developing economy, Thailand has benefited from the GSP program and has 

expanded its exports, which in turn has led to sustained economic growth and 

marked poverty alleviation in Thailand. Nevertheless, Thailand continues to face 

significant development hurdles, particularly given the onset of the current global 

economic crisis. Thailand has experienced continued economic contraction with negative GDP growths of 4.2% in the fourth quarter of 2008. The overall Thai economy 

in the second quarter of 2009 decreased by 4.9% after falling by 7.1% in the first 

quarter of 2009. In addition, U.S. imports from Thailand under the GSP program 

has declined by 24.3% from January—September of 2009. Therefore, the tariff preferences afforded to eligible products from Thailand under the GSP program have 

helped Thai manufacturers face the crisis and export their products to the U.S. market by ‘‘cushioning’’ them from facing detrimental declines in trade under the current recession. GSP duty savings also help put Thai manufacturers and suppliers 

on a level playing field with lower-cost producers in other countries. Revocation of 

the GSP program would thus harm Thailand’s competitiveness under the GSP. 

Preferences afforded to Thai products under the GSP program provide meaningful 

economic opportunities. By making Thai exports more competitive in the U.S. market, the GSP program helps to support manufacturing jobs in the Thai economy and 

helps Thai workers find employment opportunities that pay well and enable them 

to support their families and keep their children in school. The 4.5 million jobs created under the GSP program partly provide opportunities for Thai women, lowskilled workers, and minority groups who otherwise have relatively few economic alternatives. 

The GSP program’s list of eligibility criteria also encourages Thai businesses to 

improve labor practices, protect intellectual property rights (IPR) and treat U.S. investors fairly. These incentives effectively encourage Thai businesses to improve 

their practices, operations and working conditions and improve the manufacture of 

Thai products that meet both international obligations and business demands. Consequently, the requirements for participation in the GSP program have helped bring 

about economic and legal reforms in Thailand, which has led to improvements in 

the rights of workers, enhanced rule of law and a better local business climate. 

Although Thailand exports a variety of goods to the U.S., only a small share of 

what the U.S. imports from Thailand benefit from the GSP program. In 2008, U.S. 

imports from Thailand under the GSP program totaled USD 3.5 billion which only 

accounts for 15% of the total U.S. imports from Thailand that year which totaled 

USD 23.5 billion or only 1.2% of Thailand’s share of the total U.S. market. Nonetheless, this small share of Thai GSP-eligible exports, especially cultural heritage products like gems and jewelry, to the U.S. is extremely important to a large number 

of Thai manufacturers that count on the savings that the preference program affords them. Thai SMEs and manufacturers rely on the GSP program today more 

than ever and view the program as a key resource that helps them face the turbulent global economy. 

It is also worth mentioning that the GSP program greatly aids American consumers, importers, retailers by lowering prices and increasing choices. Because of 

the tariff preferences afforded to products from Thailand under the GSP program, 

Thai manufacturers and exporters are able to sell their products at competitive 

prices in the U.S., providing American consumers with more variety and selection 

of products that they can purchase. This can be seen through industries like jewelry 

in which the benefit is not limited to American consumers but also extends throughout the supply chain including American workers, service providers, distributors, 

importers, and retailers. It is estimated that for every dollar earned in the Thai 

economy another six dollars is generated in the American economy. 

As the Ways and Means Trade Subcommittee and U.S. lawmakers undertake the 

review of the GSP program, the government of Thailand would like to reiterate the 

importance of the GSP program as an effective tool to promote social development 


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and economic growth. A long-term extension of the GSP program would allow for 

better predictability and certainty for both Thai exporters and U.S. importers in 

their future business planning. However, any revisions to the thresholds for CNL 

waiver limits, country graduation, and product removal should be carefully considered for the program to be more effective and beneficial to developing economies 

such as Thailand. 

f 

Statement of the Embassy of the Republic of the Fiji Islands 

The Embassy of the Republic of the Fiji islands wishes to express its appreciation 

to the Subcommittee on Trade of the House Committee on Ways and Means for convening this hearing on this vital subject. 

The Generalized System of Preferences (GSP) is the oldest and most broadly 

based of the U.S. preference programs, first enacted by Congress in the Trade Act 

of 1974. Today, 131 developing countries are beneficiaries, with forty-four countries 

receiving additional benefits as least-developed beneficiaries. All GSP beneficiaries 

receive duty-free treatment for nearly 3500 tariff lines, and least-developed countries receive duty-free treatment for an additional 1400 tariff lines. 

The GSP program provides preferential duty-free treatment for 3,448 products 

from Fiji. In 2007, Fiji exported $69.7 million to the United States under the GSP 

program. The products mainly consist of mineral water ($56.7m), molasses ($4.3m), 

raw cane sugar (3.4 million), dasheens ($1.8m), and cane molasses ($1.6 million). 

Imports are up 32.percent over 2006, when $52.8 million in goods were imported 

from Fiji under GSP. Approximately 45.6 percent of all U.S. imports from Fiji in 

2007 entered under the GSP program. This compares to 36.2 percent of all imports 

in 2006. In 2008 Fiji exported $70,055,968 to the United States under the GSP program and from January this year 2009 to September this year 2009 Fiji has exported $34,245,733 to the United States under the GSP program. 

Preferences programs like GSP assist developing countries like Fiji in our efforts 

to build up domestic industries and increase exports. However these preference programs also help U.S. businesses and families. They are a major source of imports 

and products for U.S. businesses, including small- and medium-sized companies, 

and include important partnership opportunities between U.S. workers and businesses, and workers and businesses in beneficiary developing countries. Imports 

under these programs also lower costs for U.S. consumers and producers. For example, in 2008, duty-free treatment under GSP resulted in a total savings of approximately $850 million. In 2005, according to the U.S. Chamber of Commerce, 75 percent of U.S. imports entering duty-free under GSP were raw materials, components 

or equipment used by U.S. companies to manufacture goods either for domestic consumption or export. The Chamber also found that GSP is particularly important to 

U.S. small businesses, many of which rely on the program’s duty savings to compete 

with much larger companies. Maintaining lower costs for U.S. small- and mediumsized enterprises is particularly important as companies struggle to recover from the 

economic downturn. 

The GSP however is weeks away from expiring. We submit that the stability of 

GSP which is the U.S.’s largest program is essential to it being effective. When the 

U.S. has extended its programs in the past sometimes it is only for a few months 

or a year. No one who has ever run a business would want to invest in a climate 

that is so unstable. Such programs need to be long-term. In view of the very short 

time remaining before the program expires on December 31, 2009, we would propose 

that Congress provided immediately a five-year extension or some similar long term 

period. 

Thank you. 

f 

Letter from the Federation of Industries of the State of Sao Paulo 

Dear Chairmen Rangel, Levin, Ranking Members Camp and Brady: 

The American Chamber of Commerce in Brazil (AMCHAM) and the Federation 

of Industries of the State of Sao Paulo (FIESP) strongly support the extension of 

the General System of Preferences (GSP) and are pleased to have the opportunity 

to provide the following views to the House Committee on Ways and Means on the 

U.S. preference programs operation. 

Established in 1919, AMCHAM Brazil is the largest bi-national association in 

Latin America and the largest of 105 American chambers of commerce outside the 

United States. Its 5200 corporate members represent all sectors of the economy and 


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employ approximately 1.6 million people. With offices in ten major Brazilian cities, 

AMCHAM’s mission is to serve its members by influencing public policy in Brazil 

and the U.S. in a constructive manner, to promote trade, investment and corporate 

citizenship. 

FIESP is the major regional manufacturing association in Brazil representing 133 

national and state-level sectoral trade associations, encompassing over 140,000 companies that account for 45 percent of Brazil’s industrial GDP, 60% of its manufactured goods exports, 53 percent of its industrial wages and more than 10 million 

jobs. If one considers companies that have plants in other regions of the country but 

that are in any case based in the State of Sao Paulo, FIESP’s representation reaches 

almost 80% of the country’s industrial GDP. Therefore, FIESP acts as a mediator 

between industry and the Brazilian government. 

GSP is an important economic as well as trade tool between Brazil and the United 

States. Not only do the Brazilian people benefit from GSP in terms of jobs and economic growth but U.S. companies and citizens benefit by being able to source materials and products at lower costs. Additionally, GSP is a symbol of the relationship 

between the U.S. and Brazil and is the only formal trade agreement that we have. 

To that end, we intend to focus our comments on three key factors that are critical 

in the deliberative process: (i) the importance of GSP for Brazil and the U.S.; (ii) 

Brazil and Least Developed Countries (LDCs); (iii) the effect of removing GSP benefits from Brazil. 

The importance of GSP for Brazil and the U.S. 

The GSP has historically contributed for the development of Brazil by means of 

export promotion. Provided that Brazil takes part in the group of developing countries it is fundamental that the GSP benefit is maintained to not restrict country’s 

path towards development. 

While Brazil has made economic progress over recent years, we still unfortunately 

have a .807 World Human Development Index rating according to the United Nations Development Program. Some cities still present a HDI below countries such 

as Cape Verde, Laos and Equatorial Guinea. GSP is one tool that Brazil can use 

to help grow jobs in our poorest regions and build a strong economic platform. We 

estimate that the number of jobs directly and indirectly linked to Brazilian exports 

through GSP, reached approximately 232,000 in 2008. 

As importance as economic factors, GSP can also act as an incentive. For example, 

the criteria of eligibility for the program encourages the practice of certain measures, important for Brazilian as well as U.S. companies, such as the observance of 

intellectual property and labor rights. Illegal merchandise seizures has more than 

doubled since 2005 and in 2007 Brazil was removed from the priority watch list. 

With regard to labor rights, Brazil has ratified 10 of the ILO conventions. 

In addition to the economic relevancy for Brazil, U.S. consumers benefit from the 

GSP program with Brazil. Products or materials that are imported through the GSP 

program by American companies are less expensive than if sourced in other countries. 

Brazil and Least Developed Countries (LDCs) 

Although Brazil occupies a seat among the developing countries, the country has 

been extremely concerned about the socioeconomic improvement in other developing 

countries, especially regarding LDCs. 

The cooperation with LDCs has been one of the top priorities in the country’s foreign policy, opening up the route to strengthen the relationship with this group of 

countries, resulting in increasing figures for trade, investment, capacity building, 

technology, humanitarian aid, among others. With respect to these and other areas, 

several agreements have been signed totalizing an amount of 253 agreements with 

LDCs. 

Moreover, Brazil has undertaken several measures to promote a most favorable 

trade with LDCs. One of them is Brazil’s involvement in the Global System of Trade 

Preferences (GSTP), making tariff concessions in a large number of tariff lines, benefiting LDCs with preferences reaching up to 100 percent. 

Last but not least, it should be emphasized that the Brazilian government is currently discussing with the private sector effective ways to develop new market access opportunities for Haitian products in Brazil as a way of promoting long term 

investments in production within the Caribbean country. 

In addition to the proactive policies Brazil is working towards with LDCs, we examined product competion with the LDCs. Using USITC statistics, we reviewed the 

top 10 sectors for LDCs and the top 30 products of LDCs. Brazil does not compete 

with LDC’s in any of these sectors or products and Brazil continues to increase 

LDC’s exports. 


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The effect of removing GSP benefits from Brazil 

While Brazilian exports through GSP do not compete with those of LDCs in the 

top 30 products, Chinese products do compete in every category. If Brazil were not 

able to participate in the GSP program much of the materials and inputs currently 

sourced from Brazil would be sourced from China instead. The great shipping distance alone would increase costs for consumers and products would take longer to 

get to their destination. Removal of Brazil from the GSP program likely leads to increased costs to American consumers and increased competition from China. 

Conclusion 

In many respects, GSP is more than a preferences program. While serving as an 

economic tool, GSP also represents the bilateral relationship between the U.S. and 

Brazil.’’ The share of GSP in the total U.S. imports in 2008 represents only 0.13 

percent, while the total Brazil exports under GSP represents almost 10 percent of 

the total exports to U.S. Considering this figures, the non-renewal of GSP would 

mean front-page notice in Brazilian press while probably not garnering nearly the 

same attention in the United States. As the only formal relationship between our 

two countries, GSP takes on a greater symbolic importance of the U.S. friendship 

with Brazil. 

Economically, loss of GSP would represent a thousand of job losses for Brazilian 

economy, not to mention the losses for American companies, as importing duty free 

they are lowering the costs of their products to sell to American consumers. In 2008, U.S. imported $2.7 billion under GSP from Brazil. The process of renewal 

or extension seriously affects the planning of companies using the program. In this 

sense we believe that a possible expiration, even with a retroactive application of 

the tariffs, may compromise the development of business enterprises and result in 

harm to the private sector. 

Brazil shares the United States’ goal to help LDC’s though economic partnership 

and we continue to work with our government on robust programs for other LDCs. 

FIESP and AMCHAM appreciate the opportunity to submit these comments to 

the Committee on Ways and Means for its consideration during the current review 

of the GSP. We look forward to answering any questions you may have. 

Sincerely, 

Ma ́ rio Marconini 

International Negotiations Director 

Federation of Industries of the State of Sao Paulo 

Gabriel Rico 

CEO 

f 

American Chamber of Commerce Brazil 

Letter from God’s Pantry Food Bank 

Dear Congressman Chandler: 

The United States Department of Agriculture recently reported that over 49 million Americans were food insecure in 2008, a 36% increase over 2007. Food banks 

across the country are reporting that the newly unemployed are coming to ask for 

food to help avoid hunger. As the External Relations Coordinator, I submit the following statement for the record for the November 19, 2009 hearing titled ‘‘Food 

Banks and Front Line Charities: Unprecedented Demand and Unmet Need’’ to make 

sure my concerns regarding the increase in food insecurity and the need for Congressional action are heard. 

In one year, my food bank has experienced a 32% increase in demand. At our food 

bank, we are seeing a dramatic increase in working clients and first-time clients 

who have never before needed emergency food assistance. In our food bank, lack of 

employment and the fledgling economy was cited as the main reasons that numbers 

grew. With unemployment at 11.2% in our state, demand is likely to continue to 

grow for some time. Between the newly unemployed and those who already were 

struggling to make ends meet, the economic downturn is putting more pressure on 

our nation’s food banks to meet the unprecedented need. 

I respectfully request your assistance as a member of the Ways and Means Committee in three ways. First, please support new funding to make critically important 

changes to child nutrition programs through the upcoming reauthorization of the 


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Child Nutrition Act. No child should ever have to wonder where their next meal is 

coming from, and a greater investment in child nutrition programs will help ensure 

that no child in America ever has to face a day without food again. Second, support 

additional funding to help food banks meet the enormous increase in demand over 

the past year. Third, sign on as a cosponsor and ask your colleagues to support H.R. 

3227, the Food Samaritan Hunger Relief Tax Incentive Act. This bill would permanently expand the Section 170(e)(3) deduction to all business taxpayers, giving small 

businesses and farmers economic certainty in tax planning and utilizing the deduction to help us feed more of our neighbors. It would also increase the amount of 

the deduction to full fair market value (not to exceed twice cost) for two years, to 

help meet the growing demand for food assistance due to the sustained economic 

downturn. 

These three priorities will help food banks join in the fight to meet the nutritional 

needs of the over 49 million Americans who are food insecure. Your support is critical at this difficult time. Thank you for your consideration. I hope you will join in 

this fight and that you will visit our food bank to see the challenges we and your 

constituents are facing each day. 

Sincerely, 

Amanda P. Brajuha 

External Relations Coordinator 

f 

God’s Pantry Food Bank—Lexington, Ky. 

Letter from Michael Smiddy 

Dear all who sit on the Trade Subcommittee, 

I have been following the testimony this week on tariffs on Cambodian textiles. 

Cambodian children die every day from simple, preventable causes. 30% of Cambodians have to survive on less than $1 per day. 

The U.S. National Council of Textile Organizations is complicit in these deaths. 

It has been reported here that the Council has argued against allowing Cambodian 

people to export their way out of poverty. 

Cambodia is one of the poorest countries in the world. I suggest you come here 

and visit naked children scavenging through a rubbish dump to survive before you 

decide to put handcuffs on the Cambodian economy and a major source of poverty 

reduction. 

Yours faithfully, 

Michael Smiddy 

f 

Phnom Penh 

Statement of the National Milk Producers Federation 

The National Milk Producers Federation (NMPF) appreciates this opportunity to 

provide comments on the above referenced hearing issue. NMPF is the national 

farm commodity organization that represents dairy farmers and the dairy cooperative marketing associations they own and operate throughout the United States. 

The constituency represented by NMPF has a substantial interest in any discussion of modifications to existing U.S. preference programs or consideration of the 

creation of new preference programs. The U.S. dairy industry is the second largest 

agricultural commodity subsector, as measured by farm cash receipts, generating 

approximately $35.4 billion in farm receipts from sales of milk in 2007. There were 

over 57,000 commercial dairy farms in the U.S. in 2007, each generating an estimated average of 8.5 jobs at the dairy farm and dairy processing plant level, for 

an estimated national total of approximately 487,000 domestic jobs, not counting 

jobs at other levels in the agricultural and food industry, such as input suppliers, 

distribution, retailing and food service. By any measure, the U.S. dairy industry is 

a major domestic industry. 

NMPF recognizes that there is broad Congressional support for U.S. preference 

programs for developing countries. However, accompanying our unilateral trade 

openings through these preference programs has also been a long-standing principle 


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that limits on the full scope of product coverage applicable under these programs 

are also important. 

The dairy producer community has taken great strides over the past several years 

to move towards embracing the positive opportunities that balanced and two-way 

trade can provide. This has led NMPF to support the vast majority of recently Free 

Trade Agreements negotiated over the past few years because in our view (and 

within the scope of the FTA’s dairy provisions) they created a level playing field for 

competition and the potential to increase dairy trade to both countries’ benefit. 

Preference programs by their very design, however, provide for only one-way trade 

into the U.S. Because of this, we believe the current scope of limitation for dairy 

products in the preference programs is entirely appropriate. 

There are currently a number of in-quota tariff lines included in the various programs which provides a savings of the small in-quota duty that would otherwise be 

assessed on import of these products into the U.S. However it is fully appropriate 

that no over-quota dairy tariff lines are included in existing programs. (The attached list contains all over-quota lines with notable dairy content in them.) 

For all preference programs (with the possible exception listed below regarding Least Developed Countries), it is critical that no changes be made 

to the scope of dairy tariff lines included in the preference programs, nor 

to the binding WTO quotas that limit the in-quota benefits provided to some 

countries for specific in-quota tariff lines. 

NMPF is aware that a key point of discussion regarding future preference program changes is creating expanding market access for all Least Developed Countries (LDCs). NMPF believes that the 2005 U.S. WTO Hong Kong Ministerial commitment to provide open access for LDCs for virtually all products (97%) is best fulfilled as part of the WTO Doha Round Negotiations. This coordinated timing is useful both in order to maintain interest of the LDCs in a final agreement and in order 

to try to ensure that this concession is carried out as part of the larger package of 

commitments countries are anticipated to ultimately agree upon. 

However, in light of pressure by some to advance at least a portion of this initiative independent of the Doha Round, we are including comment on it. The following 

comments pertain to LDC countries only. We recognize that some proposals for 

greater preference program coverage for LDCs also include other non-LDC countries. We oppose extending beyond the current level of preference program coverage 

and access for any non-LDC. 

NMPF is well aware that LDCs are in particularly precarious positions and that 

there is a broad desire to help in the development goals of these most challenged 

nations. Should the U.S. move to do this by further unilaterally expanding market 

access for these countries; however, it is essential that we ensure that the full scope 

of any new benefits within the dairy realm are targeted very narrowly to the LDCs 

themselves and not to other trading partners that would seek to take advantage of 

these new access opportunities. 

Milk is a commodity that can be transformed many ways and manufactured into 

a wide range of possible ingredients for further formulation in dairy products (e.g. 

skim milk powder used in cheese manufacturing) or other products (e.g. whey products used in various bakery products). It is because of this broad mutability that 

our FTAs have included very specific rules of origin that cover most (but regrettably 

not all) dairy lines of concern to our members in order to ensure essentially that 

dairy products being sent under the benefit of that FTA are made from milk produced in that country and not from imported dairy ingredients sourced from around 

the world. 

In the situation of unilateral concessions to LDCs (which are typically not large 

milk producers themselves) extremely tight rules of origin on dairy products and ingredients are essential in order to ensure that the program’s benefits are being 

made available to the individual LDC country itself and not to other major dairy 

producing countries that would seek to take advantage of back-door opportunities 

for access into the lucrative U.S. market. Such evasiveness does not occur now 

under the U.S. preference programs because any benefits provided do not allow for 

in-quota/duty-free access that exceeds U.S. WTO tariff-rate-quota limits. However, 

an LDC program that sought to do just that—create the possibility for non-U.S.-FTA 

partners to send quantities that could result in imports that exceeded U.S. WTO 

tariff-rate quotas at low to zero duty—would certainly create a very strong incentive 

for the EU, Australia, New Zealand, Brazil, Argentina and other major dairy exporting nations to use that access to ship dairy ingredients such as milk powder or butterfat to LDCs for some small amount of further processing, effectively circumventing U.S. trade programs. 

Therefore, should efforts to improve unilateral market access into the U.S. for 

LDCs move forward, they must include the strict product-specific rules of origin 


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cited below to ensure that other countries do not take advantage of this program 

to quietly ship dairy products into the U.S. through LDCs. The following rules of 

origin would be strict enough to ensure that the LDCs are able to take advantage 

of the DFQF access for their own milk production, but that other countries will not 

be able to ship product through the LDCs in order to abuse this new program. 

Rules of Origin should exclude preferential access to: 

(a) a non-originating material classified under headings 0401 through 0406 of 

the Harmonized System, or a non-originating chocolate/food preparation classified under subheading 1806.20, 1806.32, or 1806.90; a non-originating infant 

preparation classified under subheading 1901.10; a non-originating mix or 

dough classified under subheading 1901.20; a non-originating dairy preparation 

classified under subheading 1901.90 or 2106.90; a non-originating animal feed 

classified under subheading 2309.90; or a non-originating casein/caseinate classified under heading 3501 that is used in the production of a good classified 

under headings 0401 through 0406 of the Harmonized System; 

(b) a non-originating material classified under headings 0401 through 0406 of 

the Harmonized System, or a non-originating chocolate/food preparation classified under subheading 1806.20, 1806.32, or 1806.90; a non-originating infant 

preparation classified under subheading 1901.10; a non-originating mix or 

dough classified under subheading 1901.20; a non-originating dairy preparation 

classified under subheading 1901.90 or 2106.90; a non-originating animal feed 

classified under subheading 2309.90; or a non-originating casein/caseinate classified under heading 3501, that is used in the production of the following goods: 

• chocolate/food preparations classified under subheading 1806.20, 1806.32 

or 1806.90; 

• infant preparations classified under subheading 1901.10; 

• mixes and doughs classified under subheading 1901.20; 

• dairy preparations classified under subheading 1901.90 or 2106.90; 

• ice cream and edible ices classified under heading 2105; 

• beverages containing milk classified under subheading 2202.90; 

• animal feeds classified under subheading 2309.90; 

• or casein and/or caseinates classified under heading 3501 

Again, in principle, NMPF does not agree with providing an ‘‘early harvest’’ of 

commitments made during the ongoing multilateral negotiations for any specific 

countries. However, if a decision is made to provide greater duty-free, quota-free 

treatment to LDCs, this access must be accompanied by the forms of safeguards suggested in these comments. NMPF would vigorously oppose allowing the intent of 

providing greater access for our poorest trading partners to inadvertently provide 

defacto open access to WTO members other than LDCs by allowing them to abuse 

this voluntary measure. This possibility is very likely if careful steps are not taken 

to prevent such an occurrence. We believe that the regulations suggested here, accompanied by regular monitoring of the imported products, are necessary to effectively avoid such a development. 

Over-Quota ‘‘Dairy’’ Tariff Line 

f 

Statement of the National Retail Federation 

November 17, 2009 

The Honorable Sander M. Levin 

Chairman 

Ways and Means Trade Subcommittee 

United States House of Representatives 

1104 Longworth House Office Building 

Washington, DC 20515 

RE: Hearing: Operation, Impact, and Future of the U.S. Preference Programs 

Dear Chairman Levin: 

On behalf of its members in the U.S. retail industry, the National Retail Federation (NRF) welcomes the opportunity to submit these comments to the Ways and 

Means Trade Subcommittee regarding the operation, impact, and future of the U.S. 

trade preference programs, including how U.S. preference programs fit into retailers’ sourcing strategies. 


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The National Retail Federation is the world’s largest retail trade association, 

with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain 

restaurants, drug stores and grocery stores as well as the industry’s key trading 

partners of retail goods and services. NRF represents an industry with more than 

1.6 million U.S. retail establishments, more than 24 million employees—about one 

in five American workers—and 2008 sales of $4.6 trillion. As the industry umbrella 

group, NRF also represents over 100 state, national and international retail associations 

Introduction 

The retail industry has strongly supported U.S. trade preference programs for developing countries, such as the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), the Caribbean Basin Initiative/Caribbean 

Basin Trade Preferences Act (CBI/CBTPA), the Andean Trade Preferences and Drug 

Eradication Act (ATPDEA), and the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act. U.S. retailers have used the preference programs to import a variety of consumer goods. In the process, they have provided 

needed export markets for poor countries, jobs and economic opportunity for people 

in those countries, particularly women, and greater value to U.S. consumers, particularly lower-income Americans, on products they need and want. 

Importance of Preference Programs to U.S. Retailers 

Retailers source the globe for the consumer products they sell to their customers. 

Retailers are also experiencing the most challenging time for their businesses in 

decades as U.S. consumers become increasingly price-conscious due to the adverse 

impact the current economic climate has had on jobs, housing prices, and incomes. 

For better or for worse, U.S. government policies, rules, and programs play an important role in retail sourcing decisions and strategies. While the weight of each factor varies with the retailer, in general, retailers look at a number of criteria in deciding who will supply the products they sell—ability to meet product quality and 

quantity specifications within a target price point, reliability in meeting order deadlines, compliance with codes of conduct, and (landed-duty (i.e., overall) cost. While 

cost is not usually the only factor driving sourcing decisions, it is an increasingly 

important consideration as competition for the consumer dollar among retailers has 

become more intense. In addition, U.S. tariffs are quite high for many consumer 

goods sold by retailers, notably apparel (15.8 percent trade-weighted average nonpreferential tariffs), glassware (14.2 percent), footwear (10.4 percent) and bicycles 

(9.8 percent), to name a few. Preference programs can contribute significantly to 

lowering some portion of the overall cost by eliminating the tariffs, particularly as 

many high-tariff consumer goods are typically those that developing countries are 

most able to produce. 

Retailers make use of every U.S. preference program offered, however, the industry’s enthusiasm for these programs varies depending on how ‘‘business friendly’’ 

and easy to use the program is. From a retail/importer perspective, GSP has a very 

workable rule of origin and applies to most developing countries. However, GSP 

does not cover products of major importance to retailers, including apparel and footwear. AGOA, CBTPA, and ATPDEA cover apparel and footwear; however, these programs have much more complicated rules of origin that are more difficult to administer and raise compliance costs, thereby discouraging many retailers from using 

them. Each of these programs also expires periodically, which creates unpredictability for sourcing plans, which is costly to retailers who must maintain complicated supply chains and make long-range business decisions in a just-in-time environment. 

While Congress approved a two-year extension of the CBTPA and HOPE preference programs as part of the 2008 farm bill, GSP and the ATPDEA expire on December 31, 2009, after a short-term extension. NRF and the retail industry have 

consistently advocated long-term renewals of these programs, and, most immediately, for renewal before the expiration date. In addition, based upon our long experience with these programs, we would like to suggest ways they all could be improved. 

How to Make Preference Programs Better 

Notwithstanding their benefits, the preference programs have several flaws that 

prevent them from fully achieving their goal of assisting developing countries to integrate and engage more successfully in the world economy. Therefore, we endorse 

efforts in Congress to ensure that our trade preferences operate more effectively for 

both beneficiary countries and U.S. users of the programs, who are an essential 

component to their success. 


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1Some of the largest trade barriers imposed by the United States are on consumer goods imported from least developed countries. For example, three high-tariff products that are produced 

mainly in LDCs—footwear, textiles and apparel—account for only 7 percent of U.S. trade, but 

fully one half of all duties collected by customs. Not only do these trade barriers hurt the economies and workers in some of the poorest countries in the world, but the assessed duties are 

highly regressive, falling most heavily on poor Americans. 

First, the preference programs share one major problem that we have frequently 

discussed regarding the free trade agreements. There are simply too many programs 

with too many separate, and in some instances, complicated rules. In addition, these 

programs are temporary and require periodic reauthorization with the recurring 

challenge of securing sufficient offsets under Congressional budget rules. These 

problems create inefficiencies, added costs, and unpredictability that can become significant disincentives to using the programs. 

To correct this problem, the current programs need to be consolidated into one 

permanent program with one set of simple and easily-administered origin rules. To 

this end, we recommend adoption of the current GSP rules that determine origin 

based on substantial transformation plus 35 percent value added. 

Another problem with the preference programs is that many of the poorest countries lack the ability to take full advantage of the benefits they have been provided 

due, in part, to inadequate infrastructure, inability to obtain investment capital, 

limited access to raw materials and other inputs, and a low-skilled and poorlytrained workforce. In many instances, the duty preferences are simply not enough 

to overcome these substantial hurdles, which impose sizable costs on U.S. companies 

seeking to do business in those countries. Therefore, capacity building and trade financing are essential elements in any successful effort to assist developing countries 

and allow them to take advantage of the benefits they have been provided. 

We caution, however, that reducing or eliminating preferences for certain more 

advanced developing countries, such as India and Brazil, will not result in any significant shift in preferential trade to the least developed countries. Instead, that 

trade will move either to China or other more advanced developing countries, such 

as Turkey. In addition, such action would be very disruptive and costly to the business operations of U.S. companies that have relied on program. 

Finally, it is essential to expand product coverage, particularly on products such 

as apparel and footwear, that developing countries are most capable of making, but 

are still subject to substantial U.S. tariffs.1 In most instances, these products are 

already imported to a significant degree, and the largest supplier is China. Making 

these products eligible for duty-free treatment would assist developing countries to 

gain a stronger foothold in the U.S. market and compete more effectively for business in the global economy. Continuing to exclude these products will not protect 

U.S. manufacturers from import competition, will limit retail sourcing options beyond China, and will hinder achieving the development goals of our preferences regime. 

We have learned much, both good and bad, from the many preference programs 

the United States has extended to developing countries since 1974. In contemplating 

how U.S. preference programs could be revised, we should aim to keep the good and 

jettison the bad. 

Among the ‘‘good’’ lessons, we know that many U.S. duties present significant cost 

hurdles to importing products from any country, but particularly least developed 

countries, and programs that eliminate those duties do encourage trade with the 

beneficiary countries. We know that those costs savings, creating business for poor 

countries, also get passed down to the final prices of the goods retailers sell. 

The ‘‘bad’’ lessons include restrictions inserted into the preference programs, typically to appease the protectionist objectives of some domestic industry that feels 

threatened by import competition. These restrictions make sourcing from developing 

countries under a preference program difficult for importers as well as developing 

country exporters, as they require a sophisticated technical knowledge of the rules 

of origin that many do not have, and the risk of exposure to legal and financial penalties for even small mistakes. Examples include the ‘‘yarn forward’’ rule of origin 

in the original version of AGOA that made sourcing apparel from sub-Saharan Africa nearly impossible and necessitated the addition of exceptions to that rule to ensure that this initiative could actually promote trade in these products. 

Other, more sweeping restrictions include the exclusion from GSP benefits of 

broad categories of products that just happen to be those goods that least developed 

countries are most competitive at making. Apparel and footwear are two significant 

examples. The conclusion is that the value and commercial viability of market access is directly dependent on what the rules are—bad rules that are overly complicated and restrictive kill trade; good rules that are consistent with how compaVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00305 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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nies actually conduct business and manage their supply chains will promote trade 

and investment. 

Another significant problem associated with current trade preference programs is 

their temporary nature. Congress must pass legislation authorizing these programs, 

which typically has an expiration date. Lead-times for retailers from the time a 

product is ordered to the time it arrives on a store shelf are typically six to nine 

months. Therefore, as a preference program expiration date approaches and the 

ability of Congress to pass a timely extension becomes questionable, retailers and 

others are forced to make alternative sourcing plans. This disruption becomes yet 

another disincentive to using these programs. 

Thus, the chief goal of preference programs—poverty reduction through increased 

trade—is frustrated by product restrictions and narrow rules of origin in current 

U.S. preference programs, and by their temporary nature. We should not make the 

same mistakes with any changes Congress contemplates to our preference programs. 

NRF appreciates the opportunity to comment on U.S. preference programs and 

looks forward to working with the Committee on any legislative initiatives it may 

take to improve the operation of these programs. 

Sincerely, 

Erik O. Autor 

Vice President, Int’l Trade Council 

cc: The Honorable Kevin Brady (R–TX), Ranking Member 

The Honorable John S. Tanner (D–TN) 

The Honorable Chris Van Hollen (D–MD) 

The Honorable Jim McDermott (D–WA) 

The Honorable Richard E. Neal (D–MA) 

The Honorable Lloyd Doggett (D–TX) 

The Honorable Earl Pomeroy (D–ND) 

The Honorable Bob Etheridge (D–NC) 

The Honorable Linda T. Sa ́nchez (D–CA) 

The Honorable Geoff Davis (R–KY) 

The Honorable Dave Reichert (R–WA) 

The Honorable Wally Herger (R–CA) 

The Honorable Devin Nunes (R–CA) 

f 

Statement of the Nien Hsing Textile Co., Ltd. 

AGOA Must Be Reinforced To Continue Its Success 

Nien Hsing Textile Co., Ltd. is pleased to submit these comments to the Trade 

Subcommittee of the House of Representatives Committee on Ways and Means in 

connection with its November 17, 2009 hearing on reform of U.S. trade preference 

programs. 

Nien Hsing is a specialized vertically-integrated denim fabric and jeans manufacturer. Our manufacturing process consists of yarn spinning, dyeing, weaving, cutting, and sewing, culminating in the final jeans product. Our current investments 

include denim mills and/or garment factories in Lesotho, Mexico, Nicaragua, Cambodia, Vietnam, and Taiwan, with annual worldwide production of three million 

dozen pairs of jeans and a workforce of over 22,000 workers in least developed countries around the world. Nien Hsing is the largest denim fabric and jeans apparel 

producer in Africa and employs approximately 9,000 workers in Lesotho. Our Lesotho denim plant (known as Formosa Textile in Lesotho) has a capacity of 27 million 

square meters annually. This denim plant uses exclusively African-origin cotton, 

consuming approximately 16,000 tons of cotton annually from Malawi, Zambia, Mozambique, Tanzania, and Benin, thereby adding value to cotton that otherwise 

would be exported as a raw commodity and creating additional jobs in Africa. 

The African Growth and Opportunity Act (AGOA) was a huge success during its 

first five years in effect, 2000–2004. U.S. apparel imports from Africa nearly tripled, 

and as a result, more than 300,000 new jobs were created in Africa, supporting an 

estimated 3 million people in a dozen African countries. Indeed, during that time 

AGOA was the United States’ most successful trade preference program. Attracted 

by AGOA’s incentives, Nien Hsing invested $120 million in its denim mill and jeans 

factory in Lesotho, which was the largest single investment under AGOA. 

The success of the AGOA textile and apparel program was completely dependent 

upon the duty-free preference for the AGOA LDCs, which makes apparel produced 


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1See, e.g., Harmonized Tariff Schedule (HTS) of the United States, Section XXII, Chapter 98, 

Subchapter XXII, U.S. Note 27 and Subheading 9822.06.05; Presidential Proclamation 8323, 73 

Fed. Reg. 72677 (November 28, 2008); Department of Commerce Interim Regulations, 74 Fed. 

Reg. 3563 (January 21, 2009). 2 Non-African LDCs eligible to participate in the AGOA EIAP would be those meeting the 

United Nations definition of LDCs. 

in AGOA countries cost-competitive with Asian countries like Bangladesh, Cambodia, and Vietnam. This duty preference, approximately 16% on cotton apparel, offsets the higher costs of production in AGOA LDCs due to geographic disadvantages, 

poor infrastructure, longer lead time, more expensive transportation costs, and higher labor costs as compared to Asian LDCs like Bangladesh. 

But AGOA’s stellar success changed in 2005 when, pursuant to the Uruguay 

Round Agreements, the Multi-Fiber Arrangement (MFA) system of quotas expired, 

exposing AGOA’s infant apparel industry to unfettered competition from super-efficient Asian apparel giants, including China, Bangladesh, Cambodia, and Vietnam. 

Since 2005, U.S. apparel imports from Asia have skyrocketed, while those from Africa have fallen sharply. Roughly one-half of the jobs AGOA created in Africa have 

already been lost, as U.S. apparel importers have shifted their orders to Asia. 

Imports from Various Regions Before and After the End of the MFA 

2000 vs. 2004 vs. 2008 

Region 2000 msme 2004 msme 2008 msme % Growth 

2000–2008 

% Growth 

2004–2008 

World 16,035 .349 19,950 .996 22,694 .220 41 .5% 13 .8% 

China 929 .159 2,972 .523 7,788 .499 738 .2% 162 .0% 

Vietnam 29 .991 777 .055 1,527 .711 4,993 .9% 96 .6% 

Bangladesh 966 .612 941 .685 1,436 .252 48 .6% 52 .5% 

Cambodia 253 .682 634 .683 888 .651 250 .3% 40 .0% 

India 399 .232 609 .338 882 .856 121 .1% 39 .1% 

ASEAN Region NA 3,468 .490 4,681 .212 NA 35 .0% 

Pakistan 330 .206 519 .282 692 .916 109 .8% 33 .4% 

CBI (non-CAFTA) 274 .233 228 .231 235 .646 ¥14 .1% 3 .3% 

CAFTA 3,376 .667 3,790 .834 3,379 .441 1 .2% ¥10 .9% 

Sub Saharan Africa 164 .161 440 .300 305 .964 86 .4% Ø30 .5% 

Andean Region 159 .199 252 .745 157 .583 ¥1 .0% ¥37 .7% 

The trend lines are clear. If nothing is done to maintain the African apparel industry, in a few years it will disappear. Nien Hsing in particular is currently giving 

serious consideration to closing its Lesotho operations due to the loss of orders to 

competitors in Asia, especially in Bangladesh. If this is allowed to happen, AGOA, 

the cornerstone of U.S. economic policy concerning Africa for the past decade, will 

become just another failed experiment. And worse yet, if AGOA-style trade preferences are extended to already-competitive Asian LDCs like Bangladesh and Cambodia, the demise of the African textile and apparel sector will only be accelerated. 

A bedrock principle of any reform of U.S. trade preference programs, therefore, 

must be to do no more harm to AGOA. The conventional response to this conundrum is to exclude textile and apparel products from any new preferences to be extended to already competitive LDCs, especially Bangladesh and Cambodia. But it 

is possible to provide trade preferences to textiles and apparel products from Bangladesh and Cambodia without harming—and indeed actually further reinforcing— 

the AGOA textile and apparel sector. 

Patterned after the ‘‘Earned Import Allowance Programs’’ (EIAP) already in effect 

under CAFTA–DR and the HOPE Act for Haiti,1 this new AGOA proposal would 

allow U.S. apparel importers to earn the right to import apparel duty-free from nonAfrican least developed countries (LDCs) 2 by importing apparel from Africa under 

AGOA. This ‘‘more than duty-free’’ incentive for continuing to source apparel from 


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Africa will provide the additional encouragement necessary for the AGOA apparel 

program to survive the unprecedented competition from Asian apparel giants. 

Under the proposed EIAP for AGOA, qualified U.S. apparel importers would earn 

credit authorizing the duty-free importation of one square meter equivalent (SME) 

of eligible garments from non-African LDCs for every importation of one SME of the 

same type of garments under AGOA made with third-country fabric. In addition, in 

order to encourage vertical integration in the African textile-apparel industries, 

which will in turn increase the competitiveness of these industries by cutting lead 

times and transportation costs, qualified U.S. apparel importers would earn credit 

authorizing the duty-free importation of two SMEs of eligible garments from nonAfrican LDCs for every importation of one SME of garments under AGOA made 

with African-origin fabric. 

The duty-free credits to be earned under the AGOA EIAP could only be used to 

import garments in the same MFA product category as the AGOA garment importation that generated the credit. For example, duty-free credits earned by importing 

Category 347/348 trousers under AGOA could only be used to import Category 347/ 

348 trousers from a non-AGOA LDC. Likewise, duty credits from importing Category 338/339 knit shirts from Africa could only be used to import Category 338/ 

339 knit shirts from non-AGOA LDCs. This like-product limit is intended to prevent 

imports of one type of product from undermining other types of products. 

The AGOA EIAP could be administered by the Department of Commerce Office 

of Textiles and Apparel (OTEXA), along the lines of the existing EIAPs. See, e.g., 

OTEXA’s interim regulations for the CAFTA–DR EIAP, 74 Fed. Reg. 3563 (January 

21, 2009). 

Other important changes to AGOA that would help retain U.S. orders in the African textile and apparel sectors would be to extend both the overall AGOA authorization and the third-country fabric provision beyond their current expirations in 2015 

and 2012, respectively. Nien Hsing proposes these provisions should be made permanent. Such an extension should help provide stability and continuity in the 

AGOA apparel sector. 

Nien Hsing appreciates the Committee’s consideration of its suggestions on these 

important issues, which are critical to the continued success of AGOA. Nien Hsing 

will be happy to provide any additional information requested by the Committee. 

Respectfully submitted, 

John Chen 

Chairman 

Nien Hsing Textile Co., Ltd. f 

Picard Bangladesh Limited, letter 

Dear Sir, 

I am writing on behalf of Picard Bangladesh Limited, a premier exporter of leather goods in Bangladesh. Our company mainly produces leather goods for the European market where we enjoy GSP. 

We would like to appeal to the U.S. Congress to consider Bangladesh for GSP as 

the U.S. is already our biggest market for exports. Despite the world wide recession 

and its consequent aftershocks, Bangladesh has been the fourth speediest economy 

to recover. With the advantage of a competitive labour force and recent return of 

democracy and political stability, the country has a huge potential in the coming 

years. 

At present Bangladesh is a least developed country with one of the highest poverty levels in the world as well as one of the densest populations per capita. However the country is taking giant leaps towards industrialization, and our large population is acting as a competitive advantage as we have a huge pool of skilled and 

semi-skilled labour force available to us at a competitive price. 

Apart from the textiles and readymade garments sectors, Bangladesh is also coming up in a number of other sectors such as the leather goods and footwear sector, 

shipbuilding and repairing, export of raw and finished jute products, pharmaceuticals and chemicals and fisheries sectors. Since the U.S. is the biggest market 

in the world, it would be greatly beneficial for Bangladeshi exports to obtain a tariff 

free access to this market. 

I would like to request the Committee to consider Bangladesh as a viable country 

for receiving GSP, and would like the name of my company to be included in the 

printed record of the hearing. 

f 


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1 Annex I shows Exports from Panama to United States during period 2006–2008 under CBI 

and GSP preference program. 2 Annex II shows Panamanian Companies that export to United States. 

Statement of the Office of International Trade Negotiations Ministry of 

Trade and Industries of the Republic of Panama. 

Comments of Panama related to U.S. Preference Programs 

Chairman 

Sander M. Levin 

Committee on Ways and Means 

Subcommittee on Trade 

Dear Sir: 

By these means the Republic of Panama submits written comments related to our 

experience as a beneficiary country of the United States Preference Programs, according to the Ways and Means Trade Subcommittee request about the evaluation 

of the operation and impact of the U.S. preference programs, the lessons learned 

from the circumstances where the preference programs have been successful and 

identifying opportunities for improvement in areas where challenges remain. 

From the 1980s The United States of America provides preference programs such as: the Caribbean Basin Initiative (CBI) and its subsequent expansions and the Generalized System of Preferences (GSP) to countries of Central America and the Caribbean in order to promote their growth and economic development. Through these 

preference programs the region had the opportunity to increase its trade with the 

United States. 

Throughout the years, the CBI and the GSP had been a strategic tool for the Panamanian exports, since approximately 96% of our exports to United States market 

get tariff free treatment. It has been, thanks to such preference programs that the 

United States of America has become our main trade partner.1 Indeed, as of June 

2009, Panamanian exports of goods to United States market were about US$161.9 

millions. 

Currently, Panama exports to the U.S. market agricultural products such as: 

melon, pineapple, fruit juices, legumes, yam, and watermelon under CBI and GSP 

preference programs. 

In addition, our industry sugar is one of the most significant within our export 

sector that totally depends on the benefits provided by those preference programs. 

As a matter of fact, the U.S. market is the principal market of sugar exports from 

Panama through a quota on the basis of tariff exoneration. 

Also, some industrial products such as glass bottles, aluminum profiles, articles 

of plastic, articles of jewelry and fisheries obtain benefits from the CBI and GSP 

programs. 

On the other hand, the trade preferences granted by the CBI and GSP programs 

are major incentives to attract investors from the United States and other countries 

to our region and creates substantial flow of investment and trade growth to the 

basin.2

Summarizing we can say that the Republic of Panama, as a beneficiary country 

of those preference programs, has obtained benefits such as: the increase of exports 

and production, generation of employment, and a positive effect over the balance of 

payments. 

Despite all the benefits and advantages of the U.S. trade preference programs, 

Panama would like to take this opportunity also to mention some aspects which 

could be considered in order to improve their effectiveness and positive impact. 

For example, the complex and disparate rules within to and across programs have 

generated significant challenges hindering some countries from utilizing preference 

programs. Trade capacity building assistance can help overcome these constraints, 

providing economic aid that enables countries, especially developing and poorest 

countries, to more effectively take advantage of preference programs and boost overall capacity to engage in trade. 

On the other side, most preference programs are temporary and granted ever 

shorter duration periods, requiring frequent Congressional renewal. In recent years, 

expiring trade preference programs have been extended for very short periods—two 

years or less. The uncertainty created by short-term and extensions discourages 

long-term investment and undermines the potential effectiveness of preference programs for sustainable development and poverty reduction. 

Taking into account the considerations herein expressed Panama shares the opinion to create a single, comprehensive and permanent preference program with simVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00309 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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plified rules to encompass existing programs and enhance their effectiveness. We 

strongly believe that such a program would increase opportunities for all developing 

countries to benefit as much as possible from global trade while, at the same time, 

creating certainty for exporters, importers and investors. 

At the same time, Panama realized that negotiating a Free Trade Agreement with 

the United States was both necessary and convenient. First, because as we mentioned before, the United States of America is our most important trading partner 

and significant investor. Second, even though CBI and GSP had been quite beneficial, Panama was looking for a reciprocal, stable relationship, based on a scheme 

of rights and obligations rather than unilateral concessions. 

However, although the negotiation of the Trade Promotion Agreement (TPA) between Panama and United States were successfully concluded, it is still pending in 

the U.S. Congress. It is for this reason it is essential for the Republic of Panama 

to continue as a beneficiary of the preference programs provided by United States 

until the TPA is approved by the U.S. Congress and fully implemented. Otherwise, 

Panama would not be in equal footing to compete with other countries of the region 

which are already enjoying the Dominican Republic Central America Free Trade 

Agreement (DR CAFTA) with the United States. 

Finally, we can say without a doubt that the U.S. trade preference programs have 

played a decisive role in the U.S. policy to improve the economic developing of many 

countries, including the Republic of Panama, and the experience shows that they 

had a positive impact in the region. 

The Government of the Republic of Panama, through the Ministry of Trade and 

Industries, appreciate very much the opportunity to express before the Committee 

on Ways and Means our comments about the experience of being a beneficiary country of the U.S. trade preference programs and encourages the Committee to continue 

granting and improving those preference programs according to the countries suggestions and the interest of the United States. 

With nothing further, accept, Sir, the assurances of our highest consideration. 

Francisco Alvarez De Soto 

Deputy Minister of International Trade Negotiations 

f 

Retail Industry Leaders Association, letter 

December 1, 2009 

The Honorable Charles Rangel 

Chairman 

Committee on Ways and Means 

U.S. House of Representatives 

Washington, DC 20515 

The Honorable Dave Camp 

Ranking Member 

Committee on Ways and Means 

U.S. House of Representatives 

Washington, DC 20515 

RE: Written Comments for the Record, Hearing on the Operation, Impact, 

and Future of the U.S. Preference Programs 

Dear Chairman Rangel and Ranking Member Camp: 

On behalf of the Retail Industry Leaders Association (RILA), I am pleased to submit comments to express strong support for Congressional action to enhance, simplify, harmonize, and add long-term predictability to the U.S. trade preference regime. As you are aware, the Generalized System of Preferences (GSP) and Andean 

Trade Preference Act (ATPA) programs both expire at the end of the year. RILA 

urges Congress to act as soon as possible to renew both programs while broader reform proposals are discussed. 

By way of background, RILA promotes consumer choice and economic freedom 

through public policy and industry operational excellence. Our members include the 

largest and fastest growing companies in the retail industry—retailers, product 

manufacturers, and service suppliers—which together account for more than $1.5 

trillion in annual sales. RILA members provide millions of jobs and operate more 

than 100,000 stores, manufacturing facilities and distribution centers domestically 

and abroad. 


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Trade preference programs, including the GSP, ATPA, African Growth and Opportunity Act (AGOA), Caribbean Basin Trade Partnership Act (CBTPA) and other initiatives are important development tools. Reducing tariffs and establishing dependable sourcing options are also essential for successful retail supply chains. Retailers 

rely on these programs as part of their sourcing strategies, and RILA is committed 

to promoting flexible, meaningful and simple-to-use preference programs that will 

assist development in the world’s poorest countries and offer American families the 

opportunity to purchase a variety of high-quality products at affordable prices. 

RILA has been working closely with an informal coalition of importers and development NGOs to support trade preference reform. RILA supports the consensus recommendations put forward by that group. 

RILA also provides these further clarifications as Congress considers changes to 

the U.S. trade preference regime. 

• Congress should provide duty-free benefits to all least developed countries, regardless of where they are located. 

The current patchwork of preference programs discriminates against some of the 

world’s poorest countries. Congress should provide trade preference benefits to allow 

all of the world’s poor people the opportunity to create a better future for themselves 

through trade and development. In particular, Congress should provide more trade 

preference benefits to Bangladesh and Cambodia. Poverty levels in Bangladesh and 

Cambodia are similar to those in Africa, and are worse by some indicators. Consider 

the following measures of poverty provided by the World Bank: 

Bangladesh Cambodia Sub-Saharan Africa 

GNI per capita $470 $540 $952 

% of malnourished 

children under 5 27 39 28 

Literacy (% of 

population over 15) 47 74 59 

Life expectancy at birth 64 59 51 

• The requirements, scope of product coverage, and rules of origin in the 

current patchwork of U.S. trade preference programs should be harmonized to promote consistency and integration. 

The current patchwork of preference programs makes it difficult for importers to 

utilize all the different programs. Some retailers don’t have the resources to understand and follow a multitude of different rules to ensure compliance. The result is 

that these programs are under-utilized, particularly for smaller suppliers such as 

Haiti where complicated rules are a barrier to entry for investors looking for new 

suppliers. Importers will sometimes decide that it is safer and easier to stay with 

sourcing rules they already understand rather than attempt to decipher new rules 

that apply only to a particular small supplier market especially when the benefits 

are only short-term. Congress should harmonize the rules across programs so that 

they are simpler to use and are understood by both importers and beneficiary countries. 

• There should be one simple and straightforward 35% value-added rule of 

origin for all products, including textiles and apparel. 

There are numerous examples of uncertainty and unpredictability created by complicated rules of origin and their varying interpretations by U.S. Customs and Border Protection. To eliminate this uncertainty and unpredictability, RILA believes everyone would benefit from a simple 35 percent value-added rule of origin. For textiles and apparel, RILA believes that Congress should clarify in the statute that the 

traditional interpretation of value-added would apply, which means that the value 

of fabric would qualify if it is cut and sewn (or knit to shape) in an eligible country 

(regardless of where the fabric was made). 

• Preference programs should have broader product coverage to include 

those products that are most commonly produced in poor countries. 

U.S. tariff rates are often regressive, and poor countries pay more in duty costs 

than their more developed counterparts. This is because typical products made in 

poor countries (such as textiles, apparel, footwear and agricultural products) face 

higher tariffs than the typical products made in advanced countries (such as hightech products and heavy manufactured products, which are often duty-free). 


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As Ed Gresser with the Democratic Leadership Council has documented repeatedly, least developed countries such as Cambodia or Bangladesh face tariffs that are 

15 times higher than those applied to wealthy nations and oil exporters. For example, Bangladesh, Cambodia and Pakistan together send approximately $9 billion a 

year in clothing and towels exports to the United States—and pay $1.3 billion in 

tariffs on those shipments. Meanwhile, Britain and France ship more than ten times 

that amount—$100 billion a year—to the United States in airplanes, wines, medicines, and information technologies, and pay approximately $750 million in tariffs 

on those shipments. This disparity in tariff treatment on products typically made 

by poor countries underscores the need to expand the product coverage of U.S. preference programs. 

• There should be a clear and predictable standard and process to determine eligibility for countries and products. 

RILA recognizes that U.S. trade preference programs include eligibility for both 

countries and products to ensure that beneficiaries and the programs are meeting 

certain policy goals. These eligibility criteria are important, and it is equally important that predictability be built into the decision-making process so that users of 

these programs, such as retailers, can expect and plan for any changes to product 

or country coverage. 

• Congress should enact a long-term extension of preference programs to 

foster longer-term investments and sustainable development. 

In recent years, Congress has provided short-term, last-minute renewals of preference programs. For example, the GSP and ATPA programs expire in one month; 

the Caribbean Basin trade preference program expires in nine months; and key provisions of AGOA are scheduled to be phased out in a few years. Such short-term 

durations and last minute extensions are disruptive, and the risk that benefits may 

expire or be withdrawn discourages investment that developing countries desperately need to be able to benefit from the preference programs. 

• There should be a strategic view to address country and product ‘‘graduations’’ that encourage additional bilateral and multilateral trade between and among the United States and developing countries, rather 

than eliminating duty-free treatment after certain thresholds are met. 

Advanced developing countries are significant users of U.S. trade preference programs—and that is a positive development that should be encouraged. Rather than 

attempting to limit duty-free benefits for advanced developing countries, policymakers should seek to expand our trading relationships with those countries and 

encourage more bilateral and multilateral trade. 

RILA appreciates the opportunity to provide these comments, and we look forward 

to working with the Committee to promote, expand, and simplify trade preference 

programs to benefit the United States’ poorest trading partners as well as American 

businesses and families that rely on competitively priced imports. If you have any 

additional questions, please contact me by phone at (703) 600–2046, or by email at 

stephanie.lester@rila.org. 

Sincerely, 

Stephanie Lester 

f 

Vice President, International Trade 

Statement of the U.S.-India Business Council 

U.S. House of Representatives 

Committee on Ways & Means 

Subcommittee on Trade 

Submission for the Record 

for 

Hearing on the Operation, Impact, and Future of the 

U.S. Preference Programs 

Submission made by the 

U.S.-India Business Council 

The U.S.-India Business Council (USIBC) is the premier business advocacy organization focused on promoting U.S.-India business ties. USIBC is comprised of nearVerDate Mar 15 2010 05:49 Jul 11, 2012 Jkt 063015 PO 00000 Frm 00312 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\63015.XXX GPO1 PsN: 63015

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ly 300 American companies trading with and investing in India, joined by 30 Indian 

multinational companies with growing investments throughout the United States. 

We are grateful for the opportunity to present this written submission to the House 

Ways & Means Committee, Subcommittee on Trade, detailing our support for the 

renewal of the Generalized System of Preference (GSP) program and the continuation of GSP benefits for Indian producers. 

The Indian Economy 

As a development tool, GSP benefits address the needs of the Indian economy in 

a direct and constructive manner. India’s GDP growth, while rapid in comparison 

to that of the United States at a projected 5.4% in 2009, is not yet at a level that 

can bring meaningful poverty reduction and broadly inclusive growth to the country. 

The World Bank estimates that 820 million Indians—about 75% of the population— 

today live on less than $2 a day, and the country’s per capita income stood at only 

$983 in 2007. While India’s economy may be advancing, it has not yet reached a 

level of development in line with the world’s advanced exporting countries that no 

longer require the benefits of a preference program to compete in overseas markets. 

Some 60% of India’s population is employed in subsistence level agriculture, while 

only 12% are employed through industry & manufacturing. In order to bring significant numbers of citizens out of poverty, more Indians will need to shift their means 

of employment to commercial agriculture and manufacturing. Economic development programs such as GSP can help to incentivize this shifting of the labor mix 

to these higher value added industries, and thereby support the poverty alleviation 

efforts already underway in the country. 

U.S.-India Trade 

India is the 5th largest economy in the world but only served as the 15th largest 

U.S. trading partner, ranking 18th in imports and 16th in exports in 2008. As India 

has unilaterally reduced its tariffs to a peak rate of 10%, U.S. exports to India have 

steadily increased in value, nearly doubling between 2006 and 2008—a testament 

to the mutually beneficial nature of the U.S.-India trade relationship. While absolute values of trade remain small in comparison to countries of similar size, such 

as China, the growth potential for Indian imports and U.S. exports is significant. 

In 2008, GSP imports represented only about 15% of total imports from India, and 

were largely concentrated in the categories of jewelry, automobile components, certain chemicals and carpets. The program has served as an effective impetus for a 

growing trade relationship and can continue to underscore the interests of the 

United States in supporting the development of India’s economy and the basic livelihoods of its people. 

Corporations seeking to provide high quality products to American consumers at 

the lowest possible cost also stand to benefit greatly from the GSP program. One 

American retailer is able to provide low value-add manufactured products, such as 

ball point pens, potpourri and lamps to consumers at competitive prices due, in 

large part, to the GSP benefits accorded to India on these products. 

Until the revocation of GSP benefits for gold jewelry from India, a major American retailer had sourced the bulk of this product from India. After revocation of 

these benefits in 2007 and 2008, Indian imports have fallen drastically and much 

of the product sold in the U.S. is now sourced from China. As a result, a large portion of the estimated 325,000 Indian jobs dependent on jewelry exports to the U.S. 

are in jeopardy in a country where annual GDP per capita is already amongst the 

lowest in the world. 


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Likewise, the loss of India’s GSP benefits from prior revocations have generally 

benefited developed and advanced developing nations the most. For instance, China 

has become a primary exporter of stainless steel flanges and brass lamps. In the 

case of wind powered electric generators, developed countries such as Denmark, 

Spain and Japan increased their exports to the U.S. when India’s GSP benefits were 

lost in 2006. In fact, of the top 20 exporters of wind powered electric generators, 

exports from India are the only ones to have lost value between 2006 and 2008. 

American retailers and importers have often stated that, without GSP benefits, Indian products will be phased out in favor of Chinese and other economically advanced country products—a claim that has been well evidenced by recent trade 

data. 

Today, of India’s top 20 GSP products, China ranks amongst the top five exporters 

to the U.S. in 15 and among the top two exporters in eight of the products. Similarly, Canada and Mexico rank in the top five exporters for 11 of the 20 products, 

each. If these products, too, lose GSP benefits, it will most likely be developed countries such as China, Canada and Mexico, not least developed nations, that benefit 

most from India’s loss. Such an outcome would be at odds with the Congressionallymandated objectives of the GSP program. 

The U.S.-India Partnership 

As the oldest and largest free-market democracies in the world, the U.S. and 

India are natural allies and natural partners with a strong bilateral partnership 

that spans the most pressing strategic, economic and geopolitical questions facing 

the world today. Relations between the governments of both countries have consistently improved, and India today serves as a key ally for the United States in a volatile region. As India’s economy has matured, its corporations have invested in the 

U.S. market and are creating jobs here in industries like manufacturing and IT 

services, while American firms now often collaborate with their partners in India 

to develop new technologies for use around the world. 

India’s newly constituted government has reiterated its commitment to a strong 

multilateral trading system, including a successful conclusion to the Doha Round of 

world trade talks. Economic development support from the United States through 

the GSP program will serve to strengthen the ability of the government to push forward on Doha and domestic market reforms which have the potential to positively 

impact the operations of American investors in India. 

The Obama Administration, like those which preceded it, has illustrated its support for a strong, multi-faceted partnership with India. Included is a recognition 

that the development of India’s economy is good for the U.S. and is part of global 

efforts to alleviate poverty. As India’s leaders push forward to bring hundreds of 

millions out of poverty, developmental tools like GSP will bolster their efforts both 

politically and economically. 

f 


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anorris on DSK9Q6SHH1PROD with HEARING63015A.115
345 


anorris on DSK9Q6SHH1PROD with HEARING63015A.116
346 


anorris on DSK9Q6SHH1PROD with HEARING63015A.117
347 


anorris on DSK9Q6SHH1PROD with HEARING63015A.118
348 


anorris on DSK9Q6SHH1PROD with HEARING63015A.119
349 

f 


anorris on DSK9Q6SHH1PROD with HEARING63015A.120
350 


anorris on DSK9Q6SHH1PROD with HEARING63015A.121
351 


anorris on DSK9Q6SHH1PROD with HEARING63015A.122
352 


anorris on DSK9Q6SHH1PROD with HEARING63015A.123
353 

f 


anorris on DSK9Q6SHH1PROD with HEARING63015A.124
354 


anorris on DSK9Q6SHH1PROD with HEARING63015A.125
355 


anorris on DSK9Q6SHH1PROD with HEARING63015A.126
356 


anorris on DSK9Q6SHH1PROD with HEARING63015A.127
357 

Æ 


anorris on DSK9Q6SHH1PROD with HEARING63015A.128