Report to the Chairman, Subcommittee

on Trade, Committee on Ways and

Means, House of Representatives

United States General Accounting Office

GAO

June 2001 INTERNATIONAL

TRADE

Comparison of U.S.

and European Union

Preference Programs

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

Letter 1

Appendix I Objectives, Scope, and Methodology 33

Appendix II U.S. and EU Nonreciprocal Trade Preference

Programs 35

Appendix III Additional Information on Beneficiary Country

Trade, 1999 37

Appendix IV Products Receiving the Greatest Tariff

Preferences 53

Appendix V U.S. and EU Tariffs That Are Greater Than

20 Percent, for Products Excluded From the

Non-LDC GSP Programs 55

Appendix VI GAO Contacts and Staff Acknowledgments 57

Tables

Table 1: U.S. and EU Average Tariff Rates, by Preference Program 18

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

Sector, 1999 19

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

Nonreciprocal Preference Programs 21

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

Limitations 27

Table 3: U.S. Nonreciprocal Trade Preference Programs 35

Table 4: EU Nonreciprocal Trade Preference Programs 36

Table 5: U.S. GSP Beneficiary Country Trade, 1999 (Sorted by

Actual U.S. Imports Receiving GSP Rates) 37

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

Table 6: U.S. CBERA Beneficiary Country Trade, 1999 (Sorted by

Actual U.S. imports Receiving CBERA Rates) 42

Table 7: U.S. Andean Trade Preference Act (ATPA) Beneficiary

Country Trade, 1999 (Sorted by Actual U.S. Imports

Receiving ATPA Rates) 44

Table 8: EU GSP Beneficiary Country Trade, 1999 (Sorted by

Actual EU Imports Receiving GSP Rates) 45

Table 9: EU African Caribbean and Pacific (ACP) Beneficiary

Country Trade, 1999 (Sorted by Actual EU Imports

Receiving ACP Rates) 50

Table 10: U.S. Imports for Which the Difference Between the MFN

and GSP Tariff Is at Least 15 Percent, 2000 53

Table 11: EU Imports for Which the Difference Between the MFN

and GSP Tariff Is at Least 15 percent, 2000 54

Table 12: U.S. Tariffs That Are Greater Than 20 Percent for

Products Excluded From Non-LDC GSP Program, 2000 55

Table 13: EU Tariffs That Are Greater Than 20 Percent for Products

Excluded From the Non-LDC GSP Program, 2000 56

Figures

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

Figure 2: Imports Receiving Preferences, U.S. Programs and EU

GSP Program, 1992-2000 9

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

Program, 2000 16

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

Program, 2000 17

Figure 6: Share of U.S. and EU Beneficiaries’ Dutiable Imports

Eligible for Tariff Preferences, 1999 24

Figure 7: Share of U.S. and EU Beneficiaries’ Eligible Imports

Actually Receiving Tariff Preferences, 1999 25
Page iii GAO-01-647 U.S. and European Union Preference Programs

Abbreviations

ACP African, Caribbean, and Pacific

AGOA African Growth and Opportunity Act

ATPA Andean Trade Preference Act

AVE ad valorem equivalent

CBERA Caribbean Basin Economic Recovery Act

CBTPA Caribbean Basin Trade Partnership Act

EC European Community

EU European Union

FTAA Free Trade Area of the Americas

GATT General Agreement on Tariffs and Trade

GSP Generalized System of Preferences

LDC least developed country

MFN most favored nation

OECD Organization for Economic Cooperation and Development

UNCTAD United Nations Conference on Trade and Development

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

June 8, 2001

The Honorable Phillip M. Crane

Chairman, Subcommittee on Trade

Committee on Ways and Means

House of Representatives

Dear Mr. Chairman:

Both the United States and the European Union (EU) began providing

trade preferences to eligible developing countries in the early 1970s and

have expanded these preference programs over time. The purpose of these

programs is to foster economic development through increased trade.

These trade preferences, which reduce tariffs, or duties, and quotas for

many products from eligible countries, are “nonreciprocal.” Nonreciprocal

preferences are granted unilaterally—that is, beneficiaries are not required

to reciprocate with lower tariffs for donor country exports. Alternatively,

all countries participating in free trade agreements must lower their trade

barriers. An example of a nonreciprocal preference program is the U.S.

Generalized System of Preferences program, which provides duty-free

access to the U.S. market for eligible products of qualified developing

countries.

As you requested, we compared (1) the volume of U.S. and EU

nonreciprocal preferential trade, (2) the U.S. and EU approaches to

nonreciprocal trade preferences, (3) the tariff preferences offered by the

U.S. and EU nonreciprocal trade programs, and (4) the extent to which

U.S. and EU program beneficiaries take advantage of the tariff preferences

offered under the programs. We recently briefed your staff on the results

of this analysis.

To accomplish our work, we examined relevant documents and spoke

with U.S. and EU officials about the programs. We also spoke with

experts at the Organization for Economic Cooperation and Development,1

 1

 The Organization for Economic Cooperation and Development is a group of 30 member

countries that provides governments with a venue in which to discuss, develop, and

improve economic and social policy. Its members are the richer countries in that they

produce two-thirds of the world’s goods and services.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-647 U.S. and European Union Preference Programs

the United Nations Conference on Trade and Development,2 and the World

Trade Organization.3

 We also collected and analyzed original trade data

from U.S. and EU sources. A full description of our scope and

methodology can be found in appendix I.

The volume of imports receiving preferential tariff rates under U.S. and EU

nonreciprocal trade preference programs in 1999 represented a relatively

small share of total U.S. and EU imports, at 2 percent ($18 billion) and 6

percent ($45 billion), respectively.4

 The U.S. and EU Generalized System

of Preferences (GSP) programs accounted for the majority of the

preference trade, with the U.S. program offering duty-free entry and the

EU program providing duty-free entry or reduced tariffs. Although U.S.

imports under some programs have increased, the total dollar value of

imports under all U.S. nonreciprocal programs remained generally flat

from 1993 through 2000. The dollar value of EU imports under its GSP

program declined overall from 1995 to 1999.5

 However, the dollar value of

yearly imports under the EU GSP program was more than double that of

the value of imports under all U.S. programs over the same period, partly

because the EU program covers more countries. For example, the EU GSP

program gave preferences to certain imports from Malaysia and China.

Imports from these two countries comprised about 30 percent of EU

imports under the GSP program in 1999. Although a small share of U.S.

and EU trade, exports under preference programs accounted for a large

share of some beneficiary countries’ total exports. For example, exports

under the programs for Kazakhstan, Mauritius, Senegal, and St. Kitts and

Nevis made up over three-fourths of their total exports to either the United

States or the European Union.

 2

 The United Nations Conference on Trade and Development is a permanent organization

under the General Assembly of the United Nations. Its mandate is to promote international

trade, particularly that of developing countries, with a view toward accelerating countries’

economic development.

3

 The World Trade Organization provides the institutional framework for the multilateral

trading system. It administers rules for international trade and provides a forum for

conducting trade negotiations.

4

 These figures do not include recently enacted U.S. programs covering the sub-Saharan

African countries and the Caribbean Basin, and a new amendment to the EU GSP program

expanding benefits for the poorest countries.

5

 Multiple-year data were only available for the EU GSP program.

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

The U.S. and EU approaches to nonreciprocal preferential trade have

evolved in similar ways since their inception in the early 1970s. U.S. and

EU programs have included increasingly more products, particularly to the

poorest countries, and have over time relaxed customs requirements,

known as rules of origin, that specify where and how products can be

made. For example, the United States added more than 1,700 new

products to its GSP program in 1997 for the least developed countries,6

and expanded preferences for sub-Saharan African and Caribbean Basin

countries in 2000. The European Union recently implemented a farreaching program offering these same countries duty-free and quota-free

treatment for all products, except arms, by 2009.7

 In addition, U.S. and EU

programs have given beneficiary countries increasingly more leeway to

use inputs from multiple countries to produce their products. At the same

time, the United States and the European Union may both be moving away

from purely nonreciprocal arrangements, though in different ways. The

European Union is explicitly phasing out one-way preferences in favor of

free trade arrangements in its “Cotonou Agreement,”

8

 while the United

States is involved in negotiations to establish a Western Hemisphere free

trade area with several countries that currently are U.S. program

beneficiaries.

Despite some program differences, we found that U.S. and EU

nonreciprocal preference arrangements offer relatively similar tariff

preferences on average. For example, the U.S GSP program offers dutyfree access on all eligible products, while the EU GSP program offers dutyfree access on some products and reduced tariffs on other, more sensitive

imports. Despite the different approaches, in 2000, U.S. and EU GSP

program beneficiaries faced the same simple average tariff rate9

 of 3

percent. The other U.S. and EU nonreciprocal preference programs we

 6

 The United Nations currently categorizes 49 countries as “least developed countries,”

calling them “particularly ill-equipped to develop their domestic economies and to ensure

an adequate standard of living for their populations.” Presently, 42 of the 49 countries are

eligible for the expanded benefits under the U.S. GSP program.

7

 The “Everything But Arms” amendment to the EU GSP, effective March 5, 2001, provides

duty-free and quota-free access to the EU market for all but arms and ammunition. Full

coverage of bananas will be phased in by 2006, and for rice and sugar, by 2009.

8

 The African, Caribbean, and Pacific-European Union Partnership Agreement signed in

Cotonou, Benin, on June 23, 2000, referred to as the “Cotonou Agreement,” is an agreement

between 77 African, Caribbean, and Pacific (ACP) states and the European Union. The

Cotonou Agreement provides trade preferences to the ACP countries.

9

 Simple average tariff rates are the average of all tariff lines in the tariff schedule.
Page 4 GAO-01-647 U.S. and European Union Preference Programs

examined all offered simple average tariff rates below 3 percent, with U.S.

programs close to 2 percent, and EU programs nearly at zero. Both the

United States and the European Union exclude some sensitive products

from their programs, including textiles and apparel for the United States

and agriculture products for the European Union.

On the whole, we found that EU programs cover more products than do

U.S. programs, but U.S. beneficiary countries use more of their available

tariff preferences than do EU beneficiaries. For example, in 1999, the

European Union’s African, Caribbean, and Pacific program offered

reduced tariff rates on more than 95 percent of the dutiable imports from

beneficiary countries.10 However, only about 68 percent of these imports

actually received the program’s lower tariff rates. In the same year, U.S.

programs for Caribbean and Andean countries offered reduced rates on

less than 35 percent of beneficiary imports facing duties. However, 72

percent and 92 percent of those Caribbean and Andean imports,

respectively, received the programs’ lower tariff rates. Ultimately, neither

U.S. nor EU program beneficiaries took full advantage of the lower tariff

rates offered under the preference programs. Experts have cited factors

such as complex rules of origin as reasons for the lack of use. In addition,

poorer beneficiary countries may lack the capacity in terms of economic

development and expertise to comply with program requirements.

Nonreciprocal preferential trade arrangements originated with the concept

of special and differential treatment for developing countries. This

treatment was meant to compensate for developing countries’ unequal

economic status compared with the developed world. In the late 1960s, the

United Nations Conference on Trade and Development (UNCTAD)

concluded that trade on a most-favored-nation (MFN)11 basis did not take

into account developing countries’ inability to compete on an equal basis

 10 Dutiable imports are products that, outside a preference program, would normally face a

tariff rate greater than zero.

11 Most-favored-nation trade is a concept promulgated in Article I of the General Agreement

on Tariffs and Trade (GATT). The article provides that contracting parties to GATT must

grant each other treatment as favorable as they give to any country in the application and

administration of import duties.

Background

Nature of Nonreciprocal

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

with richer nations. UNCTAD also concluded that the objectives of

nonreciprocal preference programs should be to increase export earnings,

promote industrialization, and raise the economic growth rates of

developing countries. These objectives laid the foundation for the creation

of the U.S. and EU GSP programs.

Both the United States and the European Union established GSP programs

in the early 1970s, each offering trade preferences to more than 100

developing countries around the world. The United States later established

other nonreciprocal trade preference programs through the Caribbean

Basin Economic Recovery Act (CBERA) in 1983; the Andean Trade

Preference Act (ATPA) in 1991; and, most recently, through the Trade and

Development Act of 2000, which extended nonreciprocal preferences with

the majority of the sub-Saharan African countries as well as the Caribbean

Basin region. Specifically, Title I of the act is cited as the African Growth

and Opportunity Act (AGOA), while Title II is cited as the Caribbean Basin

Trade Partnership Act (CBTPA). Presently, the United States offers

nonreciprocal trade preferences to 151 countries and territories.12 (See

app. II for more details on the U.S. programs.)

Similarly, the European Union has extended nonreciprocal trade

preferences to many countries in the African, Caribbean, and Pacific

(ACP) regions since 1975 through its ACP-EC13 Convention of Lomé. The

European Union will continue to offer nonreciprocal preferences until

2008 through the Lomé Convention’s replacement agreement, known as

the Contonou Agreement of 2000. Like the United States, the European

Union also expanded the number of products receiving tariff preferences

under its GSP program for the 49 nations designated by the United Nations

as “least developed countries” (LDC). Recently, the European Union

further expanded these GSP preferences by adopting the “Everything But

Arms” amendments, which offer duty-free access for all LDC products

except arms by 2009. Presently, the European Union offers nonreciprocal

trade preferences to 171 countries and territories under its GSP program

 12 For details on the U.S. programs, see The Year in Trade: Operation of the Trade

Agreements Program During 1999, 51st Report, Investigation No. 332-412, (United States

International Trade Commission, Publication 3336, Aug. 2000), pp. 92-102.

13 EC refers to the European Community, which was the predecessor to the European

Union.

U.S. and EU Nonreciprocal

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

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

programs.)

EU and U.S. nonreciprocal trade preference programs share certain

common features and requirements. They offer reduced or duty-free

access to eligible products from beneficiary countries, with lesser

preferences for products deemed more sensitive or competitive with U.S.

or EU domestic producers. Sensitive products are either excluded

completely from coverage or provided access at a higher preferential duty

than other covered products. For example, while the U.S. GSP offers dutyfree treatment for all eligible products, it excludes completely from

coverage sensitive products like textiles and apparel.15 The EU GSP

scheme, on the other hand, offers incremental tariff reductions on the

basis of a product’s sensitivity.

EU and U.S. programs also contain requirements regarding product origin,

which all beneficiary countries must meet to receive preferential tariff

rates on their products. “Rules of origin” ensure that tariff advantages

apply only to products actually produced in beneficiary countries.

Producers in beneficiary countries may use imported materials to produce

goods for export, provided the inputs comply with specific criteria

outlined in the rules of origin for the preference program. For example,

rules of origin may specify a maximum percentage of imported materials

that can be included in a product or may require that specific amounts and

types of processing be carried out on imported inputs in order for the final

product to qualify for preferential treatment. Both the United States and

the European Union allow, to a varying extent, countries to comply with

rules of origin by cumulating inputs or sharing production processes with

designated beneficiary countries or groups of countries. For example,

under the U.S. GSP program, Botswana could use imported inputs from

Tanzania in the production of a good for export to the United States

because both beneficiaries are eligible for cumulation benefits as members

of the Southern African Development Community. In general, allowing

broader cumulation provides producers in beneficiary countries with

greater flexibility in complying with rules of origin requirements.

 14 Additionally, the European Union has offered nonreciprocal trade preferences to certain

Mediterranean, central and eastern European, and southeastern European countries.

15 The U.S. AGOA and CBTPA do cover some textile and apparel products.

Key U.S. and EU Program

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

Finally, U.S. and EU trade preference programs contain eligibility

requirements in the form of certain country practices. For example,

receiving program tariff preferences may be dependent upon countries’

having policies in place to ensure worker rights, protect intellectual

property,16 or adequately control illegal drugs.

Thirteen percent ($133 billion) of total 1999 imports into the United States

came from beneficiaries of U.S. nonreciprocal programs, while 34 percent

($248 billion) of total 1999 imports into the European Union came from

beneficiaries of the EU GSP and ACP programs. However, a smaller

percentage of imports from these beneficiary countries actually received

preferential treatment—2 percent ($18 billion) of total U.S. imports and 6

percent ($45 billion) of total EU imports in 1999. (See fig. 1.) The U.S. and

EU Generalized System of Preferences (GSP) programs accounted for the

majority of the preference trade, with the U.S. program offering duty-free

entry and the EU program providing duty-free entry or reduced tariffs.

Although imports from beneficiary countries comprised small portions of

total U.S. and EU imports in 1999, the United States and the European

Union are the primary export markets for many beneficiaries. For

example, in 1999, 52 percent of Costa Rica’s total exports were destined

for the United States, and 58 percent of Ghana’s total exports went to the

European Union in the same year. (See app. III for the percentages of

exports destined for the U.S. and EU markets for each beneficiary country

by program). In addition, a large share of some countries’ total exports to

the United States and the European Union enter at reduced tariff rates

under one of the U.S. or EU trade preference programs. For example, over

90 percent of St. Lucia, St. Vincent and the Grenadines, Namibia, and

Senegal’s dutiable exports to the European Union received reduced tariff

rate preferences in 1999. The same was true for the dutiable exports of

Benin and Zaire.

Figure 1 also illustrates that, compared with the United States, imports

from beneficiaries of EU nonreciprocal programs comprised a larger

portion of total EU imports in 1999. One reason for this difference is that

the European Union extended preferences to 20 countries that were not

covered by the U.S. programs. For example, the EU GSP program gave

preferences to certain imports from Malaysia and China. Imports from

 16 The protection of intellectual property refers to legal rights, and enforcement of such

rights, associated with patents, copyrights, and trademarks.

Share of U.S. and EU

Imports Receiving

Preferential Tariff

Rates Is Relatively

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

these two countries comprised about 30 percent of EU imports under the

GSP program in 1999. Appendix III also provides additional data on the

share of imports from beneficiaries of U.S. and EU nonreciprocal

programs.

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

Legend

FTA = free trade agreement

MFN = most favored nation

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

imports. See appendix I for more information on the data sources and methodology.

Note 2: U.S. preference program data include GSP, ATPA, and CBERA. EU preference program

data include GSP and ACP-EC Convention of Lomé.

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

“Everything But Arms” amendment.

Note 4: The term “preference imports from beneficiaries” refers to the share of imports from

beneficiary countries that actually received tariff preferences. The term “nonpreference imports from

beneficiaries” refers to the share of imports from beneficiary countries that entered the United States

or the European Union but did not receive preferential tariff treatment.

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

and preference imports, and GAO calculations.

Overall, the total value of imports under U.S. nonreciprocal programs and

the EU GSP program has remained generally flat or declined over time.

(See fig. 2.) Imports under the U.S. GSP, its largest program, peaked in

1993 and have generally declined since then. This is partly because some

significant countries, including Mexico and Malaysia, were removed from

the program in 1994 and 1998, respectively. Although the total value of

imports into the United States under all U.S. preference programs
Page 9 GAO-01-647 U.S. and European Union Preference Programs

remained generally flat since 1993, imports under the smaller U.S.

preference programs, including CBERA and ATPA, increased between

1992 and 2000. As for the EU GSP program, the value of imports declined

overall between 1995 and 1999. The European Union removed from GSP

coverage a significant share of products from large beneficiary countries

such as Malaysia and China, which contributed to this decline. However,

the yearly imports under the EU GSP were more than double that of

imports under all U.S. programs during the same period.17 In addition, the

value of imports receiving preferences under U.S. and EU GSP programs

may have been flat or declining over time due to the elimination of tariffs

on many products through multilateral trade negotiations.

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

1992-2000

 17 Data on the EU GSP program were available only for 1995-99, and no data were available

for the ACP-EC Convention of Lomé program prior to 1999.
Page 10 GAO-01-647 U.S. and European Union Preference Programs

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

imports.

Note 2: Data on the EU GSP program were available only for 1995-99, and no data were available for

the ACP-EC Convention of Lomé prior to 1999. Imports under the ACP-EC Convention of Lomé were

$7,521 million in 1999.

Note 3: Trade data for the U.S. AGOA and CBTPA and the EU “Everything But Arms” amendment

were not yet available.

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

GAO calculations.

The United States and the European Union have offered greater tariff

preferences over time, both in terms of product coverage and reduced

restrictions. At the same time, they have increased and refined country

eligibility requirements. In the future, the United States and the European

Union may be moving away from purely nonreciprocal arrangements,

though in different ways. (See app. II for further details on the U.S. and EU

programs.)

Since 1976, the U.S. GSP has offered duty-free treatment for eligible

products and completely excluded some sensitive products from coverage.

However, in 1983 and 1991, respectively, the CBERA and the ATPA

extended tariff rates below MFN treatment for several items completely

excluded from coverage under its GSP program, including luggage,

handbags, and leather apparel. In addition, neither CBERA nor ATPA is

subject to GSP’s competitive need and country income restrictions.18 In

1997, the United States added more than 1,700 new products to its dutyfree treatment under GSP for eligible LDCs. Between 1996 and 1997, the

value of nonpetroleum exports from LDCs to the United States increased

by 71 percent. Further, in 2000, the United States, for the first time, offered

duty-free and quota-free treatment for certain qualified textile and apparel

products that meet rule of origin requirements, through (1) AGOA for

certain sub-Saharan African countries and (2) CBTPA for CBERA

beneficiaries. AGOA also extended GSP-type preferences to several new

products. Finally, AGOA’s preferences are more long term, compared with

GSP. AGOA is effective through September 30, 2008, while GSP is effective

through September 30, 2001.

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

“competitive need limit”—a specified level of imports to the United States. Countries may

lose all of their GSP benefits if their national income is higher than a specified threshold.

U.S. and EU

Approaches to

Nonreciprocal Trade

Have Evolved in

Similar Ways

The United States and the

European Union Have

Expanded Product

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

The EU’s series of ACP-EC Lomé Convention agreements offer expanded

product coverage compared with its GSP program. For example, in 2000,

89 percent of the products from ACP countries faced zero duties versus

only 48 percent under the EU GSP. Like the United States, the European

Union increased its GSP product coverage and further reduced tariff rates

for the poorest countries in 1998, by offering those countries preferences

equivalent to its ACP-EC Lomé Convention. Also in 1995, the European

Union eliminated all quotas under its GSP program and implemented a

graduated tariff reduction system based upon the market sensitivity

products. Finally, as of March 2001, the European Union adopted the

“Everything But Arms” amendment to its GSP program, which offers dutyfree and quota-free treatment for all products from the poorest countries,

except armaments, by 2009.

Both U.S. and EU programs have liberalized their rules of origin

requirements in successive programs. For example, the CBERA qualifying

rules for individual products are more liberal than those of the U.S. GSP

program. GSP requires that at least 35 percent of the value of the product

be added in a single beneficiary country or in a specified group of eligible

GSP countries. CBERA allows beneficiaries to use inputs from all other

CBERA beneficiaries, and it also allows the use of U.S. inputs in meeting

the 35 percent value-added threshold. AGOA, for the first time, allows the

poorest countries among its beneficiaries to use both non-U.S. and nonsub-Saharan African fabric, up to a specified amount.

For the European Union, the ACP-EC Convention of Lomé rules of origin

allows wider cumulation among beneficiary countries than those of its

GSP program. For example, the Lomé Convention allows cumulation

among all ACP beneficiary countries, whereas GSP only allows cumulation

within designated groups of countries. The Lomé Convention has also

liberalized its rules of origin over time. The 1995 Revised ACP-EC

Convention of Lomé expanded allowable cumulation to include certain

non-ACP developing countries, with exceptions for certain products. It

also made 15 percent the permissible amount, by value, of materials from

third countries that can be used in ACP-manufactured products.

U.S. country eligibility requirements have evolved from requiring

beneficiary countries to institute basic worker rights to targeting regionspecific issues and broader development themes. For example, to be

designated a GSP beneficiary, a country must be taking steps to provide

internationally recognized workers’ rights, and the President must take

The United States and the

European Union Have

Relaxed Rules of Origin

Requirements

The United States and the

European Union Have

Expanded Country

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

into account the extent to which a country provides adequate and effective

intellectual property rights. Several countries have had their U.S. GSP

preferences suspended, including Liberia, Nicaragua, Sudan, and Syria, for

providing inadequate worker rights.

While retaining basic requirements such as core worker rights, trade

preference programs enacted since the GSP program have focused their

country eligibility criteria on new areas. Under ATPA, the President must

also take into account whether the country has met certain U.S. narcotics

cooperation criteria. Under CBTPA, the President must take into account,

among other eligibility criteria, whether the country has demonstrated a

commitment to participate in negotiations toward completing free trade

agreements such as the Free Trade Area of the Americas. AGOA further

expanded country eligibility criteria by requiring that the President, among

other things, determine whether the country is making continual progress

toward establishing a market-based economy that protects private

property rights, the rule of law, and economic policies to reduce poverty.

The European Union bases countries’ eligibility for preferences under its

GSP program on criteria similar to those of the U.S. GSP program. Under

the EU program, preferences may be withdrawn on the basis of the

countries’ practices, such as the use of forced labor or the shortcomings in

Customs controls on the export or transit of drugs. However, in its 1995

revision of its GSP program, the European Union increased the emphasis

on promoting social and environmental policies in the beneficiary

countries. In 1998, it instituted special incentive arrangements that further

reduced tariffs for GSP beneficiaries that demonstrate compliance with

certain requirements related to labor and the environment. Thus far, the

European Union has granted one country, Moldova, additional preferences

under this system.

In its 2000 Cotonou Agreement, which replaced the ACP-EC Convention of

Lomé, the European Union indicated that it is moving away from providing

nonreciprocal preferential tariffs for all ACP countries to establishing new

reciprocal trade arrangements. During a preparatory period (2000-08), the

Cotonou Agreement will maintain Lomé IV Convention nonreciprocal

trade preferences. It will also provide financial aid to improve ACP

countries’ competitiveness, support their fiscal reform, upgrade their

infrastructures, and promote investment. By 2002, the EU and ACP

countries have agreed to negotiate “economic partnership agreements”

that establish timelines for progressively removing their trade barriers.

The new trading arrangements will then enter into force by January 1,

The United States and the

European Union Are

Moving Toward Reciprocal

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

2008, after which trade liberalization will be phased in during a period of

at least 12 years. Negotiations will take into account the level of economic

development and socioeconomic impact of the trade measures on the ACP

countries.

The European Union has identified several factors that motivated its

decision to change its approach. An EU Commission analysis states that

the results of 25 years of benefits under the ACP-EC Convention of Lomé

have been mixed and that the impact of nonreciprocal trade preferences

has been “disappointing.” The analysis cites the fact that the ACP

countries’ share of the EU market declined from 6.7 percent in 1976 to 3

percent in 1998. The rationale behind the EU’s new approach is that open

trade combined with social development policies will help the ACP

economies grow and reduce their poverty. The European Union also

intends that the economic partnership agreements will comply with World

Trade Organization19 rules, thereby encouraging domestic and foreign

investment in ACP countries and boosting their competitiveness in the

world economy. An EU official told us that the ACP countries’ ability to

export must be strengthened through export-oriented assistance and by

increasing trade among the beneficiary countries. As the ACP countries

build their capacity to export and become more competitive with each

other, it is expected that they will be better prepared to compete with

other trading partners, according to the EU official.

Not all ACP countries may be party to the economic partnership

agreements. The 39 of the 77 ACP countries that are designated as LDCs

will remain under the EU’s new, Everything But Arms amendment to GSP.

An EU official told us that he hoped that LDCs would choose to negotiate

economic partnership agreements under the Cotonou Agreement in

addition to receiving benefits under in the Everything But Arms

amendment. He believed that the economic partnership agreements held

several advantages. While Everything But Arms offered greater access to

the EU market, the economic partnership agreements encouraged ACP

countries to open their own markets and attract long-term foreign

investment. He believed that, rather than relying on trade preferences

alone, the Cotonou Agreement used all means to increase trade, including

the previously described trade-related financial assistance. The remaining

 19 The World Trade Organization provides the institutional framework for the multilateral

trading system. It administers rules for international trade and provides a forum for

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

38 non-LDC ACP countries will be free to decide whether they are ready to

negotiate these arrangements. In 2004, the European Union will evaluate

the non-LDCs that are not in a position to join an economic partnership

agreement and determine how to provide them with benefits tailored to

their existing situations.

While the United States is not phasing out its one-way preferences under

its trade preference programs, it is moving toward reciprocity with many

developing countries in its own hemisphere. Specifically, the United States

is involved in negotiations to establish a Western Hemisphere free trade

area known as the Free Trade Area of the Americas (FTAA).20 The FTAA

would eliminate tariffs and create common trade and investment rules

among the 34 democratic nations of the Western Hemisphere. Many of the

34 FTAA countries are beneficiaries of U.S. trade preference programs,

including Brazil under GSP; Bolivia and Colombia under GSP and ATPA;

and Costa Rica and El Salvador under GSP, CBERA, and CBTPA.

However, one U.S. official commented that the extensive tariff preferences

countries enjoy under nonreciprocal trade preference programs could

diminish their incentive to negotiate free trade agreements. In fact, the

CBTPA specifically states that it is the policy of the United States to offer

benefits under the act to Caribbean Basin beneficiary countries willing to

prepare for the FTAA or another free trade agreement. Furthermore,

CBTPA benefits are scheduled to end on the earlier of September 30, 2008,

or the date on which the FTAA, or any similar free trade agreement

between the United States and CBERA beneficiary countries, enters into

force.21

 20 For details on the Free Trade Area of the Americas, see Free Trade Area of the Americas:

Negotiations at Key Juncture on Eve of April Meetings (GAO-01-552, Mar. 30, 2001).

21 CBERA and CBTPA member countries are identical. However, in practice, only 11

members of the 24 CBTPA countries have been designated as eligible for CBTPA

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

Despite some differences in how they structure their tariff preferences,

U.S. and EU nonreciprocal trade preference programs offer beneficiary

countries similar overall simple average tariff reductions.22 Normal imports

entering either the U.S. or the EU market faced an overall simple average

tariff of about 5 percent in 2000.23 An examination of the largest of the U.S.

and EU preference programs—the GSP—shows that the simple average

tariff rates offered by the European Union and the United States are both

about 3 percent. Other preference programs, including the U.S. AGOA,

ATPA, CBERA, and the EU’s ACP program and Everything But Arms

amendment, reduce the average tariff further—to between 1 and 2 percent

for U.S. programs and nearly zero for EU programs.

Figures 3 and 4 provide a visual representation of the simple average tariff

rates faced by U.S. and EU GSP program beneficiaries, 2000. The shaded

areas in the two figures, moving left to right, group the products on the

schedule and their average tariff rates into three general categories:

products for which the MFN rate is already zero, products covered by

GSP, and products excluded from GSP coverage where the MFN rate is

greater than zero.

For the United States, 31 percent of the products on the U.S. tariff

schedule already have duty-free access to the U.S. market on an MFN

basis, as indicated by the lefthand segment of figure 3. The U.S. GSP

program provides duty-free access to an additional 35 percent of products

on the schedule. Therefore, about 66 percent of the products on the tariff

schedule have duty-free access if imported from a GSP beneficiary

country. The remaining 35 percent of the products are not covered by the

GSP program and face some duties.

 22 The tariff schedules of the United States and the European Union list the tariff rates

applicable for imported products. The U.S. schedule includes about 10,200 products, and

the EU schedule includes about 13,600 products.

23 This calculation does not include products that face “specific” rates of duty, which are

specific fees per unit of a product (such as $5 per bushel). Since these rates are not in ad

valorem terms (percentages), they cannot be averaged unless first converted into

percentage terms for each product.

U.S. and EU Programs

Offer Relatively

Similar Tariff Rates on

Average and Exclude

Some Sensitive

Products

U.S. and EU Programs

Offer Similar Tariff Rate

Reductions, on Average
Page 16 GAO-01-647 U.S. and European Union Preference Programs

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

Note 1: Averages do not include products that face “specific” rates of duty. See footnote 23.

Note 2: Percentages do not add to 100 due to rounding.

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

As for the EU GSP program, figure 4 shows that the EU provides duty-free

access on an MFN basis to 17 percent of the products on its schedule, a

smaller share compared with the United States. However, the EU GSP

program covers a larger share, 71 percent, of the remaining products, so

that approximately 88 percent of the products on the EU tariff schedule

are offered either MFN duty-free access or special rates under GSP.

Finally, figure 4 shows that 12 percent of the products on the EU tariff

schedule are completely excluded from GSP coverage, versus 35 percent

for the United States. However, although the European Union excludes

fewer products from its GSP program than does the United States from its

GSP program, unlike the United States, the EU GSP program does not

provide duty-free access to all products but rather provides a partial tariff

reduction on more sensitive products.
Page 17 GAO-01-647 U.S. and European Union Preference Programs

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

Note: Averages do not include products that face “specific” rates of duty. See footnote 23.

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

A close examination of these categories reveals that the United States and

the European Union structure their GSP programs differently. While the

U.S. and EU GSP programs structure their tariff preferences differently,

their overall average tariff rates fall from 5 percent on normal MFN

imports to about 3 percent for GSP beneficiaries. (See app. IV for U.S. and

EU products receiving the largest tariff reductions under GSP.) Average

tariff rates are further reduced for other U.S. and EU nonreciprocal

programs. Table 1 shows that other U.S. programs reduce this average to

between 1 and 2 percent. The EU goes further by bringing the average

down to nearly zero. Although tariffs of 2 percent or below are generally

considered to be very low, these overall average rates can include some

high tariff rates on individual products, particularly on sensitive goods.24

 24 Regarding figure 4, an EU official noted that the EU found a slightly different proportion

of products on the EU tariff schedule were offered MFN zero rates and GSP rates (23

percent versus our 17 percent, and 67 percent rather than 71 percent, respectively). There

are several reasons why these values may vary, but we chose to report the UNCTAD values,

the same source used for the U.S. tariff schedule analysis.
Page 18 GAO-01-647 U.S. and European Union Preference Programs

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

Program

Average tariff on

all products

United States

GSP 3.0%

GSP (LDC)a2.0

AGOA 1.8

ATPA 1.8

CBERA 1.7

European Union

GSP 3.1%

GSP (LDC)a0.1

ACP-EC Convention 0.1

Everything But Arms Negligible

Note: Averages do not include products that face “specific” rates of duty. See footnote 18.

 aBoth the United States and the European Union provide tariff preferences on additional products for

the least developed countries under their GSP programs.

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

Both the United States and the European Union exclude some sensitive

products from coverage in their programs because of their potential

negative effect on a competing domestic industry. Many of these products

are in areas in which experts stress developing countries are particularly

competitive, such as agriculture and textiles and apparel, and could

benefit from reduced rates.25 Figure 5 shows the share of U.S. and EU

imports from beneficiaries accounted for by agricultural products and

textile, apparel, leather, and footwear products. Combined, these products

account for approximately one-third of imports from beneficiaries of both

the U.S. and EU trade preference programs. Table 2 shows the percentage

of tariff lines excluded across all programs in the agriculture and textile

and apparel sectors (app. III compares the overall coverage of the various

programs on basis of the value of trade).

 25 In addition to higher tariffs, imports of agricultural and textiles and apparel products also

may face quotas and other import restrictions. However, we did not examine the

prevalence or impact of these other measures on developing countries’ exports.

U.S. and EU Programs

Exclude Products That Are

Important to Developing

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

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

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

imports.

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

and GAO calculations.

Overall, the European Union excludes fewer sensitive products from its

programs than does the United States. Table 2 shows that most EU

exclusions are in the agricultural sector. About half of agricultural

products are excluded from coverage under the EU GSP program,

including sensitive products such as rice, bananas, and sugar. Although the

ACP-EC and GSP programs reduce the number of exclusions, the new

Everything But Arms amendment to the GSP program, for the LDCs, is

significant because it will provide complete coverage by 2009 for all LDC

products (except arms and ammunitions).26

Under U.S. trade preference programs, most textile and apparel products

have traditionally been excluded from coverage, as well as certain

agricultural products such as certain fruits and vegetables. For example,

about 90 percent of textile, apparel, leather, and footwear products are

excluded from the GSP program. More textile and apparel products were

 26 Products from the LDCs also will need to meet rules of origin and other requirements and

will be subject to “safeguard” provisions (which allow a country to restrict imports if they

increase significantly and may have a negative impact on a domestic industry). Therefore,

all imports from LDCs may not be able to fully use the tariff benefits offered.
Page 20 GAO-01-647 U.S. and European Union Preference Programs

included in the CBERA and ATPA programs and in the GSP program for

the LDCs, but many of the most commercially important products of these

countries were still excluded. The United States did provide some CBERA

beneficiary countries with virtually unlimited access for certain apparel

products that met requirements on the use of U.S. textile inputs. This

access was further expanded under the new CBTPA program, which also

included greater access for footwear and other previous excluded

products. Additionally, similar access was provided under AGOA for

eligible sub-Saharan African countries. CBTPA also provides access for

footwear, which was previously excluded from the other U.S. programs.

Program exclusions also exist in the agriculture sector, with about 62

percent of products excluded under the GSP program and between 15 and

20 percent of products excluded under other U.S. preference programs.

Some agricultural products are subject to tariff-rate quotas, which offer

reduced rates up to a certain quantity of imports of the product and higher

rates of duty on imports above that threshold.27

 27 Products subject to tariff-rate quotas are covered under preference programs when the

tariff rate on either the “in-quota” portion (the initial imports) or the “out-of-quota” portion

of imports is reduced or eliminated. Since the U.S. tariff schedule lists in-quota and out-ofquota imports as separate tariff lines, one or both tariff lines can be excluded from

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

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

Preference Programs

Industry

Program Agriculture

Textile,

apparel, etc. Other

Total

percentage

United States

GSP 62% 90% 29% 50%

GSP (LDC) 18 89 3 26

CBERA 16 65 1 19

ATPA 17 75 1 22

AGOA 16 82 2 24

European Union

GSP 50% 1% 2% 15%

GSP (LDC) 22 0 0 6

ACP 14 0 0 4

Everything But Arms 0 0 0 0

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

EU GSP program.

Note 2: The CBTPA program, not shown, further reduces the number of exclusions faced by

recipients of the CBERA program, particularly in the areas of apparel and footwear.

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

For both of the U.S. and EU programs, products that are excluded tend to

have high MFN tariffs. For example, the average tariff rate on products

excluded from the U.S. GSP program is about 10 percent; however, rates

are as high as 350 percent on certain tobacco products28 and between 37

and 48 percent on certain footwear. For the EU GSP program, the average

tariff of excluded products is 12 percent, with rates as high as 32 percent

(grape must) and several rates are above 20 percent, such as apricots,

jams, sardines, and tunas. (See app. V for a list of products that face duties

greater than 20 percent and that are not covered by the U.S. and EU GSP

programs.)

 28 This is the “out-of-quota” duty on certain tobacco products that are subject to tariff-rate

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

Although EU programs provide greater coverage compared with U.S.

programs—that is, a greater share of EU beneficiary imports is eligible for

tariff preferences, U.S. beneficiaries use more of their available

preferences than do EU beneficiaries. The effectiveness of nonreciprocal

trade preference programs is dependent upon a combination of the extent

of product coverage and beneficiaries’ actual use of the preferences

offered. Neither U.S. nor EU beneficiaries were able to fully use the

preferences offered in 1999. Experts have noted that program-related

factors, such as rules of origin, as well as other external factors have

limited beneficiaries’ ability to use preferences.

Figure 6 shows the share of dutiable imports29 from beneficiary countries

that were eligible for tariff reductions or elimination under each of the

programs in 1999. For example, the first bar on the left shows that 25

percent of the imports (in terms of value) that would normally face duties

were eligible to receive duty-free access under the U.S. GSP program. This

does not mean that the imports actually received duty-free access but

rather that they were eligible to receive such access, if requested, and the

products met the requirements of the programs (discussed below). Figure

6 also shows that U.S. programs covered a smaller share of beneficiaries’

trade than did EU programs in 1999. For example, in 1999, more than 90

percent of the value of dutiable imports from ACP and GSP LDC countries

were eligible for tariff reductions under EU programs. For U.S.

beneficiaries of the Caribbean, Andean, and GSP LDC programs, less than

50 percent of imports was eligible for tariff preferences in 1999.30

 29 Dutiable imports are those imports that face normal tariff rates greater than zero. Some

imports enter both the U.S. and EU markets duty free, meaning the tariff rate is zero. We

focus on those products that face duties because there is a potential to provide a

preferential rate. If the tariff is already zero, then no preference can be provided. However,

the share of duty-free imports is an indicator of how open the economy is to imports.

30 We did not analyze U.S. AGOA and CBTPA, or the EU Everything But Arms amendment,

because they were enacted after 1999.

EU Programs Cover

More Products Than

U.S. Programs, While

U.S. Beneficiaries Use

a Greater Share of

Available Tariff

Preferences

Amount of U.S. and EU

Trade Eligible for

Preferences Versus Actual

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

However, it is important to note that the United States provides a larger

number of products with MFN duty-free access compared with the

European Union. About 65 percent of the U.S. tariff schedule for a GSP

beneficiary is duty free (either through MFN or GSP), while about 48

percent of the EU tariff schedule for a GSP beneficiary is duty free (not all

EU GSP tariffs are zero). This report focuses on preferential access and

therefore examines the share of dutiable imports that benefit from

reduced rates, rather than rates already duty free, because a preference

can actually be provided. We did not analyze U.S. AGOA and CBTPA, or

the EU Everything But Arms amendment because they were enacted after

1999.
Page 24 GAO-01-647 U.S. and European Union Preference Programs

Figure 6: Share of U.S. and EU Beneficiaries’ Dutiable Imports Eligible for Tariff

Preferences, 1999

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

imports.

Note 2: Figure does not include data for the U.S. AGOA and CBTPA programs, nor for the EU’s

Everything But Arms initiative, because the programs were implemented after 1999.

Note 3: Some U.S. and EU beneficiary countries are eligible to receive preferences under more than

one program. For example, all ACP beneficiaries are eligible for GSP trade preferences. Similarly,

beneficiaries of the ATPA program are eligible for preferences under the U.S. GSP program.

Sources: UNCTAD Trade Analysis and Information System CD-ROM, U.S. Department of Commerce

official trade statistics, EU Eurostat official trade statistics, and GAO calculations.

Although the United States covers a smaller share of its dutiable imports

with its preference programs, U.S. beneficiaries use more of their available

preferences than do EU beneficiaries. Figure 7 shows the share of eligible

imports that actually received tariff preferences under each of the

programs in 1999. For example, the lefthand bar shows that 72 percent of

the dutiable imports eligible to receive U.S. GSP preferences actually

received them. Overall, U.S. programs had from more than 70 percent to

over 90-percent use of preferences offered. The EU programs’ use rates

were lower, with utilization of the EU GSP and ACP programs at less than

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

Figure 7: Share of U.S. and EU Beneficiaries’ Eligible Imports Actually Receiving

Tariff Preferences, 1999

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

imports.

Note 2: Figure does not include data for the U.S. AGOA and CBTPA programs, nor for the EU’s

Everything But Arms initiative, because the programs were implemented after 1999.

Note 3: Some U.S. and EU beneficiary countries are eligible to receive preferences under more than

one program. For example, all ACP beneficiaries are eligible for GSP trade preferences. Similarly,

beneficiaries of the ATPA program are eligible for preferences under the U.S. GSP program.

Sources: UNCTAD Trade Analysis and Information System CD-ROM, U.S. Department of Commerce

official trade statistics, EU Eurostat official trade statistics, and GAO calculations.

Neither U.S. nor EU beneficiaries fully used the tariff preferences offered.

There are several reasons why this might be the case. First, some imports

are eligible for the same tariff reductions from more than one program and

importers are able to choose which program to use. For programs not

chosen, it would appear that tariff preferences went unused, although the

products received preferential tariff rates under another program. Second,

preferences must actually be requested and producers must meet

requirements on how and where the products are produced. In particular,

experts and officials cited complex and restrictive U.S. and EU rules of

Some Limitations May

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

origin requirements as a limitation on beneficiary countries’ ability to fully

use tariff preferences offered under the programs.31

U.S. and EU preference programs’ rules of origin are mainly intended to

ensure that the tariff preferences are confined to the designated

beneficiary countries. To qualify for preferences, producers in beneficiary

countries must not only produce goods in accordance with rules of origin,

but they must also document that the final product complies with the

requirements. Although the U.S. and EU apply rules of origin differently,

experts have noted that complexities associated with both rules of origin

schemes limit beneficiary countries’ ability to fully use the preferences.

Key features and limitations of U.S. and EU preferential rules of origin are

shown in figure 8.

 31 None of the studies we examined provided an explanation for the differences in

utilization rates between the U.S. and EU trade preference programs.

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

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

Source: GAO.

U.S. preferential rules of origin are based on minimum local content

percentage criteria that require that the sum of the cost or value of the

materials produced in the beneficiary country plus the direct costs of

processing equal at least 35 percent of the appraised value at the time the

product enters the United States. Imported materials may be used and

counted toward the local content percentage requirement provided the

materials have been “substantially transformed” into new and different

materials. Additionally, cumulation provisions under U.S. rules of origin

consider certain regional groupings as one area for the purpose of

complying with the percentage criteria.32 For example, a manufacturer in

Colombia (an ATPA beneficiary country) could use imported materials

from Bolivia (another ATPA beneficiary country), and the imported

materials would be counted toward the minimum 35-percent local content

requirement.

 32 Under the U.S. GSP program, eligible countries within the following five regional

associations may benefit from these cumulation provisions: the Andean Community, the

Association of Southeast Asian Nations; the Caribbean Common Market; the Southern

Africa Development Community; and the West African Economic and Monetary Union.

Beneficiaries of CBERA and CBTPA are granted cumulation with other CBERA/CBTPA

beneficiaries. ATPA allows cumulation among all ATPA beneficiaries as well as cumulation

with CBERA/CBTPA beneficiary countries. AGOA allows cumulation among AGOA

beneficiaries for all eligible products, including eligible textile and apparel products.

Additionally, ATPA, CBERA/CBTPA, and AGOA provide for limited use of U.S.-made

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

Experts have cited several ways in which U.S. rules of origin limit

beneficiaries’ ability to use nonreciprocal preferences. First, UNCTAD and

Organization for Economic Cooperation and Development (OECD)

officials said that the administrative costs and accounting sophistication

required to calculate the percentage of local content create problems for

producers in beneficiary developing countries. For example, although the

35-percent local content rule is simple in concept from a production

standpoint, accounting for and documenting diverse direct costs, such as

labor, research and design, fringe benefits, and blueprints, may require

producers to account for costs not normally tracked in the course of

commercial operations. Additionally, because the local content calculation

is based on the appraised value of the product at the time that it enters the

United States, exporters may not know the precise value and may

miscalculate the local content percentage. Second, experts and our

previous work33 have noted that the lack of a clear definition of what

constitutes “substantial transformation” makes it difficult for beneficiaries

to accurately and consistently comply with the requirement.

Rules of origin under the EU preferential trade programs are described in

what is commonly referred to as the “Single List” and are based on

product-specific process criteria. EU rules of origin allow beneficiaries to

use imported inputs in the production of goods for export, provided the

inputs comply with the process criteria contained in the Single List. The

process criteria may require, among other things, that imported inputs (1)

undergo a change in tariff heading,34 (2) undergo specific working and

processing, (3) not exceed a specified maximum percentage of the value of

the final product, or (4) comply with a combination of the above criteria.

Additionally, EU rules of origin under both the GSP and the ACP-EC

 33 See International Trade: Assessment of the Generalized System of Preferences Program

(GAO/GGD-95-9, Nov. 9, 1994).

34 In general, the change in a tariff heading rule requires that imported inputs undergo

working or processing such that the final exported product has a four-digit tariff heading

that is different from all imported inputs, on the basis of the Harmonized System of product

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

agreements allow cumulation within specific regions, although the

cumulation provisions contained in the ACP-EC are less restrictive.35

Experts have also noted problems with the EU scheme. UNCTAD and

OECD officials said that the extent or type of processing required for some

products can exceed producers’ capacity or require producers to add an

exceptionally high value in order to comply with the rules of origin—

particularly for certain fish, processed food, and textile and apparel

products. In addition to process requirements, experts have noted that the

complexity and diversity of the rules contained in the Single List

complicate documenting compliance with the EU rules of origin.

Certain limitations on U.S. and EU GSP program tariff preferences are

related to the programs’ temporary nature. These limitations present a

trade-off between reserving program preferences for beneficiary countries

most in need and providing program stability to attract long-term foreign

investment. For both the United States and the European Union, GSP

program “graduation” is meant to remove preferences when a country

goes beyond a certain level of development, while GSP products can be

removed from coverage if, among other reasons, they become sufficiently

competitive in the U.S. market. GSP preferences have also been

interrupted during the program authorization process. For example, since

its implementation in 1976, the U.S. GSP program has been renewed seven

times, with gaps in program coverage of up to 15 months. Regarding GSP

country graduation, one U.S. official told us that it was politically difficult

to retract GSP preferences because developing countries strongly oppose

losing their preferences and are concerned that affected export industries

might flee to other countries where preferences are still in place. An EU

official believed that it should be easier to graduate more efficient,

developed countries from its GSP program to prevent them from

dominating program preferences. The EU official noted, however, that

 35 Under the EU GSP, the following three regional associations may benefit from

cumulation provisions: the Association of Southeast Asian Nations, the Central American

Common Market, and the Andean Group. The EU GSP provisions are based on partial

cumulation, which require imported inputs to have already acquired originating status in

the exporting country. For example, country A can use imported fabric from country B to

produce a jacket, provided the fabric has already complied with EU rules of origin in

country B. Cumulation provisions under the ACP-EC Convention of Lome are less

restrictive in that the territories of all ACP beneficiaries are considered as being one

territory. Additionally, working and processing carried out in the EU is considered as

having been carried out in the ACP beneficiary country provided the materials undergo

subsequent working or processing in an ACP beneficiary country.

Other Program-related Factors
Page 30 GAO-01-647 U.S. and European Union Preference Programs

products should be harder to remove from GSP coverage. He commented

that just as GSP beneficiary countries become competitive in exporting a

product, the entire sector might be removed from the program.

Experts and officials also identified external factors that may limit the

program use. As MFN rates decline in multilateral trade negotiations, the

value of preferential rates may be diluted. For example, the World Trade

Organization calculated that following the conclusion of the Uruguay

Round of multilateral negotiations in 1994, developed countries had

committed to reducing their tariffs on industrial goods from an average of

6.3 percent to 3.8 percent—a 40-percent reduction.36 Tariffs on agricultural

products were scheduled to fall by 37 percent. On the other hand, tariff

rates on products that developing countries tend to export in greater

quantities were to remain higher and be reduced less. For example, the

Uruguay Round reduced the average tariffs weighted by developing

country exports for textile and apparel products from 14.6 percent to 11.3

percent—about a 23-percent reduction.

Also, some poorer beneficiary countries may lack the capacity in terms of

economic development and expertise to comply with program

requirements in the first place. As mentioned in appendix IV, the EU’s

Cotonou Agreement provides trade-related assistance to help beneficiary

countries improve their infrastructures and develop trade policies to

enhance their export markets. Unlike the European Union, the United

States has not incorporated financial aid into its trade agreements.

However, in a slight departure from previous U.S. nonreciprocal trade

programs, AGOA contains provisions for providing technical assistance to

help build sub-Saharan countries’ capacity to take advantage of program

preferences. In addition, in July of 2000, the United States published a

survey of the relevant U.S. government programs and activities that

promote trade-related capacity building. The survey concluded that in the

period covered (1999-2000), the United States government committed

more than $600 million toward strengthening the trade-related capacity of

developing countries and transitional economies. Such programs and

activities include legal and regulatory reform, customs processes,

infrastructure, and foreign investment incentives.

 36 These figures are based on trade-weighted average tariffs in which the value of trade by

product across all imports provides weights for the tariff rates that are averaged together.

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

Although both U.S. and EU program preferences have been shared fairly

equally among upper-middle income to low-income countries, a small

number of large developing countries (based on overall size of the

economy) have tended to account for a greater portion of the trade

preferences. For example, in 1999, Angola, Thailand, Brazil, Indonesia, and

India accounted for 60 percent of the trade preferences under the U.S.

GSP program. Similarly, in the same year, China, India, Indonesia, South

Africa, and Thailand accounted for 57 percent of the trade preferences

under the EU GSP program.

Finally, program officials and some beneficiary countries contend that

preferences offered under new programs can undermine the preferences

of existing programs. For example, supporters of Colombia’s efforts to

enhance preferences offered by the ATPA program claim that Colombia

has lost part of its apparel industry to the beneficiaries of the new CBTPA

program.

We obtained oral comments on a draft of this report from officials from

the Office of the U.S. Trade Representative, including the Assistant U.S.

Trade Representative for Trade and Development. USTR generally agreed

with the information presented and provided technical comments that we

incorporated as appropriate. Overall, USTR emphasized that our analysis

represented a snapshot in time, based upon 1999 trade and, thus, generally

did not address the impact of AGOA and CBTPA, U.S. trade preference

programs enacted in 2000. USTR also highlighted the fact that the U.S.

GSP program provides duty-free treatment to eligible products, while the

EU GSP program provides graduated duties that are based upon product

sensitivity. USTR disagreed with the characterization of U.S. rules of

origin requirements as complex, and maintained that importers can use

brokers and U.S. Customs binding rulings to clarify and interpret the rules.

We did not conduct an independent analysis of how rules of origin may

affect program beneficiaries’ use of preferences, but cited the analyses of

experts at UNCTAD and the OECD. In addition to USTR, officials from the

U.S. International Trade Commission and the U.S. Department of

Agriculture’s Foreign Agricultural Service reviewed selected sections of

the draft.

We also obtained informal comments from the Head of Unit, Trade and

Development, European Commission. The European Commission raised

some general issues and provided several technical comments that we

incorporated into the report as appropriate. Overall, the European

Community believed that our analysis implied too much similarity among

Agency Comments

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

U.S. and EU programs. The EU also maintained that the major reasons for

its program beneficiaries’ lower use of program preferences compared

with U.S. beneficiaries’, was the EU GSP beneficiaries’ ability to choose

among multiple programs. Regarding the similarity between U.S. and EU

trade preference programs, this report does not compare every aspect of

the U.S. and EU programs, but concludes that the programs have generally

evolved in similar ways, and that they offer similar tariff-rate reductions on

average. Regarding the effect of multiple program eligibility on program

use, we found that although EU beneficiaries utilize tariff preferences

under the EU’s other major program, ACP-EC Convention of Lome , to a

greater extent than its GSP program, even the utilization rate of this

program is less than 70 percent. We added language to the report

emphasizing that the effectiveness of trade preference programs is

dependent upon a combination of both the extent of product coverage,

which is broader for EU programs than for U.S. programs, and the

beneficiaries’ actual use of the preferences offered.

We are sending copies of this report to the U.S. Trade Representative, the

Secretary of Commerce, the Secretary of State; the Chairman of the U.S.

International Trade Commission; and interested congressional

committees. We are also sending copies to the European Commissioner

for Trade. Copies will also be made available to other interested parties on

request.

If you or your staff have any questions about this report, please contact me

on (202) 512-4128. Other GAO contacts and staff acknowledgments are

listed in appendix VI.

Sincerely yours,

Loren Yager

Director, International Affairs and Trade
Appendix I: Objectives, Scope, and

Methodology

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

In conducting our analysis, we compared (1) the volume of U.S. and EU

nonreciprocal preferential trade, (2) the evolution of U.S. and EU

approaches to nonreciprocal trade preferences, (3) the tariff preferences

offered by the U.S. and EU nonreciprocal trade programs, and (4) the

extent to which U.S. and EU program beneficiaries take advantage of the

tariff preferences offered under the programs. We recently briefed your

staff on the results of this analysis.

We reviewed U.S. and EU analyses of the trade preference programs,

analyzed the texts of the relevant trade agreements, and reviewed reports

issued by multilateral agencies that assessed the trade preference

programs. We also obtained the views of U.S. and EU trade officials on the

goals, operation, and effectiveness of the trade preference programs. To

obtain the views of U.S. officials regarding preference programs, we

interviewed officials from the U.S. Trade Representative in Washington,

D.C.; at the U.S. Mission to the European Union in Brussels, Belgium; and

at the World Trade Organization in Geneva. We also met with officials

from the U.S. International Trade Commission, the Department of

Commerce, and the Department of State. To obtain the views of the EU

officials, we interviewed European Commission officials from the Trade

Directorate; the External Relations Directorate; the Agriculture

Directorate; the Taxation and Customs Directorate; and the Development

Directorate in Brussels. We also spoke with officials with the EU

Delegation to the United States in Washington, D.C. We obtained thirdparty assessments of the U.S. and EU trade preference programs by

interviewing experts from the Organization for Economic Cooperation and

Development in Paris, France, and from the World Trade Organization; the

United Nations; and the International Trade Centre in Geneva,

Switzerland.

To assess preferential tariff rates, we analyzed the tariff schedules of both

the United States and the European Union provided by the United Nations

Conference on Trade and Development, which were derived from official

U.S. and EU sources. Some tariff rates are given as specific rates of duty

(i.e., $5 per bushel) rather than ad valorem (percentage of value) rates. Ad

valorem equivalent (AVE) rates are conversions of specific rates to ad

valorem rates in order to allow average tariff rates to be calculated.

Although AVE rates are available for the United States, they are not

available for the European Union. Therefore, we did not use them in our

analysis, and products subject to specific rates of duty are excluded from

the tariff averages. Also, we did not assess the impact of nontariff trade

barriers, such as quotas, on trade flows.

Appendix I: Objectives, Scope, and

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

To assess U.S. trade flows, we analyzed data (imports for consumption)

from the official Commerce statistics at customs value. To assess EU trade

flows, we analyzed data on EU preferential trade provided by EUROSTAT,

the official EU statistical organization. Data were only available on the EU

GSP program from 1995 through 1999, and no data were available on the

ACP program prior to 1999. EU preferential trade data have some

limitations. First, the data are based on declarations by importers

requesting preferential status and not on whether actual preference was

granted. Countries or products not eligible for preference were screened

out, but if the products were rejected trade preference status for another

reason, this would not be apparent from the data. Second, the data may

not capture all preferential trade since some ports of entry did not provide

EUROSTAT with complete information. Total EU import data (normal

imports) came from the EU’s official trade statistics, COMEXT. Export

data by country for all beneficiaries came from United Nations

International Trade Statistics. To calculate utilization rates for each of the

preference programs, we looked at the share of eligible trade (actual

imports of products included in the programs) that actually received tariff

benefits under the programs. Some countries were able to receive benefits

for the same products under multiple programs. These countries tended

to utilize regional programs rather than GSP when given the option.

However, even these regional programs were not fully utilized and we

chose to use all countries eligible for a program when reporting utilization

rates.

We performed our work from October 2000 through May 2001 in

accordance with generally accepted government auditing standards.
Appendix II: U.S. and EU Nonreciprocal Trade

Preference Programs

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

This appendix contains tables that describe the U.S. and EU

nonreciprocal trade preference programs. Table 3 illustrates

the U.S. programs, and table 4 depicts the European Union’s

programs.

Table 3: U.S. Nonreciprocal Trade Preference Programs

Program title Key dates

Number of beneficiary

countries and

territories Other

Generalized System of

Preferences

Authorized and enacted

in 1974; implemented in

1976; preferences expire

Oct. 1, 2001, and are

subject to

reauthorization.

146 Authorizes President to grant duty-free access to

the U.S. market for certain products that are

imported from designated developing countries

and territories.

Caribbean Basin

Economic Recovery Act

(CBERA)

Enacted Aug. 5, 1983;

extended and expanded

through the Caribbean

Basin Economic

Recovery Expansion Act

of 1990; no statutory

expiration date.

24a

Trade-related component of Caribbean Basin

Initiative launched in 1982 to promote exportoriented growth in the Caribbean region.

Offers duty-free or reduced duties on most

products from the region.

Andean Trade

Preference Act

Enacted Dec. 4, 1991;

preferences expire Dec.

3, 2001, and is subject to

reauthorization.

4 Trade-related component of the Andean Trade

Initiative launched in 1990 to combat production

of illegal narcotics in Bolivia, Colombia, Ecuador,

and Peru.

Offers duty-free entry or reduced duties on

eligible products from the region.

United States -

Caribbean Basin Trade

Partnership Act

Enacted May 18, 2000;

preferences expire Sept.

30, 2008, or when the

Free Trade Area of the

Americas goes into

effect.

24a

Allows imports of qualifying apparel from CBERA

countries to enter duty free and quota free, and

provides reduced duties for other products

previously excluded under CBERA.

African Growth and

Opportunity Act

Enacted May 18, 2000;

preferences expire Oct.

1, 2008.

35 Grants duty-free treatment under the Generalized

System of Preferences program to imports of

qualifying apparel from eligible sub-Saharan

African countries.

Also eliminates U.S. quotas on imports of textiles

and apparel from such countries.

a The 24 beneficiaries shown for the Caribbean Basin Economic Recovery Act are the same as those

noted for the United States - Caribbean Basin Trade Partnership Act.

Source: GAO.

Appendix II: U.S. and EU Nonreciprocal

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

Preference Programs

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

Table 4: EU Nonreciprocal Trade Preference Programs

Program title Key dates

Number of

beneficiary countries

and territories Other

Generalized System of

Preferences (GSP)

Authorized 1971;

expires 2004,

and is subject to

reauthorization.

171 Offers lower customs duties to developing

countries.

ACP-ECa Convention of Lomé I

ACP-EC Convention of Lomé II

ACP-EC Convention of Lomé III

ACP-EC Convention of Lomé IV

Revised Convention of Lomé IV

In force:

1975-80

1980-85

1985-90

1990-95

1995-2000

46

58

65

68

70

Series of contractual agreements between the

European Union and African, Caribbean, and

Pacific (ACP) states containing aid, trade, and

political components.

ACP-EU Partnership

Agreement, “Cotonou

Agreement”

Signed June 23,

2000; duration

20 years.

77

ACP states

Maintains trade regime of Lomé Convention until

2008, then phases in nonreciprocal arrangements

with some ACP countries.

Officially in force after ratification by European

Union and national parliaments.

“Everything But Arms” Council

Regulation (European Union)

Effective Mar. 5,

2001.

49

 least developed

 countries (LDC)

Amends EU GSP to provide

duty-free/quota-free access to EU market for all

but arms and ammunition.

Full coverage of bananas will be phased in by

2006; for rice and sugar by 2009.

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

Source: GAO.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

In this appendix, tables 5 to 9 provide information on U.S. and EU

beneficiary country trade in 1999, according to trade program.

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

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable U.S.

imports

U.S. imports

covered by

GSP

Share of

dutiable U.S.

imports

covered by

GSP

Actual U.S.

imports

receiving

GSP rates

Share of

covered U.S.

imports

actually

receiving

GSP rates

Angola 2,349 2,270 2,269 100% 2,009 89%

Thailand 14,296 22% 6,850 2,416 35 1,953 81

Brazil 11,273 24 5,924 2,330 39 1,894 81

Indonesia 9,389 14 5,563 1,544 28 1,276 83

India 9,072 19 5,021 1,089 22 990 91

Philippines 12,379 34 4,111 1,236 30 821 66

Venezuela 10,390 54 7,870 549 7 529 96

South Africa 3,193 13 1,132 506 45 448 89

Russia 5,706 6 1,694 475 28 416 88

Chile 2,823 18 1,235 498 40 337 68

Turkey 2,591 10 2,149 384 18 335 87

Hungary 1,893 5 560 359 64 303 85

Poland 806 3 549 365 67 293 80

Czech Republic 754 2 532 297 56 205 69

Kazakhstan 226 1 225 191 85 188 99

Argentina 2,570 11 1,886 209 11 182 87

Zaire 232 * 122 121 100 114 94

Slovenia 276 3 181 117 65 97 83

Sri Lanka 1,744 41 1,613 98 6 86 88

Zimbabwe 135 * 121 76 63 75 99

Pakistan 1,742 1,662 70 4 64 91

Romania 432 4 367 77 21 63 81

Bahrain 227 181 58 32 58 100

Uruguay 193 7 148 58 39 57 97

Oman 219 1 209 57 27 55 96

Peru 1,871 30 1,226 275 22 52 19

Malta 325 23 80 54 67 50 92

Colombia 5,883 51 3,413 472 14 46 10

Slovakia 169 1 147 68 46 44 64

Dominican Republic 4,278 57 3,557 567 16 31 6

Bangladesh 1,922 38 1,794 32 2 30 92

Morocco 414 3 167 34 20 29 86

Ukraine 520 240 34 14 27 81

Egypt 703 15 630 27 4 25 92

Appendix III: Additional Information on

Beneficiary Country Trade, 1999
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable U.S.

imports

U.S. imports

covered by

GSP

Share of

dutiable U.S.

imports

covered by

GSP

Actual U.S.

imports

receiving

GSP rates

Share of

covered U.S.

imports

actually

receiving

GSP rates

Croatia 109 2 47 29 62 25 85

Costa Rica 3,954 52 1,670 457 27 25 5

Malawi 59 44 43 97 25 57

Bulgaria 201 3 128 34 26 24 70

Lebanon 58 36 23 65 22 95

Ecuador 1,853 39 926 134 14 19 14

Macedonia 134 13 108 20 18 17 83

Paraguay 47 8 23 18 79 16 91

Guatemala 2,258 35 1,674 167 10 14 8

Tunisia 74 1 65 15 23 13 86

Fiji 101 89 13 14 13 99

Benin 18 12 12 99 12 100

Estonia 226 3 212 15 7 11 77

Belarus 92 1 80 11 14 11 95

Ghana 209 6 35 10 29 10 95

Ivory Coast 343 44 10 23 9 90

Mauritius 258 245 10 4 9 94

Swaziland 38 32 8 25 8 97

Bolivia 224 35 116 68 59 8 12

Equatorial Guinea 41 29 29 98 8 27

Honduras 2,712 58 2,453 172774

Nepal 178 39 176 8 4 7 85

Congo 411 338 7 2 6 93

El Salvador 1,603 22 1,497 54 4 6 11

Jordan 31 1 29 6 21 5 82

Latvia 227 6 219 6 3 5 85

Madagascar 80 6 53 6 12 5 79

Kenya 106 55 8 14 5 62

Bosnia-Herzegovina 15 9 5 52 4 89

French Polynesia 43 10 5 45 4 81

Uzbekistan 27 19 4 23 4 83

Papua New Guinea 108 55 4 7 4 99

Lithuania 92 4 72 4 6 3 74

Armenia 15 11 14 3 22 3 89

Jamaica 664 33 478 57 12 3 5

Seychelles 5 * 4 3 62 3 97

Panama 338 48 168 47 28 3 5

Guyana 101 34 17 51 2 13

Albania 9 2 6 2 32 2 92
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable U.S.

imports

U.S. imports

covered by

GSP

Share of

dutiable U.S.

imports

covered by

GSP

Actual U.S.

imports

receiving

GSP rates

Share of

covered U.S.

imports

actually

receiving

GSP rates

Togo 3 1 2 1 71 1 99

Barbados 59 20 55 12 21 1 11

Tanzania 34 2 8 4 54 1 26

Cambodia 592 590 1 * 1 70

Haiti 301 83 288 22 8 1 4

Senegal 17 * 10 1 10 1 72

Trinidad and Tobago 1,285 42 667 136 20 1 *

Cameroon 77 2 48 1 3 1 40

St. Lucia 28 15 27 2 8 1 25

Ethiopia 30 2 1 67 1 49

St. Kitts and Nevis 33 57 32 25 79 ** 2

Namibia 30 2 1 34 ** 57

Moldova 89 3 88 1 1 ** 38

Zambia 38 * 1 1 62 ** 35

Tokelau Islands 6 5 2 30 ** 20

Mali 9 6 ** 7 ** 77

Niger 5 1 1 36 ** 52

Tonga 5 2 ** 10 ** 91

Anguilla 2 1 ** 16 ** 100

Suriname 123 18 7 ** 4 ** 60

Rwanda 4   47 **  80

Belize 80 46 46 10 22 ** 1

Mozambique 10 12 1 ** 13 ** 100

Dominica 23 5 18 1 5 ** 10

Guinea 115 7 5 79 ** 2

Central African

Republic

3 * ** ** 33 ** 92

Burkina Faso 3 3 ** 3 ** 99

Cook Islands 1   70 **  31

Vanuatu 2 ** ** 81 ** 18

Gaza Strip   **  37 ** 100

Cape Verde   **  93 ** 80

Uganda 20 2   35 **  46

Norfolk Island **   90 **  29

Yemen 15 * 10 9 89 ** *

Sierra Leone 10 2 ** 17 ** 8

Kyrgyz Republic 1 3   43 **  14

Gambia **   33 **  44

Bhutan **   22 **  12
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable U.S.

imports

U.S. imports

covered by

GSP

Share of

dutiable U.S.

imports

covered by

GSP

Actual U.S.

imports

receiving

GSP rates

Share of

covered U.S.

imports

actually

receiving

GSP rates

Burundi 7 1 1 96 ** 1

Djibouti   **  91 ** 92

Antigua Barbuda 2 1 ** 10 ** 3

New Caledonia 9   43 **  3

Solomon Islands 1 ** ** 11 ** 7

Lesotho 111 111 ** * ** 100

St Vincent and the

Grenadines

8 2 8 7 94 ** *

British Indian Ocean

Territory

3 ** ** 18 ** *

British Virgin Islands 23 10 4 41 ** *

Chad 7 ** ** * **

Christmas Island   **  30 ** *

Cocos Islands ** ** ** * **

Comoros 2   78 **  *

Eritrea **   57 **  *

Falkland Islands 1 ** ** * **

Gibraltar 8 7 ** 4 ** *

Grenada 20 17 14 11 80 ** *

Guinea-Bissau **   99 **  *

Kiribati 1 1 ** * **

Mauritania 1   89 **  *

Niue ** ** ** * **

Pitcairn Island   **  * **

Sao Tome and

Principe

3 2 2 97 ** *

Somalia **   39 **  *

St. Helena **   31 **  *

Turks and Caicos

Islands

6 3 ** * ** *

Wallis and Futuna ** * ** ** 87 ** *

West Bank 3 ** 3 ** 3 ** *

Western Sahara ** * ** ** * **

Subtotal (GSP

countries)

$131,325 76,830 18,825 25% 13,569 72%

Total (all U.S.

imports)

$1,017,435

Legend

* = value rounds to zero
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

** = values are less than $1 million

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

Note 2: Countries in this table may be eligible for other preference programs for the same products.

Therefore, the amount of actual imports receiving a preference under this program for some countries

may be lower if some imports are entering under another preference program.

Sources: United Nations Conference on Trade and Development (UNCTAD) Trade Analysis and

Information System CD-ROM, U.S. Department of Commerce official trade statistics, United Nations

International Trade Statistics, and GAO calculations.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

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

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable

U.S. imports

U.S. imports

covered by

CBERA

Share of

dutiable U.S.

imports

covered by

CBERA

Actual U.S.

imports

receiving

CBERA

rates

Share of

covered U.S.

imports

actually

receiving

CBERA

rates

Dominican Republic 4,278 57% 3,557 1,284 36% 820 64%

Costa Rica 3,954 52 1,670 808 48 683 85

Guatemala 2,258 35 1,674 320 19 285 89

Trinidad and Tobago 1,285 42 667 222 33 218 98

Honduras 2,712 58 2,453 385 16 180 47

Jamaica 664 33 478 96 20 90 93

El Salvador 1,603 22 1,497 134 9 59 44

Bahamas 194 71 111 66 60 56 84

Nicaragua 492 38 334 69 21 51 74

Panama 338 48 168 53 32 46 86

St. Kitts and Nevis 33 57 32 28 88 26 92

Barbados 59 20 55 51 91 25 49

Belize 80 46 46 23 51 23 99

Haiti 301 83 288 44 15 22 50

Guyana 101 34 21 61 15 71

Grenada 20 17 14 12 81 11 100

Dominica 23 5 18 10 57 9 93

St. Lucia 28 15 27 14 52 9 66

St. Vincent and the

Grenadines

8 2 8 7 95 7 99

Netherlands Antilles 384 327 11 3 2 15

British Virgin Islands 23 10 4 43 ** 8

Antigua Barbuda 2 1 ** 16 ** 11

Aruba 525 455 ** * ** 23

Montserrat   **  62 ** 6

Subtotal (CBERA

countries)

19,365 13,924 3,662 26% 2,637 72%

Total (all U.S.

imports)

1,017,435

Legend

* = value rounds to zero

** = values are less than $1 million

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

Note 2: Countries in this table may be eligible for other preference programs for the same products.

Therefore, the amount of actual imports receiving a preference under this program for some countries

may be lower if some imports are entering under another preference program.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

Sources: UNCTAD Trade Analysis and Information System CD-ROM, U.S. Department of Commerce

official trade statistics, United Nations International Trade Statistics, and GAO calculations.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

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

ATPA Rates)

(Values in millions - $US)

Country

U.S.

imports

Share of

country’s

total exports

destined for

the U.S.

Dutiable

U.S. imports

U.S. imports

covered by

ATPA

Share of

dutiable U.S.

imports

covered by

ATPA

Actual U.S.

imports

receiving

ATPA rates

Share of

covered U.S.

imports

actually

receiving

ATPA rates

Colombia 5,883 51% 3,413 853 25% 797 93%

Peru 1,871 30 1,226 693 57 631 91

Ecuador 1,853 39 926 284 31 260 92

Bolivia 224 35 116 69 60 61 88

Subtotal (ATPA

countries)

9,830 5,681 1,899 33% 1,750 92%

Total (all U.S.

imports)

1,017,435

Legend

* = value rounds to zero

** = values are less than $1 million

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

Note 2: Countries in this table may be eligible for other preference programs for the same products.

Therefore, the amount of actual imports receiving a preference under this program for some countries

may be lower if some imports are entering under another preference program.

Sources: UNCTAD Trade Analysis and Information System CD-ROM, U.S. Department of Commerce

official trade statistics, United Nations International Trade Statistics, and GAO calculations.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

GSP

Share of

dutiable EU

imports

covered by

GSP

Actual EU

imports

receiving

GSP rates

Share of

covered EU

imports

actually

receiving

GSP rates

China 50,499 15% 41,514 16,794 40% 10,416 62%

India 10,020 29 7,746 5,683 73 4,398 77

Indonesia 8,505 13 6,382 4,562 71 2,552 56

South Africa 9,973 36 3,976 3,008 76 2,233 74

Thailand 9,767 16 7,015 3,330 47 1,903 57

Brazil 12,789 26 5,651 2,735 48 1,748 64

Vietnam 3,197 2,929 2,908 99 1,635 56

Mexico 4,167 4 2,525 2,346 93 1,441 61

Pakistan 2,256 2,139 1,232 58 972 79

Malaysia 12,513 15 4,598 1,811 39 921 51

Bangladesh 2,241 45 2,198 2,198 100 848 39

Russia 22,034 32 3,812 1,559 41 828 53

Colombia 1,994 15 1,336 1,024 77 759 74

Argentina 4,766 19 2,360 1,117 47 739 66

Philippines 5,647 21 1,924 1,434 75 602 42

Iran 4,880 4 718 699 97 444 63

Venezuela 1,799 6 609 542 89 410 76

Ecuador 993 17 933 542 58 402 74

Saudi Arabia 7,647 11 684 522 76 359 69

Peru 1,503 24 538 499 93 348 70

Ukraine 1,674 881 489 56 348 71

Sri Lanka 1,182 27 899 894 99 295 33

Costa Rica 1,826 22 891 476 53 272 57

Chile 3,635 25 1,197 516 43 270 52

Guatemala 412 11 392 357 91 243 68

Honduras 289 13 262 219 83 147 67

Cuba 294 257 204 79 139 68

United Arab Emirates 1,510 911 775 85 137 18

Kuwait 1,389 170 170 100 122 72

Belarus 390 8 250 194 78 121 63

Libya 6,942 473 140 30 121 86

Nepal 158 51 155 155 100 108 70

Algeria 6,279 63 803 765 95 102 13

El Salvador 174 13 171 170 99 88 52

Bahrain 250 239 214 90 78 37

Nicaragua 119 20 114 103 90 71 69

Uruguay 491 19 337 91 27 66 73
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

GSP

Share of

dutiable EU

imports

covered by

GSP

Actual EU

imports

receiving

GSP rates

Share of

covered EU

imports

actually

receiving

GSP rates

Egypt 2,172 41 1,097 979 89 65 7

Moldova 87 21 59 51 87 49 95

Uzbekistan 396 53 49 92 40 82

Turkmenistan 263 49 49 100 39 80

Syria 2,245 220 195 88 37 19

Cambodia 279 274 274 100 36 13

Kazakhstan 1,667 22 301 66 22 33 50

Nigeria 2,912 22 473 381 80 33 9

Laos 115 114 114 100 31 28

Morocco 4,994 62 4,051 3,567 88 27 1

Virgin Islands 37 31 31 100 24 77

Tajikistan 45 23 22 96 22 97

Tunisia 4,378 80 3,946 3,817 97 20 1

Kenya 816 606 583 96 15 3

Panama 375 19 312 33 10 14 44

Zimbabwe 756 559 471 84 14 3

Aruba 134 65 36 56 13 36

Georgia 120 32 30 94 13 44

Haiti 21 15 17 16 98 12 74

Paraguay 195 38 24 15 62 11 74

Belize 153 44 134 59 44 10 18

Bolivia 262 16 21 18 85 10 55

Netherlands Antilles 162 118 84 71 10 11

Uganda 270 35 232 232 100 9 4

Former Yugoslav

Republic of

Macedonia

389 363 23 6 9 38

Lebanon 163 102 97 96 9 9

Azerbaijan 468 46 36 35 96 8 24

Albania 74 93 45 36 80 8 21

Ethiopia 171 152 151 100 7 5

Croatia 1,627 48 1,234 21 2 7 34

Cyprus 412 50 314 279 89 6 2

Mauritius 1,130 70 1,085 737 68 6 1

Dominican Republic 234 25 171 143 83 6 4

Qatar 95 13 13 98 6 42

Mongolia 41 14 11 9 85 5 57

Yemen 23 12 12 100 5 42

Maldives 22 26 21 21 100 5 23
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

GSP

Share of

dutiable EU

imports

covered by

GSP

Actual EU

imports

receiving

GSP rates

Share of

covered EU

imports

actually

receiving

GSP rates

Macao 672 665 109 16 5 4

Ivory Coast 2,209 1,825 1,540 84 5 *

Trinidad and Tobago 293 11 205 160 78 4 3

Ghana 1,124 58 701 473 67 4 1

Zambia 211 77 74 96 4 5

Oman 40 2 22 22 96 4 17

Madagascar 519 63 468 456 98 4 1

Papua New Guinea 405 318 311 98 3 1

Tanzania 235 36 155 147 95 3 2

Afghanistan 27 9 9 100 2 28

Namibia 459 312 117 38 2 1

Cameroon 1,403 79 610 294 48 2 1

Malawi 211 184 161 88 1 1

Armenia 100 15 5 4 91 1 25

Botswana 440 59 13 22 1 8

Rwanda 31 26 26 99 1 4

Swaziland 138 134 30 22 1 3

Djibouti 5 4 4 96 1 25

Jamaica 497 30 493 95 19 1 1

Togo 68 14 35 35 99 1 2

Fiji 154 143 3 2 1 18

Mali 79 12 12 100 1 5

Congo 304 72 46 63 1 1

Grenada 15 47 12 12 96 1 5

Kyrgyz Republic 139 5 1 1 84 1 49

Gabon 376 114 46 41 ** 1

Sierra Leone 61 32 32 100 ** 1

Antigua Barbuda 4 4 3 74 ** 13

Burundi 42 31 31 100 ** 1

Senegal 388 23 349 299 86 ** *

Guinea 420 36 35 97 ** 1

Burkina Faso 63 18 18 100 ** 2

Jordan 128 62 58 93 ** *

Mayotte 3 2 1 75 ** 22

Gambia 66 11 10 99 ** 2

Polar Region 1   64 **  82

Eritrea 8 2 2 97 ** 12

Bosnia and

Herzegovina

296 257 6 2 ** 4
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

GSP

Share of

dutiable EU

imports

covered by

GSP

Actual EU

imports

receiving

GSP rates

Share of

covered EU

imports

actually

receiving

GSP rates

Benin 42 9 9 95 ** 2

Congo (Democratic

Republic)

911 57 50 88 ** *

Bahamas 353 24 282 39 14 ** *

New Caledonia 149 12 12 98 ** 1

Turks and Caicos

Islands

1 1 ** 94 ** 27

Mozambique 116 37 77 76 98 ** *

Liberia 409 33 8 25 ** 1

Surinam 155 34 146 20 13 ** *

British Virgin Islands 53 5 5 98 ** 2

St. Pierre and

Miquelon

8 2 1 35 ** 15

Falkland Islands 87 74 63 85 ** *

Barbados 52 22 45 11 25 ** 1

Mauritania 331 83 82 99 ** *

Niger 6 2 2 100 ** 3

Sudan 195 33 39 17 44 ** *

Western Samoa 3 ** ** 98 ** 77

American Oceania 4 3 3 96 ** 2

Central African

Republic

191 97 11 9 80 ** 1

Marshall Islands 7 2 2 99 ** 2

Chad 59   87 **  35

Guyana 198 183 14 8 ** *

Wallis and Futuna 1 ** ** 100 ** 5

Tonga 2 2 2 100 ** 1

Greenland 197 85 194 3 2 ** 1

Bhutan   **  100 ** 21

New Zealand Oceania 1   68 **  4

Comoros 7 4 4 95 ** *

St. Vincent 73 49 34 3 8 ** *

Vanuatu 15 2 2 100 ** *

Equatorial Guinea 334 19 13 66 ** *

Gibraltar 35 17 17 99 ** *

St. Lucia 57 65 56 3 5 ** *

Pitcairn 5 1 1 94 ** *

Solomon Islands 29 29 29 100 ** *

Dominica 31 37 28 5 18 ** *

Seychelles 123 90 119 8 7 ** *
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

GSP

Share of

dutiable EU

imports

covered by

GSP

Actual EU

imports

receiving

GSP rates

Share of

covered EU

imports

actually

receiving

GSP rates

Brunei 78 73 44 60 ** *

Cayman Islands 101 1 1 99 ** *

Angola 808 34 33 96 ** *

Anguilla **   8 **  *

Australian Oceania 1 ** ** 100 ** *

British Indian Ocean

Territories

**   89 **  *

Bermuda 83 39 37 96 ** *

Cape Verde 13 13 12 99 ** *

Federated States of

Micronesia

1 ** ** 100 ** *

French Polynesia 35 12 10 83 ** *

Guinea-Bissau 9 6 6 100 ** *

Iraq 3,922 1 ** * ** *

Kiribati **   100 **  *

Lesotho 16 1 1 83 ** *

Montserrat 1 1 1 92 ** *

Myanmar 228 197 ** * ** *

Nauru 2 1 1 100 ** *

Palau **   100 **  *

Sao Tome and

Principe

10 9 9 100 ** *

Somalia 1 ** ** 93 ** *

St. Helena 1 ** ** 55 ** *

St. Kitts and Nevis 13 38 13 3 22 ** *

Tuvalu 1 1 1 100 ** *

Subtotal (GSP

countries)

253,103 133,798 78,593 59% 37,418 48%

Total (all EU

imports)

746,817

Legend

* = value rounds to zero

** = values are less than $1 million

Note 1: EU trade data are normal imports. Country-level values exclude some imports classified as

confidential information.

Note 2: Countries in this table may be eligible for other preference programs for the same products.

Therefore, the amount of actual imports receiving a preference under this program for some countries

may be lower if some imports are entering under another preference program.

Sources: EUROSTAT, UNCTAD Trade Analysis and Information System CD-ROM, United Nations

International Trade Statistics, and GAO calculations.
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

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

ACP Rates)

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

ACP

Share of

dutiable EU

imports

covered by

ACP

Actual EU

imports

receiving

ACP rates

Share of

covered EU

imports

actually

receiving

ACP rates

Mauritius 1,130 70% 1,085 1,084 100% 964 89%

Ivory Coast 2,209 1,825 1,789 98 926 52

Ghana 1,124 58 701 684 98 418 61

Madagascar 519 63 468 466 100 396 85

Zimbabwe 756 559 558 100 389 70

Kenya 816 606 605 100 361 60

Cameroon 1,403 79 610 591 97 333 56

Jamaica 497 30 493 492 100 325 66

Senegal 388 23 349 348 100 320 92

Namibia 459 312 311 100 285 91

Bahamas 353 24 282 282 100 270 96

Nigeria 2,912 22 473 461 97 245 53

Papua New Guinea 405 318 317 100 198 62

Uganda 270 35 232 232 100 178 77

Trinidad and Tobago 293 11 205 205 100 154 76

Malawi 211 184 184 100 130 71

Guyana 198 183 143 78 127 89

Fiji 154 143 143 100 124 87

Ethiopia 171 152 152 100 109 72

Swaziland 138 134 134 100 99 74

Seychelles 123 90 119 119 100 98 82

Tanzania 235 36 155 154 99 96 62

Dominican Republic 234 25 171 171 100 93 54

Mauritania 331 83 82 99 80 97

Mozambique 116 37 77 76 99 69 90

Belize 153 44 134 133 99 66 50

Surinam 155 34 146 137 94 56 41

St. Lucia 57 65 56 56 100 55 98

Botswana 440 59 59 100 45 75

Congo (Democratic

Republic)

911 57 50 88 44 88

Congo 304 72 68 94 39 57

Gabon 376 114 112 99 39 34

Zambia 211 77 77 100 38 49

Barbados 52 22 45 45 100 35 79

St. Vincent 73 49 34 34 100 33 97
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

ACP

Share of

dutiable EU

imports

covered by

ACP

Actual EU

imports

receiving

ACP rates

Share of

covered EU

imports

actually

receiving

ACP rates

Angola 808 34 33 96 29 87

Togo 68 14 35 35 99 27 79

Dominica 31 37 28 28 100 26 94

Guinea 420 36 35 97 26 74

Solomon Islands 29 29 29 100 23 78

Burundi 42 31 31 100 20 64

Sudan 195 33 39 28 72 17 62

St. Kitts and Nevis 13 38 13 13 100 12 95

Rwanda 31 26 26 100 11 43

Cape Verde 13 13 12 100 11 86

Sierra Leone 61 32 25 79 9 38

Equatorial Guinea 334 19 13 66 9 70

Gambia 66 11 10 99 9 82

Central African

Republic

191 97 11 9 80 8 94

Burkina Faso 63 18 18 100 8 43

SaoTome and

Principe

10 9 9 100 6 68

Benin 42 9 9 96 5 62

Grenada 15 47 12 12 100 5 43

Guinea-Bissau 9 6 6 100 5 72

Mali 79 12 12 100 4 37

Comoros 7 4 4 100 3 69

Liberia 409 33 8 25 2 22

Haiti 21 15 17 16 99 2 10

Antigua and Barbuda 4 4 4 99 2 39

Nauru 2 1 1 100 1 100

Vanuatu 15 2 2 100 1 71

Niger 6 2 2 100 1 47

Eritrea 8 2 2 100 1 49

Tonga 2 2 2 100 1 31

Djibouti 5 4 4 99 ** 13

Lesotho 16 1 1 83 ** 43

Tuvalu 1 1 1 100 ** 14

Somalia 1   100 **  25

New Zealand Oceania 1 ** ** 98 ** 1

Western Samoa 3   98 **  8

Chad 59 ** ** 87 ** *

Federated States of

Micronesia

1 ** ** 100 ** *
Appendix III: Additional Information on

Beneficiary Country Trade, 1999

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

(Values in millions - $US)

Country EU imports

Share of

country’s

total exports

destined to

EU

Dutiable EU

imports

EU imports

covered by

ACP

Share of

dutiable EU

imports

covered by

ACP

Actual EU

imports

receiving

ACP rates

Share of

covered EU

imports

actually

receiving

ACP rates

Kiribati **   100 **  *

Marshall Islands 7 2 2 99 ** *

Palau **   100 **  *

Subtotal (ACP

countries)

21,268 11,212 10,996 98% 7,521 68%

Total (all EU

imports)

746,817

Legend

* = value rounds to zero

** = values are less than $1 million

Note 1: EU trade data are normal imports. Country-level values exclude some imports classified as

confidential information.

Note 2: Countries in this table may be eligible for other preference programs for the same products.

Therefore, the amount of actual imports receiving a preference under this program for some countries

may be lower if some imports are entering under another preference program.

Sources: EUROSTAT, UNCTAD Trade Analysis and Information System CD-ROM, United Nations

International Trade Statistics, and GAO calculations.
Appendix IV: Products Receiving the Greatest

Tariff Preferences

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

Some of the products covered under the U.S. and EU nonreciprocal trade

preference programs receive significant tariff reductions. For example, the

U.S. GSP program covers some products that normally face duties of up to

30 percent, including cantaloupes, certain ceramic products, and

macadamia nuts. Table 10 shows the products for which the difference

between the U.S. most-favored-nation (MFN) rate and GSP rate is at least

15 percentage points.

Table 10: U.S. Imports for Which the Difference Between the MFN and GSP Tariff Is

at Least 15 Percent, 2000

Product description MFN rate GSP rate Difference

Cantaloupes 29.8% 0% 29.8%

Porcelain kitchenware 26 0 26

Ceramic serviette rings 22.9 0 22.9

Okra 20 0 20

Articles for pocket or handbags 20 0 20

Salad and cooking oils 18 0 18

Macadamia nuts 17.9 0 17.9

Artificial flowers 17 0 17

Certain preserved plants 16 0 16

Parts and accessories of telescopic sights 16 0 16

Railway, tramway passenger coaches or cars 15.6 0 15.6

Ceramic mugs 15.4 0 15.4

Sturgeon 15 0 15

Caviar 15 0 15

Headbands 15 0 15

Titanium bars and rods 15 0 15

Note: Product descriptions are not legal definitions but are intended to provide an indicator of the type

of product discussed. Different tariff rates may be applied to similar types of products that vary by one

or more product characteristic, such as weight.

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

The European Union also offers some significant reductions for its GSP

beneficiaries. The European Union reduces tariffs on certain products,

such as smoking tobacco, fruit juices, and tuna, and eliminates duties on

pineapples and road tractors. Table 11 shows the products for which the

difference between the EU MFN rate and GSP rate is at least 15

percentage points.

Appendix IV: Products Receiving the

Greatest Tariff Preferences
Appendix IV: Products Receiving the Greatest

Tariff Preferences

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

Table 11: EU Imports for Which the Difference Between the MFN and GSP Tariff Is at

Least 15 percent, 2000

Product description MFN rate GSP rate Difference

Pineapples 25.6 0 25.6

Smoking tobacco 74.9 52.4 22.5

Juice of fruit or vegetables 33.6 11.7 21.9

Cigarettes, cigars, etc. 57.6 40.3 17.3

Perfumes and oils 17.3 0 17.3

Cigars, etc. 26 9.1 16.9

Mixtures of fruit, etc. 25.6 8.9 16.7

Road tractors for semitrailers 16 0 16

Homogenized preparations of fruit jams 24 8.4 15.6

Mixtures of fruit, etc. 24 8.4 15.6

Note: Product descriptions are not legal definitions but are intended to provide an indicator of the type

of product discussed. Different tariff rates may be applied to similar types of products that vary by one

or more product characteristic, such as weight.

Sources: UNCTAD Trade Analysis and Information System CD-ROM and GAO calculations.
Appendix V: U.S. and EU Tariffs That Are

Greater Than 20 Percent, for Products

Excluded From the Non-LDC GSP Programs

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

Table 12: U.S. Tariffs That Are Greater Than 20 Percent for Products Excluded From Non-LDC GSP Program, 2000

Product description MFN rate GSP (LDC) rate CBERA rate ATPA rate

Tobacco a350 . . .

Peanuts a132 to 164 . . .

Peanut butter a132 . . .

Footwear 26.2 to 48 . . .

Glassware 26 to 38 0 0 0

Tunas and skipjack 35 0 . .

Apparel (various types)b20 to 33 . . .

Glassware, drinking glasses 32.3 0 0 0

Brooms of broomcorn 32 0 0 0

Ceramics table and kitchenware 30.8 0 0 0

Glassware 30 0 0 0

Onion, garlic powder, or flour 29.8 . 0 0

Dates 29.8 0 0 0

Apricots 29.8 0 0 0

Woven fabric of animal hair 29.4 . . .

Porcelain or China table or kitchenware 29 0 0 0

Ski suits 22.3 to 28.8 . 0 .

Woven fabrics of wool 28.2 . . .

Melons 28 0 0 0

Bovine meats a26.4 . . .

Dairy products a20 to 25 0 0 0

Trucks 25 0 0 0

Gloves 24.1 . 23 23

Woven fabric of cotton, etc. 21.3 to 24 . . .

Ceramic food and drink kitchenware 23.1 . . .

Mixtures of nuts and seeds 22.4 0 0 0

Dates, prepared or preserved 22.4 0 0 0

Pillowcases 22.1 . . .

Goya cheese 21.3 0 0 0

Asparagus 21.3 0 0 0

Sweet corn 21.3 . 0 0

Dried onions, except powder or flour 21.3 . 0 0

Note: Product descriptions are not legal definitions but are intended to provide an indicator of the type

of product discussed. Different tariff rates may be applied to similar types of products that vary by one

or more product characteristic, such as weight.

a

These products are subject to tariff-rate quotas. Tariff-rate quotas allow a certain quantity of a

product to be imported at a low “in-quota” rate, while any remaining quantity enters at a higher “outof-quota” rate. The MFN tariff rates listed for these products are generally the “out-of-quota” rates.

b

This category covers a wide variety of types of apparel products. Although the CBERA program does

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

CBERA.

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

Appendix V: U.S. and EU Tariffs That Are

Greater Than 20 Percent, for Products

Excluded From the Non-LDC GSP Programs
Appendix V: U.S. and EU Tariffs That Are

Greater Than 20 Percent, for Products

Excluded From the Non-LDC GSP Programs

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

Table 13: EU Tariffs That Are Greater Than 20 Percent for Products Excluded From

the Non-LDC GSP Program, 2000

Product description MFN rate GSP (LDC) rate ACP rate

Grape must 32 . .

Apricots 25.6 0 0

Sardines 25 0 0

Anchovies 25 0 0

Tunas 24 0 0

Euthynnus (type of fish) 24 0 0

Apple purée 24 0 0

Jams, fruit jellies, marmalades 24 0 0

Apricots 24 0 0

Miscellaneous fruit preparations 24 0 0

Sardines 23 0 0

Plum purée and paste 22.40 0 0

Albacore 22 0 0

Tunas 22 0 0

Skipjack 22 0 0

Euthynnus (type of fish) 22 0 0

Strawberries 20.8 0 0

Apricots 20.8 0 0

Sour cherries 20.8 0 0

Note: Product descriptions are not legal definitions but are intended to provide an indicator of the type

of product discussed. Different tariff rates may be applied to similar types of products that vary by one

or more product characteristic, such as weight.

Sources: UNCTAD Trade Analysis and Information System CD-ROM and GAO calculations.
Appendix VI: GAO Contacts and Staff

Acknowledgments

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

Beth Sirois (202) 512-8989

Nina Pfeiffer (202) 512-9639

In addition to those listed above, Kim Frankena, Matthew Helm, Ernie

Jackson, Rona Mendelsohn, and Timothy Wedding made key contributions

to this report.

Appendix VI: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(320006)

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