Senate overwhelmingly passes GSP

With a full U.S. Senate chamber vote expected within the week, Trade Promotion Authority (TPA) has hogged the headlines, as President Barack Obama hopes to sign the legislation soon in order to implement the Trans-Pacific Partnership (TPP) deal with 11 other foreign nations.

In the meantime, though, there have been developments on other trade initiatives that are in the course of mounting the necessary legislative hurdles to potentially go into effect shortly

Perhaps the most meaningful one is Generalized System of Preferences. In a vote of 97 in favor and only one against, the U.S. Senate voted to reauthorize GSP, which helps foster free trade by removing tariffs on various imports. More than 126 developing nations participate in the program – Algeria, Cameroon, Cambodia, Haiti, Ethiopia, Tanzania, Nepal, Peru and Sri Lanka, just to name a few – and 5,000 products fall under GSP rules.

First authorized in 1974 after the passage of the Trade Act, GSP is similar to other trade deals, in that it terminates after a certain time period. GSP expired in 2013, and prior to that, it lapsed in 2011. Should it garner the requisite number of votes in the House of Representatives, then signed by Obama, GSP will be back in effect.

Few could argue that GSP hasn't been a boon for the worldwide economy. According to U.S. government data, imports under the GSP program in 2012 totaled nearly $20 billion.

Economists say GSP extension should be 10 years
Because GSP is considered to be a key component of both job growth and economic development, public policy organizations advocate for a long-term extension. As noted by the Heritage Foundation, GSP has been renewed three times for period longer than five years, those coming in 1974, 1984 and again in 2001.

Ryan Olson, research associate for the Washington, D.C.-based think tank, indicated that it in order to bring consistency to the world's trading markets, GSP ought to be extended for 10 years at the least.

"A long-term GSP renewal is vital to ensure certainty in the program and encourage utilization," Olson wrote. "GSP imports remain near 2002 levels. It is time Congress addressed declining GSP imports through a long-term renewal."

He added that all the short-term renewals that GSP has gone through since the mid-1970s hurts the global economy by making the trading climate less conducive to the exchanging of goods and services.

The U.S. Trade Representative website has more details on GSP, including a full list of member nations and what products are duty-free when it's in effect.