In one of its final acts, the outgoing US Congress narrowly passed a bill containing a raft of trade preferences and other commercial measures long pursued by the Bush administration. The legislation extended the Generalised System of Preferences, which accords duty-free access to certain goods from over 100 developing nations, and prolonged specific trade preference schemes for Andean nations and sub-Saharan Africa. It also normalised trade relations with Vietnam. The bill must still be signed by the president Bush to become law.
Andean preferences extended but with conditions
The unilateral trade preferences for Peru, Colombia, Bolivia, and Ecuador under the Andean Trade Promotion and Drug Eradication Act (ATPDEA), scheduled to expire at the end of 2006, were extended for an extra six months. This will be followed by a further six months for countries that approve free trade agreements (FTAs) with the US.
AGOA expanded
More importantly, the bill improved the ability of African clothing manufacturers to use raw materials from third countries and still benefit from preferential access to the US market under the African Growth and Opportunity Act (AGOA).
- The act extends until through 2012 an exemption that allows least-developed country (LDC) clothing manufacturers to use raw materials from third countries to manufacture the clothing which they export to the USunder AGOA provisions.
- The act also encourages African clothing producers to use fabric from other African countries when available, by denying them duty-free access if they fail to do so.
- Finally, in an attempt to help countries like Lesothoregain factory jobs in the textile industry, the US will now grant duty-free access under AGOA to non-apparel textile products manufactured in sub-Saharan African LDCs, so long as they use materials from other least-developed countries.
Haitian clothing receives duty-free access:
The bill also extended duty-free privileges to imports of Haitian clothing made from fabric produced in third countries. This provision proved to be particularly controversial, drawing strong opposition from House and Senate Republicans representing textile states arguing that Haiti would become a conduit for Chinese products to enter the US market, tariff free.
GSP extended, modified
Congress agreed to extend for two years the Generalised System of Preferences, which grants certain products from over 100 developing countries tariff-free access to the US market. It modified the scheme to make it harder for imports that surpass threshold levels of import value and import volume in the US to continue to receive preferential market access. Trade sources suggest that certain Brazilian and Indian exports will lose duty-free access to the US due to the change.
Trade with Vietnam normalised
The legislation grants also permanent normal trade relations to Vietnam. This will make US businesses eligible to benefit from the tariff cuts and other liberalisation measures that Vietnamundertook in order to join the WTO, once it becomes the global trade body’s 150th Member on 11th January 2007.