For leading retailers, the CHIPS Act is a frustrating blow and a missed opportunity for lawmakers to send a clear message about the importance of trade to the U.S. economy. In particular, the Trade Act of 2021, which was included in the Senate’s USICA bill, contained key trade provisions that would have provided certainty and targeted duty relief that retailers need to operate in today’s challenging economic environment.
Senate Majority Leader Chuck Schumer (D-NY) said the conference process to reconcile the differences between USICA and the House America COMPETES Act lives on – and lawmakers will continue their work after the August recess to try to find compromises on remaining issues like trade that were left out of the slimmed down version, but with midterms looming, it is hard to see how the remaining issues get resolved.
These are the trade related provisions retailers need Congress to address:
Generalized System of Preferences (GSP) expired at the end of 2020, more than 18 months ago. Leading retailers rely on important programs like the GSP to provide duty benefits, create sourcing alternatives to China, and build reliable and resilient supply chains. Countries participating in the GSP program rely on it to grow investment, provide jobs, and raise standards. These benefits are unavailable to retailers until the GSP program is renewed.
Renewal has been frustrated largely by discussions regarding new criteria on labor and environment standards and the length of renewal. Balancing new criteria with a longer program extension is essential. If new criteria are too onerous and not accompanied by an appropriately long program extension, beneficiary countries may not be incentivized to do the important work of raising standards. A longer extension would also demonstrate the program is strongly supported by the U.S. government and create certainty it will exist long enough for both beneficiary countries and users of the program to realize the benefits.
The Miscellaneous Tariff Bill (MTB) also provides important duty savings benefits, temporarily, on goods imported to the U.S. The MTB process enacted by Congress several years ago requires a rigorous review by the U.S. International Trade Commission (USITC) to ensure goods produced domestically are not included where a domestic producer objects. The process includes a further safeguard to ensure controversial products are not included: any Member of Congress can object to the inclusion of a product for any reason, and in such instances, the product is stripped from the bill. But MTB has become hostage to an unnecessary debate over the inclusion of “finished goods” despite the multiple safeguards already enshrined in the process. Like GSP, the last MTB expired at the end of 2020.
The prolonged expiration of the GSP and MTB programs adds to the uncertainty retailers face in today’s challenging economic environment and undermines U.S. competitiveness.
Section 301 Exclusions Process
In addition to GSP and MTB renewal, the trade title in USICA included important language requiring the Office of the U.S. Trade Representative (USTR) to restart a fair, transparent, and comprehensive product exclusion process for goods subject to the Section 301 China tariffs.
Lawmakers on both sides of the aisle have been urging USTR to restart this process for some time, but USTR has resisted offering a broader process. Meanwhile, leading retailers continue to pay the Section 301 China tariffs on more than $350 billion worth of goods. In an economic environment plagued by runaway inflation, soaring transportation and energy costs, and persistent supply chain challenges, tariffs create further economic burdens on American companies and hinder U.S. competitiveness. A targeted exclusions process would help ease this burden and is absolutely essential as long as harmful tariffs remain in place.
Congress Must Act
The decision to move forward on China competition legislation without the inclusion of fundamental trade pieces is a missed opportunity for lawmakers to provide certainty and create economic benefits for American companies, as well as enhance U.S. competitiveness – especially vis-à-vis China.
Leading retailers urge lawmakers to stay at the negotiating table on these important trade provisions and pass legislation that reflects the bipartisan Trade Act of 2021 without delay.
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