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U.S. Think Tank Urges USTR to Use GSP Benefits as Trade Enforcement Tool

The Information Technology and Innovation Foundation, a Washington, D.C.-based independent, non-partisan research and educational institute focusing on the intersection of technological innovation and public policy, is calling on the Office of the U.S. Trade Representative to terminate the Generalised System of Preferences duty-free benefits of nations that “utilize mercantilist trade policies, including those that enact modern barriers to trade, such as data localization.” USTR should not hesitate to use GSP eligibility as a trade enforcement tool in order to combat modern mercantilist practices because World Trade Organisation members have so far been unable to adopt the necessary rules and enforcement mechanisms to address these practices, the think tank states. Current GSP beneficiaries identified by ITIF as potential candidates for termination of preferential duty treatment include Argentina, Brazil, India, Indonesia, Thailand and Ukraine.

GSP provides duty-free treatment for more than 3,500 products imported from 120 beneficiary developing countries and an additional 1,500 products imported from least-developed BDCs. The combined lists include most dutiable manufactured and semi-manufactured products as well as certain agricultural, fishery and primary industrial products that are not otherwise duty-free. Mainland China is not a beneficiary of the programme, which, most notably, has provided duty-free treatment to a range of travel goods (including luggage, backpacks, handbags and pocket goods such as wallets) from all eligible suppliers since 1 July 2017. Apparel and footwear products, by contrast, remain excluded from the programme.

In an August 2018 report, ITIF acknowledges steps by USTR to review access to GSP benefits more stringently and consider a broader range of market access issues in a number of beneficiary countries. However, the think tank still believes USTR should be more willing to use GSP access as leverage to address U.S. trade concerns, including in the area of intellectual property rights. ITIF contends, for example, that USTR should make clear to all countries included on the Special 301 priority watch list that it will withdraw their GSP benefits, either fully or partially, “after a reasonable period of engagement – e.g., 6 to 12 months – if they fail to address these issues or make clear concrete steps toward doing so.”

ITIF further argues that USTR should “conduct a more stringent assessment of whether a trade partner provides adequate protection for U.S. intellectual property (including whether non-existent or ineffective administrative processes and enforcement essentially denies protection) and be more aggressive suspending or withdrawing GSP benefits when this protection is found to be sorely lacking.” In addition, the report states that USTR should consider a broader range of market access issues such as those relating to digital services, data flows and modern intellectual property. This may include denying reasonable market access to cloud services and other digital economy sectors; forcing companies to establish a local office, use local services or disclose source codes as a condition of market entry; and requiring compliance with minimum local content thresholds for on-line services.

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