March 09,2010

Grassley Outlines Principles for Reforming Trade Preference Programs

Opening Statement of Senator Chuck Grassley
Hearing, “U.S. Preference Programs: Options for Reform”
Tuesday, March 9, 2010

This is the third hearing in three years that this Committee is conducting to address the operation
and potential reform of our trade preference programs. Now is the time for a more detailed
discussion of potential reform ideas. The Chairman and I are engaged in detailed discussions
with the aim of coming up with joint reform legislation. Hopefully we can achieve that. We’ll
continue working hard on this, because it is a very important priority. Ideally, I would hope that
we could introduce and markup a bill by the end of the second quarter this year. So, today’s
hearing is timely, and the testimony that we receive from our witnesses, as well as any public
comments submitted for the record, will inform our joint effort.

To begin, I would note that the Chairman and I are engaged in a separate, standalone, effort with
our colleagues on the Ways and Means Committee to enact Haiti-specific trade preference
legislation that will assist Haiti in its long-term recovery efforts. While that ongoing effort to
help Haiti is urgent, it is not the focus of today’s hearing. Instead, our focus today is on our
broader reform effort, which primarily involves the Generalized System of Preferences, or GSP.
We are also examining how GSP operates in relation to the Andean Trade Preference Act, the
African Growth Opportunity Act, and the Caribbean Basin Economic Recovery Act.

I want to reiterate some of the elements that I think are essential to a reform of our preference
programs. A preference program should have firm graduation provisions, both on a productspecific
and a country-specific basis. The point of graduation is two-fold. First, graduation
creates opportunities for other beneficiary developing countries to take advantage of the
preferences—perhaps not immediately, but down the road.

Second, at a certain point of development, preferences should not be extended to advanced
developing economies—instead, we should expect and receive more reciprocity in our trading
relationships with advanced developing economies.

In addition, preferences should be extended to a trading partner based upon clear eligibility
criteria, which should be reviewed regularly and transparently.

And, preferences should be structured so that rules of origin and product coverage promote new
trade flows to maximize the potential for economic development, particularly among leastdeveloped

I can appreciate calls for a more rationalized distribution of our trade capacity building funds, so
that capacity building works hand-in-hand with our trade preferences. We should examine ways
to accomplish that with our colleagues on the Foreign Relations Committee.

And, if we can craft a reform package that adequately addresses the elements I’ve outlined, I can
appreciate calls for a longer-term authorization of our preference programs. As the Chairman
and I proceed with our effort, I will continue to monitor the actions of advanced developing
countries that benefit from our unilateral preference programs, particularly in the context of the
Doha Round trade negotiations. If unilateral access to the U.S. market impedes progress in
realizing meaningful reciprocal market access concessions in the Doha negotiations, we should
reconsider the extension of such unilateral trade preferences.

In sum, the reform I have in mind is based on specific principles, such as simplifying the
operation of our trade preference programs, expanding the number of eligible countries that
actually benefit from our trade preference programs, and expecting more from the countries that
benefit from our preference programs—particularly advanced developing countries. With these
principles in mind, I look forward to hearing the testimony of today’s witnesses.