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On the Hill: Congress Moves to Renew Lapsed Tariff-Busting Trade Programs

House Republicans on the Ways and Means Committee are touting a new bill aimed at renewing programs that they believe will bolster American businesses and ensure their global competitiveness.

Ranking member Kevin Brady (R.-Tex.) and trade subcommittee ranking member Rep. Vern Buchanan (R.-Fla.) have introduced the Trade Preferences and American Manufacturing Competitiveness Act of 2021, which renews the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB) through January 2027. These programs, which eliminate duties on goods from certain developing economies and create a system for suspending import tariffs on particular products or components made overseas, lapsed in December.

At a Wednesday event, the subcommittee said the delay in renewing the MTB and the GSP—which garnered bipartisan support as a part of the American Manufacturing Competitiveness Act of 2016 (AMCA)—has cost small businesses $450 million in 2021. Those burdens raised costs for American SMBs, risking stateside jobs in the process, they said.

Earlier this month, the Senate passed the U.S. Innovation and Competition Act, which was crafted with the aim of reducing U.S. dependence on China for the production of semiconductors. The House bill was based on the Trade Act of 2021, drafted by Senator Mike Crapo (R-Idaho) and Senate Finance Committee Chairman Ron Wyden (D-Ore.) as an amendment to that text.

Given the Senate’s overwhelming support for the Crapo-Wyden agreement, which received 91 affirmative votes in the upper chamber, the Ways and Means Republicans are touting their bill’s potential to generate similar support. House Democrats introduced their own MTB-GSB renewal legislation on Thursday, which includes proposed updates to environmental standards and labor criteria, as well as revisions to the MTB process that closes loopholes that could benefit China.

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“It’s long past time for Congress to modernize these programs and ensure they are inclusive, reflect our nation’s values, and align with our current trade policies,” Ways and Means Committee chairman Richard E. Neal (D-Mass.) said of the Generalized System of Preferences and Miscellaneous Tariff Bill Modernization Act of 2021 in a statement last week. “These Ways and Means bills revamp support provided to U.S. workers impacted by trade and create more equitable economic outcomes while also assuming a more strategic posture towards China.”

Democrats’ efforts to revamp the existing programs could hold up much-needed action, Republicans warned.

“Reauthorizing MTB will provide limited duty relief on certain manufacturing imports that don’t have significant production here in the U.S., but are essential raw materials for American made products,” Rep. Brady said. Meanwhile, the GSP aids “America’s Main Street businesses and manufacturers by renewing job-creating programs that maintain relationships with developing countries.”

The programs help advance “the most important U.S. priorities around the world, including human rights and the environment, women’s economic empowerment, the rule of law and digital trade, free of unjustified government restrictions,” he added.

When it comes to reauthorizing both the MTB and the GSP, “The cost of delay is substantial,” added Rep. Buchanan. “We are certainly open to further discussion with our Democratic colleagues, but this bipartisan approach must serve as a framework for future discussions.”

Aso, LLC spoke on behalf of renewing the MTB—and doing so quickly. Ed Sinda, vice president of sales and marketing for the Sarasota, Fla.-based private-label adhesive bandages manufacturer, noted that its passage is “so critical, because we are currently in a tariff inversion situation.”

Aso, which relies heavily on a one-dimensional stretch polyester fabric sourced from overseas in the production of its bandages, is currently paying a 37.5-percent tariff. Meanwhile, the company’s contemporaries in the first-aid space have benefited from tariff code HS 3005.10, which allows finished adhesive dressings to enter the country for free.

“It’s actually less expensive to import a finished product than it is for us to import our raw material,” Sinda said. “And that’s what our competition is currently doing.”

When Aso’s material arrives in the U.S., it’s coated with adhesive and other domestically sourced additives from states like Illinois, Delaware, Wisconsin and South Carolina at the company’s Florida facility, which employs 400 workers, he added. “Ninety percent of what is used in the construction of our bandages is domestic supply,” he said. “Our largest competitors are branded products. I don’t have to mention their names, but they produce the goods in Brazil and China.”

The taxes on inputs like Aso’s stretch polyester are a burden to American enterprises, which face a disadvantage compared to those that produce elsewhere, Sinda said. “Without the passage of the MTB, Aso is going to be put into the position of making a difficult decision,” he added. “Do we remain with our operations here in the U.S.? Or do we do what our competitors do, and move to offshore operations to take advantage of the tariffs?”

Opting to divest from U.S. production would impact hundreds of jobs at the company’s manufacturing facilities, and also create a “domino effect” with Aso’s suppliers that could imperil thousands of positions across the country, he said. Sinda implored Congress to take action “before any irreversible decisions are made by small companies like Aso, and everyone else.”

“Please help us avoid this undesirable outcome, and help us control this,” he said.

Nina Cooper, founder and CEO of jewelry part wholesaler Nina Designs Ltd., said more than 1,000 U.S. artisans depend on her Berkeley, Calif., company for the silver parts and pieces used to bring their creations to life. The company also deals in its own designs, employing hundreds of makers at production facilities in Bali, Indonesia, and Bangkok.

“Today we are the hub of an ecosystem of women mak[ing] and sell[ing] jewelry,” she said, both across the U.S., on platforms like Etsy and at small regional boutiques, and in Asia, where jobs for skilled artisans represent not just a livelihood, but a lifeline.

“It is well documented that when women make money, they use it to buy food, pay school fees and improve their family’s standard of living, all of which we have found to be true,” Cooper said. While Bali’s economy—which is mostly dependent on tourism—floundered during the pandemic, Nina Designs was able to keep orders flowing, “which kept many families from slipping into poverty and food insecurity.” It is not uncommon for one employee salary to support more than 20 family members overseas, she added.

The GSP, which aims to foster economic growth in developing nations like Bali by shielding imports into the U.S. from business-stifling tariffs, has been “a crucial enabler” for Cooper’s business. Without the program, the company’s silver jewelry pieces face tariffs of up to 13.5 percent.

“If [the GSP] does not get renewed shortly, we’ll have to raise prices, which will lead to fewer orders both for me and for the artisans in Indonesia and Thailand,” she said. “To date, we have spent $30,000 on unexpected tariffs, and we expect that number to be six figures by the end of the year.”

Without legislative action, the duties will impact the amount of inventory the company is able to purchase and hold, as well as blunting bonuses and raises for Cooper’s staff in California. Nina Designs also provides micro-loans for female artisans across the globe, empowering them to build their own businesses, and that program could be in danger, too. “There are so many better uses for this money than to pay the tariffs, and wait and hope for refunds someday in the future,” Cooper said.

While businesses hope to see the GSP swiftly reinstated, uncertainty surrounding that timeline could have adverse effects in the near term, she added. “We face this uncertainty over and over again,” she said. And while the program’s renewal would likely come with a repayment of the tariffs already incurred by her business, “You never know, so you can’t bank on it,” she added.

As Congress works through the legislative kinks, Nina Designs could be forced to raise its prices. “And that has a cascading effect throughout this whole ecosystem, with thousands of people that are affected,” Cooper said.