A Little Help From GSP

Originally published in The Journal of Commerce.

Two U.S. companies long embroiled in a fight with the Argentine government over its refusal to honor arbitral awards under a bilateral investment treaty have turned to a new tactic: petitioning for the withdrawal of Argentina's status as a beneficiary developing country under the Generalized System of Preferences.

Frustrated at their failure to secure payment through negotiations with the Argentine government, Blue Ridge Investments and Azurix have tactfully employed this statutory strategy to pressure the U.S. and Argentine governments to address their concerns. U.S. exporters should take note and consider employing this effective but seldom-exercised tool to address market-access problems.

The U.S. uses several trade preference programs to assist many countries, usually in the developing world, through enhanced access to the U.S. market.

Designed to promote economic growth, they provide preferential duty treatment for thousands of products from more than 100 designated beneficiary countries and territories. But beneficiary countries must meet statutory mandatory requirements to qualify for preferential treatment.

Every preference program reviews country and product eligibility annually. Public comments on the eligibility of countries to receive the trade preference benefits are solicited. The reviews offer highly underutilized opportunities for U.S. companies to turn up the heat on the U.S. government and the foreign government to address a market access issue.

The reviews can serve as an effective pressure point for four key reasons:

The mandatory criteria for country eligibility under most preference programs address some of the most common and troublesome market access issues U.S. exporters face. For example, all of the preference programs prohibit intellectual property violations such as patent, trademark and copyright infringement. Likewise, discretionary criteria for all the preference programs include the degree to which a country provides access to its markets. These statutory mandatory and discretionary criteria provide the legal basis for a submission challenging the GSP benefits of a country that does not meet the criteria. This is important because it arms the company with a legal hook to approach the U.S. government. More pressing market access problems arise in developing countries. Other than China, these countries are the most likely to lack proper enforcement mechanisms for...