The Office of the United States Trade Representative Subcommittee on the Generalized System of Preferences (GSP) held a public hearing last week on its review of the eligibility of several countries, including India and Indonesia, for benefits under the GSP program.

GSP provides duty-free treatment to goods of designated beneficiary countries and, according to Eric Byer, president of the National Association of Chemical Distributors, has a significant positive impact on the chemical distribution industry and the US economy as a whole.

Expressing concern about the impact of the removal of GSP benefits from these countries, Byer said that removing India and Indonesia “would have harmful consequences for the chemical distribution industry.”

“Many NACD members import chemicals from these countries and depend on the GSP program for cost efficiency of those imports,” he added. “They have longstanding relationships with suppliers in India and Indonesia, and it would be time-consuming, especially for small businesses, to identify new suppliers with the same quality and price point should GSP status be revoked. Furthermore, the chemical sectors in these countries are still developing and should be allowed to take advantage of the benefits that GSP status provides.”

According to an analysis conducted by John Dunham & Associates on behalf of NACD, elimination of GSP imports from India, Indonesia and the other countries under review would lead to nearly $2.2 billion in chemical products newly subject to tariffs ranging from 0.1 percent to 6.5 percent. Based on these tariff rates, products currently imported duty-free from these nations under the GSP would be subject to an annual tariff of more than $112 million, equal to a price increase of 4.9 percent on these goods. Based on the model developed for NACD, the resulting price increase would lead to reduced sales, lost jobs and lower wages, with a total cost to the US economy in the chemical distribution industry estimated to be as high as $33.6 million.

“We encourage USTR to keep India and Indonesia as GSP beneficiary countries,” said Byer. “Removing these countries from the GSP program has the potential to harm hundreds, if not thousands, of US businesses and increase prices across a wide swath of industries.”

NACD also submitted written comments on the potential rule change.