GSP Expiration – A Hard Lesson About Imports and Jobs

May is World Trade Month. For those intrepid trade souls who like to buck conventional wisdom and speak about the unspeakable – the benefits of imports – today also marks the start of the 4th annual “Imports Work for America” week. This is not to discount the positive contribution of exports, but for many companies, especially users of the Generalized System of Preferences (GSP) program, imports are the key to creating and sustaining good jobs in the United States.

Nothing has made the importance of GSP for American jobs more apparent than its continued expiration. As we noted around this time last year, a March 2014 survey showed that 10 percent of companies had laid off workers, while 31 percent had delayed hires. By September 2014, the number of companies reporting lay offs increased to 13 percent, while the number reporting a hiring freeze climbed to 44 percent.

Take Sophia Foods, a small business in New York. According to owner Candace Abitbul:

“We planned to purchase a property and double our size, but due to waning sales directly related to GSP we have put that idea on hold. Furthermore, until we know where we stand on the [GSP] issue, we have not only implemented a hiring freeze, but have had to lay off two employees.”

This situation was not just avoidable, but predictable. Kona Bicycle in Washington is another small business for which GSP expiration has impacted its ability to create American jobs. According to Chairman Jacob Heilbron:

“We’re unable to raise prices during our model year so the loss of profit is absorbed into our bottom line. We would like to hire new U.S. based personnel for our R&D/Product Development team but are waiting until GSP is renewed.”

After nearly 2 years, Kona Bicycle is still waiting. Higher prices for imports doesn’t just impact the quantity of jobs – it impacts the quality as well. Between March 2014 and September 2014, the share of companies reporting worker benefits cuts because of GSP expiration doubled from 11 percent to 22 percent. Stackhouse Athletic in Oregon and HiBlow USA in Michigan both cut health benefits for workers, while Fast-Pak Trading in New Jersey cut salaries by 20 percent across the board (in addition to laying off workers).

More recently in an April 2105 survey, 22 percent of companies reported layoffs (+9 percentage points from September 2014); 43 percent reported hiring freezes (-1 percentage point), and 26 percent reported benefits cuts (+4 percentage points). Since different companies responded to each survey, these are not quite apples-to-apples comparisons, but the trends certainly are not positive.

What is positive? Congressional focus on a robust trade agenda that includes legislation to renew GSP through December 2017 and refund (most) tariffs paid to date. As Congress seeks to advance bipartisan trade legislation during World Trade Month, it should remember that American jobs depend not just on access to foreign export markets, but also on access to low-cost imports. GSP expiration has taught that lesson the hard way.

This post is part of the 4th Annual “Imports Work for America Week.“ For more information visit the Imports Work website.

 

This entry was posted in Imports Work, Michigan, New Jersey, New York, Oregon, Small Business, Washington. Bookmark the permalink.

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