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U.S. Trade Representative Ron Kirk Comments on Presidential Actions Related to the Generalized System of Preferences

March 26, 2012

South Sudan Added to Program, Argentina’s Eligibility Suspended

Washington, D.C. – United States Trade Representative Ron Kirk issued the following statement on today’s presidential proclamation that designates the Republic of South Sudan as a new beneficiary of the Generalized System of Preferences (GSP) program and suspends the GSP eligibility of Argentina:

“The GSP program is an important tool for helping developing countries to grow their economies through increased trade,” said Ambassador Kirk. “The President’s designation of the Republic of South Sudan as a GSP beneficiary country provides an opportunity for this newly independent nation to use trade to boost its economic development and, we hope, will encourage it to continue needed economic reforms. The President’s action is also an important step toward consideration of South Sudan’s eligibility for trade benefits under the African Growth and Opportunity Act (AGOA). We look forward to working with Congress on near-term passage of legislation extending AGOA’s third-country fabric provision, which is crucial for continued success of the program.”

The designation of South Sudan as a GSP beneficiary country follows a request by the Government of South Sudan for such designation and a subsequent interagency U.S. Government review of South Sudan’s GSP eligibility, based on the criteria set forth in the GSP statute. The President also designated South Sudan as a least developed beneficiary developing country, which means that once the presidential action takes full effect, nearly 4,900 products from South Sudan will be eligible for duty-free treatment upon entry into the United States. GSP eligibility is a prerequisite for consideration of a country’s eligibility for trade benefits under AGOA.

“The suspension of Argentina’s GSP eligibility is based on a finding that the country is not in compliance with the statutory GSP eligibility criteria set by Congress,” said Ambassador Kirk. “Specifically, the Argentine government has failed to pay two longstanding arbitral awards in favor of U.S. companies. We urge the Government of Argentina to pay the subject awards. This would allow us to consider reinstating Argentina’s GSP eligibility and promote the growth of a mutually beneficial U.S.-Argentina trade and investment relationship.”

The GSP action on Argentina, which becomes effective 60 days after the publication of the presidential proclamation in the Federal Register, follows an interagency U.S. Government review of two separate petitions submitted by U.S. companies. The petitions sought the removal of Argentina from GSP eligibility based on the Government of Argentina’s failure, in contravention of the GSP statutory eligibility criteria, to act in good faith in recognizing as binding and enforcing arbitral awards in favor of U.S. companies rendered under the United States-Argentina bilateral investment treaty and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). The subject awards, totaling about $300 million plus interest, were rendered by ICSID arbitral tribunals in 2005 and 2006 and were subsequently upheld against challenge by Argentina in ICSID annulment proceedings. The Government of Argentina has not paid the awards, despite repeated requests to do so by the two petitioners and the United States Government. In 2011, U.S. imports from Argentina benefiting from GSP treatment totaled $477 million (about 11 percent of total imports from Argentina), making Argentina the ninth-ranking source of imports under the GSP program last year.

Congress created the GSP program in the Trade Act of 1974 to help developing countries expand their economies by allowing certain goods to be imported to the United States duty-free. Under the GSP program, 129 beneficiary developing countries, including 42 least-developed countries, are eligible to export up to 4,881 types of products to the United States duty-free. In 2011, the total value of imports that entered the United States duty-free under GSP was $18.5 billion. For more information on the GSP program, please visit the GSP page.

The African Growth and Opportunity Act (AGOA) was established in 2000 to provide eligible sub-Saharan African countries with duty-free access for a broader variety of products than is available under GSP, including apparel, footwear, and some agricultural and processed food products. AGOA’s third-country fabric provision allows most sub-Saharan African AGOA beneficiaries to use fabric from any source in the production of qualifying duty-free apparel subject to duty-free treatment when imported into the United States. This provision is scheduled to expire on September 30, 2012. For more information on AGOA, visit the AGOA page.