It’s no secret that our prior Congress inflicted some serious pain and suffering on the small business operators of America when they their failed to renew the Generalized System of Preferences (GSP).
Established in 1974, GSP is one of the very best tools in our arsenal for building economic and political relationships with least developed countries. GSP offers U.S. duty elimination for imported products as long as these items do not compete with American industry. Countries are required to follow guidelines for workers’ rights and intellectual property, and they must treat their guest companies fairly.
In return, American companies are able to import selected items (duty free) for use in domestic production or product placement.
{mosads}The 40-year-old GSP program has always been renewed, but the 113th Congress couldn’t get its act together in time, and small operators were suddenly forced to pay an unexpected tax in the form of previously waived duties. Real profits were yanked right out of their bottom line, and operational costs skyrocketed. By failing to act, Congress placed a direct hit on the small business community of America.
There is an excellent website that explains GSP in detail, sponsored by the Coalition for GSP. The group includes about 660 organizations that represent 45 states and 290 congressional districts. It’s important to note that 80 percent of the companies are small business enterprises, with 100 or less employees. The typical company has only 15 employees, which explains why the pain of reimposed tax is so great and why it hurts so much.
As we study imports under GSP, one notices that many of the items are strictly raw materials for U.S. manufacturing. Products include motor vehicle parts, ferroalloys, rubber tires, crude oil, precious metal jewelry, corn maize, building stone, insulated wire, air conditioning parts, electric motors, etc. The top countries involved are India, Thailand, Brazil, Indonesia, Turkey, Philippines, South Africa, Angola, Pakistan and Bolivia.
While trying to detail the burden on small enterprise, look to the West Coast, where a GSP importer of jewelry stated that paying these unnecessary duties is putting the business in peril. As the owner said, “I’m over my ears in debt, the bank recalled our credit line, and I don’t know how much longer I can survive.”
In the Southwest, there is a GSP importer of bronze who brought in 15 containers a year, but is now down to four. “We’ve lost 40 percent of our sales; if this situation continues, we might have to close our business completely,” the owner said.
Believe it or not, the collective companies that utilize the GSP program have been paying tax at the rate of $1.85 million for each and every day that this nonsense continues.
In a recent study by the coalition, 44 percent of American GSP companies have slowed down their planned hires, 40 percent have delayed or canceled job-creating investments, 22 percent have cut employee wages and 13 percent were actually forced to lay off workers. Some companies have even closed their doors altogether.
Frogs in a frying pan never feel the heat until it’s too late. Do members of Congress fully realize what is going on? We seriously question the wisdom of congressional representatives from the states of California, New Jersey, Texas, New York, Florida and Illinois who have not raised enough of a fuss over this situation. Companies in those listed states have actually paid the highest tax during this ongoing disaster. Back in 2009, all of the TV pundits were espousing the idea that assistance to small business enterprise was the best way to grow U.S. jobs and the economy. Don’t congressmen always talk about protecting small business America? What exactly are we doing to ourselves by hurting the part of the economy that helps us the most?
Those who rally and fight for the rights of small business understand that 18 lengthy months have elapsed since July 31, 2013, when the bill expired. Not only does this situation demonstrate that big business gets the attention of government, but it also says that the small business contract with America is broken.
Yes, the new 114th Congress has just begun, but the campaign and fight for GSP is far from over. We must remind everyone (who will listen) that the tax clock ticks every single day for a small business owner. This core of American business needs to be protected, and it remains our responsibility to see that it is done.
History teaches us that almost every date of absurdity has an anniversary and GSP is having a truly dishonorable one. It is estimated that as of Jan. 22, 2015, the American small business community will have paid, out of pocket, over $1 billion of unnecessary and punitive tax. GSP has never been untethered for so long. Its absence has never caused so much damage.
Congress, please do renew GSP quickly.
Try to get into the heads and hearts of the small business operators and understand that their GSP problem is caused solely by your inaction. Their pain should be your pain and, only then, will it finally get the attention it needs and the resolve it deserves.
Helfenbein is chairman of the board of the American Apparel and Footwear Association. He is a strong advocate for a robust U.S. trade agenda and lectures frequently on the subjects of supply chain and international trade. Follow him on Twitter @rhelfen.