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The East: As Trade Grows, U.S. Help Ends

Washington, 26 May 1997 (RFE/RL) - Just as the nations of Central and Eastern Europe and the former Soviet Union are pumping up their exports to the United States, a special American trade program that allows the bulk of those products to enter duty free is expiring.

Under the U.S. General System of Preferences, popularly known as GSP, the 27 nations of the ex-USSR, East and Central Europe were able to sell more than $1.4 billion worth of their products on U.S. markets in 1996 without paying any import duties.

For a country like Uzbekistan, virtually everything it sold to the U.S. last year -- 99.98 percent of its exports -- were sold without duties that would normally add as much as 20 percent to the cost of a product. Without the special break, experts question whether such countries can be competitive enough to sell these same goods in the U.S.

Yet at the stroke of midnight next Saturday, the GSP program expires, a victim of cost-cutting in the U.S. government budget process that has not yet found a way to fund the program.

In 1996, the U.S. imported a total of $16.9 billion worth of products from 149 nations under GSP. While this was $1.4 billion less than the GSP imports the previous year, it still cost the U.S. government nearly $1 billion in lost import duties.

Until the U.S. Congress approves and the president signs a reauthorization, U.S. customs will begin charging regular tariffs on the products which were entering duty free under GSP. The same thing happened in 1995, although when a reauthorization was finally approved several months later, the Congress made it retroactive and the duties collected during the non-GSP period were refunded. There is no guarantee that this will happen again, however, says Eugene Milosh, President of the American Association of Exporters and Importers. But he says it has given traders experience to help them deal with next week's expiration.

The program, begun in 1976, is designed to help less-developed nations build their export industries by giving them a special break on U.S. markets. Growing exports help spur economic development, especially for nations in transition from central planning, experts say.

GSP currently allows designated countries to sell more than 4,400 different products -- ranging from dried potatoes to TV tuners -- in the U.S. without normal tariff charges.

The U.S. Government says it wants the GSP program renewed and a bipartisan coalition in the House of Representatives has introduced a bill to renew it for 10 years. The challenge, they say, is to make other cuts in the budget to off-set the cost of GSP.

The expiration couldn't have come at a worse time for the nations of Central and East Europe and the former Soviet Union. Just last week, the Commerce Department reported that these nations recorded a 40 percent increase in their exports to the United States in the first three months of 1997. For Russia and the other former Soviet republics, the improvement was even better -- 46.6 percent compared to the first quarter of 1996.

U.S. officials won't comment on how the end of GSP will impact the sale of products now being sold duty free and the countries which are depending on those sales for their own economic growth. But it certainly can't help, they admit.

Amazingly, some trade experts say, a handful of countries which are eligible for GSP have not yet taken advantage of the program. In 1996, seven countries in the region sold nothing to American markets that was GSP eligible. As would be expected, their total exports to the United States were the lowest in the area.

Following is a list of the nations of the region, their total exports to the United States in 1996 (in millions of dollars) and the percentage of that trade which entered duty free according to the U.S. Trade Representative's Office.

Total 1996 Exports To United States

Albania: $5.2 million -- 99.5 percent duty free

Bulgaria: 18.9 -- 87.3

Czech Republic: 235.1 -- 79.5

Slovakia: 35.6 -- 83.4

Hungary: 300.9 -- 77.5

Estonia: 18.8 -- 89.7

Latvia: 3.1 -- 87.7

Lithuania: 3.0 -- 86

Poland: 318.2 -- 94

Romania: 62.4 -- 81.4

Russia: 486.8 -- 73.3

Belarus: 2.5 -- 63

Ukraine: 12.7 -- 59.7

Armenia: 0.2 -- 0

Azerbaijan: .01 -- 0

Georgia: 3.2 -- 0

Kazkhstan: 80.1 -- 78.2

Kyrgyzstan: 0.3 -- 68.6

Moldova: 1.1 -- 0

Tajikistan: 0.1 -- 0

Turkmenistan: 0.25 -- 0

Uzbekistan: 10.6 -- 99.9

Croatia: 37.4 -- 79.30

Slovenia: 189.4 -- 66.9

Bosnia: 8.3 -- 97.9

Macedonia: 26.6 -- 98.2

Former Yugoslavia: 4.8 -- 0