By Lucy Craymer in Hong Kong and Josh Zumbrun in Washington 

The White House push to confront rivals over trade has spread beyond the world's biggest economies like China and Europe to include poorer countries that also see the U.S. as a critical market for their goods.

Since President Donald Trump took office 18 months ago, the U.S. Trade Representative has launched wide-ranging reviews of the eligibility of less-developed countries for a federal government program that lowers tariffs for thousands of the products they export to the U.S.

Most recently the Trump administration targeted Turkey for revocation of tariff-free exports to the U.S., part of a growing dispute between the two nations. Thailand, Indonesia and India have also been put on notice that they could lose some duty-free privileges. The number of countries on that list is likely to increase in the months ahead as the U.S. expands plans for reviews of trade with less developed economies beyond Asia, which is its focus now.

The tool the administration has used to pressure these nations is a program known as the U.S. Generalized System of Preferences, or GSP, initiated in 1976 to aid the economic development of poor countries by granting them duty-free treatment on a selection of thousands of goods, from vehicle parts to jewelry. It currently provides favorable treatment to 121 countries, ranging from Fiji to Ecuador.

The USTR has always had legal authority to review a country's eligibility for the program. In recent decades its reviews almost always involved petitions from outside groups like trade associations or labor unions and tended to focus on issues like child labor or human rights.

Beginning in October the administration began a new "proactive process" -- in the words of U.S. Trade Representative Robert Lighthizer -- of reviewing eligibility for the program, with an eye toward achieving "a level playing field for American businesses," according to a statement released by the USTR last year.

The first round of this assessment focused on 25 Asian and Pacific countries. Assessments of Eastern Europe, the Middle East and Africa will begin this autumn.

So far no countries have had their eligibility for participation in the program revoked under the new review program.

The USTR has raised questions about whether these U.S. trade partners provide "equitable and reasonable market access" to their own economies, citing trade and investment barriers as the concern. "Market access" hadn't formed the basis for reviewing a country's GSP status in recent years. A USTR official said this rationale hadn't been listed as a concern in outside petitions that called for reviews.

Deborah Elms, executive director at the Asian Trade Center in Singapore, said the U.S. is using the reviews to cajole countries into negotiating bilateral trade agreements or making other concessions. For many countries, "there is quite a bit at stake" simply because the U.S. is such a large market for so many goods, she noted.

Less than 1% of all U.S. imports came in under the program's favorable treatment in 2016: about $19 billion of a total $2.2 trillion in imports. Though small from the U.S. perspective, the sums are significant for poorer nations. Advocates of the program say it is worth giving lower-income countries a pass on some trade issues to help them develop.

The new approach on the GSP program fits with President Trump's focus on bilateral trade imbalances. It is not the first time the administration has revived largely unused trade powers to apply pressure. The administration's tariffs on steel and aluminum, and on washing machines and solar panels, for example, both relied on provisions of trade law that had been unused for over a decade.

"There has been this trend toward 'How can we make this [trade] more reciprocal?'" said Kimberly Elliott, a visiting fellow at the Center for Global Development in Washington.

The most recent review hit Turkey in early August, with USTR saying it had concerns that Turkey wasn't providing U.S. exporters fair market access, pointing to Turkish tariffs on U.S. goods. The review came as the U.S. sought to ratchet up pressure on Turkey, both because of its trade moves and because of a dispute over an American pastor who has been detained in Turkey.

"We hope that Turkey will work with us to address the concerns that led to this new review of their duty-free access to the United States," Deputy U.S. Trade Representative Jeffrey Gerrish said in a release on the issue earlier this month.

Washington also imposed steel and aluminum tariffs on Turkey earlier this year. Turkey retaliated with proportionate tariffs on U.S. exports such as rice, tobacco and autos. On Friday, Mr. Trump said he would double U.S. steel and aluminum tariffs on Turkey as its currency tumbled.

In May, the U.S. government said it would review Thailand's eligibility following a petition from the U.S. National Pork Producers Council, which had complained that Thailand rarely grants licenses for American pork imports.

For more than a decade, Bangkok banned imports of pork containing the hormone Ractopamine, which many U.S. farmers feed to pigs, and charged high inspection fees for shipments that claim to be free of the drug.

Swine federations from six Thai provinces in May responded to the U.S. concerns in an open letter to President Trump, urging his administration to stop pressing Thailand to accept U.S. pork while the country's domestic market was overflowing with supply.

"This will bring unimaginable disaster to Thai pig farmers," they said in the letter.

A decision on Thailand's GSP status is pending.

Anan Tridechapong, a spokesman for the Swine Raisers Association of Thailand, said that small pig farmers were already struggling due to the Thai market's low prices. If shipments from the U.S. were allowed, it would make it even harder, he said.

In 2017, Thailand exported about $4.2 billion of goods under the GSP program, around 13% of its total exports, to the U.S.

Indonesia, meanwhile, has been accused of implementing an array of trade and investment barriers that had "serious negative effects" on U.S. business, USTR said in April. About $2 billion of Indonesia's $20 billion in exports came in under the program in 2017, including machinery and chemicals.

In late July, a team of senior Indonesian government officials including Trade Minister Enggartiasto Lukita traveled to Washington to plead the country's case for remaining within the program. A decision is pending. The Indonesian Trade Ministry didn't respond to requests for comment.

India's eligibility in the program is also being reviewed because of market-access concerns. The U.S. dairy industry and the U.S. medical device industry say they face trade barriers. About $5.6 billion of India's $49 billion in exports come to the U.S. through the program.

Write to Lucy Craymer at Lucy.Craymer@wsj.com and Josh Zumbrun at Josh.Zumbrun@wsj.com

 

(END) Dow Jones Newswires

August 12, 2018 10:14 ET (14:14 GMT)

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