"World Trade Organization (WTO) Members must grant immediate and unconditional most-favored-nation (MFN) treatment to the products of other Members with respect to tariffs and other trade-related measures. Programs such as the Generalized System of Preferences (GSP), under which developed countries grant preferential tariff rates to developing country products, are facially inconsistent with this obligation because they accord goods of some countries more favorable tariff treatment than that accorded to goods of other WTO Members. Because such programs have been viewed as trade-expanding, however, Contracting Parties to the General Agreement on Tariffs and Trade (GATT) provided a legal basis for one-way tariff preferences and certain other preferential arrangements in a 1979 decision known as the Enabling Clause. In 2004, the WTO Appellate Body ruled that the Clause allows developed countries to offer different treatment to developing countries in a GSP program, but only if identical treatment is available to all similarly situated GSP beneficiaries. Where WTO Members' preference programs have provided expanded benefits, Members (including the United States) have in many instances obtained WTO waivers. With the GSP and Andean preference programs set to expire at the end of 2006, Congress enacted legislation in December 2006 (P.L. 109-432) extending the GSP for two years and extending Andean preferences until June 30, 2007, with the possibility of conditional extension thereafter. The statute also extends until September 30, 2012, with amendments, a provision in the African Growth and Opportunity Act allowing lesserdeveloped beneficiary countries to receive duty-free benefits for apparel made with third country fabric or yarn and expands textile and apparel benefits for Haiti. This report will be updated."
CRS Report for Congress, RS22183
U.S. Department of State: http://fpc.state.gov/