Keepin’ Those Poor Countries Poor

Por: kekepana.com/blog

Congress went home for Christmas without renewing a vital piece of legislation for America’s economic development policies: the Generalized System of Preferences, or GSP. Here we are in May and they still haven’t taken any action. For those of you not in the import business, GSP offers low or zero customs duties to developing countries to assist in their economic advancement. It is a low-cost alternative to traditional foreign aid – and has none of the problems of ensuring that our aid dollars actually get spent the way we think they will. Economists prize efficiency, and GSP is an efficient way to spark economic development without the middlemen. But it is being held up because a single senator wants to protect a single company.

If you don't like GSP, why are you here?

The usual objection to GSP is that goods from poor countries will compete with poor producers in somebody’s Congressional district. Or that competition from, say, Bhutan will hurt American union members. There is virtually no recognition that imports from such countries support many of our local retailers (you know, the guy who lives down the street) or that most of what comes in under GSP consists of inputs used by American manufacturers who employ American union members. We just don’t bother to think such things through. Ending GSP (or the moral equivalent: allowing to lapse, as Congress has done), is a politician’s way of telling the American public that Congress doesn’t want our citizens to have the freedom to choose what products they buy, and that Congress isn’t very serious about creating jobs unless it is in staid manufacturing industries that are on their way out anyway.

GSP is only a small feature of U.S. foreign policy, but it is very important to the poorest countries around the world. It allows them to export their products to developed countries and learn that the market system really is a pretty good way to achieve economic development. As they develop, these poor economies almost accidentally become customers for U.S. products, so allowing their products in duty-free today becomes an investment in America’s exports in the future. Win-win.

There is always the objection that some products from some countries are competitive already and don’t need the jump start in our market that GSP is designed to give. This is undoubtedly true on a small scale, and it is why there are mechanisms in place to allow for “graduation” from GSP. Many of the now major developing economies no longer get GSP – an indication that GSP and other programs are getting the job done of creating more developed economies around the world.

Last week we saw the spectacle of leaders of an array of developing countries (Indonesia, Kosovo, Mongolia, Nepal, Paraguay, the Philippines, Sri Lanka, Thailand and Uruguay) lining up to tell our Congress how much their countries need and appreciate GSP. What needs to get through to our political class is how important programs like this are to our own economy and our own development. A decision not to renew GSP is the same as a vote to raise prices for all American consumers and to kill manufacturing jobs in industries that have to rely on imported inputs and components. It is a vote to help one sleeping bag manufacturer in Alabama at the cost of firing somebody you know who works at Costco or Sam’s Club. Which way would you vote?

If you run or work for a company that benefits from GSP imports, please check out Renew GSP Today and lobby your Congressional reps to get a move on.