Lame Duck Congress Extends Trade With Developing Countries
January 18, 2007
Consumers today are able to purchase a wide range of products such as jewelry, furniture, and leather products that enter the U.S. from certain developing countries without any border taxes, known as tariffs, applied. This ability comes as a result of several programs: the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA) and the HOPE Act, which benefits Haiti. All of these programs reduce prices for consumers.
Consumers aren't the only people benefiting from GSP and the other preference programs. U.S. Businesses also get a competitive edge by importing essential manufacturing inputs without the extra cost of border taxes. In fact, many companies benefiting from these programs, are smaller businesses, operating on small profit margins. So the elimination of border taxes can, in some instances, be the difference between showing a loss or making a profit. Indeed, were some of these programs to expire--most notably GSP--some smaller U.S. businesses might close their doors. According to report released by the US Chamber of Commerce, 82,000 Americans jobs are supported by the GSP program alone.
U.S. consumers, businesses, their employees are not the only folks who benefit from these programs. These programs provide opportunities for poor workers in some of the most poverty-stricken places on earth. These programs are based on the notion that trade --not aid--is the best way to help poor nations improve their standards of living. When U.S. consumers buy products made in places like Bangladesh, or one of the nations of Sub-Saharan Africa they are helping eradicate grinding world poverty.
CWT had battled for most of the year to see these programs extended, and for a while it looked like we were going to fail in our efforts. The GSP program suddenly became quite controversial in 2007, because it provides benefits to countries such as Brazil and India--which are further along in their development. Unfortunately, both India and Brazil have taking somewhat obstructionist positions in the Doha Round of Multilateral negotiations, now bogged down at the World Trade Organization in Switzerland. These countries have taken a very short-sighted view, that they will benefit more through preference programs, which do not require them to remove trade barriers to exports, than through reciprocal trade agreements, which would require them to remove barriers to other countries' exports. Consequently, some of the biggest supporters of open trade regimes, including the Chairman of the Ways and Means Committee, Bill Thomas (R-CA), refused to extend GSP on the grounds that it was needlessly complicating the process of moving forward with the Doha Round. Unfortunately, this view penalized other poor countries that benefit from GSP and which have not been obstructing progress at the multi-lateral level. At the last moment, a compromise was struck
In addition to this unusual problem coming from some of the most trade-friendly members of Congress, we faced an uphill battle with domestic textile producers, who ratcheted up their lobbying efforts to eliminate preferential textile provisions included in Africa Growth and Opportunity Act. Thankfully, in the end, cooler heads prevailed, and the textile lobby lost its bid to shut down the tiny clothing industry that operates in sub-Saharan Africa. Indeed, the benefits for clothing product were extended to Haiti in the bill, meaning that the last hours of the 109th Congress were a boon for free traders.
It may be a long time
before we win another day on Capitol Hill, however. (See lead
story in this issue.)