Should the United States help the poor abroad? If so, how much? Should we ask something of their governments in exchange? And what if we ask something the governments can’t fully do? These are the core questions as Congress discusses renewal of the Generalized System of Preferences.
This system, known for short as “GSP,” is the U.S.’ largest trade and development program. Dating to 1974, it waives tariffs on about 11% of imports from 119 low- and middle-income countries and territories, so as to encourage U.S. buyers to source some products from them rather than larger, wealthier economies. Balancing these benefits, it imposes some eligibility rules, for example asking “beneficiary countries” to take steps toward enforcement of labor rights, intellectual property, and other matters.
GSP lapsed at the end of 2020, and thus has provided no benefits in over a year. Both parties in Congress appear in principle to support its renewal. The Senate has passed a bipartisan reauthorization bill (endorsed as well by House Republicans); and while the House is divided by party on several specific issues, actual opposition seems scarce. Assuming one believes the U.S. should try to help the poor, this is good news — for countries enrolled in GSP, for the workers and businesses that draw the benefits, and also, in a small but tangible way, for the Biden administration’s effort to show that America “is back” and has not slumped into inward-looking passivity or resentment.
On the other hand, the renewal bills share a weakness: they try to make a small program do too much. GSP is somewhat old and creaky. Its product coverage is limited by product exclusions and “Competitive Need Limitation” (CNL) rules dating to the 1970s, and its eligibility criteria have remained unchanged since the late 1990s. Both could be better. But most of Congress’ work appears to have gone into adding new eligibility rules, and neither bill proposes adding anything to GSP’s relatively modest list of goods eligible for tariff waivers. It is fair to ask governments of countries whose businesses and workers receive duty-free benefits to meet basic requirements, and some of the proposed new criteria are good ideas. But overly long lists of new criteria are likely to create confusion as U.S. policy priorities clash, and could force wholesale expulsion of poorer countries whose capacity to implement policy is lower than that of middle-income countries. This latter risk is particularly troubling, since some new proposals appear so strict that few if any low-income countries could meet them.
So while Congress deserves applause for an apparent intent to renew the program, and willingness to take a fresh look at old rules, there is reason for concern that the updated program may achieve less than the old. Congress should therefore think about (a) how much it wants to add, and (b) a balance between new criteria and new export opportunities. Some relatively simple revisions could help: