Is Congress about to let the Generalized System of Preferences program expire again? The program, under which the United States offers preferential market access to developing countries, is authorized only through the end of July. The program is not ideal—it excludes important products, such as footwear, clothing, and other labor-intensive goods where developing countries have a comparative advantage. But GSP still provides an important boost to countries that want to use trade as a development tool by encouraging investment and job creation in developing countries.
That has become even more difficult in recent years, however, because of the uncertainty surrounding the US GSP program. Since 2006, GSP has been authorized for only a year or two at a time and it lapsed for nearly a year in 2011. The chart below, from the Washington consulting group The Trade Partnership, illustrates starkly the impact of that uncertainty on investors and buyers and, therefore, on developing country exports under GSP. I realize that there is a lot on Congress’s plate right now, but GSP is a noncontroversial program with broad support and it should not be a heavy lift to get this done before yet another lapse. The chart also shows clearly that extending it for more than a year or two would be a big help for developing countries.
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