This week, I’m joined on the Global Prosperity Wonkcast by Kimberly Ann Elliott, a senior fellow here at the Center for Global Development. Kim’s research focuses on ways in which rich country trade policy affects the developing world. She currently chairs CGD’s working group on Global Trade Preference Reform.
Trade preferences are a way for countries to offer access to their markets to poor countries, in spite of other import tariffs or quotas that might otherwise apply. Kim tells me that most countries, including a growing number of advanced developing countries, have some form of trade preference program. However, she says, not all of them benefit developing countries very much.
“The problem is that these programs are often full of holes,” Kim explains. “They don’t cover everything, in most cases. And what they don’t cover is often what’s most important to the poor countries. It’s things like agriculture, clothing, and footwear that poor countries are especially good at making and exporting.”
In the case of the United States, the result is a system where exports from developing countries like Bangladesh and Cambodia are charged as much in tariffs as the United Kingdom or France—even though those two European countries export goods worth much more. Kim’s working group is putting the finishing touches on a report, due out in April, that will recommend changes in trade preference programs. In the interview, she explains the three basic recommendations the report will contain—that developed countries extend full duty-free quota-free access to the least developed countries this year, that the rules of preference programs be designed to facilitate rather than block access in practice, and that these programs be guaranteed for the long term to encourage investment in developing countries’ export sectors.
Despite the difficult politics of trade policy, Kim says she is optimistic about preference reform. Two major U.S. preference programs are up for renewal this year, and legislation that would extend and reform them is being drafted in both houses of Congress. And, while access to U.S. markets could be a huge boost for poor country economies, providing that access will have a negligible impact on the American economy—least developed countries provide less than 1% of the U.S.’ total non-oil imports
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