On Friday, we wrote about how adding new GSP eligility criteria is not the hill to die on when it comes to whether/how to renew GSP this year. One of the points we made, and that we’ll expand on today: Eliminating GSP benefits, whether through expiration or suspension, risks hurting the marginalized communities within the developing countries that the criteria are meant to help.
Several years ago, the Office of the U.S. Trade Representative produced a report highlighting development success stories related to GSP and other preference programs. While the GSP Coalition tends to focus on U.S. impacts, they are two sides to the same coin. When GSP expired from 2013-2015, around 80% of U.S. importers reported lower sales, and each one means lower sales for workers in developing countries whose livelihoods depend on those exports.
The practical impact of lost GSP: poor workers face a shrinking U.S. market for their products. There is really no scenario where those workers are helped by lost GSP, whether from expiration or termination.
Take dZi, Inc. in Easthampton, Massachusetts, which since 1990 has provided a market for products made by the Tibetan refugee community. A founding member of the Fair Trade Federation, dZi’s purchases support over 1,000 artisans in Nepal and India. What happened when India lost GSP and tariffs went up? Not surprisingly, U.S. trade data shows that imports of the types of products dZi sells (e.g., non-apparel textile products, handmade jewelry, bells, and percussion instruments) have declined.
That is out of the norm. U.S. imports from India grew in every quarter from 2017 to mid-2019 – except the one quarter when Congress allowed GSP to expire temporarily (Q1 2018). After GSP benefits were terminated in June 2019, there was one more quarter of growth, followed by consecutive quarters of large declines even before Covid-19. (It has only gotten worse since.)
Acacia Creations, another Fair Trade importer based in Pennsylvania, emailed a similar story: “When India lost its GSP status we significantly reduced our orders. Sales dropped off when we tried to pass the extra cost on to our customers which, in turn, forced us to cut production.”
Import reductions aren’t merely number, these are real people hurt by loss of exports to the United States. If policymakers want to raise living standards and empower workers, raising tariffs on their products is not the way to do it. Letting GSP expire would greatly expand the number of workers facing grim employment prospects at an already terrible time, both in the GSP countries and the United States.
Watch Mac McCoy, founder of dZi, explain why he urges “all of Congress to move on this cornerstone of good American policy that helps both businesses in our country and struggling communities in developing countries.”