The country of Bangladesh and US fugitive Edward Snowden are both at the center of questions over the future of two U.S. trade preferential programs — the Generalized System of Preferences (GSP), and the Andean Trade Preference Act (ATPA) programs.
GSP is a program that allows about 5,000 products from about 127 developing countries to enter the United States on a duty-free basis. GSP duty-free access benefits exporters from developing countries as it helps them to be competitive in the U.S. market. US importers also rely on the program for access to lower-priced consumer goods and manufacturing inputs. Developed countries, like the United States, extend GSP unilaterally to beneficiary countries; it is not the result of a negotiated agreement.
In the United States, the program is authorized by legislation. The US President also has the authority to remove previously eligible countries that fail to meet the specified requirements.
On June 27th, President Obama announced the suspension of Bangladesh from the program. Though under review for some time, the timing of the decision is a direct result of the death and injury in April (2013) of hundreds of garment workers as a result of poor working conditions.
Sadly, it is difficult to see how the lot of the workers has been improved by this decision. The garment industry is notoriously fickle. Companies have moved operations all around the world in search of the cheapest inputs and of countries whose products are allowed duty-free access back to their home markets. Complete loss of GSP access to the US market for products from Bangladesh is likely to result in loss of jobs for Bangladesh workers. We can only hope that the suspension will spur the government and private companies to move at warp speed to improve working conditions.
On the same day, President Correa of Ecuador, who is reviewing an application for asylum by Edward Snowden, announced his intention to refuse the benefits that Ecuador receives under the ATPA. Ecuadorean government officials have accused the United States Government of using the program to blackmail the country for its willingness to review Snowden’s asylum request. Ecuadoran products are also eligible for unilateral duty-free entry under the GSP program. The Obama Administration is also said to be considering expelling Ecuador from GSP. The US Government has been known to wield threats of denying access to GSP and other preferential programs by countries with whose actions they disagree. Ecuador apparently has decided to act first. Meanwhile, however, this leaves Ecuadorean exporters wishing to access the US market at a disadvantage.
It is also worth noting that both the GSP and ATPA programs are set to expire on July 31, 2013. This won’t be the first time. The programs periodically expire and are then renewed again. Unfortunately, these periods of expiration seriously inconvenience and harm the companies that rely on the programs. President Correa’s actions increase the likelihood that the ATPA may not be renewed any time soon, if at all. Trade programs, like GSP and ATPA, that provide a lifeline for many small exporters in developing countries, should not be held hostage to politics.