We’ve already highlighted the ways that the Generalized System of Preferences (GSP) works for American jobs, families, and manufacturing, but we can’t forget about the original intent of the program: promoting growth in developing countries.
Today, the GSP program provides duty-free access for about 3,400 products from 130 developing countries. Forty-three “least-developed” countries – including South Sudan, the world’s newest country – receive GSP benefits for an additional 1,450 products. U.S. companies bought more than $18 billion worth of GSP eligible-products from these developing countries in 2011.
To ensure that GSP maintains its development goals, countries automatically “graduate” from the program if their per capita income rises to a level deemed to be “high income” by the World Bank. The top GSP beneficiaries typically fall far short of this threshold, set at $12,276 in 2010, or about a quarter of the per capita income in the United States.
For example, per capita income for India, the top GSP beneficiary, is just $1,130. Thailand, a close second in terms of U.S. imports under the program, has a per capita income of $4,150. Indonesia and Philippines, which ranked 4th and 6th in imports under the program in 2011, both have per capita incomes between $2,000 and $2,500.
The United States is not alone in providing these benefits; developed countries like Canada, the EU, Japan, and New Zealand have offered similar GSP programs for decades. More recently, developing countries like Brazil, China, India, and Turkey – themselves beneficiaries of certain GSP program – have begun offering their own duty-free programs, particularly for least-developed countries.
By offering access instead of direct aid, the GSP program offers a hand up, not a handout, to the benefit of all. It should come as no surprise then that developing countries are the fastest-growing purchasers of U.S. exports, in part because they earn dollars by exporting their products to the United States.
This post is part of the Imports Work for America Week initiative, an effort by a number of organizations and individuals in the trade policy community to start talking about the benefits of imports for the U.S. economy. You can see our earlier blog post about the initiative here or visit the Imports Work website here.