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AGOA Preview: Generalized System of Preferences

This week, in preparation for the annual African Growth and Opportunity Act (AGOA) Forum, is reviewing trade preference programs for a look at how developing countries can use trade to help alleviate poverty and raise living standards.

U.S. Trade Representative Ron Kirk has said, "Expanded trade with the world's developing countries is critical to boosting their growth, reducing income inequality, and providing people with hope for the future. The GSP program is an important step in helping to revive global trade and restoring our sense of faith in international commerce to help improve lives at home and abroad."

The Generalized System of Preferences (GSP) is a program that promotes economic growth of developing countries through trade while expanding the choices of American industry and consumers. Generally, when goods are imported into the United States, customs duties are collected on the products. The GSP program helps developing countries by providing "preferences" to certain products - allowing U.S. importers to import certain goods from beneficiary developing countries free of customs. The GSP program also advances the international recognition of worker rights and the protection of intellectual property rights abroad by requiring that beneficiary countries take steps to protect worker rights and provide adequate and effective intellectual property rights.

The GSP program was established by Congress on January 1, 1976, through the Trade Act of 1974. The current program expires on December 31, 2009.  In 2008, the GSP program provided preferential duty-free treatment for about 4,800 products from 131 designated beneficiary countries and territories (including least-developed countries) totaling $31.7 billion in imports. You can see a complete list of beneficiary countries here.

By promoting trade with developing countries, the GSP program provides an effective market-oriented approach to alleviate poverty and to improve the standard of living in developing countries.  For example, garden brooms made from coir natural fiber are one type of GSP-eligible product that helps to increase the incomes of rural women entrepreneurs in Sri Lanka.

Additionally, the GSP program helps American companies by allowing businesses to save on customs duties. For many American companies, significant duty savings translate to lowered costs of production and increased potential for business growth. Businesses can pass savings on to consumers in turn. The GSP program also helps support thousands of jobs in the United States, particularly in small and medium-sized businesses, some of the primary drivers of employment growth. For example, according to a 2006 report by the American Chamber of Commerce, S&V Industries, a small business from Akron, Ohio, that supplies equipment to the U.S. transportation industry, was able to grow from four to 20 employees due to duties saved under the GSP program.

Visit the GSP page for more program information.