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USTR Releases Report on Impact of Trade Preferences on Poverty and Hunger

Washington, D.C. – Today, the Office of the U.S. Trade Representative released a report to the Congress assessing the contribution of U.S. trade preference programs, including the Generalized System of Preferences (GSP), the African Growth and Opportunity Act (AGOA), and the Caribbean Basin Economic Recovery Act (CBERA), on poverty and hunger, as provided for in the Trade Preferences Extension Act of 2015 (TPEA).

For decades, these preference programs have waived tariffs on thousands of goods sourced from developing countries meeting certain eligibility criteria.  In 2015, the three preference programs provided duty-free treatment to about $27 billion of goods from 126 beneficiary countries and territories.  This accounted for about 1.3 percent of the United States’ $2.2 trillion in total goods imports, and 13 percent of the $212 billion in all goods sourced from the beneficiary countries.  

“President Obama has made promoting development a core objective of trade policy,” said U.S. Trade Representative Michael Froman, “building on a long bipartisan tradition of using trade policy to encourage growth, improve food security, and alleviate poverty.  The report we release today shows how GSP, AGOA, and CBERA have contributed to the last decade’s remarkable declines in poverty and undernourishment, and their human impact in countries as diverse as Haiti, Tunisia, Kenya, and Cambodia.  But tariff preferences are also only part of the picture.  Addressing supply-side constraints to trade, including weaknesses in the business environment, are essential for trade to deliver its full development benefit.”  

U.S. preference programs aim to support domestic reforms and economic growth through trade.  In renewing the three preference programs in June 2015, Congress requested a review of their contribution to the alleviation of poverty and hunger in the beneficiary countries. The resulting report surveys the data and empirical research on the benefits of trade for higher economic growth, reduced poverty, and the alleviation of hunger. It also evaluates the links between U.S. preference programs and increased trade with beneficiary countries and the effects on reducing poverty and eliminating hunger, and highlights preference successes in seven countries.

The report’s major conclusions are as follows:

  • The preference programs have made a valuable contribution to the reduction of poverty, and the alleviation of hunger in beneficiary countries.  They remain an important element of American trade and development policy overall, and are important to U.S. relationships with beneficiary countries.
     
  • The impact of duty-free treatment on the reduction of poverty and hunger may begin to wane, however, in light of an overall drop in tariff rates worldwide, including through the negotiation of free trade agreements. 
     
  • Economic research and available data also suggest that preferences are only one element in the larger set of trade policies that help promote development.  Addressing supply-side constraints including slow and expensive port transits, costly telecommunications, the time and expense of managing overly complicated trade paperwork, inefficient internal transport and logistics bottlenecks, and other challenges is essential to success in trade, and tariff preferences cannot substitute for policy reforms in these other areas.
     
  • Preferences are of crucial importance to a number of least-developed countries which do not as yet have the capacity to negotiate and implement comprehensive FTAs.

To read the full report, please click here.