Obama Administration’s Accidental Support for Unilateral Free Trade

The U.S. Trade Representative issued a statement yesterday lamenting Congress’s failure to extend tariff breaks for imports from poor countries. In defense of the program, known as the Generalized System of Preferences (GSP), the statement makes a wonderfully succinct case for unilateral free trade.

GSP is a 37-year-old trade preference program designed to promote economic growth in the developing world by providing preferential, duty-free entry for up to 5,000 products when imported from one of 127 designated beneficiary countries and territories.

GSP also supports U.S. jobs: U.S. businesses imported $19.9 billion worth of products under the program in 2012, including many raw materials, parts or components,  and machinery and equipment used by U.S. companies to manufacture goods in the United States for domestic consumption or for export.  The program also helps to support American jobs associated with moving GSP imports from the docks to farmers, manufacturers, and retail shelves. 

“Beginning August 1, U.S. businesses and consumers will pay more for thousands of goods imported under the GSP program, including many inputs for U.S. manufacturing,” said Ambassador Froman.  “The Obama Administration urges Congress to extend this important trade program, which increases U.S. competitiveness, keeps costs low for U.S. consumers, and benefits some of the world’s poorest countries.” [emphasis in original]

And that’s just 5000 products from 127 countries. Imagine if all products from all countries were allowed to enter the United States without paying import duties. Raw materials for manufacturing! American jobs in the supply chain! Increased U.S. competitiveness! Low prices for consumers! Opportunity for the poorest people in the world!

These are the benefits of open trade, and none of them depends on expanding export markets for U.S. goods. Unfortunately, the entire edifice of U.S. trade policy stands in defiance of that simple truth. Imports are seen as losses in the great game of trade and should be accepted only in exchange for an equal number of exports. Ambassador Froman certainly has no intention of challenging that paradigm. But the truth is there for those willing to see it, and it managed to shine through a little bit yesterday from an unlikely source.