Help for poor nations is essential
Millions of people in developing nations now have a direct stake in the deliberations of the United States Congress. If Congress acts too hastily, 20 years of continuous effort to expand United States trade with developing countries could be set back tremendously.
What is happening to affect the lives of so many people? Congress is expected to determine the fate of the Generalized System of Preferences (GSP) in the next few days.
The GSP was adopted by 20 industrial countries in the mid-1970s, after a decade of international negotiations. Its purpose is to foster industrial development in poor countries by eliminating industrial country tariffs, mostly from manufactured goods, on the premise that the 140 beneficiary countries need this preferential treatment to overcome the high start-up costs of developing an industrial sector.
Unless action is taken in Congress, the US GSP will expire on Jan. 1, 1985. Congress now faces the task of reconciling differences in the legislation proposed to renew and restructure the program. There is a very real danger that the differences will not be overcome and the program could expire due to a combination of protectionist lobbying and the efforts of those trying to improve the law.
The GSP warrants renewal. Why?
* It benefits poor nations: The US program has contributed substantially to the economic success of the more advanced developing countries. For the 15 main beneficiary countries which account for 86 percent of these goods, these exports represent nearly 16 percent of their total exports. As a result, their production has expanded, their balance of trade has been improved, and their debt has been serviced.
* It benefits the US. The American economy receives substantial benefits from these GSP imports. The duty-free entrance of these goods helps control inflation by lowering the prices of consumer and intermediate goods. Often these goods are produced by overseas firms owned wholly or partially by US companies. These imports also allow developing countries to earn money to buy US exports, thus providing hundreds of thousands of jobs, and to make debt payments to US banks. Twelve of the top 15 beneficiaries are major export markets for US goods.
Of course there are costs to the program for the US. The federal government loses tariff revenue and US producers of these goods lose market shares to foreign, low-cost producers. However, in 1983 only 4 percent of US imports came in duty-free under this program - around $11 billion. The tariff revenue forgone annually amounts to roughly half a billion dollars, a fraction of the $200 billion budget deficit. A majority of the American industries most seriously affected by these imports are undergoing an inevitable process of adjustment to new international conditions.
Certainly there are flaws in the present GSP program. The benefits of the GSP have been concentrated in 15 countries, which are generally the more advanced developing countries. The least developed countries have thus far been unable to take advantage of the opportunities provided by the US GSP. However, the process for ''graduating'' the most advanced developing countries out of the system has failed to shift any benefits to these poorer countries, making ''graduating'' under the current program only a disguise for protectionism. Although proposed revisions have attempted to address this deficiency, a significant improvement in the distribution of benefits toward the poorer countries will only occur when the GSP is expanded to accommodate the major primary and semi-manufactured exports of the least-developed countries.
The reality is that major modification of the law cannot be properly studied and debated before the law expires. Therefore, any serious attempt at alteration can only come later. In the meantime, the benefits of the current GSP program warrant an extension of the law until Congress has time to address its shortcomings.