To Counter Unfair Trade Barriers in Key Developing Countries, New Report Recommends U.S. Limit or Withdraw Their Preferential, Duty-Free Access to the U.S. Market

August 20, 2018

WASHINGTON—Offering preferential, duty-free market access to developing countries can be mutually beneficial for the United States, but a new report shows how some the largest beneficiaries of this trade liberalization are enacting trade barriers that harm U.S. consumers, workers, and businesses, especially those in the digital, technology, and life science sectors. The report from the Information Technology and Innovation Foundation (ITIF), the world’s top-ranked think tank for science and technology policy, calls on the United States to be more willing to limit or withdraw this duty-free access which it provides through its largest and oldest trade preference program, known as the Generalized System of Preferences (GSP), for those countries that persist in pursuing trade mercantilism at home.

“For many years, U.S. trading partners have benefited from the trade liberalization at the heart of the GSP program but have failed to reciprocate and provide fair and reasonable market access to U.S. firms and their goods, services, and intellectual property,” said Nigel Cory, ITIF associate director for trade policy and lead author of the report. “The Trump administration has already taken steps in the right direction in reviewing a number of countries' access to the GSP, but more can be done to turn it into a more credible and effective tool to ensure trade is fair and reciprocal, particularly in innovation-based industries that are increasingly targeted with mercantilist measures.”

The GSP is a U.S. trade preference program that helps a subset of developing countries grow their economies by providing them duty-free access to U.S. markets. But ITIF’s report shows how many of those countries, per reporting on foreign trade barriers from the U.S. Trade Representative (USTR), have not lived up to the trade-related criteria of the program. In a series of case studies, the report shows how Argentina, Brazil, India, Indonesia, Thailand, and Ukraine have enacted and continue to add a growing range of trade barriers that harm U.S. firms, such as by failing to provide adequate protections for intellectual property, enacting local content requirements for technology products, or requiring service providers to store data locally.

The report offers a series of policy recommendations to turn the GSP into a more effective trade enforcement tool, including:

  • Use the trade issues raised in the USTR’s reporting to self-initiate reviews of whether a GSP beneficiary is breaching the program’s trade, market access, and intellectual property criteria;
  • Expand the types of market access issues USTR assesses to include technology and digital issues, such as local data storage requirements;
  • Be more forceful in partially or fully suspending or withdrawing countries’ access to GSP benefits if they refuse to address trade issues within a reasonable timeframe;
  • More strictly enforce the GSP’s “graduation” criteria, which is based on income status and trade competitiveness and development, starting by revoking Turkey’s access to the GSP.

“These recommendations are not meant to ‘punish’ developing countries,” said ITIF President Rob Atkinson, co-author of the report. “Instead, they are meant to leverage GSP privileges to prevail upon these countries that abandoning mercantilism will actually produce stronger economic growth outcomes over the long term, which is the core goal of the GSP program.”

Read the report.