The United States needs to urgently reinstate the Generalized System of Preferences (GSP), the country’s largest and oldest trade preference program.
First implemented in 1976, GSP was designed to facilitate economic growth in developing countries by allowing certain products, such as jewelry, carpets, some agricultural and fishery products, and many types of chemicals and minerals, to enter the US. duty-free. This policy encouraged the establishment of factories and investments in developing nations, creating thousands of jobs and fostering economic development. Europe and Japan extend duty-free treatment to developing countries under similar programs, recognizing the importance of integrating developing countries into the global trading system.
Four years ago, in December 2020, GSP lapsed in the US, a casualty of a broader collapse of political consensus on trade policy. The lapse was a bipartisan failure. While the program had lapsed in the past, no prior period of suspension has lasted this long. In addition, developing countries now have alternative trading partners – notably China, Russia, and the Gulf states. China in particular is replacing US trade and investment in GSP countries. The signal to our partners is alarming: suggesting that the US is indifferent to their economic progress, implicitly encouraging them to strengthen ties with China instead. Our inability to reach a consensus on trade policies has far-reaching geopolitical impacts, eroding America’s influence in critical regions.
GSP is not enough but we need to start somewhere. Ideally the US would have a trade strategy with developing countries linked to our aid and national security goals. US trade partnerships with developing countries should also be linked to reforms and other goals. Such a trade approach would speak to each partner’s hopes and aspirations. GSP is one tool out of many, but we need it at a moment when we have no substantive trade agenda in any part of the world. We need to revisit the larger US trade agenda in a changed world of great power competition, where our partners have other options, and make these partnerships work for us and them.
GSP grows markets and opens doors to more exports from the US. By granting duty-free access to certain goods from developing countries, GSP not only boosts struggling economies but also sets the stage for increased US exports. This program facilitates trade in goods that the US does not produce in significant quantities, thereby enabling it to focus on sectors where we have a comparative advantage. GSP also helps set the table for “friend-shoring,” a strategy aimed at building resilient supply chains among allied nations, reducing dependence on China for key inputs.
Many developing countries are experiencing significant economic growth, for example, Kazakhstan. Its GDP per capita surged from $3,700 in 1995 to $11,700 in 2023, a development trajectory comparable to that of Poland. Kazakhstan, which would like a stronger partnership with the United States, has expressed concern over the GSP lapse during recent discussions. Similarly, leaders in Uzbekistan have highlighted that they have increasingly turned to Chinese trade to fill the void left by the US. China became Kazakhstan’s largest trading partner in 2023; the same holds true for Uzbekistan.
Since the European Union first offered duty free treatment under GSP to Uzbekistan in 2021, Uzbek-EU trade has increased exponentially. In 2020, the EU imported goods worth 200 million euros from Uzbekistan. By 2022, this figure had soared to 845 million euros. This dramatic increase underscores the potential economic activity that duty-free treatment under GSP can support.
Some developing countries, like Pakistan, do not necessarily aspire to be China’s closest allies and seek alternatives to trading exclusively with China. They want to diversify their economic relationships. It is not in the US interest for China to become the largest trading partner of numerous developing countries or for China to control critical infrastructure such as ports or telecommunication systems in these regions. The GSP lapse has the practical effect of encouraging deeper economic integration between China and developing countries around the world, many of which would rather trade with the US than China.
Critics of GSP often cite concerns about the impact on US jobs, arguing that allowing duty-free imports could harm domestic industries. However, the GSP statute precludes the President from designating import sensitive products such as textiles and apparel as eligible for duty -free treatment.
The delay in reauthorizing GSP stems from broader disputes over US trade policy including trade promotion authority and trade adjustment assistance. The debates in Congress of 10 or 20 years ago around these topics should be rethought in the context of the new global landscape and China’s trade heft with these GSP beneficiary countries. Congress should adopt a new perspective on trade preferences, viewing them through the lens of great power competition and national security or what might be considered a Second Cold War.
Reauthorizing GSP in this Congress is not just about trade policy. It is about reaffirming US commitment to its global partners and countering China’s growing influence. It is only one building block in a stronger bridge we need to start building with the Global South. The longer the US dithers on renewing GSP, the more entrenched China’s relationships with countries like Pakistan, Uzbekistan and Kazakhstan will become.
Congress should act swiftly to reauthorize the GSP; the longer we wait, the more ground we cede to China.
