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Expiration of Trade Preference Program Means Higher Prices

Posted By Bryan Riley On August 1, 2013 @ 4:00 pm In Economics | Comments Disabled

Kenichiro Seki/ZUMA Press/Newscom [1]

Kenichiro Seki/ZUMA Press/Newscom

On July 31, the Generalized System of Preferences (GSP) expired.

GSP is a program that waives tariffs on thousands of products that Americans import from developing countries. In 2012, the program reduced [2] tariffs by $742 million. As House Ways and Means chairman Dave Camp (R–MI) observed [3], “GSP provides important benefits to U.S. manufacturers and consumers and supports more than 80,000 American jobs.”

As a result of GSP expiring, tariffs will be imposed on products ranging from car parts to jewelry. Increasing taxes on these products means higher prices for the Americans who buy them. For example, when the government imposes a 4 percent tariff on imported jewelry, the jewelry company passes much of that expense on to American consumers in the form of higher prices.

According [4] to the office of the U.S. Trade Representative:

An underlying principle of the GSP program is that the creation of trade opportunities for developing countries is an effective way of encouraging broad-based economic development and an important means of sustaining momentum for their economic reform and liberalization. The GSP program also helps to lower the cost of imported goods for U.S. businesses and consumers.

Putting it another way, by failing to extend GSP, the United States is harming momentum for economic reform and liberalization in developing countries while increasing the cost of imported goods for U.S. businesses and consumers. That’s a lose-lose situation for people in the United States and in developing countries, too.

Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2013/08/01/gsp-expiration-means-higher-prices/

URLs in this post:

[1] Image: http://blog.heritage.org/wp-content/uploads/CargoShip_130308.jpg

[2] reduced: http://www.ustr.gov/sites/default/files/GSP%20by%20the%20numbers_0.pdf

[3] observed: http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=342885

[4] According: http://www.ustr.gov/sites/default/files/Chapter%20V.%20Trade%20Enforcement%20Activities.pdf

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