Duty-Free Access for the Poorest and Most Vulnerable Countries

To: President-elect Barack Obama

Cc: Hillary Clinton, Secretary of State–designate; Ron Kirk, U.S. Trade Representative–designate; Michael Warren, Presidential Transition Agency Review Team Lead, Economics and International Trade; Senator Max Baucus; Senator Charles Grassley; Congressman Charles Rangel; Congressman Dave Camp; Congressman Sander Levin; Congressman Wally Herger

From: Kimberly Elliott, Center for Global Development

RE: Duty-free access for the poorest and most vulnerable countries

Background: The poorest countries of the world are in serious trouble as a result of a global economic crisis which is not of their making. In many countries, the poverty gains of recent years are at risk, and political stability, already fragile, is seriously threatened. The Millennium Development Goals include a commitment to provide duty-free and quota-free access (DFQF) for least-developed countries, and the United States and other rich countries pledged as part of the Doha Round in 2005 to provide such access for least-developed countries for 97 percent of their products; but the Doha Round is now stalled. Although the United States already provides close-to-DFQF access for AGOA-eligible countries in sub-Saharan Africa and slightly less generous treatment for most Andean and Caribbean countries, other very poor countries are currently ineligible for these regional programs, and some of them bear large tax burdens on their exports. Even Africa faces restrictions on agricultural exports despite the importance of that sector to poor people.

Recommendation: By implementing an improved and expanded DFQF program this year, the United States could use the power of its markets to boost jobs and incomes in the poorest countries while doing little or no damage to domestic producers. This effort could also provide the foundation for increased political stability in fragile states essential to U.S. national security. The administration and Congress should work together immediately on legislation that authorizes a permanent program with simplified rules for country and product eligibility that provides full DFQF access for the poorest and most vulnerable countries. While the program would be authorized on a permanent basis, countries would still be subject to review and would “graduate” as they develop. The most effective policy proposal would include least-developed countries (LDCs) and would add other AGOA-eligible, low-income, and lower-middle-income countries with gross national incomes below $100 billion. The advantages of such a proposal would include the following:

• demonstrating U.S. leadership at a time of uncertainty for the global trade system
• increasing opportunities for foreign investment, job creation, and poverty alleviation
• supporting vulnerable countries where there is a risk of political instability
• providing reassurance to global financial markets concerned about protectionism