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Opening Markets to the Poorest Countries: A Discussion with Congressman McDermott and Kimberly Elliott of the Center for Global Development

On Tuesday, September 8^th, a standing room-only crowd gathered at the Montlake Library to hear Congressman Jim McDermott and Kimberly Ann Elliott of the Center for Global Development discuss opening markets for the poor by reforming and expanding trade preferences.

The United States currently provides special access to its markets to products from developing countries through a few different trade preference programs.  The program that reaches the most countries is called the Generalized System of Preferences, or GSP, and this program covers the fewest products and has the most restrictions.  It has been in place since the 1970s and needs to be renewed by Congress every few years- in fact, it expires at the end of 2010, so if Congress doesn’t act, many countries will lose their special access to the U.S. market.  Other trade preference programs are for specific geographic regions, which are the African Growth and Opportunity Act (AGOA), the Andean Trade Preference Act (ATPA), and the Caribbean Basin Initiative (CBI).  There are also special trade preferences for Haiti. 

Under AGOA, African least developed countries (LDCs) get the most product coverage and the most flexible rules of origin of any U.S. trade preference program.  As Kim Elliott pointed out in her presentation, AGOA covers about 98% of products for African LDCs, and includes flexible rules of origin on apparel items, which is where AGOA has had the greatest economic impact.  She noted that the main omission from AGOA is in the area of agricultural goods, where African countries are still subject to U.S. quotas in a number of key products, not to mention competition from subsidized U.S. cotton.  Agriculture is very important to African economies, with about 60-70% of the workforce directly involved in agricultural production.  AGOA was initially passed in 2000, and is set to expire in 2015 unless Congress renews it.

Kim Elliott’s presentation included the recommendations and findings of the CGD Working Group on Trade Preference Reform.  They have five main recommendations:

1. Expand coverage to all products from all least developed countries.  The reason for expanding coverage to all products is that even when only 3% of products are excluded (as in the current Doha agreement), countries have room to leave out all of the products in which an LDC is most competitive.  The Working Group found that allowing 100% product access to all LDCs would have a minimal effect on competing producers in rich countries – LDCs account for less than 1% of non-oil imports in rich countries.
2. Relax restrictive rules of origin.  Rules of origin can prevent developing countries from taking advantage of preferential market access, because they are often vague and opaque, and commonly stipulate that all inputs must come from one country.  Poor countries must be able to source inputs globally, as they do not have the capacity (or the market size) to vertically integrate their industries.  They also do not have the resources to wade through heavily bureaucratized processes to prove origin.
3. Make trade preferences permanent and predictable.  Investors need to know that the market access will last long enough for them to get a return on their investment.  Without this guarantee, they will not invest in a country.  Most poor countries need foreign investment to spur growth.
4. Promote cooperation between countries giving and receiving preferences.  This includes trade capacity building to help countries improve their infrastructure to promote export growth, and identifying other non trade barriers to exports, such as difficulty meeting technical standards for imports.  Kim Elliott pointed out that African agriculture is a good example of this- African agricultural exporters have a difficult time meeting U.S. sanitary and phyto-sanitary standards, so they export very little to the United States.  These same exporters are able to meet European standards, which are no less strict than U.S. standards from a safety perspective, but for some reason they are easier for Africans to meet.  18% of European agricultural imports come from Africa, where less than 2% of U.S. agricultural imports do.
5. Encourage advanced developing countries to implement trade preference programs that adopt the above principles.  Advanced developing countries such as Brazil, China, Turkey, and India have recently announced trade preference programs for LDCs.  These programs would have greater impact if they adopted the above principles.

Congressman McDermott added his thoughts on why better market access for LDCs is important- and what else is needed to make market access work.  He said that it is important to help poor people from all developing countries, not just those from a certain geographic region.  During the question & answer session, he remarked that trade and development are complex, and when large projects or policy changes are undertaken without an appreciation of the complexity involved, unintended consequences may arise.  He offered the example of building dams in developing countries without regard for the potential consequences- something that was problematic in Ghana and elsewhere.  Congressman McDermott has been working on trade preferences for developing countries for many years- he is the author of AGOA, which he first introduced in 1995 and it took five years to pass Congress and get signed into law.  He has since introduced the New Partnership for Trade Development Act of 2009, which includes some provisions similar to the CDG working group’s recommendations.

How Do Americans Feel about U.S. Foreign Aid And the Millennium Development Goals?

Both the Senate and the House Appropriation Committees have recently approved a cut in the FY2011 foreign aid budget, despite pleas from many, including Secretary Clinton.  The amounts approved are $54.06 billion by the Senate and $52.6 billion by the House; both lower than the $56.6 billion requested by the Obama Administration.  In the atmosphere of budget deficits and economic constraints, the cut did not come as a surprise.   However, as the 2015 deadline for the Millennium Development Goals (MDGs) is soon approaching, the need for continuing U.S. efforts to reach these goals has never been greater.  There is a conflict here, between the great need for foreign aid, and the current economic difficulties.  It leads us to ask: do Americans identify with the urgent need to continue to provide foreign aid to meet the MDGs?  Also, do Americans agree with the international development community on the U.S. responsibility to contribute to the millennium development goals?  

To answer these questions, a national poll was conducted in April 2010 by Public Opinion Strategies and Hart Research, on behalf of the United Nations Foundation.  It surveyed American’s attitudes toward foreign aid and the MDGs.  Here are some key findings:

• – For the first time in five years, Americans’ view of the United Nations (UN) rose from above 50% favorable to 60% favorable.  This increase in positive impressions of the UN is due to the positive stories they have seen in the news on events such as the Haiti relief effort, humanitarian efforts in Africa, relief efforts in Chile and Peru, WHO humanitarian efforts, UNICEF humanitarian efforts and the earthquake relief effort in China. 
•  – Two-thirds of Americans believe the UN is still needed today.
•  – 59% of Americans believe international issues have an impact on them personally and only 15% believe international issues have no personal impact on them.
•  – Although 89% of Americans say they are not familiar with the specifics of the MDGs, after hearing a brief description of the eight goals, 87% of Americans believe the U.S. should be very or somewhat involved in a worldwide effort to accomplish the MDGs by 2015.  50% of Pacific residents stated that the U.S. should be very involved in accomplishing the MDGs.
•  – When asked to choose which MDGs are the most important to accomplish, Americans chose those goals that address the most basic human needs for survival.
•  – The top 3 choices for the most important MDGs were: access to safe drinking water (47%), alleviating extreme hunger and poverty (36%), and eliminating gender disparity in completing primary education (27%).

Though it is discouraging to know that a huge majority (89%) of Americans are unfamiliar with the MDGs, one positive realization did emerge from this rather negative finding.    Most Americans are supportive of U.S. involvement in accomplishing the MDGs once they learn about the specifics.  If we want to accelerate our progress towards meeting the MDGs by 2015, one thing we cannot undermine is the power of the collective action from this majority of Americans.  In addition to the strategy that the U.S. government has recently mapped out for meeting the MDGs (see recent blog post), we need to educate and engage our communities, local leaders of all sectors, local media and audience about this collective responsibility toward eliminating global poverty.  We can start by taking part in the 2010 Stand Up Against Poverty movement, when individuals and organizations around the world will stand up and make noise against poverty around September 17^th, 2010.

Tech-Aid: Innovation and Development

As Global Washington’s Conversation with USAID Administrator Rajiv Shah came to a close last Friday, Congressman Jim McDermott (D-WA) left the audience with a new way of looking at an old question.

As Congressman McDermott explained, when faced with contemplating the future of global development, one can readily apply the age-old question “is the glass half-full or half-empty?” Similarly, we can ask ourselves is this the time in world history that the human race bands together to solve the critical problems of our time, or will we allow the global financial crisis to stifle our humanitarian spirit and maintain the status quo? Can we capitalize on the momentum building up to the Millennium Development Goals and eradicate hunger, disease, and extreme poverty, or are we setting ourselves up for a big disappointment with such lofty goals?

But these questions, however important, are insufficient in finding the solutions to the world’s ills. To solve these problems, Congressman McDermott exhorted the audience to consider how to fill the glass, rather than consider how full it is already. Indeed we must not ask ourselves if we will succeed, but how we will succeed in meeting the basic needs of all. And technology is inevitably a part of the answer to that question.

Such was the purpose of this panel discussion. Bringing together the USAID Administrator, two Congressmen, and representatives from Microsoft, Washington State University, PATH, and the Bill & Melinda Gates Foundation, the panel discussed the role innovation and technology plays in development projects, particularly in the health and agriculture sectors.

Before introducing Dr. Shah, Congressman Adam Smith (D-WA) opened the discussion with a case for investment in development, saying funding foreign assistance can create a more stable and secure global environment. However, as Congressman Smith pointed out, the current foreign assistance structure is not efficient enough to get the most out of our resources.

Dr. Shah echoed Congressman Smith’s sentiments on the state of the foreign aid system, saying that programs are too often ineffective because projects are not guided by results and evidence from the ground. Fortunately, Dr. Shah has committed to basing programs off of conditions on the ground, beginning with the two new development initiatives Feed the Future, and the Global Health Initiative.

Using the right technology and the right means of delivering that technology may ultimately decide the success or failure of many development programs. Innovative new pieces of technology have already played a large role in improving development programs. For instance, M-Pesa allows you to safely and securely transfer money via cell phone, giving people without steady access to a bank a way to easily access their money.

With such promising technological innovations and committed leadership from our panelists, I can’t help but see that glass filling up quickly.