IGD urges the following reforms to expand access, improve preference programs and build capacity for developing countries:

Grant duty-free, quota-free access to the United States for all products from Least Developed Countries* (LDCs)

Even though the U.S. market is one of the most open in the world, barriers remain in sectors where poor countries could be most competitive – agriculture and labor-intensive manufactures. For example, in 2006 Bangladesh and Cambodia, both LDCs, paid $850 million to the United States in import tariffs. This amount far exceeded the $120 million they received in U.S. foreign assistance. Tariffs on poor-country imports are about twice as much as tariffs on products from rich countries.

Developed countries and larger developing countries pledged in 2005 to provide free market access for 97 percent of products from the poorest countries as part of an overall Doha deal. Given the halt in the Doha negotiations, the United States should provide this now and expand it to include 100 percent of LDC products.

LDCs are in desperate need of opportunities and assistance to help them grow and reduce poverty. Opponents of duty-free, quota-free access for the poorest countries often cite the potentially damaging impact on U.S. business from imports from LDCs, especially apparel. In fact the impact would be minimal – imports from LDCs accounted for only 1.3 percent of total U.S. imports in 2006 and less than 10 percent of clothing imports.

*LDCs are countries with annual per capita incomes of under $745, low nutrition, education and child mortality numbers and high vulnerability to economic shocks. There are currently 50 LDCs, 32 of which are in Africa.

Make U.S. trade preference programs simpler and more predictable

In addition to the need for expanded coverage, the development impact of U.S. preference programs is blunted by other factors. Regional preference programs and the broader Generalized System of Preferences (GSP) all have different rules and eligibility criteria, increasing transaction costs for business and making the programs difficult to use. Merging the various programs into one with the same set of rules would be a significant improvement toward the goal of granting the kind of market access that stimulates investment and production in developing countries.

Over the last 12 years, GSP has been allowed to lapse periodically and has usually been renewed for periods of less than one year. Making the program permanent and eliminating the threat of expiration would remove uncertainty and would more effectively encourage investment. It would not preclude countries graduating from preferences as they develop.

Help build the capacity of poor countries to take advantage of new market openings

For many developing countries – particularly the poorest – gaining market access, even preferential market access, is only half the battle. Opportunity does not necessarily imply ability to take advantage. Many poor countries need “aid-for-trade” assistance to help them loosen the supply-side constraints they face in producing and getting their goods to market – local, regional and international. Transportation infrastructure, marketing assistance, customs modernization and even basic productivity investments – like affordable fertilizer and drip irrigation technology – are all critical in helping developing countries realize their economic potential. It is essential that we begin to see trade and foreign assistance as two sides of the same development coin.

The close relationship between aid and trade in promoting growth and poverty reduction points to a larger need in U.S. policy. Currently foreign assistance and trade policies aimed at promoting economic development in poor countries are strictly separated, and policy in one area rarely informs policy in the other – despite their common purpose. This incoherence leads to inefficiency, waste and less effective policy.