GSP- What is it?

While discussing economic development in foreign countries, it is important to understand the laws and duties of our country and how the regulations of the United States can impact the success of any country’s import and export programs. Many third world countries have an economy that is tied by an umbilical cord to the vagaries of the US market. Our laws and duties can make or break the success of many countries exports to our consumers. One of the most misunderstood programs is called the Generalized System of Preferences, which is a government program affecting the duties imposed on products coming from certain countries.

President Ronald Regan was adamant that the government of our country do all it could to eliminate the use of illicit drugs in this country during his terms. After visiting several countries in Central and South America, President Regan tasked our U.S. Customs officials and Congress to develop a plan to help many of these small countries replace illicit drugs as a major source of income for their economies. Out of this concern, GSP was born. The major purpose of GSP was to help Columbia, Ecuador and many other small countries to diversify their economies away from illicit drugs and to stimulate the export of finished and raw material from their host country. To help these smaller countries in this effort, Congress enacted the GSP program which gives preferential treatment to countries exporting goods to our country. The idea was to develop legal and proper trade rather than having these countries rely so heavily on the sale of illegal drugs.

One of the products these countries had in abundance was timber. Therefore, certain countries became exempt from duties when they exported these products to the United States. This gave them a huge price advantage over other countries with established trade in Timber already developed. Almost overnight, GSP countries were wildly successful in selling their wares to the U.S because they enjoyed this protected status from Congress.

It wasn’t long before many other countries applied for this protected status offered by the GSP program. As is the case with many governmental programs, the entire process of choosing which countries could garner GSP status lost sight of the original intent of this regulation. The process became highly politicized and through massive lobbying and political machinations many countries were added to the GSP program.

Thus, the US had good intentions to begin with but this motivation was soon lost in the shuffle. As a result, the favorable duties did help many smaller countries with their exports to the United States, but it was at the cost of long term trading partners with our country and these partners were still paying full duties and suffering for their loyalty and success with our country.

GSP is still in effect, but perhaps it is time for our Congress to reexamine the original intent of this program and to rectify the trading disasters it has spawned.

Thursday, April 12th, 2012 Economics Comments Off

Truly a Global Economy

Even twenty-five years ago, the world economy was driven by the United States. Over the course of the last century, America became the engine driving world commerce. For investors and entrepreneurs, an awareness and knowledge of the U.S. market was an absolute must if you aspired to develop a portfolio with upward mobility. Fifty years ago, something manufactured in Japan was synonymous with cheap or substandard merchandise. Today, that is far from the truth. Today, we truly live in a global economy where developments on the other side of the world can have major ramifications in our own backyard.

Recently, we have all been monitoring the stock market with anxious eyes. The impact a relatively small country like Greece has had on the U.S. stock market has been enormous. As a matter of fact, Greece has had an impact far greater than this small country should be able to impact finances elsewhere in the world. With the European market trying desperately to bolster the failing Greek economy, markets in the U.S. have exhibited a volatility unknown just a few short years ago.

Spain’s economy is showing increasingly alarming symptoms of following in the footsteps of the Greek financial woes. Adversely affected by their trading partners, both France and Portugal also are suffering from “ European Union” woes due to their common economic distress.

While China has in recent years had the fastest growing economy in the world, even their unprecedented growth has been stymied in recent months. China’s biggest critics complain because their government does not allow their currency to float free-market like most of the world’s major players. In China, the government has established parameters that force their currency to vary only between these narrow confines determined by the Chinese government.

Brazil has been a shining star financially in recent years. Bucking the trend of economic downturns, Brazil has strengthened their currency dramatically. Mostly this is as a result of Brazil’s energy independence. Ethanol has been a boone to Brazil’s varied economy and the country is enjoying one of the most positive trends in economic growth.

This overview simply pinpoints the true nature of today’s economy. We are all intertwined into one strand of financial health. Today- we must be a student of a truly Global Economy. Click here for a complete online guide to finance, economics, and business.

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Sunday, February 12th, 2012 Economics Comments Off

Sudan Economic Development

The Country of Sudan is a developing economy that currently relies heavily on oil production, high oil prices, and foreign direct investment. The countries supplying most of the economic assistance over the years has been the United States, the Netherlands, Kuwait, Saudi Arabia, Italy, and Germany. There is also a few other OPEC countries that have supplied considerable economic assistance as well. Sudan also relies on the World Bank for loans on various development projects that the country undertakes.

Sudan registered a little over 10% GDP growth in 2006 and 2007. That definitely shows that their economy is on an upswing. Most of that growth is fueled by higher oil production and prices. Agriculture also plays a big role in Sudan’s economy by making up 1/3 of Gross Domestic Product. Even more significant is that agriculture employs over 80% of the overall Sudanese work force. The biggest growth sector in the years to come may be in mining. Sudan is reportedly sitting on large mineral deposits, but there has not been enough exploration to give a true gauge on what is actually there.I do have to say that this is an economy that everyone should watch. They have these untapped resources and an oil industry that is fairly strong.

 

 

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Tuesday, November 29th, 2011 Economics Comments Off