Working Paper: CEPR ID: DP5153
Authors: Joseph Francois; Bernard Hoekman; Miriam Manchin
Abstract: Because of concern that OECD tariff reductions will translate into worsening export performance for the least developed countries, trade preferences have proven a stumbling block to developing country support for multilateral liberalization. We examine the actual scope for preference erosion, including an econometric assessment of the actual utilization, and also the scope for erosion estimated by modeling full elimination of OECD tariffs and hence full MFN liberalization-based preference erosion. Preferences are underutilized due to administrative burden ? estimated to be at least 4% on average ? reducing the magnitude of erosion costs significantly. For those products where preferences are used (are of value), the primary negative impact follows from erosion of EU preferences. This suggests the erosion problem is primarily bilateral rather than a WTO-based concern.
Keywords: Development; Doha Round; GSP; Preference Erosion; Trade; WTO
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Compliance costs (Q52) | Effective utilization of preferences (D11) |
| Effective utilization of preferences (D11) | Potential benefits for developing countries (F63) |
| Removal of EU trade barriers (F15) | Preference erosion (D11) |
| Broader trade liberalization efforts (F13) | Economic outcomes for developing countries (F63) |