Policy Responses to Trade Preference Erosion

Options for Developing Countries

image of Policy Responses to Trade Preference Erosion
It was hoped that trade preferences, offered to exports from developing countries by industrialised countries, would give greater economic benefits than has been the case. Now continuing multilateral tariff liberalisation threatens to further erode even those benefits that remain.

This study looks at how best developing countries should respond to this erosion of trade preferences, either through restructuring individual preference arrangements or by acting to offset the adverse effects of preference erosion.



Appendix to Chapter 3 (A3)

The provision of trade preferences is embodied in preferential trade arrangements such as customs unions and free trade areas, typically those between developed and developing countries. Such PTAs tend to increase trade between members participating in the arrangement and may also affect trade with non-members. The PTAs can be reciprocal, where members reciprocate the treatment received in equal measure and form, or nonreciprocal, where some (typically lower-income) members are under no obligation to reciprocate the preferential treatment they receive from other members. A particular widespread non-reciprocal PTA is the generalised system of preferences, whereby developed countries (notably the QUAD) grant differential preferential tariffs to imports from developing, least developed and small and vulnerable countries. GSP preferences are granted unilaterally, without legal obligation on the part of the GSP-giving country, and as such may be withdrawn at any time. In cases where beneficiaries cannot be certain that the preferences will continue in the future, the potential benefits are less valuable, for example because there is less incentive for producers to invest in the produc - tion of goods that can benefit from such preferences.


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