Advanced Search
MyIDEAS: Login

Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization

Contents:

Author Info

  • Nuno Lim�o
  • Marcelo Olarreaga

Abstract

The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows multilateral trade liberalization. Recent theoretical and empirical evidence indicates that this is the case even for unilateral preferences that developed countries provide to small and poor countries, but there is no estimate of the resulting welfare costs. This stumbling block effect can be avoided by replacing the unilateral preferences with a fixed import subsidy, which generates a Pareto improvement. More importantly, this paper presents the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. Recent estimates of the stumbling block effect of preferences with data for 170 countries and more than 5,000 products are used to calculate the welfare effects of the European Union, Japan, and the United States switching from unilateral preferences for least developed countries to an import subsidy scheme. In a model with no dynamic gains to trade, the switch produces an annual net welfare gain for the 170 countries that adds about 10 percent to the estimated trade liberalization gains in the Doha Round. It also generates gains for each group: the European Union, Japan, and the United States ($2,934 million), least developed countries ($520 million), and the rest of the world ($900 million). Copyright 2006, Oxford University Press.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Article provided by World Bank Group in its journal The World Bank Economic Review.

Volume (Year): 20 (2006)
Issue (Month): 2 ()
Pages: 217-240

as in new window
Handle: RePEc:oup:wbecrv:v:20:y:2006:i:2:p:217-240

Contact details of provider:
Postal: Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK
Phone: (202) 477-1234
Fax: 01865 267 985
Email:
Web page: http://wber.oxfordjournals.org/
More information through EDIRC

Order Information:
Web: http://www.oup.co.uk/journals

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mattoo, Aaditya & Subramanian, Arvind, 2004. "The WTO and the poorest countries: the stark reality," World Trade Review, Cambridge University Press, vol. 3(03), pages 385-407, November.
  2. Azam, Jean-Paul & Laffont, Jean-Jacques, 2003. "Contracting for aid," Journal of Development Economics, Elsevier, vol. 70(1), pages 25-58, February.
  3. Aaditya Mattoo & Arvind Subramanian, 2004. "The WTO and the Poorest Countries," IMF Working Papers 04/81, International Monetary Fund.
  4. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  5. Nuno Limão, 2002. "Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Bloc for Multilateral Liberalization?," International Trade 0206001, EconWPA.
  6. Pravin Krishna, 1998. "Regionalism And Multilateralism: A Political Economy Approach," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 227-250, February.
  7. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 1-24, February.
  8. Marcelo Olarreaga & Hiau Looi Kee & Alessandro Nicita, 2004. "Estimating Import Demand and Export Supply Elasticities," Econometric Society 2004 North American Summer Meetings 368, Econometric Society.
  9. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import Demand Elasticities and Trade Distortions," CEPR Discussion Papers 4669, C.E.P.R. Discussion Papers.
  10. T.N. Srinivasan, 1999. "Developing Countries in the World Trading System: From GATT, 1947, to the Third Ministerial Meeting of WTO, 1999," The World Economy, Wiley Blackwell, vol. 22(8), pages 1047-1064, November.
  11. Hoekman, Bernard, 2004. "Dismantling Discrimination Against Developing Countries: Access, Rules and Differential Treatment," CEPR Discussion Papers 4694, C.E.P.R. Discussion Papers.
  12. Christopher S Adam & Stephen A O'Connell, 2004. "Aid versus Trade Revisited: Donor and Recipient Policies in the Presence of Learning-by-Doing," Economic Journal, Royal Economic Society, vol. 114(492), pages 150-173, 01.
  13. McCulloch, Rachel & Pinera, Jose, 1977. "Trade as Aid: The Political Economy of Tariff Preferences for Developing Countries," American Economic Review, American Economic Association, vol. 67(5), pages 959-67, December.
  14. André Sapir, 1981. "Trade benefits under the EEC generalized system of preferences," ULB Institutional Repository 2013/8290, ULB -- Universite Libre de Bruxelles.
  15. Panagariya, Arvind & Shah, Shekhar & Mishra, Deepak, 2001. "Demand elasticities in international trade: are they really low?," Journal of Development Economics, Elsevier, vol. 64(2), pages 313-342, April.
  16. Karacaovali, Baybars & Limão, Nuno, 2005. "The Clash of Liberalizations: Preferential vs. Multilateral Trade Liberalization in the European Union," CEPR Discussion Papers 4973, C.E.P.R. Discussion Papers.
  17. André Sapir & Richard Baldwin & Daniel Cohen & Anthony Venables, 1999. "Market integration, regionalism and the global economy," ULB Institutional Repository 2013/8074, ULB -- Universite Libre de Bruxelles.
  18. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  19. Levy, Philip I, 1997. "A Political-Economic Analysis of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 87(4), pages 506-19, September.
  20. Brown, Drusilla, 1989. "A computational analysis of Japan's generalized system of preferences," Journal of Development Economics, Elsevier, vol. 30(1), pages 103-128, January.
  21. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  22. Limão, Nuno, 2005. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the US," CEPR Discussion Papers 4884, C.E.P.R. Discussion Papers.
  23. Kyle Bagwell & Robert W. Staiger, 1997. "Regionalism and Multilateral Tariff Cooperation," NBER Working Papers 5921, National Bureau of Economic Research, Inc.
  24. Hans P. Lankes & Katerina Alexandraki, 2004. "The Impact of Preference Erosionon Middle-Income Developing Countries," IMF Working Papers 04/169, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oup:wbecrv:v:20:y:2006:i:2:p:217-240. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.