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Preference Erosion and Multilateral Trade Liberalization

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Author Info
Francois, Joseph
Hoekman, Bernard
Manchin, Miriam

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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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5153.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5153

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Related research
Keywords: development; Doha Round; GSP; preference erosion; trade; WTO;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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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.:
  1. Paul Brenton & Miriam Manchin, 2003. "Making EU Trade Agreements Work: The Role of Rules of Origin," The World Economy, Blackwell Publishing, vol. 26(5), pages 755-769, 05. [Downloadable!] (restricted)
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  2. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    Other versions:
  3. Limão, Nuno & Olarreaga, Marcelo, 2005. "Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization," CEPR Discussion Papers 5045, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March. [Downloadable!]
    Other versions:
  5. Joseph Francois & Ian Wooton, 2005. "Market Structure in Services and Market Access in Goods," The Institute for International Integration Studies Discussion Paper Series iiisdp80, IIIS. [Downloadable!]
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  6. Brenton, Paul, 2003. "Integrating the least developed countries into the world trading system : the current impact of EU preferences under everything but arms," Policy Research Working Paper Series 3018, The World Bank. [Downloadable!]
  7. Ianchovichina, Elena & Mattoo, Aaditya & Olarreaga, Marcelo, 2001. "Unrestricted market access for Sub-Saharan Africa - How much is it worth and who pays?," Policy Research Working Paper Series 2595, The World Bank. [Downloadable!]
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  8. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Blackwell Publishing, vol. 28(1), pages 63-77, 01. [Downloadable!] (restricted)
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  11. Hoekman, Bernard, 2004. "Dismantling Discrimination Against Developing Countries: Access, Rules and Differential Treatment," CEPR Discussion Papers 4694, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  12. Hoekman, Bernard & Ozden, Caglar, 2005. "Trade preferences and differential treatment of developing countries : a selective survey," Policy Research Working Paper Series 3566, The World Bank. [Downloadable!]
  13. repec:rus:hseeco:123712 is not listed on IDEAS
  14. Carrère, Céline & de Melo, Jaime, 2004. "Are Different Rules of Origin Equally Costly? Estimates from NAFTA," CEPR Discussion Papers 4437, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  15. Arvind Panagariya, 2000. "Preferential Trade Liberalization: The Traditional Theory and New Developments," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 287-331, June. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Romain Perez & Mustapha Sadni Jallab, 2009. "Preference erosion and market access liberalization: the African dilemma in multilateral negotiations on agriculture," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 145(2), pages 277-292, July. [Downloadable!] (restricted)
  2. Joseph Francois & Julia Woerz, 2006. "Rags in the High Rent District: the Evolution of Quota Rents in Textiles and Clothing," The Institute for International Integration Studies Discussion Paper Series iiisdp121, IIIS. [Downloadable!]
    Other versions:
  3. Erika Vianna Grossrieder, 2006. "Preference Erosion: The case of Bangladesh - A SUR-EC-AR Gravity Model of Trade," HEI Working Papers 18-2007, Economics Section, The Graduate Institute of International Studies, revised Aug 2007. [Downloadable!]
  4. Francois, Joseph & Horn, Henrik & Kaunitz, Niklas, 2008. "Trading Profiles and Developing Country Participation in the WTO Dispute Settlement System," Working Paper Series 730, Research Institute of Industrial Economics. [Downloadable!]
  5. Djankov, Simeon & Freund, Caroline & Pham, Cong S., 2006. "Trading on time," Policy Research Working Paper Series 3909, The World Bank. [Downloadable!]
  6. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," NBER Working Papers 12971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Agostino, Maria Rosaria & Aiello, Francesco & Cardamone, Paola, 2007. "Analyzing the Impact of Trade Preferences in Gravity Models. Does Aggregation Matter?," Working Papers 7294, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
  8. Bchir, Mohamed Hedi & Karingi, Stephen N. & Mold, Andrew & Osakwe, Patrick N. & Jallab, Mustapha Sadni, 2006. "The Doha Development Round and Africa: Partial and General Equilibrium Analyses of Tariff Preference Erosion," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25240, International Association of Agricultural Economists. [Downloadable!]
    Other versions:
  9. Hoekman. Bernard & Prowse, Susan, 2005. "Economic policy responses to preference erosion : from trade as aid toaid for trade," Policy Research Working Paper Series 3721, The World Bank. [Downloadable!]
  10. Lawrence, Robert Z. & Rosito, Tatiana, 2006. "A New Compensation Mechanism for Preference Erosion in the Doha Round," Working Paper Series rwp06-044, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  11. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization Towards Non-Members?," CEP Discussion Papers dp0868, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  12. John Gilbert, 2008. "Agricultural Trade Reform and Poverty in the Asia-Pacific: A Survey and Some New Results," Working Papers 200801, Utah State University, Department of Economics and Finance. [Downloadable!]
    Other versions:
  13. Jean-Christophe Bureau & Raja Chakir & Jacques Gallezot, 2007. "The Utilisation of EU and US Trade Preferences for Developing Countries in the Agri-Food Sector," The Institute for International Integration Studies Discussion Paper Series iiisdp193, IIIS. [Downloadable!]
    Other versions:
  14. James Cassing & Anna-Maria Salameh, 2006. "Jordan – United States Free Trade Agreement Economic Impact Study: Searching for Effects of the FTA on Exports` Imports and Trade Related Investments," Working Papers 226, University of Pittsburgh, Department of Economics, revised Jan 2006. [Downloadable!]
  15. Kavallari, A. & Schmitz, P.M., 2008. "Multilateral trade liberalisation and Preference erosion: Effects on the agricultural sector of the EU's Mediterranean Partner Countries," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44177, European Association of Agricultural Economists. [Downloadable!]
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