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Preference Erosion and Multilateral Trade Liberalization

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  • J. Francois

    ()
    (Faculty of Economics, Erasmus Universiteit Rotterdam, and CEPR)

  • B. Hoekman

    (World Bank, Institut d'Etudes Politiques, Paris, and CEPR)

  • M. Manchin

    ()
    (Faculty of Economics, Erasmus Universiteit Rotterdam)

Abstract

Because of concern that OECD tariff reductions will translate intoworsening export performance for the least developed countries, trade preferences haveproven a stumbling block to developing country support for multilateral liberalization.We examine the actual scope for preference erosion, including an econometricassessment of the actual utilization, and also the scope for erosion estimated by modelingfull elimination of OECD tariffs and hence full MFN liberalization-based preferenceerosion. Preferences are underutilized due to administrative burden -estimated to be atleast 4 percent on average- reducing the magnitude of erosion costs significantly. Forthose products where preferences are used (are of value), the primary negative impactfollows from erosion of EU preferences. This suggests the erosion problem is primarilybilateral rather than a WTO-based concern.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-073/2.

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Date of creation: 07 Jul 2005
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Handle: RePEc:dgr:uvatin:20050073

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Web page: http://www.tinbergen.nl

Related research

Keywords: preference erosion; GSP; WTO; Doha Round; trade and development;

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References

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  1. André Sapir & Sam Laird, 1987. "Tariff preference," ULB Institutional Repository 2013/8248, ULB -- Universite Libre de Bruxelles.
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  4. Ianchovichina, Elena & Mattoo, Aaditya & Olarreaga, Marcelo, 2001. "Unrestricted Market Access for Sub-Saharan Africa: How Much is it Worth and Who Pays?," CEPR Discussion Papers 2820, C.E.P.R. Discussion Papers.
  5. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
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  9. Francois, Joseph, 1998. "Scale Economies and Imperfect Competition in the GTAP Model," GTAP Technical Papers 317, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
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  11. 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.
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  13. Nuno Lim�o & Marcelo Olarreaga, 2006. "Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization," World Bank Economic Review, World Bank Group, vol. 20(2), pages 217-240.
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  15. Hoekman, Bernard, 1993. "Rules of Origin for Goods and Services: Conceptual Issues and Economic Considerations," CEPR Discussion Papers 821, C.E.P.R. Discussion Papers.
  16. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2007. "Market access for sale," Journal of Development Economics, Elsevier, vol. 82(1), pages 79-94, January.
  17. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2004. "A Consistent, Ad-Valorem Equivalent Measure of Applied Protection Across the World: The MAcMap-HS6 Database," Working Papers 2004-22, CEPII research center.
  18. Marcelo Olarreaga & Çaglar Özden, 2005. "AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?," The World Economy, Wiley Blackwell, vol. 28(1), pages 63-77, 01.
  19. 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.
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