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Preference Erosion: The case of Bangladesh - A SUR-EC-AR Gravity Model of Trade

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    Abstract

    This paper analyses the impact of preference erosion on Bangladesh’s clothing industry coming from both the ATC quotas phasing-out and the reduction on MFN tariffs under NAMA negotiations. First, it undertakes a numerical exercise to estimate the effects of tariffs reduction in the US and the EU on Bangladesh’s economic performance. Then it uses a SUR-EC-AR gravity model of trade to measure the effects of ATC quotas phasing out and NAMA negotiations on trade pattern. The results suggest that Bangladesh gains from importing countries’ tariffs reduction, independently of ATC implementation. Despite the fact that these results may underestimate the effects of quotas phasing out on T&C trade pattern, the model’s structure presents the advantage of eliminating the aggregation bias problem. It would be interesting to expand the econometric model to include other trade partners and new variables.

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    File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP18-2007.pdf
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    Bibliographic Info

    Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 18-2007.

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    Length: 89
    Date of creation: Oct 2006
    Date of revision: Aug 2007
    Handle: RePEc:gii:giihei:heiwp18-2007

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    Keywords: International Economics; Trade; Preference Erosion; ATC; NAMA; SUR-EC-AR; Gravity Model; Quota; textiles;

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    1. Manole, Vlad & Martin, Will & Francois, Joseph, 2005. "Choosing formulas for market access negotiation : efficiency and market access considerations," Policy Research Working Paper Series 3474, The World Bank.
    2. Antoine Bouët & Lionel Fontagné & Sébastien Jean, 2005. "Is Erosion of Tariff Preferences a Serious Concern?," Working Papers 2005-14, CEPII research center.
    3. Jörg MAYER, 2004. "Not Totally Naked: Textiles And Clothing Trade In A Quota Free Environment," UNCTAD Discussion Papers 176, United Nations Conference on Trade and Development.
    4. Peter Egger, 2001. "SUR Estimation of Error Components Models With AR(1) Disturbances and Unobserved Endogenous Effects," WIFO Working Papers 171, WIFO.
    5. Jaya Krishnakumar, 2002. "A SUR-EC-AR System Gravity Model of Trade," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-4, International Conferences on Panel Data.
    6. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 338-384, June.
    7. J. Francois & B. Hoekman & M. Manchin, 2005. "Preference Erosion and Multilateral Trade Liberalization," Tinbergen Institute Discussion Papers 05-073/2, Tinbergen Institute.
    8. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.
    9. Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Potential Economic Impacts," OECD Trade Policy Papers 17, OECD Publishing.
    10. Hans P. Lankes & Katerina Alexandraki, 2004. "The Impact of Preference Erosionon Middle-Income Developing Countries," IMF Working Papers 04/169, International Monetary Fund.
    11. repec:dgr:uvatin:2005073 is not listed on IDEAS
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