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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.

Suggested Citation

  • Erika Vianna Grossrieder, 2006. "Preference Erosion: The case of Bangladesh - A SUR-EC-AR Gravity Model of Trade," IHEID Working Papers 18-2007, Economics Section, The Graduate Institute of International Studies, revised Aug 2007.
    • Handle: RePEc:gii:giihei:heiwp18-2007
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    1. 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.
    2. Low, Patrick & Piermartini, Roberta & Richtering, Jurgen, 2005. "Multilateral solutions to the erosion of non-reciprocal preferences in NAMA," WTO Staff Working Papers ERSD-2005-05, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Baldwin, Richard E., 2006. "The euro's trade effects," Working Paper Series 594, European Central Bank.
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    6. Joseph Francois & Will Martin & Vlad Manole, 2005. "Choosing formulas for market access negotiations: efficiency and market access considerations," Chapters, in: Sisira Jayasuriya (ed.), Trade Policy Reforms and Development, chapter 5, Edward Elgar Publishing.
    7. 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.
    8. Mr. Hans P Lankes & Miss Katerina Alexandraki, 2004. "The Impact of Preference Erosionon Middle-Income Developing Countries," IMF Working Papers 2004/169, International Monetary Fund.
    9. Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Potential Economic Impacts," OECD Trade Policy Papers 17, OECD Publishing.
    10. 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.
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    More about this item

    Keywords

    International Economics; Trade; Preference Erosion; ATC; NAMA; SUR-EC-AR; Gravity Model; Quota; textiles;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables

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