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Preference Erosion and Multilateral Trade Liberalization

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Author Info
Joseph Francois
B. Hoekman
M. Manchin

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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 percent 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 IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp87.

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Date of creation: 15 Dec 2005
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Handle: RePEc:iis:dispap:iiisdp87

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

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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. Francois, Joseph & Wooton, Ian, 2005. "Market Structure in Services and Market Access in Goods," CEPR Discussion Papers 5135, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. 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)
  3. 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)
  4. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
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  5. 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)
    Other versions:
  6. 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!]
  7. repec:rus:hseeco:123712 is not listed on IDEAS
  8. 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!] (restricted)
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  9. 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. [Downloadable!] (restricted)
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  10. 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)
  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. [Downloadable!]
  12. 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)
  13. 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)
  14. 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. [Downloadable!] (restricted)
  15. Antoine Bouet & Yvan Decreux & Lionel Fontagne & Sebastien 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. [Downloadable!]
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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. Hoekman. Bernard & Prowse, Susan, 2005. "Economic policy responses to preference erosion : from trade as aid to aid for trade," Policy Research Working Paper Series 3721, The World Bank. [Downloadable!]
  2. Joseph Francois & Julia Woerz, . "Rags in the High Rent District: the Evolution of Quota Rents in Textiles and Clothing," Tinbergen Institute Discussion Papers 06-007/2, Tinbergen Institute. [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. 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!]
  8. 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!]
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