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Go ahead and trade: the effect of uncertainty removal in the EU's GSP scheme

Author

Listed:
  • Ingo Borchert

    (Department of Economics, University of Sussex, Falmer, United Kingdom)

  • Mattia Di Ubaldo

    (Department of Economics, University of Sussex, Falmer, United Kingdom)

Abstract

We estimate the trade effect of removing uncertainty about future trading conditions in the context of the 2014 reform of the Generalized System of Preferences (GSP) of the European Union (EU). EU GSP members receive non-reciprocal trade preferences (NRTPs), but only as long as they are not too competitive; i.e. they will graduate in case their share of EU GSP imports in a sector exceeds a certain threshold. However, the 2014 reform removed the threat of these competitivenessrelated graduations for a members of the GSP+, a sub-scheme of the main programme. We and that the reform increased EU imports from GSP+ countries by about 7% on average whilst tariffs stayed the same. This trade impact is driven by the country-sector pairs most exposed to NRTPs uncertainty prereform. The effect is robust to taking into account other aspects of the reform, such as the reduction in GSP membership and changes in tariff margins, respectively.

Suggested Citation

  • Ingo Borchert & Mattia Di Ubaldo, 2020. "Go ahead and trade: the effect of uncertainty removal in the EU's GSP scheme," Working Paper Series 0520, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:0520
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    Cited by:

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    2. Fabien Forge & Jason Garred & Kyae Lim Kwon, 2021. "When are Tariff Cuts Not Enough? Heterogeneous Effects of Trade Preferences for the Least Developed Countries," Working Papers 2106E, University of Ottawa, Department of Economics.
    3. Gnutzmann-Mkrtchyan, Arevik & Volmer, Maximilian, 2022. "EU trade policy reform: towards reciprocal concessions with developing countries," Hannover Economic Papers (HEP) dp-697, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    4. Gnangnon, Sèna Kimm, 2022. "Effect of the Duty-Free Quota-Free Market access Schemes in favour of Least developed countries' Products on the Volatility of the Utilization Rate of these Schemes," EconStor Preprints 260567, ZBW - Leibniz Information Centre for Economics.

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    More about this item

    Keywords

    GSP; trade preferences; trade policy uncertainty;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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