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The impact of GSP Preferences on Developing Countries' Exports in the European Union: Bilateral Gravity Modelling at the Product Level

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Author Info

  • Xavier Cirera

    (IDS and CARIS, University of Sussex)

  • Francesca Foliano

    (Institute of Education, University College London)

  • Michael Gasiorek

    (Department of Economics and CARIS, University of Sussex)

Abstract

Unilateral preferences aim at increasing exports from developing countries via reductions on applied tariffs and the incentives created by the preference margin. After decades of existence of these schemes, an important policy question is whether preferential schemes have been effective in increasing exports. This paper evaluates empirically the impact of the European Union (EU) GSP preferential regimes on exports from developing countries using a bilateral gravity model at the product level. Rather than using dummy variables to proxy each trade regime as in most empirical papers, this paper uses a unique dataset at CN-10 digits that allows us to determine the tariff rate paid by each export to the EU and the preferential regime of entry and address the issue of utilisation and nonutilisation of trade preferences, which can result in wrong attribution of causality between trade regimes and export flows. The most important finding of the paper is the fact that the results critically depend on (i) how the advantage provided by the preferences measure is measured, and (ii) whether the extensive margin of trade is included. Overall the results suggest preferences have a very small impact on trade, and negligible or even negative when we consider the scope for trade diversification. Therefore, it appears that the GSP system has provided a small effect on increasing exports at the intensive margin, but no effect on export diversification.

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Bibliographic Info

Paper provided by Department of Economics, University of Sussex in its series Working Paper Series with number 2711.

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Date of creation: Oct 2011
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Handle: RePEc:sus:susewp:2711

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Related research

Keywords: preferential trade arrangements; GSP; gravity models; preference utilisation;

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Cited by:
  1. Cipollina, Maria & Laborde, David & Salvatici, Luca, 2013. "Do Preferential Trade Policies (Actually) Increase Exports? An analysis of EU trade policies," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150177, Agricultural and Applied Economics Association.
  2. Pierluigi Montalbano & Silvia Nenci & Emiliano Magrini, 2014. "Are the EU trade preferences really effective? A generalized propensity score evaluation of the Southern Mediterranea countries’ case in Agriculture and Fishery," Departmental Working Papers of Economics - University 'Roma Tre', Department of Economics - University Roma Tre 0188, Department of Economics - University Roma Tre.

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