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The perversity of preferences : GSP and developing country trade policies, 1976 - 2000

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  • Ozden, Caglar
  • Reinhardt, Eric

Abstract

Industrial countries maintain special tariff preferences, namely the Generalized System of Preferences (GSP), for importsfrom developing countries. Critics have highlighted the underachieving nature of such preferences, but developing countries continue to place the GSP at the heart of their agenda in multilateral negotiations. What effect do such preferences have on a recipient's own trade policies? The authors develop and test a simple theoretical model of a small country's trade policy choice, using a dataset of 154 developing countries from 1976 through 2000. They find that countries removed from the GSP adopt more liberal trade policies than those remaining eligible. The results, corrected for endogeneity and robust to numerous alternative measures of trade policy, suggest that developing countries may be best served by full integration into the reciprocity-based world trade regime rather than continued GSP-style special preferences.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2955.

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Date of creation: 31 Jan 2003
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Handle: RePEc:wbk:wbrwps:2955

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Keywords: Environmental Economics&Policies; Trade Policy; Economic Theory&Research; Rules of Origin; Payment Systems&Infrastructure; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Environmental Economics&Policies; Economic Theory&Research; Trade Policy; Trade and Regional Integration;

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Cited by:
  1. Ornelas, Emanuel, 2012. "Preferential trade agreements and the labour market," ILO Working Papers 469183, International Labour Organization.
  2. DeMaria, Federica & Drogue, Sophie & Matthews, Alan, 2008. "Agro-Food Preferences in the EU's GSP Scheme: An Analysis of Changes between 2004 and 2006," Working Papers 6151, TRADEAG - Agricultural Trade Agreements.
  3. Emily Blanchard & Xenia Matschke, 2010. "U.S. Multinationals and Preferential Market Access," Research Papers in Economics 2010-08, University of Trier, Department of Economics.
  4. Persson, Maria, 2011. "From trade preferences to trade facilitation: Taking stock of the issues," Economics Discussion Papers 2011-23, Kiel Institute for the World Economy.
  5. Bernhard Herz & Marco Wagner, 2011. "The Dark Side of the Generalized System of Preferences," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 763-775, 09.
  6. Morrissey, Oliver & Zgovu, Evious, 2008. "The Impact of Economic Partnership Agreements on African, Caribbean and Pacific Countries Imports and Welfare," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44205, European Association of Agricultural Economists.
  7. Liborio S. Cabanilla, 2006. "Agricultural Trade Between the Philippines and the US : Status, Issues and Prospects," Development Economics Working Papers 22620, East Asian Bureau of Economic Research.
  8. Douillet, Mathilde, 2012. "Trade policies and agricultural exports of Sub-Saharan African countries: Some stylized facts and perspectives," MPRA Paper 40962, University Library of Munich, Germany.
  9. Kyle Bagwell & Robert W. Staiger, 2013. "Can the Doha Round be a Development Round? Setting a Place at the Table," NBER Chapters, in: Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, pages 91-124 National Bureau of Economic Research, Inc.
  10. Shalah Mostashari, 2011. "Vertical specialization, intermediate tariffs, and the pattern of trade: assessing the role of tariff liberalization to U.S. bilateral trade 1989-2001," Globalization and Monetary Policy Institute Working Paper 71, Federal Reserve Bank of Dallas.
  11. Agostino, Maria Rosaria & Aiello, Francesco & Cardamone, Paola, 2007. "Analyzing the Impact of Trade Preferences in Gravity Models. Does Aggregation Matter?," Working Papers 7294, TRADEAG - Agricultural Trade Agreements.
  12. Benjamin Shepherd & Patrick Messerlin, 2008. "Development Perspectives on Trade Growth at the Extensive Margin," Sciences Po publications info:hdl:2441/5341, Sciences Po.
  13. Katerina Gradeva & Inmaculada Martínez-Zarzoso, 2009. "Trade as Aid: The Role of the EBA-Trade Preferences Regime in the Development Strategy," Ibero America Institute for Econ. Research (IAI) Discussion Papers 197, Ibero-America Institute for Economic Research.
  14. Persson, Maria, 2013. "Trade Preferences from a Policy Perspective," Working Papers 2013:3, Lund University, Department of Economics.
  15. Christie, Andrew, 2009. "Special and Differential Treatment in the GATT: A Pyrrhic Victory for Developing Countries," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 10(2).

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