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Generalized System of Preferences and Graduation: Is there a Parallel with Infant Industries?

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  • Kerr, William A.

Abstract

The generalized system of preferences (GSP) is an accepted part of trade and development policy. Their rational and expected outcome are strikingly similar to those associated with the promotion of infant industries through the imposition of tariffs. One common thread in both GSP and infant industry arguments is that the benefits offered should only be temporary – until the affected industries become internationally competitive. For GSPs the temporary nature of the protection is institutionalized in the idea of graduation. In the case of infant industries, it is observed that they never grow up – they do not become internationally competitive – and they often can successfully lobby to retain their protection. This is not the case with GSP graduation, but there is no reason to be optimistic that firms receiving GSP benefits will have become internationally competitive. Thus, they may face similar adjustment costs to those that are deemed unacceptable in the case of firms protected under the auspices of infant industry policy. This asymmetry suggests a further examination of GSP schemes, and graduation in particular, is warranted.

Suggested Citation

  • Kerr, William A., 2021. "Generalized System of Preferences and Graduation: Is there a Parallel with Infant Industries?," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 22(2), December.
    • Handle: RePEc:ags:ecjilt:316791
    DOI: 10.22004/ag.econ.316791
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    References listed on IDEAS

    as
    1. William A. Kerr, 2007. "Capitalization of Trade Policy Benefits," Chapters, in: William A. Kerr & James D. Gaisford (ed.), Handbook on International Trade Policy, chapter 25, Edward Elgar Publishing.
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    4. Baldwin, Robert E, 1969. "The Case against Infant-Industry Tariff Protection," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 295-305, May/June.
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