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A preference for development: the law and economics of GSP


The Generalized System of Preferences (GSP), authorized by the 1979 Enabling Clause under GATT, allows importing nations to extend preferential tariff treatment to the products of developing countries. India recently brought a successful WTO complaint challenging aspects of the EC preference scheme, claiming that it impermissibly discriminated among developing countries. We analyze the law and economics of discrimination within GSP schemes, assessing the implications of the Appellate Body decision in the case brought by India, and noting the economic costs and benefits of imposing tight nondiscrimination obligations on trade preferences for developing countries. We conclude that the case against discriminatory preferences is at best an uneasy one, both in legal and in economic terms. We also note that the ostensible justification for GSP schemes in the fist instance to promote growth and development is unlikely to be served terribly well by existing GSP policy.

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Article provided by Cambridge University Press in its journal World Trade Review.

Volume (Year): 4 (2005)
Issue (Month): 01 (March)
Pages: 41-67

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Handle: RePEc:cup:wotrrv:v:4:y:2005:i:01:p:41-67_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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