Liberalising Trade Policy and Industrial Protection: the European Union GSP Sensitivity Issue

This paper deals with the concept of industrial “sensitivity” as a justification of the safeguard clause included in EU preferential trade agreements. To protect specific industries somehow considered more exposed to structural adjustment costs does not appear to be a comprehensive motivation. The subjective nature of the sensitivity (in other words, its arbitrariness) however, emerges clearly. We have adopted an analytical model called the “Sensitivity Diamond” in order to evaluate this fact within the new EU GSP scheme. The proposed model is based on three central variables: the (geographic) market concentration, the market competition level and the Trade Balance performance. Surprisingly, only the geographic concentration seems to be significant; furthermore, the obtained protection often appears to be a nonsense determined by a sort of “Defence of the Dominant”. The subjective aspect of sensitivity emerges from a community decision-making process which is affected by non-economic factors overcoming any economic and objective evidence. It represents further evidence of the existence of what has been called the “market of protection”.