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Accounting for underutilization of trade preference programs: The US generalized system of preferences

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  • Shushanik Hakobyan

Abstract

The US Generalized System of Preferences (GSP) provides duty‐free market access to developing countries. Yet despite these preferences, about 40% of imports qualifying for GSP enter the US without claiming the benefits. This paper documents variations in GSP utilization rates and explains their determinants with a special emphasis on the production structure of beneficiary countries as captured by local content. The findings suggest that higher local content shares in output lead to higher utilization rates. In addition, the utilization rate rises with the preference margin, size of exports and regional cumulation, in general, and declines with degree ofprocessing. Expliquer la sous‐utilisation des programmes de préférences commerciales : le système généralisé de préférences des États‐Unis. Le système généralisé de préférences (SGP) donne accès sans droits de douane au marché américain pour des pays en développement. Mais malgré ce traitement de faveur, à peu près 40 % des importations qui se qualifieraient entrent aux États‐Unis sans réclamer ces avantages. Ce mémoire documente les variations dans le taux d'utilisation du SGP, et les facteurs qui peuvent expliquer ce phénomène, en mettant l'accent sur la structure de production des pays bénéficiaires telle que saisie par le contenu local. Les résultats suggèrent qu'une portion élevée de contenu local dans le produit entraîne un plus haut taux d'utilisation du SGP. De plus, le taux d'utilisation s'accroît avec la marge de préférence, la taille des exportations, et la cumulation d'autres arrangements régionaux, et diminue à proportion que le degré de transformation s'accroît.

Suggested Citation

  • Shushanik Hakobyan, 2015. "Accounting for underutilization of trade preference programs: The US generalized system of preferences," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(2), pages 408-436, May.
    • Handle: RePEc:wly:canjec:v:48:y:2015:i:2:p:408-436
    DOI: 10.1111/caje.12131
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