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Preference Erosion and Multilateral Trade Liberalization

  • Francois, Joseph
  • Hoekman, Bernard
  • Manchin, Miriam

Because of concern that OECD tariff reductions will translate into worsening export performance for the least developed countries, trade preferences have proven a stumbling block to developing country support for multilateral liberalization. We examine the actual scope for preference erosion, including an econometric assessment of the actual utilization, and also the scope for erosion estimated by modeling full elimination of OECD tariffs and hence full MFN liberalization-based preference erosion. Preferences are underutilized due to administrative burden — estimated to be at least 4% on average — reducing the magnitude of erosion costs significantly. For those products where preferences are used (are of value), the primary negative impact follows from erosion of EU preferences. This suggests the erosion problem is primarily bilateral rather than a WTO-based concern.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5153.

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Date of creation: Jul 2005
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Handle: RePEc:cpr:ceprdp:5153
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  1. Brenton, Paul, 2003. "Integrating the least developed countries into the world trading system : the current impact of EU preferences under everything but arms," Policy Research Working Paper Series 3018, The World Bank.
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