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The Impact of Trade Preferences Removal

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  • Gnutzmann, Hinnerk
  • Gnutzmann-Mkrtchyan, Arevik

Abstract

Under the Generalized System of Preferences (GSP), high-income countries grant unilateral trade preferences to developing countries. These preferences are subject to political conditionality, but little is known about the trade impact of loss of preferential access and the implications for political leverage implied by it. We study the EU’s withdrawal of GSP preferences from Belarus in 2007 in response to labour rights violations to fill this void. The withdrawal caused a significant drop in trade for affected products (26\% to 29\% trade decline) and some trade reduction at the extensive margin. However, there is little evidence of a GSP effect on total trade. This is due to the fact that the main exports of Belarus were not eligible for the GSP program.

Suggested Citation

  • Gnutzmann, Hinnerk & Gnutzmann-Mkrtchyan, Arevik, 2020. "The Impact of Trade Preferences Removal," Hannover Economic Papers (HEP) dp-663, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-663
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    References listed on IDEAS

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    1. Garth Frazer & Johannes Van Biesebroeck, 2010. "Trade Growth under the African Growth and Opportunity Act," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 128-144, February.
    2. Emanuel Ornelas & Marcos Ritel, 2020. "The not‐so‐generalised effects of the Generalized System of Preferences," The World Economy, Wiley Blackwell, vol. 43(7), pages 1809-1840, July.
    3. Gassebner, Martin & Gnutzmann-Mkrtchyan, Arevik, 2018. "Politicized trade: What drives withdrawal of trade preferences?," Economics Letters, Elsevier, vol. 167(C), pages 10-13.
    4. Emanuel Ornelas, 2016. "Special and Differential Treatment for Developing Countries," CESifo Working Paper Series 5823, CESifo.
    5. Daniel Lederman & Çaglar Özden, 2007. "Geopolitical Interests And Preferential Access To U.S. Markets," Economics and Politics, Wiley Blackwell, vol. 19(2), pages 235-258, July.
    6. Hoekman, Bernard & Ozden, Caglar, 2005. "Trade preferences and differential treatment of developing countries : a selective survey," Policy Research Working Paper Series 3566, The World Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    GSP; generalized system of preferences; preference withdrawal; political leverage; Belarus;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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