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Trade Preference Erosion: Potential Economic Impacts

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  • Douglas C. Lippoldt
  • Przemyslaw Kowalski

Abstract

This paper presents the new findings from the on-going work of the OECD project on trade preference erosion. Following a review of the recent literature, the paper develops two main types of analysis. First, a detailed statistical analysis is undertaken drawing on the trade preferences database developed by the Secretariat and covering the Quad countries and Australia. This includes a presentation of the structure of tariff regimes in these key developed countries and identification of countries and sectors that are most reliant on tariff preferences. The second analytical approach uses the standard model and database of the Global Trade Analysis Project to simulate trade liberalisation scenarios that would entail preference erosion. While highlighting a number of cases of preference reliance, the paper underscores the advantages of multilateral liberalisation. Globally and for a majority of developing regions, liberalisation by preference-granting countries will result in positive welfare gains, notwithstanding the effects of preference erosion. In a comparatively small number of cases, however, the analysis points to a risk of net welfare losses under the scenarios modelled here.

Suggested Citation

  • Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Potential Economic Impacts," OECD Trade Policy Papers 17, OECD Publishing.
  • Handle: RePEc:oec:traaab:17-en
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    File URL: http://dx.doi.org/10.1787/217558400455
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    Cited by:

    1. Erika Vianna Grossrieder, 2006. "Preference Erosion: The case of Bangladesh - A SUR-EC-AR Gravity Model of Trade," IHEID Working Papers 18-2007, Economics Section, The Graduate Institute of International Studies, revised Aug 2007.
    2. Aussilloux, Vincent & Gallezot, Jacques, 2006. "Collected Customs Duties: A Comparative Analysis of the Protection Applied by the US and the EU," Working Papers 18871, TRADEAG - Agricultural Trade Agreements.
    3. Anania, Giovanni, 2010. "EU Economic Partnership Agreements and WTO negotiations. A quantitative assessment of trade preference granting and erosion in the banana market," Food Policy, Elsevier, vol. 35(2), pages 140-153, April.
    4. Sam LAIRD, 2007. "Aid for Trade: Cool Aid or Kool-Aid?," G-24 Discussion Papers 48, United Nations Conference on Trade and Development.
    5. Robert Z. Lawrence & Tatiana Rosito, 2006. "A New Compensation Mechanism for Preference Erosion in the Doha Round," IDB Publications (Working Papers) 2408, Inter-American Development Bank.
    6. Lawrence, Robert Z. & Rosito, Tatiana, 2006. "A New Compensation Mechanism for Preference Erosion in the Doha Round," Working Paper Series rwp06-044, Harvard University, John F. Kennedy School of Government.
    7. Osakwe, Patrick N., 2006. "Emerging Issues and Concerns of African Countries in the WTO Negotiations on Agriculture and the Doha Round," MPRA Paper 1850, University Library of Munich, Germany.
    8. Lawrence, Robert Z. & Rosito, Tatiana, 2006. "A New Compensation Mechanism for Preference Erosion in the Doha Round," Working Paper Series rwp06-044, Harvard University, John F. Kennedy School of Government.
    9. Bob Fisher, 2006. "Preference Erosion, Government Revenues and Non-tariff Trade Barriers," The World Economy, Wiley Blackwell, vol. 29(10), pages 1377-1393, October.

    More about this item

    Keywords

    CGE simulation; developing countries; multilateral trade negotiations; nonreciprocal preferences; preference erosion; tariff reductions;

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