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Trade Preference Erosion: Expanded Assessment of Countries at Risk of Welfare Losses


  • Douglas C. Lippoldt
  • Przemyslaw Kowalski


This paper presents additional findings from the on-going work of the OECD project on trade preference erosion. The purpose was to assess in more detail the situation of those preference-reliant countries seen as being most at risk of experiencing negative welfare effects from preference erosion as a consequence of multilateral tariff liberalisation (building on Lippoldt and Kowalski, 2005). Based on a selection criterion, 7 developing countries were chosen for inclusion in the present study: Bangladesh, Madagascar, Morocco, Mozambique, Tanzania, Uganda and Zambia. Using the standard GTAP database and model, the paper considers a scenario of multilateral tariff liberalisation involving a 50% linear reduction in the ad-valorem equivalent measure of protection. Whereas most developing regions experienced welfare gains as a consequence of such a scenario, the selected countries were found to be at risk of modest welfare losses, most of which were associated with tariff liberalisation by European Union countries (EU-15). Where negative welfare impacts occurred in the selected developing countries, they tended to be driven primarily by terms of trade losses (especially by negative export price effects). In line with the modest size of the estimated welfare losses, the overall impact in terms of structural adjustment -- as measured by an index of structural change -- tended to be relatively modest. For three of the seven developing countries, welfare losses primarily associated with the EU-15 tariff liberalisation are estimated to be more than fully offset by greater gains arising from improved market access in other sectors and markets.

Suggested Citation

  • Douglas C. Lippoldt & Przemyslaw Kowalski, 2005. "Trade Preference Erosion: Expanded Assessment of Countries at Risk of Welfare Losses," OECD Trade Policy Papers 20, OECD Publishing.
  • Handle: RePEc:oec:traaab:20-en
    DOI: 10.1787/175838456867

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    Cited by:

    1. Jan Hagemejer & Ewa Kaliszuk, 2007. "Wpływ redukcji ceł na towary nierolne w rundzie Doha na handel zagraniczny Polski," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 5-6, pages 61-83.
    2. Ben Hammouda, Hakim & Osakwe, Patrick N., 2006. "Global Trade Models and Economic Policy Analyses: Relevance, Risks and Repercussions for Africa," MPRA Paper 1851, University Library of Munich, Germany.
    3. Mohamed Hedi Bchir & Stephen N. Karingi & Andrew Mold & Patrick N. Osakwe & Mustapha Sadni Jallab, 2007. "The Doha development round and Africa: partial and general equilibrium analyses of tariff preference erosion," Agricultural Economics, International Association of Agricultural Economists, vol. 37(s1), pages 287-295, December.
    4. Marilyne Huchet-Bourdon & Anna Lipchitz & Audrey Rousson, 2009. "Aid for Trade in Developing Countries: Complex Linkages for Real Effectiveness," African Development Review, African Development Bank, vol. 21(2), pages 243-290.
    5. 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


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