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Trade diversion under selective preferential market access

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  • Borchert, Ingo

Abstract

Through its diverse trade preference schemes, the European Union provides different groups of developing countries with different degrees of market access. This paper is the first to demonstrate empirically that such staggered market access induces sizable trade diversion to the detriment of relatively less preferred beneficiary countries. In particular, preferences granted to African, Caribbean and Pacific economies are shown to impair the export performance of seven developing countries whose products only qualify for basic preferences under the Generalized System of Preferences. Exports to the European Union decline by about 30 percent if the African, Caribbean and Pacific tariff falls by 10 percentage points. In terms of forgone trade volume, losses for these relatively disadvantaged countries amount on average to 9 percent of their total trade with the European Union, depending on the country and its main exports. These intra-developing country distortions are driven by highly substitutable, often labor-intensive commodities.

Suggested Citation

  • Borchert, Ingo, 2008. "Trade diversion under selective preferential market access," Policy Research Working Paper Series 4710, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4710
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    References listed on IDEAS

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    Cited by:

    1. Emanuel Ornelas, 2016. "Special and Differential Treatment for Developing Countries," CESifo Working Paper Series 5823, CESifo Group Munich.
    2. Maria Cipollina & Luca Salvatici, 2010. "The trade impact of European Union agricultural preferences," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 13(1), pages 87-106.
    3. Katerina Gradeva & Inmaculada Martínez-Zarzoso, 2009. "Trade as Aid: The Role of the EBA-Trade Preferences Regime in the Development Strategy," Ibero America Institute for Econ. Research (IAI) Discussion Papers 197, Ibero-America Institute for Economic Research.
    4. Persson, Maria, 2013. "Trade Preferences from a Policy Perspective," Working Papers 2013:3, Lund University, Department of Economics.
    5. Maria Cipollina & David Laborde Debucquet & Luca Salvatici, 2017. "The tide that does not raise all boats: an assessment of EU preferential trade policies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 199-231, February.

    More about this item

    Keywords

    Free Trade; Trade Policy; Trade Law; Debt Markets; International Trade and Trade Rules;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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