The Perversity of Preferences : The Generalized System of Preferences and Developing Country Trade Policies, 1976-2000
Industrial countries maintain special tariff preferences, namely the Generalized System of Preferences (GSP), for imports from developing countries. Critics have highlighted the underachieving nature of such preferences, but developing countries co...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/01/2120331/perversity-preferences-gsp-developing-country-trade-policies-1976-2000 http://hdl.handle.net/10986/19170 |
| Summary: | Industrial countries maintain special
tariff preferences, namely the Generalized System of
Preferences (GSP), for imports from developing countries.
Critics have highlighted the underachieving nature of such
preferences, but developing countries continue to place the
GSP at the heart of their agenda in multilateral
negotiations. What effect do such preferences have on a
recipient's own trade policies? The authors develop and
test a simple theoretical model of a small country's
trade policy choice, using a dataset of 154 developing
countries from 1976 through 2000. They find that countries
removed from the GSP adopt more liberal trade policies than
those remaining eligible. The results, corrected for
endogeneity and robust to numerous alternative measures of
trade policy, suggest that developing countries may be best
served by full integration into the reciprocity-based world
trade regime rather than continued GSP-style special preferences. |
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