Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization

The proliferation of preferential trade liberalization over the past 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that industrial countries provide to...

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Main Authors: Limão, Nuno, Olarreaga, Marcelo
Format: Policy Research Working Paper
Language:English
Published: World Bank, Washington, DC 2012
Subjects:
CD
GDP
WTO
Online Access:http://documents.worldbank.org/curated/en/2005/04/5752850/trade-preferences-small-developing-countries-welfare-costs-lost-multilateral-liberalization
http://hdl.handle.net/10986/9022
id okr-10986-9022
recordtype oai_dc
spelling okr-10986-90222021-04-23T14:02:42Z Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization Limão, Nuno Olarreaga, Marcelo AGRICULTURE APPAREL APPAREL PRODUCTS AVERAGE TARIFF BALANCE OF PAYMENTS BARGAINING POWER BENCHMARK CD COMPARATIVE ADVANTAGE COMPETITIVE POSITION DEMAND ELASTICITIES DEMAND ELASTICITY DEVELOPED COUNTRIES DEVELOPMENT ASSISTANCE DIRECT TRANSFERS DUTY FREE DUTY-FREE ACCESS DYNAMIC GAINS EMPIRICAL EVIDENCE ENVIRONMENTAL STANDARDS EQUILIBRIUM EQUILIBRIUM MODEL EXPORT DATA EXPORT MARKETS EXPORT PRICE EXPORT QUANTITIES EXPORT REVENUE EXPORT SUPPLY EXPORTERS EXPORTS EXTERNALITIES EXTERNALITY FREE ACCESS FREER TRADE GATT/WTO GDP GENERALIZED SYSTEM OF PREFERENCES HUMAN RIGHTS IMPORT DEMAND IMPORT QUANTITIES IMPORT SIDE IMPORT SUBSIDY IMPORT TARIFFS IMPORTS INCOME INCOME COUNTRIES INCOME EFFECT INTELLECTUAL PROPERTY INTERNATIONAL TRADE LDCS LEGISLATION MARGINAL BENEFIT MARGINAL UTILITY MARKET ACCESS MFN TARIFFS MOST-FAVORED-NATION MULTILATERAL LIBERALIZATION MULTILATERAL TARIFFS MULTILATERAL TRADE MULTILATERAL TRADE LIBERALIZATION MULTILATERAL TRADE NEGOTIATIONS NEGOTIATING PARTIES NEGOTIATION RESOURCES NET EXPORTS NON-TRADE ISSUES OPPORTUNITY COST POLITICAL ECONOMY PREFERENCE EROSION PREFERENCE SCHEMES PREFERENTIAL ACCESS PREFERENTIAL AGREEMENT PREFERENTIAL LIBERALIZATION PREFERENTIAL MARGIN PREFERENTIAL MARGINS PREFERENTIAL SCHEME PREFERENTIAL TARIFF PREFERENTIAL TARIFF MARGIN PREFERENTIAL TARIFFS PREFERENTIAL TRADE PREFERENTIAL TRADE AGREEMENTS PREFERENTIAL TRADE LIBERALIZATION PREFERENTIAL TREATMENT PRICE CHANGES PRICE EFFECTS PRICE SUPPORT PRODUCERS PRODUCTS ORIGINATING REGIONAL BLOC RULES OF ORIGIN SCALE EFFECT TARIFF CONCESSIONS TARIFF DATA TARIFF LIBERALIZATION TARIFF LINES TARIFF REDUCTION TARIFF REDUCTIONS TARIFF REVENUE TRADE BARRIERS TRADE DATA TRADE DIVERSION TRADE EFFECT TRADE EFFECTS TRADE NEGOTIATIONS TRADE PREFERENCES TRADE VOLUMES TRADING PARTNERS TRADING SYSTEM UNILATERAL PREFERENCE PROGRAMS UNILATERAL PREFERENCES UNILATERAL TRADE URUGUAY ROUND WEIGHTED TARIFF WELFARE EFFECTS WELFARE GAINS WORLD MARKET WORLD MARKETS WORLD PRICE WORLD PRICES WORLD TRADE WTO The proliferation of preferential trade liberalization over the past 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that industrial countries provide to small and poor countries but there is no estimate of the resulting welfare costs. To avoid this stumbling block effect the authors suggest replacing unilateral preferences by a fixed import subsidy. They argue that this scheme would reduce the drag of preferences on multilateral liberalization and generate a Pareto improvement. More important, the authors provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. By combining recent estimates of the stumbling block effect of preferences with data for 170 countries and over 5,000 products they calculate the welfare effects of the United States, European Union, and Japan switching from unilateral preferences to the developing countries to the import subsidy scheme. Even in a model with no dynamic gains to trade the authors find that the switch produces an annual net welfare gain for the 170 countries ($4,354 million) and for each group: the United States, European Union, and Japan ($2,934 million), the developing countries ($520 million), and the rest of the world ($900 million). 2012-06-26T14:42:33Z 2012-06-26T14:42:33Z 2005-04 http://documents.worldbank.org/curated/en/2005/04/5752850/trade-preferences-small-developing-countries-welfare-costs-lost-multilateral-liberalization http://hdl.handle.net/10986/9022 English Policy Research Working Paper; No. 3565 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic AGRICULTURE
APPAREL
APPAREL PRODUCTS
AVERAGE TARIFF
BALANCE OF PAYMENTS
BARGAINING POWER
BENCHMARK
CD
COMPARATIVE ADVANTAGE
COMPETITIVE POSITION
DEMAND ELASTICITIES
DEMAND ELASTICITY
DEVELOPED COUNTRIES
DEVELOPMENT ASSISTANCE
DIRECT TRANSFERS
DUTY FREE
DUTY-FREE ACCESS
DYNAMIC GAINS
EMPIRICAL EVIDENCE
ENVIRONMENTAL STANDARDS
EQUILIBRIUM
EQUILIBRIUM MODEL
EXPORT DATA
EXPORT MARKETS
EXPORT PRICE
EXPORT QUANTITIES
EXPORT REVENUE
EXPORT SUPPLY
EXPORTERS
EXPORTS
EXTERNALITIES
EXTERNALITY
FREE ACCESS
FREER TRADE
GATT/WTO
GDP
GENERALIZED SYSTEM OF PREFERENCES
HUMAN RIGHTS
IMPORT DEMAND
IMPORT QUANTITIES
IMPORT SIDE
IMPORT SUBSIDY
IMPORT TARIFFS
IMPORTS
INCOME
INCOME COUNTRIES
INCOME EFFECT
INTELLECTUAL PROPERTY
INTERNATIONAL TRADE
LDCS
LEGISLATION
MARGINAL BENEFIT
MARGINAL UTILITY
MARKET ACCESS
MFN TARIFFS
MOST-FAVORED-NATION
MULTILATERAL LIBERALIZATION
MULTILATERAL TARIFFS
MULTILATERAL TRADE
MULTILATERAL TRADE LIBERALIZATION
MULTILATERAL TRADE NEGOTIATIONS
NEGOTIATING PARTIES
NEGOTIATION RESOURCES
NET EXPORTS
NON-TRADE ISSUES
OPPORTUNITY COST
POLITICAL ECONOMY
PREFERENCE EROSION
PREFERENCE SCHEMES
PREFERENTIAL ACCESS
PREFERENTIAL AGREEMENT
PREFERENTIAL LIBERALIZATION
PREFERENTIAL MARGIN
PREFERENTIAL MARGINS
PREFERENTIAL SCHEME
PREFERENTIAL TARIFF
PREFERENTIAL TARIFF MARGIN
PREFERENTIAL TARIFFS
PREFERENTIAL TRADE
PREFERENTIAL TRADE AGREEMENTS
PREFERENTIAL TRADE LIBERALIZATION
PREFERENTIAL TREATMENT
PRICE CHANGES
PRICE EFFECTS
PRICE SUPPORT
PRODUCERS
PRODUCTS ORIGINATING
REGIONAL BLOC
RULES OF ORIGIN
SCALE EFFECT
TARIFF CONCESSIONS
TARIFF DATA
TARIFF LIBERALIZATION
TARIFF LINES
TARIFF REDUCTION
TARIFF REDUCTIONS
TARIFF REVENUE
TRADE BARRIERS
TRADE DATA
TRADE DIVERSION
TRADE EFFECT
TRADE EFFECTS
TRADE NEGOTIATIONS
TRADE PREFERENCES
TRADE VOLUMES
TRADING PARTNERS
TRADING SYSTEM
UNILATERAL PREFERENCE PROGRAMS
UNILATERAL PREFERENCES
UNILATERAL TRADE
URUGUAY ROUND
WEIGHTED TARIFF
WELFARE EFFECTS
WELFARE GAINS
WORLD MARKET
WORLD MARKETS
WORLD PRICE
WORLD PRICES
WORLD TRADE
WTO
spellingShingle AGRICULTURE
APPAREL
APPAREL PRODUCTS
AVERAGE TARIFF
BALANCE OF PAYMENTS
BARGAINING POWER
BENCHMARK
CD
COMPARATIVE ADVANTAGE
COMPETITIVE POSITION
DEMAND ELASTICITIES
DEMAND ELASTICITY
DEVELOPED COUNTRIES
DEVELOPMENT ASSISTANCE
DIRECT TRANSFERS
DUTY FREE
DUTY-FREE ACCESS
DYNAMIC GAINS
EMPIRICAL EVIDENCE
ENVIRONMENTAL STANDARDS
EQUILIBRIUM
EQUILIBRIUM MODEL
EXPORT DATA
EXPORT MARKETS
EXPORT PRICE
EXPORT QUANTITIES
EXPORT REVENUE
EXPORT SUPPLY
EXPORTERS
EXPORTS
EXTERNALITIES
EXTERNALITY
FREE ACCESS
FREER TRADE
GATT/WTO
GDP
GENERALIZED SYSTEM OF PREFERENCES
HUMAN RIGHTS
IMPORT DEMAND
IMPORT QUANTITIES
IMPORT SIDE
IMPORT SUBSIDY
IMPORT TARIFFS
IMPORTS
INCOME
INCOME COUNTRIES
INCOME EFFECT
INTELLECTUAL PROPERTY
INTERNATIONAL TRADE
LDCS
LEGISLATION
MARGINAL BENEFIT
MARGINAL UTILITY
MARKET ACCESS
MFN TARIFFS
MOST-FAVORED-NATION
MULTILATERAL LIBERALIZATION
MULTILATERAL TARIFFS
MULTILATERAL TRADE
MULTILATERAL TRADE LIBERALIZATION
MULTILATERAL TRADE NEGOTIATIONS
NEGOTIATING PARTIES
NEGOTIATION RESOURCES
NET EXPORTS
NON-TRADE ISSUES
OPPORTUNITY COST
POLITICAL ECONOMY
PREFERENCE EROSION
PREFERENCE SCHEMES
PREFERENTIAL ACCESS
PREFERENTIAL AGREEMENT
PREFERENTIAL LIBERALIZATION
PREFERENTIAL MARGIN
PREFERENTIAL MARGINS
PREFERENTIAL SCHEME
PREFERENTIAL TARIFF
PREFERENTIAL TARIFF MARGIN
PREFERENTIAL TARIFFS
PREFERENTIAL TRADE
PREFERENTIAL TRADE AGREEMENTS
PREFERENTIAL TRADE LIBERALIZATION
PREFERENTIAL TREATMENT
PRICE CHANGES
PRICE EFFECTS
PRICE SUPPORT
PRODUCERS
PRODUCTS ORIGINATING
REGIONAL BLOC
RULES OF ORIGIN
SCALE EFFECT
TARIFF CONCESSIONS
TARIFF DATA
TARIFF LIBERALIZATION
TARIFF LINES
TARIFF REDUCTION
TARIFF REDUCTIONS
TARIFF REVENUE
TRADE BARRIERS
TRADE DATA
TRADE DIVERSION
TRADE EFFECT
TRADE EFFECTS
TRADE NEGOTIATIONS
TRADE PREFERENCES
TRADE VOLUMES
TRADING PARTNERS
TRADING SYSTEM
UNILATERAL PREFERENCE PROGRAMS
UNILATERAL PREFERENCES
UNILATERAL TRADE
URUGUAY ROUND
WEIGHTED TARIFF
WELFARE EFFECTS
WELFARE GAINS
WORLD MARKET
WORLD MARKETS
WORLD PRICE
WORLD PRICES
WORLD TRADE
WTO
Limão, Nuno
Olarreaga, Marcelo
Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
relation Policy Research Working Paper; No. 3565
description The proliferation of preferential trade liberalization over the past 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that industrial countries provide to small and poor countries but there is no estimate of the resulting welfare costs. To avoid this stumbling block effect the authors suggest replacing unilateral preferences by a fixed import subsidy. They argue that this scheme would reduce the drag of preferences on multilateral liberalization and generate a Pareto improvement. More important, the authors provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. By combining recent estimates of the stumbling block effect of preferences with data for 170 countries and over 5,000 products they calculate the welfare effects of the United States, European Union, and Japan switching from unilateral preferences to the developing countries to the import subsidy scheme. Even in a model with no dynamic gains to trade the authors find that the switch produces an annual net welfare gain for the 170 countries ($4,354 million) and for each group: the United States, European Union, and Japan ($2,934 million), the developing countries ($520 million), and the rest of the world ($900 million).
format Publications & Research :: Policy Research Working Paper
author Limão, Nuno
Olarreaga, Marcelo
author_facet Limão, Nuno
Olarreaga, Marcelo
author_sort Limão, Nuno
title Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
title_short Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
title_full Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
title_fullStr Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
title_full_unstemmed Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization
title_sort trade preferences to small developing countries and the welfare costs of lost multilateral liberalization
publisher World Bank, Washington, DC
publishDate 2012
url http://documents.worldbank.org/curated/en/2005/04/5752850/trade-preferences-small-developing-countries-welfare-costs-lost-multilateral-liberalization
http://hdl.handle.net/10986/9022
_version_ 1764407251416645632