Assessing Trade Policy Changes Induced by Graduation

Abstract

There are few studies that specifically look at the potential effects arising from graduation from preferential trade regimes. Instead, most of the literature focuses on changes in preferential tariffs and resultant trade effects. This chapter provides an analytical framework that recognises how firms set their pricing in a given market and consider the actions of other exporters, as well as how a firm's market share, in turn, influences its price-setting policy. This is because the potential for trade shifts to arise as a response to price changes depends on the price elasticities of demand and firms' market shares.