DFQF Market Access Schemes Offered by the QUAD Countries to Least Developed Countries’ Products and the Volatility of the Utilization Rate of these Schemes

Abstract

Members of the World Trade Organization (WTO) have been keen in supporting the integration of the least developed countries (LDCs) into the global trading system. A major Decision adopted by WTO Trade Ministers in favor of LDCs was the one concerning the Duty-Free-Quota-Free (DFQF) market access for products originating in LDCs. This paper investigates whether the DFQF market access schemes offered by the Quadrilateral (i.e., Canada, the European Union, Japan and the United States) to LDCs have helped reduce the volatility of the utilization rates of these generous preferences. To perform the analysis, we compare LDCs’ performance in terms of the volatility of the utilization rate of the DFQF market access schemes with countries that would have been included in the LDC category but were not. These countries did not enjoy the benefits of the DFQF schemes, as their products received less generous preferential treatment than LDCs’ products. The comparison of the performance of LDCs with this set of countries was made over the period 2014-2019 versus the period 2004–2013. Results have revealed that the DFQF market access initiative has genuinely been instrumental in reducing the volatility of the utilization rate of these generous preferences schemes by LDCs. Moreover, countries with higher utilization rates of GSP programs experience a larger negative effect of the DFQF schemes on the volatility of the utilization of GSP programs than countries with lower utilization rates of these programs. The policy implications of the analysis are discussed.