The trade and welfare impacts of multilateral liberalization on individual countries and groups within countries depend on many factors—including the depth of liberalization by trading partners, the extent of countries’ own reforms, the responsiveness of investors to changes in relative prices and market opportunities, and actions by governments to reduce real trade costs. One consequence of multilateral liberalization is that it reduces the value of preferential access to markets that one or more countries have granted to other countries. Such preference erosion has become more of a policy concern for the least developed countries following initiatives by many Organization for Economic Co-operation and Development (OECD) members to provide duty-free, quota-free access to their markets on a nonreciprocal basis. But erosion will also affect other developing countries that have received preferences, as well as economies that have signed reciprocal trade agreements. The magnitude of erosion will depend on a variety of factors, including the product and country coverage of preferential schemes, the level of most favored nation restrictions in the markets granting preferential access, the administrative costs associated with using preference programs, the incidence of any preference rents, the depth of liberalization realized in Doha, and the existence of and changes in reciprocal trade agreements. Recent studies of European Union (EU) and U.S. preference arrangements have concluded that the value of preferences—measured by the product of the volume of dutiable exports and the preference margin—is significant for a relatively small number of countries. Thus, U.S. preferences are equal to 5 percent or more of dutiable exports for some 27 countries (Dean and Wainio 2006), while EU preferences exceed 6 percent of dutiable exports for 16 countries (excluding preferential trade area partners; Candau and Jean 2006). These studies conclude that apparel and some agricultural products—especially sugar and bananas in the EU—account for the largest share of the value of preferences. While for some countries, trade coverage is large relative to total dutiable exports to the markets concerned, the aggregate value of the preferences—and thus potential losses—is relatively small and will diminish when the EU reforms in sugar and bananas are implemented.1