Generalized System Of Preferences Research Articles

Potential Impact of Withdrawal of Generalized System of Preferences for India by European Union

Trade between India and Europe has been growing at strong pace for the last two decades. India’s goods exports to Europe have increased from USD 12.3 Bn in 2002 to USD 68.9 Bn in 2002. During the same time period India’s export products eligible for Europe Generalized System of Preferences (GSP) has also risen in absolute terms from USD 5.8 Bn in 2002 to USD 19.7 Bn in 2022. While the absolute value of GSP covered products has increased, the percentage coverage of India’s export products eligible for Europe GSP has fallen from 47% in 2002 to just 29% in 2022. Since, the end of 2022, India is graduating out of many sectors covered under the GSP regime. While, this is a major concern for policymakers, and exporters in general, the potential impact has not been quantified. This article quantifies this impact applying CGE modelling through GTAP. The results show that, while India’s overall exports are affected only to a minimum extent by the removal of GSP, it is mainly due to the growth in non-GSP sectors and services exports. However, the negative shock on some labour-intensive sectors will have an impact on the country’s overall GDP.

Effects of Wage Differentials, MFA, and GSP on Exports in the Bangladesh Textile and Garment Industry

ABSTRACT In this paper, we investigate the effect of inter-country wage differentials on textile and garment (T&G) exports of Bangladesh and present an account of the important issue of why textile and garment exports are directed from developing countries to developed countries. Our empirical results imply that the wage differentials between developed and developing countries constitute one of the main drivers of T&G exports. In addition, we checked other factors such as the Multi-Fiber Arrangement (MFA) and the Generalized System of Preferences (GSP) by including dummy variables representing the MFA quota withdrawal and the GSP. We found that removal of the MFA had a significant negative effect, as expected. Our study confirms the positive correlation between GSP and exports. After phasing out the MFA and its quota system, the wage differentials not only boost the T&G exports from Bangladesh, but also increase the effectiveness of GSP. Given such findings, we discuss relevant policy implications.

Institutional factors of international trade: A case of the European Union’s Generalized System of Preferences and World Trade Organization

Institutional factors of international trade: A case of the European Union’s Generalized System of Preferences and World Trade Organization

The Generalized System of Preferences and NGO activism

Can NGOs contribute to the implementation of Labor Laws in a developing country? We exploit as a quasi-natural experiment the renegotiation of the Generalized System of Preferences (GSP) between the US and Indonesia in 1994, which induced the Indonesian government to raise the level of the legal minimum wage. Using data from Indonesian manufacturing firms, a diff-in-diff analysis and an event study show that the activism of workers’ rights groups helped increase firm-level average wages up to the minimum-wage level, not only inside but also outside the export sector. Labor NGO activism helped to implement the new minimum wage standards in a country that lacked strong governmental institutions.

Asymmetric Cold War Trade: Romania and the Generalized System of Preferences (1968–1979)

This article investigates Romania’s position towards the creation and functioning of the Generalized System of Preferences (GSP), with a special focus on its interaction with the European Economic Community (EEC). The period under investigation is limited to the 1970s, which was not only the first decade of the implementation of the GSP, but also a time of détente arguably favouring international cooperation and trade. This article argues that Romania did not conceptualise its foreign policy (economic foreign policy included) in terms of East against West, socialism against capitalism or command economy against free market economy but rather in terms of smaller states/powers against bigger states/powers and less developed (poor) countries against developed (rich) countries, regardless of their socio-economic systems and Cold War alliances.

Retrospective analysis of exports and imports between Georgia and the United States

The article analyzes exports and imports between Georgia and the United States during the period from 2015 to 2020. This period is used to calculate the specific weight of the United States trade with Georgia, both in exports and imports. In addition, the article analyzes the advantages of GSP (Generalized System of Preferences) trading regime in Georgian exports, the export-import balance and the relevant conclusions are made based on the obtained results; The commodity structure of Georgia's exports and imports to the United States is also studied. The article shows that a recent Free Trade Agreement is needed to move Georgia and the United States into a new phase in trade relations. Keywords: Georgia; USA; GSP; Export; Import; Balance; Commodity structure; FTA.

Trade-Based Solutions for Revitalizing Post-Conflict Economies

International trade improves efficiency in home markets, creates new sources of demand for domestic industries, and boosts worker productivity. However, some types of trade are better than others for reviving the economies of countries emerging from internal or international armed conflicts. This note evaluates existing trade mechanisms that ostensibly help developing countries but fail to actually do so. It ultimately recommends the use of investor-state partnerships over trade-based mechanisms as the appropriate tool for improving the economies of post-conflict states. Part I evaluates a number of these existing trade mechanisms, including preferential trade agreements and the General System of Preferences. Part II raises two problems unique to post-conflict countries that must be factored into any analysis of how to best help their economies: aid dependency and resource dependency. Part III undertakes several historical comparisons to examine the effects of these measures in practice. It offers a set of brief case studies into postwar reconstruction efforts in Germany and Japan after World War II and Iraq after the First Gulf War. Finally, Part IV distills the lessons learned from these inquiries and presents “build-operate-transfer” schemes as the “ideal” way to boost tradable goods sectors in post-conflict countries and ensure that funds used to do so are directed to their purposes effectively and efficiently.

Costs of LDC graduation on market access: evidence from emerging Bangladesh

We empirically estimate the costs of LDC graduation on market access for Bangladesh using a computable general equilibrium modelling framework. If developed countries impose standard generalized system of preferences (GSP) tariffs while importing from Bangladesh and at the same time Bangladesh eliminates its export subsidies, our modelling suggests that real gross domestic product (GDP) may drop by about 0.38 per cent and exports could fall by about six percent for Bangladesh. The ready-made garment sector could be affected severely, with results suggesting exports could decline by about 14 per cent. Our analysis indicates that the income of urban households could decrease by three per cent, and household consumption may shrink by about four per cent. To minimize these potentially adverse impacts, Bangladesh should aim to ensure market access continues through signing preferential trade agreements. In addition, streamlined subsidy policies, enhanced domestic productivity, export diversification, and increased foreign investment, are likely to be important areas of focus for a smooth LDC graduation.

Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences Offered by the QUAD Countries

This paper investigates the effect of Aid for Trade (AfT) flows and foreign direct investment (FDI) inflows, as well as their interplay on the utilization of non-reciprocal trade preferences (NRTPs) offered by the Quadrilaterals (i.e., QUAD countries, which are Canada, the European Union, Japan, and the United States). Two major blocks of NRTPs provided by the QUAD countries have been considered, namely, the Generalized System of Preferences (GSP) programs and other NRTPs. The analysis has covered 114 beneficiary countries of these NRTPs and the period of 2002–2018. Several findings have emerged from the analysis. Total AfT flows and FDI inflows contribute to enhancing the utilization rate of both GSP programs and other NRTPs, and are strongly complementary in affecting positively the utilization of both types of NRTPs. Finally, beneficiary countries’ level of export product diversification matters for the effect of both AfT flows and FDI inflows on the utilization of NRTPs. The conclusion section discusses the implications of these findings.

US Trade Preference and Export Performance of Sub-Saharan Africa (SSA): Evidence from the African Growth and Opportunity Act (AGOA)

AbstractThe African Growth and Opportunity Act (AGOA) was signed into law in May 2000 to encourage increased trade and investment between the United States and Sub-Saharan Africa (SSA). It provides eligible countries with duty free access to the US market for over 1800 products in addition to those available under the Generalized System of Preferences (GSP). The benefits extend through 2025. This study explores the link between US trade preferences under AGOA and beneficiary country exports. Using a large US import database, the study examines the extent to which AGOA influences export performance. It also examines the moderating roles of rule of law and foreign direct investment. The results largely indicate that AGOA has a positive and significant effect on beneficiary country exports. It also shows that rule of law moderates the relationship between AGOA and export performance. We believe that AGOA will target foreign direct investment (FDI) to SSA from other advanced regions such as the EU to take advantage of the US market. However, the role of FDI appears to be weak in moderating the relationship between trade preferences (tariff concessions) and exports from beneficiary countries to the US market.

The impact of trade preferences removal: Evidence from the Belarus Generalized System of Preferences withdrawal

AbstractUnder the Generalized System of Preferences (GSP), high‐income countries grant unilateral trade preferences to developing countries. These preferences are subject to political conditionality, but little is known about the trade impact of loss of preferential access. We study the EU's complete withdrawal of GSP preferences from Belarus in 2007 in response to labour rights violations to fill this void. The withdrawal caused a significant drop in trade for affected products (25%–27% trade decline) and some trade reduction at the extensive margin. For products where trade was affected at the intensive margin, there is some evidence of adjustment through falls in quantities but also through prices for larger export sectors. The impact was uneven across sectors, with textiles and plastics particularly strongly affected by the withdrawal.

Improving Preferential Market Access through Rules of Origin: Firm-Level Evidence from Bangladesh

In countries where there exist limited opportunities to source inputs locally, rules of origin undermine access to preferential trade agreements for final goods exporters. I analyze the 2011 revision to the rules of origin associated with the European Union’s Generalized System of Preferences, which allowed apparel producers in least developed countries to use internationally sourced textiles in exported products. Using transaction-level data on Bangladeshi apparel firms, I find that the rules of origin effectively cut the preferential margin by three-fourths. Liberalizing the rules of origin resulted in firm-level revenue growth, which was driven by the intensive margin through increased shipment sizes and quality upgrading. (JEL F13, F14, L67, O14, O19)

The Generalized System of Preferences and Ngo Activism

Can preferential market access help to enforce Labor Laws in beneficiary countries? The US Generalized System of Preferences (GSP) is accorded conditional on compliance with labor rights and leaves room for petitioning and revising the scheme upon request by interest groups. Using data from Indonesian Manufacturing firms, we show that GSP renegotiation combined with the activism of workers' rights groups helped increase firm-level average wages up to the minimum-wage level, not only inside but also outside the export sector. GSP leverage allowed labor NGOs to act more effectively by putting the violation of national Labor Laws under the international spotlight.

Are Cambodia-U.S. Relations Mendable?

Are Cambodia-U.S. Relations Mendable? Thearith Leng (bio) and Vannarith Chheang (bio) The essay analyzes the evolution of U.S.-Cambodia bilateral relations since the turn of the century and explores possible avenues that may help improve bilateral ties. Since 2000 the relationship has been troubled by differences over human rights and democracy, the China factor, and Cambodia's debt to the United States that was incurred during the 1970s. Nevertheless, both countries have an opportunity to promote mutual trust if they embrace the principles of mutual respect, noninterference, and equal sovereignty. The United States and Cambodia can find common ground to expand and deepen cooperation. U.S.-Cambodian Relations since 2000 On the heels of decades of conflict, instability, and volatile U.S. relations, Phnom Penh's relations with Washington improved significantly after the 2003 national election in Cambodia. The two main political parties, the Cambodian People's Party (CPP) and FUNCINPEC (Front uni national pour un Cambodge indépendant, neutre, pacifique et coopératif), managed to reach a deal and formed a government solely led by Prime Minister Hun Sen of the CPP. In the eyes of the United States, this move showed that the CPP at least accepted a pluralist government, even if it did not meet U.S. democratic standards. In early March 2006, CPP lawmakers amended the constitution from a two-thirds majority formula to a 50%-plus-one model that allowed the CPP to create a government on its own if it won the majority of votes or parliamentary seats in future elections. Momentum for restoring bilateral ties grew after Secretary of State Colin Powell visited Cambodia in 2003 and the two countries normalized their relations. The first U.S. Peace Corps volunteers arrived in 2007, and Secretary of State Hillary Clinton visited Cambodia in 2010. From 2000 to 2009, the United States provided over $470 million in aid to improve health [End Page 124] and education systems, stimulate economic growth, and promote human rights and democracy in Cambodia. From 2008 to 2010, U.S.-Cambodia defense and security cooperation also expanded considerably as Washington increased financial assistance and its training programs in the country. In 2008 the United States granted $4 million to assist in demining activities and offered loans and training to build the Royal Cambodian Armed Forces' capacity for participating in UN peacekeeping operations. An annual bilateral defense dialogue, established in 2008, became a foundation for defense and security cooperation, confidence-building measures, and operational topics of mutual concern. Cambodia and the United States created a security cooperation coordination group in September 2009 to discuss operational issues involving theater security cooperation. In the summer of 2010, Phnom Penh was invited to participate in the Cooperation Afloat Readiness and Training (CARAT) Program and received a port visit by the USS Tortuga. Cambodia and the United States also then co-hosted the U.S. Global Peace Operations Initiative capstone exercise Angkor Sentinel, which included around a thousand peacekeeping personnel from over twenty countries.1 Contemporary Economic Relations Cambodia has become steadily dependent on the United States economically since its 1993 elections, after which Washington and its Western allies re-established economic ties with the country, having made democracy and human rights protection preconditions for accessing their markets. The Cambodian government signed a bilateral textile agreement with the United States in 1996, and the two sides have regularly met under their 2006 trade and investment framework agreement.2 Since 2010 the United States has emerged as a key market for Cambodian exports and one of the kingdom's most important donors. The United States is Cambodia's second-largest export market (around 23.9% of Cambodia's total exports) after the European Union (29.1%).3 The kingdom is currently the United States' 58th-biggest trading partner, with two-way trade [End Page 125] volume nearly tripling between 2010 and 2020 from $245.46 million to $690.63 million.4 Among its economic priorities, Cambodia has continually sought to retain the general system of preferences (GSP) designation from the United States and actively seeks U.S. investment. For example, in September 2020, the Cambodian ambassador to the United States, Chum Sounry, together with...

The Pursuit of Non-Trade Policy Objectives in EU Trade Policy

AbstractThe European Union (EU) often conditions preferential access to its market on compliance with Non-Trade Policy Objectives (NTPOs), including human rights and labor and environmental standards. In this paper, we first systematically document the coverage of NTPOs across the main tools of EU trade policy: its (association and non-association) trade agreements and Generalized System of Preferences (GSP) programs. We then discuss the extent to which the EU can use these tools as a ‘carrot-and-stick’ mechanism to promote NTPOs in trading partners. We argue that, within trade agreements, the EU has limited scope to extend or restrict tariff preferences to ‘reward good behavior’ or ‘punish bad behavior’ on NTPOs, partly because multilateral rules require members to eliminate tariffs on substantially all trade. By contrast, GSP preferences are granted on a unilateral basis, and can thus more easily be extended or limited, depending on compliance with NTPOs. Our analysis also suggests that the commercial interests of the EU inhibit the full pursuit of NTPOs in its trade agreements and GSP programs.

Utilization of GSP schemes as a political and economic determinant of the utilization of North-South FTAs

Many works have examined the variables driving the formation of North-South free trade agreements (FTAs) between developed and developing countries. This study analyzes the determinants shaping their utilization in the contexts of their political economy and of Generalized System of Preferences (GSP) schemes that are unilaterally granted by developed economies to developing countries’ exports. Most of the goods liberalized through GSP are liberalized from early on in North-South FTAs; however, since FTA concessions are legally binding, goods that are excluded or only partially liberalized in GSP will be also excluded or protected in FTAs. As GSP schemes are subject to unilateral restriction/elimination by the developed country, exporters using GSP tariffs will lobby for the non-removable liberalization of their exports through an FTA and subsequently will have a high FTA utilization. These scenarios result in North-South FTAs being used to a great extent to export goods covered by and exported through GSP, thus consolidating pre-FTA trade patterns. These arguments were tested by analyzing disaggregated and rarely accessed data on Thailand’s and Malaysia’s exports through the Japanese GSP and their bilateral FTAs with Japan, as well as interviews with key actors involved in the policymaking of these FTAs. Most sectors in Thailand and Malaysia that benefited from GSP lobbied for FTA liberalization with Japan. Goods previously exported through GSP account for most of FTA utilization and the previous use of GSP preferences has a higher predictive value of subsequent FTA utilization than FTA tariff savings.

The European Union's reform in rules of origin and international trade: Evidence from Cambodia

AbstractThe European Union (EU) has unilaterally granted developing countries preferential access to EU markets under the Generalized System of Preferences (GSP). To obtain preferential access, exporters in beneficiary countries must follow the rules of origin (ROO) in the EU’s GSP. Previous ROO were criticised as restrictive, because exporters’ production costs increase with a restriction on imported inputs from the lowest‐cost third countries and the administrative process of proving origin. The EU simplified the restrictive ROO on January 1, 2011. However, the impact of the EU’s reform on beneficiary economies remains largely unexplored. This paper estimates the causal impact of simplifying ROO on garment exports in a beneficiary country, Cambodia, during the period 2007–2015. In the new ROO, garment exporters in least developing beneficiaries such as Cambodia can use imported fabric from any third country and still maintain preferential access. I adopt a difference‐in‐differences method and provide evidence to support the parallel trends assumption. The results show that garment exports to the EU increased by 112% after 2011, which coincided with a sharp increase in textile imports from China to Cambodia. Foreign direct investment inflows increased sharply after 2011 in the garment sector but decreased in the textile sector.

Truly Preferential Treatment? Reconsidering the Generalised System of (Trade) Preferences with Competing Suppliers

AbstractEmpirical research on preferential treatment for developing economies has generally not considered how relative preferential margins might influence market access to a given destination market. In this paper, we develop and apply two indices to measure the tariff component of bilateral and multilateral trade restrictions less developed countries face in a given export destination. These indices are then used in a gravity model framework to re‐evaluate the trade effects of the Generalized System of Preferences (GSP). The trade facilitation impacts of the GSP are found to vary both across products and across export destinations. Overall results indicate that the GSP has increased relative market access of low‐income countries to developed country markets and boosted exports from these countries by 26–28%.

A Carbon Emission Measurement Method for Individual Travel Based on Transportation Big Data: The Case of Nanjing Metro

With the strengthening of environmental awareness, the government pays much more attention to environmental protection and thus implements carbon trading schemes to promote the reduction of global carbon dioxide emissions. The carbon Generalized System of Preferences (GSP) is an incentive mechanism for citizens to value their energy conservation and carbon reduction. Individual travel needs to rely on various means of transportation, resulting in energy consumption. Carbon tax or subsidy can only be carried out after carbon GSP accurately measures individual carbon emissions. The big data acquired from the smart cards of passengers’ travels provide the possibility for carbon emission accounting of individual travel. This research proposes a carbon emission measurement of individual travel. Through establishing the network model of the Nanjing metro with a complex method, the shortest path of the passengers’ travels is obtained. Combined with the origination–destination (OD) records of the smart cards, the total distance of the passengers’ travels is obtained. By selecting the operation table to estimate the carbon emissions generated by the daily operation of the subway system, the carbon emissions per kilometer or per time of passenger travel are finally obtained. With the accurate tracking of carbon emissions for individual travel, the government may establish a comprehensive monitoring system so as to establish a carbon tax and carbon supplement mechanism for citizens.

Did the US GSP Scheme Truly Benefit the Indian Economy – Political Economy of Denying Market Access?

The Generalised System of Preferences (GSP), instituted in 1971 under the aegis of UNCTAD, has contributed over the years to creating an enabling trading environment by providing tariff reduction or complete elimination for developing countries and the LDCs. The study of GSP imports of the US economy reveals that 177 beneficiary countries import a total of US$ 562 billion from 1989 to 2019 – to investigate the role of the US to support industrialisation and encourage economic growth by creating positive exports earnings. However, in the US total imports, the share of GSP schemes total shares has consistently fallen since the formation of WTO. There are shreds of evidence that trade route can facilitate a country to improve its status from the lower-income to higher income level - the example of the US does not support this thesis. While there are shreds of evidence that trade route can facilitate a country to improve its status from the lower-income to higher income level - the example of the US does not support this thesis. It is incumbent on the nature of products sought by consumers in the benefactor country (the US market) and the relative capacity of beneficiary economies to supply in the growing market require/demand. The top ten sectors impacted by the GSP withdrawal were transport, chemical, mineral & metals, electrical machinery, non-electrical machinery, fruits, vegetable, plants, cereals & preparation, leather, footwear & rubber, manufacturing n.e.s and textiles. The fish and fish products, although it had tremendous imported values by the US in 2018 - however, these sectors have seen a major shift towards the MFN route. The top ten sectors, all of them were manufacturing and with a high presence of MSMEs. Top ten sectors accounted for 95% of the US imports under the GSP route in 2018. It can also be argued, that the US has not aided by WTO rules while withdrawing the India’s GSP privileges as it continues to give such access to other developing countries with higher income levels or similar income level – India can take this matter to the WTO Dispute Settlement Body on the grounds of discriminatory treatment.