Non-reciprocal Trade Preferences Research Articles

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.

Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity

This article aims to contribute to the nascent literature on the effect of non-reciprocal trade preferences (NRTPs) on economic complexity in beneficiary countries. It investigates the effect of NRTPs (Generalized Systems of Preferences - GSP - and other trade preferences) offered by the QUAD countries (Canada, the European Union, Japan, and the United States) on the beneficiary countries' levels of economic complexity. The analysis has used a panel dataset of 110 beneficiary countries over the period of 2002-2018, and the two-step system Generalized Method of Moments estimator. Results show that the utilization of NRTPs (either GSP programs or other trade preferences) influences positively economic complexity when beneficiary-countries' shares of exports under the relevant NRTP in total merchandise exports is very high. In addition, GSP programs and other trade preferences jointly promote economic complexity, if the utilization of either NRTP reaches high levels. The utilization of NRTPs also enhances economic complexity in countries that receive high shares of foreign direct investment flows in GDP. Finally, development aid flows are strongly complementary with the utilization of NRTPs in fostering economic complexity, especially when they reach very high amounts. One message conveyed by this analysis is that preference-granting countries (including QUAD countries) should offer both generous NRTPs and high amounts of development aid if NRTPs were to be effective in expanding the manufacturing base in the beneficiary countries, and in particular, in improving their economic complexity.

The not‐so‐generalised effects of the Generalized System of Preferences

AbstractWe use an empirical gravity equation to study how non‐reciprocal trade preferences (NRTPs), enacted mainly through the Generalized System of Preferences, affect the exports of the beneficiary nations. In line with existing studies, the average trade effect stemming from non‐reciprocal preferences is highly unstable across specifications. However, once we allow for heterogeneous effects, results become robust and economically important. Specifically, NRTPs have a strong effect on the exports of beneficiaries when they are members of the World Trade Organization and are very poor. Not‐so‐poor beneficiaries also expand foreign sales, but only if they are not WTO members. For all others, the average export effects of NRTPs are mute.

Go Ahead and Trade: The Effect of Uncertainty Removal in the EU’s GSP Scheme

We estimate the trade effect of removing uncertainty about future trading conditions in the context of the 2014 reform of the Generalized System of Preferences (GSP) of the European Union (EU). EU GSP members receive non-reciprocal trade preferences (NRTPs), but only as long as they are not too competitive; i.e. they will graduate in case their share of EU GSP imports in a sector exceeds a certain threshold. However, the 2014 reform removed the threat of these competitiveness-related graduations for members of the GSP+, a sub-scheme of the main programme. We find that the reform increased EU imports from GSP+ countries by about 7% on average whilst tariffs stayed the same. This trade impact is driven by the country-sector pairs most exposed to NRTPs uncertainty pre-reform. The effect is robust to taking into account other aspects of the reform, such as the reduction in GSP membership and changes in tariff margins, respectively.

The Not-so-Generalized Effects of the Generalized System of Preferences

We use an empirical gravity equation approach to study how nonreciprocal trade preferences (NRTPs), enacted mainly through the Generalized System of Preferences, affect the exports of the beneficiary nations. In line with existing studies, the average trade effect stemming from nonreciprocal preferences is highly unstable across specifications. However, once we allow for heterogeneous effects, results become robust and economically important. Specifically, NRTPs have a strong effect on the exports of beneficiaries when they are members of the World Trade Organization and are very poor. Not-so-poor beneficiaries also expand foreign sales, but only if they are not WTO members. For all others, the average export effects of NRTPs are mute.

Avrupa Birliği’nin Sahra-Altı Afrika’ya Yönelik Kalkınma İşbirliği Politikasının Gelişimi: Başarılar ve Zorluklar

This article examines the evolution of the European Union's(EU) development aid policy towards sub-Saharan Africa since the 2000s by looking at its main achievements and challenges. As a leading donor of world politics, the EU provides development and humanitarian aid to African countries since the early period of European integration. In addition to aid provision, the EU is one of main trading partner of African countries. Over the past two decades, the Union development cooperation policy has undergone significant changes. Politically, it strengthened political conditionalities and expanded the role of civil society in development policy. Economically, it shifted from reciprocal trade preferences to non-reciprocal trade preferences. It introduced performance-based aid allocations in aid management. With these changes, the Union removed the peculiar characteristics of EU development cooperation policy and followed global trends in its development cooperation policy.

Relative Trade Preferential Margin and Aid for Trade Allocation

ABSTRACTThis article investigates the interplay between non-reciprocal trade preferences and Aid for Trade (AfT) by examining the extent to which relative preferential margins (RPM) enjoyed by recipient countries affect AfT flows supplied by donors. The empirical results suggest that the RPM exerts a significant and positive impact on the bilateral AfT inflows that recipient countries enjoy from donors. In addition, when this impact is lower, the higher the recipient countries’ level of economic development. Furthermore, the analysis indicates that the influence of RPM on AfT is dependent on non-AfT (i.e., the aid flows allocated to the non-trade sector) allocated to recipient countries.

A Prima Facie Evidence on the Impact of Export Diversification on Relative Trade Preferential Margin

This paper assesses the impact of export diversification in developing countries and particularly Least developed countries (LDCs) on the relative preferential margin that they enjoy in accessing preference-granters’ market. The analysis is carried out in a gravity-type model comprising 19 developed countries and 54 beneficiaries of non-reciprocal trade preferences from these developed countries, over the period 2002–2007. The empirical analysis suggests a non-linear relationship between the degree of export diversification in developing countries and the relative preferential margin that they benefit from developed preference-granting countries. However, it appears that the latter encourage LDCs to diversify their export products by providing them with higher trade preference advantages compared to their competitors in their markets.

Export Competitiveness of Botswana's Beef Industry

We investigate Botswana’s beef export competitiveness using indices of Revealed Comparative Advantage (RCA) and data for the period 1961-2011. Results indicate that Botswana has been the most competitive SADC beef exporter, and that it has compared well with the leading world beef exporters. However, the country has recorded declining competitiveness since the mid 1970s. It is argued that, state trading export operations and non-reciprocal trade preferences with the EU have enhanced competitiveness through facilitating export market access. However, the single channel exportation arrangement, through a loss-making state trader, is a potential threat to beef export competitiveness. Further, recurrent outbreaks of cattle diseases and drought, and the rise in domestic demand for beef (coupled with stagnant domestic supply) have adversely impacted beef export competitiveness.

EU Trade Preferences and Export Diversification

Since at least the 1960s, the European Union (EU) has offered various kinds of non-reciprocal trade preferences for developing countries. Originally, these trade preferences had at least two policy goals: (i) to increase export volumes for developing countries and thereby boost their export earnings, and (ii) to facilitate export diversification. While extensive research has confirmed that the first of these goals is typically met, the second goal seems to have been largely forgotten by researchers as well as in policy circles. The aim of this paper is therefore to analyse the impact of the EU’s non-reciprocal trade preferences for developing countries on export diversification. Our estimation results suggest that some trade preference programs, such as the Generalised Scheme of Preferences (GSP), are associated with increasing ranges of export products. By contrast, preferences offered to Mediterranean countries typically have no significant effects, and African, Caribbean and Pacific (ACP) preferences actually have negative effects toward the end of our time period, suggesting that ACP countries may respond to preferences by specializing into fewer goods.

Evaluating the impact of nonreciprocal trade preferences using gravity models

This article presents new evidence on the impact of Nonreciprocal Preferential Trade Policies (NRPTPs) granted by developed countries to exports from developing countries over the period 1995 to 2003. The analysis has been carried out by using three levels of data aggregation. It accounts for unobservable heterogeneity, endogeneity of the preferential treatment and potential selection bias. We find a positive and significant impact of NRPTPs when considering total exports and total agricultural exports. However, at 2-digit agricultural level the results are heterogeneous.

Are EU Non-Reciprocal Trade Preferences Passé?

A substantial body of opinion argues that, at best, trade preferences for developing countries have had little or no trade stimulating effect. This paper argues that this view fails to distinguish between the effects of EU and US preferences and, in the case of EU preferences, can be rejected on the basis of recent empirical evidence. The implications of the Appellate Body ruling on EU special preferences and the Commission's proposals for the reform of the rules of origin are then examined. The paper concludes with an examination of proposals to increase the effectiveness of the GSP+.

Implications of the Doha Development Agenda on the Economic Partnership Agreement (EPA) Negotiations

On September 27, 2002, in Brussels, the 77 African, Caribbean and Pacific (ACP) countries and the European Union (EU) officially opened negotiations on Economic Partnership Agreements (EPAs). These new WTO-compatible agreements should replace, at the latest by 2008, the current non-reciprocal trade preferences between the ACP and the EU under the Cotonou Agreement. The EPAs, proposed by the European Commission, would be free trade areas (FTAs) between (regional) groups of ACP countries and the EU. In parallel, a new WTO round of multilateral trade negotiations has been launched in Doha, Qatar, in November 2001, which should be concluded by a single undertaking in 2005. In consequence, the ACP countries are confronted with the commitment to negotiate new WTO-compatible trade agreements with the EU while the WTO rules are being negotiated at the multilateral level, and thus subject to changes. The challenge of the new Doha Round of negotiations, like that of the negotiation of an EPA, is to realise expectations concerning the relationship between international trade and sustainable development. The aim of this study is to determine to what extent EPA negotiations between the EU and ACP countries, and in particular EPAs between COMESA member countries and the EU, will be influenced by multilateral negotiations under the Development Round under the auspices of the WTO.

The past, present and future ACP-EC trade regime and the WTO

The Lome IV Convention, which expired on 29 February 2000, provided for non-reciprocal trade preferences in favour of ACP states. Such a trade regime is incompatible in principle with WTO rules and it could only be maintained because the WTO granted a waiver from the obligations of Article I GATT. The successor regime, the so-called Partnership Agreement between the Community, its Member States and the ACP States, provides for a preparatory period from 2000 to 2007, during which the non-reciprocal trade preferences in favour of the ACP will be maintained. A new WTO waiver will therefore be necessary until 2007. During the preparatory period, economic partnership agreements (EPA) will be negotiated between the Community and subgroups of ACP states, which will provide for reciprocal liberalization of substantially all trade. They will constitute free trade areas in the sense of Article XXIV GATT and a waiver will no longer be needed. For those ACP states not classified as least developed countries (LDC) and which are not in a position to negotiate an EPA, alternative trade arrrangements will need to be developed. The only viable alternative to an EPA would appear to be the integration of these countries into the Community's Generalized System of Preferences (GSP), which is authorized under WTO rules. For all LDCs, ACP states or otherwise, the Community will grant duty-free imports for essentially all products from 2005 at the latest. This differential treatment of LDCs is covered by the so-called Enabling Clause of the GATT of 1979 and a waiver is not required.

The future of the ACP countries

The record to date of trade and development cooperation between the European Union and the ACP countries has been rather disappointing. Evidently, neither the non-reciprocal trade preferences granted to the ACP countries nor the support for development projects have led to much progress in terms of economic and social development. Can the implementation of the EU's present reform proposals be expected to safeguard the future of the Lome system and of the ACP countries in the new millenium?

Trade and Welfare Effects of the European Schemes of the Generalized System of Preferences

Previous articleNext article No AccessTrade and Welfare Effects of the European Schemes of the Generalized System of PreferencesDrusilla K. BrownDrusilla K. Brown Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Economic Development and Cultural Change Volume 37, Number 4Jul., 1989 Article DOIhttps://doi.org/10.1086/451759 Views: 4Total views on this site Citations: 16Citations are reported from Crossref Copyright 1989 The University of ChicagoPDF download Crossref reports the following articles citing this article:Sèna Kimm Gnangnon Effect of the utilization of non-reciprocal trade preferences offered by the QUAD countries on beneficiary countries' economic complexity, Journal of the Japanese and International Economies 65 (Sep 2022): 101214.https://doi.org/10.1016/j.jjie.2022.101214Tobias Sytsma Rules of origin and trade preference utilization among least developed countries, Contemporary Economic Policy 39, no.44 (Mar 2021): 701–718.https://doi.org/10.1111/coep.12529Stephan Klasen, Inmaculada Martínez-Zarzoso, Felicitas Nowak-Lehmann, Matthias Bruckner Does the designation of least developed country status promote exports?, The Journal of International Trade & Economic Development 30, no.22 (Oct 2020): 157–177.https://doi.org/10.1080/09638199.2020.1831042Ludo Cuyvers, Reth Soeng The impact of the EU Generalized System of Preferences on exports and GSP utilization by Asian and Latin American countries, Journal of International Trade Law and Policy 12, no.11 (Mar 2013): 80–97.https://doi.org/10.1108/14770021311312511Gene M. Grossman, Alan O. Sykes European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries (WT/DS246/AB/R), World Trade Review 5, no.S1S1 (Sep 2015): 220–253.https://doi.org/10.1017/S1474745606001455KYM ANDERSON On the Virtues of Multilateral Trade Negotiations*, Economic Record 81, no.255255 (Dec 2005): 414–438.https://doi.org/10.1111/j.1475-4932.2005.00279.xÇaglar Özden, Eric Reinhardt The perversity of preferences: GSP and developing country trade policies, 1976–2000, Journal of Development Economics 78, no.11 (Oct 2005): 1–21.https://doi.org/10.1016/j.jdeveco.2004.08.007Kym Anderson Setting the Trade Policy Agenda: What Roles for Economists?, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.708427John T Wainio, Shahla Shapouri, Michael Trueblood, Paul Gibson Agricultural Trade Preferences and the Developing Countries, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.751965Patrick Low, Roberta Piermartini, Jürgen Richtering Multilateral Solutions to the Erosion of Non-Reciprocal Preferences in NAMA, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.922272Alex F. Mccalla GATT, Preferential/Regional Trading Blocs and Agricultural Trade, Review of International Economics 1, no.11 (Nov 1992): 73–89.https://doi.org/10.1111/j.1467-9396.1992.tb00007.xMordechai E. Kreinin, Michael G. Plummer Effects of economic integration in industrial countries on ASEAN and the Asian NIEs, World Development 20, no.99 (Sep 1992): 1345–1366.https://doi.org/10.1016/0305-750X(92)90083-8ROLF J. LANGHAMMER The Developing Countries and Regionalism, JCMS: Journal of Common Market Studies 30, no.22 (Jun 1992): 211–232.https://doi.org/10.1111/j.1468-5965.1992.tb00428.xMICHAEL G. PLUMMER Efficiency Effects of the Accession of Spain and Portugal to the EC, JCMS: Journal of Common Market Studies 29, no.33 (Mar 1991): 317–325.https://doi.org/10.1111/j.1468-5965.1991.tb00395.xGene M. Grossman, Alan O. Sykes, Henrik Horn, Petros C. Mavroidis European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries (WT/DS246/AB/R), (): 220–253.https://doi.org/10.1017/CBO9780511754463.011Caf Dowlah, Yong-Shik Lee, Gary Horlick, Won-Mog Choi, Tomer Broude Trade Preferences and Economic Growth, (): 334–355.https://doi.org/10.1017/CBO9780511994715.016