All the developed countries that agreed to be donors under the
proposal for Generalized System of Preferences (GSP) adopted at the
first UNCTAD session in 1964, have introduced their individual (GSP)
schemes.1 Under these schemes, imports of a large number of manufactures
and semimanufactures from less developed countries are permitted at zero
or reduced tariff rates up to a certain maximum amount. The full tariff
rates continue to apply to imports from other countries. Attention has
focused on the institutional arrangements underlying the schemes, the
nature and possible effects of quantitative limitations such as import
ceilings and tariff quotas, and the estimation of probable demand
responses to preferential tariff cuts in developed countries under
specific schemes [3,4, 8, 11, 12, 13 and 14]. An underlying assumption
of the GSP has been that a preferential treatment of imports from less
developed countries would promote the exports of manu¬factured and
semimanufactured products from these countries. The purpose of , this
study is not to test or otherwise quantify this hypothesis as such.
Rather, this study seeks to provide a comprehensive assessment of the
global trade effects of all the schemes, taken individually as well as
collectively, by estimating the trade creation, (i.e., increase in world
trade) and trade diversion, (i.e., decline in the exports of
non-preferred countries) effects. These estimates are drawn upon