Structural Economic Vulnerability and the Utilization of Unilateral Trade Preferences: Does Development Aid Matter?

Mapping Intimacies ◽

10.21203/rs.3.rs-1149563/v1 ◽

2021 ◽

Author(s):

Sèna Kimm GNANGNON

Keyword(s):

Development Aid ◽

Trade Preference ◽

Economic Vulnerability ◽

Generalized System ◽

Generalized System Of Preferences ◽

Trade Preferences ◽

Conclusion Section

Abstract This article has investigated the effect of structural economic vulnerability on the utilization of non-reciprocal trade preferences (NRTPs) offered by the 'Quadrilaterals' and whether development aid flows alter this effect. It considers two major blocks of NRTPs, namely the Generalized System of Preferences (GSP) programs and 'other trade preferences programs'. The analysis uses a panel dataset of 84 beneficiary countries of both NRTPs and development aid, over the period of 2002-2019. Results reveal that a rise in the level of structural economic vulnerability reduces the utilization rates of both GSP programs and other trade preference programs. At the same time, when the level of structural economic vulnerability falls, countries tend to use both blocks of NRTPs in a complementarity way. While development aid inflows foster the utilization of the two blocks of NRTPs, the increase of these resource inflows in the context of greater structural economic vulnerability leads beneficiary countries to strengthen the utilization of other trade preferences programs at the expense of the utilization of GSP programs. The implications of these results are discussed in the conclusion section of the article.

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Effect of the Utilization of Non-Reciprocal Trade Preferences offered by the QUAD on Economic Complexity in Beneficiary Countries

10.21203/rs.3.rs-864634/v1 ◽

2021 ◽

Author(s):

Sèna Kimm GNANGNON

Keyword(s):

Jel Classification ◽

Development Aid ◽

Product Diversification ◽

Economic Complexity ◽

Generalized System ◽

Generalized System Of Preferences ◽

Generalized Methods Of Moments ◽

Trade Preferences ◽

Methods Of Moments ◽

Positive Effect

Abstract This article aims to contribute to the nascent literature on the effect of non-reciprocal trade preferences (NRTPs) on industrialization in beneficiary countries. In so doing, it complements the few existing works on the effect of NRTPs on export product diversification by investigating the effect of NRTPs (both the Generalized System of Preferences- GSP programs- and other non-reciprocal trade preferences) offered by the QUAD countries on the level of economic complexity in beneficiary countries. The analysis has relied on 110 beneficiary countries of these NRTPs over the period 2002–2018, and made primarily use of the two-step system Generalized Methods of Moments estimator. The findings are quite interesting. First, beneficiary countries tend to use GSP programs (rather than other trade preferences) to achieve greater economic complexity, and the positive effect of the utilization of GSP programs on economic complexity is higher for high income beneficiary countries than relatively less advanced beneficiary countries. Second, both GSP programs and other non-reciprocal trade preferences are strongly complementary in promoting economic complexity in beneficiary countries, in particular if their usage reach high levels. Third, the utilization of NRTPs enhances economic complexity in countries that receive high foreign direct investment flows. Finally, development aid flows are strongly complementary with the utilization of NRTPs in fostering economic complexity in beneficiary countries, especially for high amounts of development aid. This suggests the need for preference-granting countries (that are also suppliers of development aid) to offer both generous NRTPs and higher development aid flows if those NRTPs are to be effective in expanding the manufacturing base in the beneficiary countries.Jel Classification: F13; F14; O14.

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European Communities – Conditions for the Granting of Tariff Preferences to Developing Countries (WT/DS246/AB/R)

World Trade Review ◽

10.1017/s1474745606001455 ◽

2006 ◽

Vol 5 (S1) ◽

pp. 220-253 ◽

Cited By ~ 1

Author(s):

Gene M. Grossman ◽

Alan O. Sykes

Keyword(s):

Developing Countries ◽

Legal Authority ◽

Most Favored Nation ◽

Policy Area ◽

Generalized System ◽

Preferential Tariff ◽

Generalized System Of Preferences ◽

Trade Preferences ◽

Enabling Clause ◽

Unanimous Agreement

The WTO case brought by India in 2002 to challenge aspects of the European Communities’ Generalized System of Preferences (GSP) brings fresh scrutiny to a policy area that has received little attention in recent years – trade preferences for developing countries. The idea for such preferences emerged from the first United Nations Conference on Trade and Development (UNCTAD) in 1964. The ensuing negotiations led to Resolution 21(ii) at the second session of UNCTAD in 1968, acknowledging “unanimous agreement” in favor of the establishment of preferential arrangements. Tariff discrimination violates the most-favored nation (MFN) obligation of General Agreement on Tariffs and Trade (GATT) Art. I, however, and thus the legal authority for preferential tariff schemes had to await a GATT waiver of this obligation, which came in 1971. The waiver was to expire after 10 years, but the authority for preferences was extended by the GATT Contracting Parties Decision of November 28, 1979 on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries, popularly known as the “Enabling Clause,” and now incorporated into the law of the WTO along with the GATT itself.

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