Trade Diversion under Selective Preferential Market Access
Through its diverse trade preference schemes, the European Union provides different groups of developing countries with different degrees of market access. This paper is the first to demonstrate empirically that such staggered market access induces...
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/09/9820612/trade-diversion-under-selective-preferential-market-access http://hdl.handle.net/10986/6991 |
| Summary: | Through its diverse trade preference
schemes, the European Union provides different groups of
developing countries with different degrees of market
access. This paper is the first to demonstrate empirically
that such staggered market access induces sizable trade
diversion to the detriment of relatively less preferred
beneficiary countries. In particular, preferences granted to
African, Caribbean and Pacific economies are shown to impair
the export performance of seven developing countries whose
products only qualify for basic preferences under the
Generalized System of Preferences. Exports to the European
Union decline by about 30 percent if the African, Caribbean
and Pacific tariff falls by 10 percentage points. In terms
of forgone trade volume, losses for these relatively
disadvantaged countries amount on average to 9 percent of
their total trade with the European Union, depending on the
country and its main exports. These intra-developing country
distortions are driven by highly substitutable, often
labor-intensive commodities. |
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