Description: Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization

Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization

The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows multilateral trade liberalization. Recent theoretical and empirical evidence indicates that this is the case even for unilater...

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Bibliographic Details
Main Authors:	Limão, Nuno, Olarreaga, Marcelo
Language:	English en_US
Published:	Oxford University Press on behalf of the World Bank 2013
Subjects:	ABSOLUTE VALUE ACCORDS AD VALOREM ADJUSTMENT ASSISTANCE AGRICULTURAL SECTOR AGRICULTURE BALANCE OF PAYMENTS BENCHMARK BILATERAL TRADE COMPARATIVE ADVANTAGE COMPETITIVE POSITION CONCESSIONS CONSTANT RETURNS TO SCALE CUSTOMS DEMAND ELASTICITIES DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DIFFERENTIAL TREATMENT DIRECT TRANSFERS DOMESTIC PRICE ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC RELATIONS ECONOMIC RESEARCH ELASTICITY ENVIRONMENTAL STANDARDS EQUILIBRIUM EUROPEAN UNION EXPORT MARKETS EXPORT PRICE EXPORT REVENUE EXPORT SPECIALIZATION EXPORT SUPPLY EXPORTERS EXPORTS EXTERNALITIES EXTERNALITY FOREIGN PRODUCER FREE TRADE FREE TRADE AGREEMENT FREE-TRADE AGREEMENTS FUTURE RESEARCH GDP GENERAL AGREEMENT ON TARIFFS GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERALIZED SYSTEM OF PREFERENCES GLOBAL ECONOMY GLOBAL TRADE GLOBAL TRADING HUMAN RIGHTS IMPORT DUTIES IMPORT TARIFFS INDUSTRIALIZED COUNTRIES INEQUALITY INFANT INDUSTRY INFANT INDUSTRY ARGUMENT INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY PROTECTION INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRADE COMMISSION INTERNATIONAL TRADE POLICY LDCS LEGAL PERSPECTIVE LESS DEVELOPED COUNTRIES MARKET ACCESS MARKET INTEGRATION MOST FAVORED NATION MULTILATERAL LIBERALIZATION MULTILATERAL TARIFFS MULTILATERAL TRADE MULTILATERAL TRADE LIBERALIZATION NATIONAL BUREAU NET EXPORTS PERFECT COMPETITION POLICY RESEARCH POLITICAL ECONOMY PREFERENTIAL ACCESS PREFERENTIAL AGREEMENT PREFERENTIAL AGREEMENTS PREFERENTIAL MARGIN PREFERENTIAL MARGINS PREFERENTIAL TARIFF PREFERENTIAL TARIFFS PREFERENTIAL TRADE PREFERENTIAL TRADE AGREEMENT PREFERENTIAL TRADE AGREEMENTS PREFERENTIAL TRADE ARRANGEMENTS PREFERENTIAL TRADE LIBERALIZATION PREFERENTIAL TREATMENT PREFERENTIAL ~ TRADE PREFERENTIAL ~ TRADE AGREEMENTS PRICE EFFECTS PRICE SUPPORT RECIPROCITY REGIONAL INTEGRATION REGIONALISM RULES OF ORIGIN SPECIALIZATION TARIFF CHANGES TARIFF DATA TARIFF LINE TARIFF PREFERENCE TARIFF PREFERENCES TARIFF RATE TARIFF REDUCTION TARIFF REDUCTIONS TARIFF REVENUE TAX RATE TERMS OF TRADE TERMS OF TRADE EFFECTS TRADE BARRIERS TRADE DISTORTIONS TRADE EFFECT TRADE FLOWS TRADE INTEGRATION TRADE MODEL TRADE NEGOTIATORS TRADE OBJECTIVES TRADE PREFERENCE TRADE PREFERENCES TRADE REFORM TRADING PARTNERS TRANSPORT COSTS UNILATERAL PREFERENCES UNILATERAL TRADE URUGUAY ROUND VALUE OF IMPORTS WELFARE GAINS WORKER RIGHTS WORLD MARKET WORLD MARKETS WORLD PRICE WORLD PRICES WORLD TRADE WORLD TRADE ORGANIZATION WORLD TRADING SYSTEM WTO
Online Access:	http://documents.worldbank.org/curated/en/2006/05/17753325/trade-preferences-small-developing-countries-welfare-costs-lost-multilateral-liberalization http://hdl.handle.net/10986/16431

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Summary:	The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows multilateral trade liberalization. Recent theoretical and empirical evidence indicates that this is the case even for unilateral preferences that developed countries provide to small and poor countries, but there is no estimate of the resulting welfare costs. This stumbling block effect can be avoided by replacing the unilateral preferences with a fixed import subsidy, which generates a Pareto improvement. More importantly, this paper presents the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. Recent estimates of the stumbling block effect of preferences with data for 170 countries and more than 5,000 products are used to calculate the welfare effects of the European Union, Japan, and the United States switching from unilateral preferences for least developed countries to an import subsidy scheme. In a model with no dynamic gains to trade, the switch produces an annual net welfare gain for the 170 countries that adds about 10 percent to the estimated trade liberalization gains in the Doha Round. It also generates gains for each group: the European Union, Japan, and the United States ($2,934 million), least developed countries ($520 million), and the rest of the world ($900 million).

Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization

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