RESEARCH AND ANALYSIS: WORKING PAPERS
Multilateral Solutions to the Erosion of Non-Reciprocal Preferences in NAMA
This paper analyzes the risks of preference erosion
arising from MFN trade liberalization in manufactured products. It focuses
on developing countries that receive non-reciprocal preferences in the
markets of United States, EU, Japan, Canada and Australia. The paper
estimates preference margins as the difference between non-reciprocal
preferential rates received by individual countries and the best available (MFN
or better-than-MFN) treatment received on average by all other suppliers.
Most previous work on this subject has compared the preferential rates for
individual countries with MFN rates alone, which the paper found to have the
effect of over-stating the margin at risk from erosion following MFN
reductions. The paper also considers the effect of less than full
utilization of preference margins by beneficiaries, but a lack of data
prevented the inclusion of this additional moderating factor relating to
erosion risk.
The paper finds that developing countries as a whole do not loose from
preference erosion following MFN liberalization, although significant gains
and losses underlie the estimate of the average. Almost all least-developed
countries either lose from preference erosion or are unaffected by it
because their exports are already largely MFN duty-free. A large number of
LDCs are in the latter group. The main sectors where preference erosion
occurs are textiles, fish and fish products, leather and leather products,
electrical machinery and wood and wood products.
As regards trade solutions to preference erosion, options are somewhat
limited. Improved utilization rates may help certain countries but certainly
do not offer a generalized solution. Limited scope exists for expanding the
coverage of preference schemes within the destination markets considered in
the paper. Other destination markets might offer some prospect, but these
are limited by the fact that the markets studied dominate the trade flows of
the beneficiary countries.
No: ERSD-2005-05
Author:
Patrick Low, Roberta Piermartini and Jurgen Richtering — WTO
Manuscript date: October 2005
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Disclaimer
This is a working paper, and hence it represents research in progress. This paper represents the opinions of the author, and is the product of professional research. It is not meant to represent the position or opinions of the WTO or its Members, nor the official position of any staff members. Any errors are the fault of the author. Copies of working papers can be requested from the divisional secretariat by writing to: Economic Research and Statistics Division, World Trade Organization, rue de Lausanne 154, CH 1211 Genève 21, Switzerland. Please request papers by number and title.
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