Monday, September 28th
Mitali Pradhan (Fordham), “Impact of Losing Preferential Status: Evidence from the EU’s Generalized System of Preferences Reform”
International trade policy is currently at crossroads, owing to the growing chasm between developing and developed countries over the implementation of multilateral trade rules. While the former still argue for special and differential treatment (SDT), the latter group wants to rethink the same. The Generalized System of Preferences (GSP) program, which is at the core of SDT, allows developed countries to grant non-reciprocal tariff concessions to developing and least developed countries. In 2014, the European Union (EU) reformed its GSP program, withdrawing preferential tariff concessions from several developing countries and small territories, taking away a potentially important driver of economic development for these nations. In this paper, I analyze the impact of this withdrawal on these countries’ exports to the EU using a triple difference specification with interactive fixed effects that control for preexisting trade patterns allowing for causal inference. I find that exports of GSP eligible products of the excluded countries decreased by 1.6% post reform as compared to those countries still receiving GSP treatment. The probability of exporting GSP eligible products decreases by 0.2%. Overall, my findings suggest that unilateral tariff concessions are necessary for all developing countries and losing them can cause exports to the donor countries to decline. This paper adds to the limited literature on withdrawal of unilateral preferences and to the larger debate on SDT.