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Preference erosion and multilateral trade liberalization

Francois, J.; Hoekman, B.; Manchin, M.; (2006) Preference erosion and multilateral trade liberalization. The World Bank Economic Review , 20 (2) pp. 197-216. 10.1093/wber/lhj010.

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Because of concern that tariff reductions in Organisation for Economic Co-operation and Development (OECD) countries will translate into worsening export performance for the least developed countries, the erosion of trade preferences may become a stumbling block for multilateral trade liberalization. An econometric analysis of actual preference use shows that preferences are underused because of administrative burdens—estimated to be equivalent to an average of 4 percent of the value of goods traded. To quantify the maximum scope for preference erosion, the compliance cost estimates are used in a model-based assessment of the impact of full elimination of OECD tariffs. Taking into account administrative costs eliminates erosion costs in the aggregate and greatly reduces the losses for countries most affected by preference erosion.

Title:Preference erosion and multilateral trade liberalization
Publisher version:http://dx.doi.org/10.1093/wber/lhj010
UCL classification:UCL > School of Arts and Social Sciences > SSEES

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