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- Title
MFN TARIFF REDUCTIONS AND DEVELOPING COUNTRY TRADE BENEFITS UNDER THE GSP.
- Authors
Baldwin, R. E.; Murray, T.
- Abstract
This paper addresses the question: How should the developing countries view the prospects of significant MFN tariff reductions in light of their existing tariff advantages under the GSP? Our calculations of the static effects, based on a differentiated product model, indicate that the developing countries stand more to gain from MFN tariff cuts than they will lose from the simultaneous erosion of their GSP preferential tariff margins.[1] Their gross trade expansion during the preference period amounts to $401 million annually and consists of $106 million to beneficiaries from MFN cuts on products restricted by GSP value limits, $27 million to beneficiaries from MFN cuts on products not included under the GSP schemes, and $268 million to non-beneficiaries; the annual loss due to the erosion of GSP tariff margins is only $32 million. Then why is it that the developing countries have expressed such concern that the forthcoming MFN negotiations hold the prospect of adversely affecting their world trading interests? It could be that the beneficiary developing countries are optimistic about future improvements in the GSP schemes. If such improvements include the elimination of value limits on GSP trade and an extension beyond the initial 10 year duration of the GSP, MFN tariff reductions would impose a net cost to beneficiaries of some $40-50 million annually in foregone trade flows. A final consideration for the developing countries may be a desire to keep the GSP alive with improvements being negotiated in the UNCTAD forum which has proved to be sympathetic to the trade problems of developing countries. In contrast, MFN negotiations would come under the auspices of the GATT, a forum which has generally downplayed the objective of economic development and instead concentrated on reconciling the trade problems of the industrial nations. But with UNCTAD playing an advisory role to the developing countries as they approach the GATT negotiations, we should expect t...
- Subjects
UNITED States; JAPAN; TARIFF preferences; MOST favored nation clause; INTERNATIONAL trade; DEVELOPING countries; EUROPEAN Economic Community
- Publication
Economic Journal, 1977, Vol 87, Issue 345, p30
- ISSN
0013-0133
- Publication type
Article
- DOI
10.2307/2231831