The Trade Impact of Surprise Graduations from the EU’s GSP scheme

Ingo Borchert and Mattia Di Ubaldo
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Ingo Borchert: University of Sussex Business School, CITP, UKTPO

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: A key feature of the EU’s Generalized System of Preferences (GSP) scheme is its graduation mechanism, whereby preferential market access for imports to the EU is withdrawn from beneficiaries in sectors in which they are considered to be sufficiently competitive. This paper estimates the effect of competitiveness-related preference removals by exploiting ‘surprise graduations’ that arose from the 2014 GSP reform and could not realistically have been foreseen. We find a strongly negative impact on affected countries and products’ export performance to the EU, with trade values dropping by nearly 35% on average after three years. The effect differs appreciably across affected GSP beneficiaries, with the fall in EU imports ranging from -24% from India to -67% from Nigeria. Graduations are found to bite where it would hurt beneficiary countries the most, namely in products for which the GSP had enabled export success. At the same time, we also find evidence of a positive spillover effect to closely related non-GSP eligible products, exports of which nearly double as developing country exporters redirect production towards non-graduated products.

Keywords: GSP; graduations; trade policy; preferences (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F63 (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:sus:susewp:1224

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