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Preferential Tariff Formation -- The Case of the European Union

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Abstract

In this paper, we address the impact of multilateral trade liberalisation (MTL) on the preferential tariffs granted by the EU, who is one of the top traders as well as biggest contributors to MTL. We empirically address two important questions. First, if the MFN tariff for a product is higher, does it lead to a higher or lower preferential tariff? Second, the EU being a large trading partner in such agreements, does reciprocity matter for giving meaningful preferential access? For a given MFN tariff, we model the preferential tariff with a simple linear functional form. We draw three important conclusions. First, the products that are highly protected do not get high preferential access even at the regional level. Second, reciprocity plays only a limited role in granting better preferential access. Third, GSP preferences matters when the EU negotiates with the developed partners but it does not matter when it negotiates with the developing partners.

Suggested Citation

  • Vivek Joshi, 2010. "Preferential Tariff Formation -- The Case of the European Union," IHEID Working Papers 05-2010, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp05-2010
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    References listed on IDEAS

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    1. Nuno Limão, 2018. "Preferential Trade Agreements as Stumbling Blocks for Multilateral Trade Liberalization: Evidence for the United States," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 13, pages 353-371, World Scientific Publishing Co. Pte. Ltd..
    2. Hummels, David, 1999. "Toward a Geography of Trade Costs," Working papers 283448, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    4. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    5. Limão, Nuno, 2006. "Preferential vs. multilateral trade liberalization: evidence and open questions," World Trade Review, Cambridge University Press, vol. 5(2), pages 155-176, July.
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    Cited by:

    1. Pedro J. Martinez Edo, 2011. "Reciprocal liberalization: Bilateral, plurilateral or multilateral?," STUDIES IN TRADE AND INVESTMENT, in: United Nations ESCAP (ed.), Trade beyond Doha: Prospects for Asia-Pacific Least Developed Countries, Studies in Trade and Investment 76, chapter 4, pages 60-94, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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    More about this item

    Keywords

    MFN tariffs; preferential tariffs; reciprocity; GSP;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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