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

Author

Listed:
  • Ingo Borchert

    (University of Sussex Business School, CITP, UKTPO)

  • Mattia Di Ubaldo

    (University of Sussex Business School, CITP, UKTPO)

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of Preferences (GSP) scheme is its graduation mechanism, whereby preferential market access for imports to the EU is withdrawn from beneficiaries in sectors in which they are considered to be sufficiently competitive.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.

Suggested Citation

  • Ingo Borchert & Mattia Di Ubaldo, 2024. "The Trade Impact of Surprise Graduations from the EU’s GSP scheme," Working Paper Series 1224, Department of Economics, University of Sussex Business School.
    • Handle: RePEc:sus:susewp:1224
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    References listed on IDEAS

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    More about this item

    Keywords

    GSP; graduations; trade policy; preferences;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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