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Preferential Trade Agreements

How Much Do They Benefit Developing Economies?

image of Preferential Trade Agreements

This report aims to answer two major questions: (1) How beneficial are the trade preferences provided to developing countries; and (2) what are the implications of possible erosion of these benefits under multilateral trade liberalisation? The report focuses on trade preferences provided by the so-called Quad countries (Canada, the European Union, Japan and the United States) because they have some of the world’s highest tariffs on agricultural commodities. Findings from this study suggest that although preferential margins will be eroded with multilateral liberalisation, this may be a problem only for certain countries and within specific sectors, and that factors not related to preferential trade schemes may be limiting the exports of the least-developed countries (LDC).

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Executive summary

The present analysis is part of the OECD’s ongoing effort to examine the implications of non-reciprocal tariff preferences provided by developed countries to developing and least developed countries in agricultural trade. The first part of this two-part report focuses on calculating the preference margins for selected non-reciprocal preference arrangements at the detailed tariff-line level provided by each Quad country (Canada, European Union, Japan, and the United States) and how these margins will change under alternative MFN tariff reduction formulas. Part II combines the preference margin information from Part I with trade data, again at the tariff-line level, to assess the value of the apparent preferential receipts provided by the Quad to the countries eligible to the various non-reciprocal agreements. The report identifies the countries that garner the largest gains and the agricultural commodities that generate the largest benefits, while also identifying countries that are more reliant on preferential market access and that may be more vulnerable to preference erosion.

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