Trade Preferences and Differential Treatment of Developing Countries: A Selective Survey

Abstract:     
Non-reciprocal trade preferences and provisions in the GATT/WTO that allow developing countries greater leeway to retain or use protectionist policies are two of the central planks of so-called special and differential treatment (SDT) for developing countries in the multilateral trading system. This paper surveys the literature on the rationales, institutional features, and economic effectiveness of SDT. A large literature has emerged on SDT in the last 50 years, by both proponents and opponents. We summarize a number of key contributions on the subject, with a special emphasis on the evaluation of the impact of SDT, especially preferential market access. The issue of SDT has become very topical again, following a period during which it was viewed as an outdated concept for the multilateral trading system. We therefore devote attention as well to a number of recent contributions that discuss (i) whether there is a continued need for SDT, and (ii) how this might be designed from both a development (recipient) objective and from the perspective of the trading system more generally. A major theme of the survey is that most of the issues that are debated today were already being discussed in the 1960s. We conclude that those who questioned the value of unilateral preferences have proven to be prescient.

Number of Pages in PDF File: 47

Keywords: Trade preferences, special and differential treatment

JEL Classification: F13, F15

working papers series