Go Ahead and Trade: The Effect of Uncertainty Removal in the EU’s GSP Scheme

47 Pages Posted: 3 Sep 2020

See all articles by Ingo Borchert

Ingo Borchert

University of Sussex

Mattia Di Ubaldo

University of Sussex

Date Written: March 1, 2020

Abstract

We estimate the trade effect of removing uncertainty about future trading conditions in the context of the 2014 reform of the Generalized System of Preferences (GSP) of the European Union (EU). EU GSP members receive non-reciprocal trade preferences (NRTPs), but only as long as they are not too competitive; i.e. they will graduate in case their share of EU GSP imports in a sector exceeds a certain threshold. However, the 2014 reform removed the threat of these competitiveness-related graduations for members of the GSP+, a sub-scheme of the main programme. We find that the reform increased EU imports from GSP+ countries by about 7% on average whilst tariffs stayed the same. This trade impact is driven by the country-sector pairs most exposed to NRTPs uncertainty pre-reform. The effect is robust to taking into account other aspects of the reform, such as the reduction in GSP membership and changes in tariff margins, respectively.

Keywords: GSP, trade preferences, trade policy uncertainty

JEL Classification: F13, F14

Suggested Citation

Borchert, Ingo and Di Ubaldo, Mattia, Go Ahead and Trade: The Effect of Uncertainty Removal in the EU’s GSP Scheme (March 1, 2020). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2020/15, Available at SSRN: https://ssrn.com/abstract=3630247 or http://dx.doi.org/10.2139/ssrn.3630247

Ingo Borchert (Contact Author)

University of Sussex

Mattia Di Ubaldo

University of Sussex ( email )

Sussex House
Falmer, Brighton BN1 9SL
United Kingdom

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