Assessment of economic benefits generated by the EU Trade Regimes towards the developing countries

The EU uses a wide range of trade policy instruments to give exporters in developing countries access to EU markets and contribute to their economic growth. Under the EU’s Generalised Scheme of Preferences (GSP), exports from developing countries can access the EU market either duty-free or at a reduced tariff rate.

In order to assess how the EU GSP has affected the growth and diversification of exports from developing countries to the EU, we apply a new and advanced micro-econometric technique to an extremely large dataset of more than 12 million observations, containing detailed trade and tariff information. This allows us to isolate the causal impact of GSP preferences on the growth of exports. To the best of our knowledge, this is the first time that this has been done in an EU context.

We also used a dynamic model to assess the linkages between poverty rates and export performance, and we tested how potential benefits depend on domestic policies.

The main conclusions of our study are

• GSP preferences have, on average, caused exports of covered products to the EU, to increase by up to 5%. This average impact masks very large differences across different country groups, GSP schemes and individual product groups.
• Impacts are found to be especially large for the Least Developed Countries and are approximately twice as high as the average across all countries.
• GSP preferences are also found to increase the likelihood of exporting products covered by preferences and thereby diversify the exports from developing countries to the EU. Again, impacts are found to be especially large for the Least Developed Countries, for which preferences on average increases the likelihood of exporting a covered product by 25%.
• Exports are an important engine of growth and may also be an engine for poverty reduction, if combined with the right domestic policies

The study is commissioned by The European Commission,
Directorate-General for International Cooperation and Development.

Download