Accounting for underutilization of trade preference programs: The US generalized system of preferences

The US Generalized System of Preferences (GSP) provides duty‐free market access to developing countries. Yet despite these preferences, about 40% of imports qualifying for GSP enter the US without claiming the benefits. This paper documents variations in GSP utilization rates and explains their determinants with a special emphasis on the production structure of beneficiary countries as captured by local content. The findings suggest that higher local content shares in output lead to higher utilization rates. In addition, the utilization rate rises with the preference margin, size of exports and regional cumulation, in general, and declines with degree ofprocessing.     

Export Competitiveness of Developing Countries and US Trade Policy

This paper examines the impact of the revocation of tariff exemptions on exports of developing countries using data from cases of the Competitive Needs Limits (CNL), a feature of the US Generalized System of Preferences (GSP). Competitive Needs Limits are arguably imposed on ‘super competitive’ GSP beneficiaries who no longer need the preferential treatment, and aim to reserve the GSP benefits for other GSP eligible countries. The findings suggest that being excluded from the GSP as a result of a CNL induces a large and significant drop in US imports from affected countries, both in value and as a share of total US imports, and much of their market share is captured by non‐GSP countries, contrary to the policy objectives of CNLs.     

The US Generalised System of Preferences in Principle and Practice

In principle, the US generalised system of preferences (GSP) offers uniform market access to exports from eligible developing countries for a broad set of GSP‐eligible products. In practice, realised GSP tariff exemptions demonstrate marked variation across countries, industries and years. In this paper, we identify the sources of discretionary and non‐discretionary GSP exclusions and quantify the extent to which competitive needs limitations (CNLs), waivers and additional annual product, country and country‐product exclusions drive a wedge between the ‘generalised’ principle of GSP and its implementation in practice.