Global Trade Preference Reform: Background Paper for Working Group 1

For more than 30 years, rich countries have provided preferential market access for developing countries, via lower than normal tariffs, as a mechanism for promoting development through export expansion and diversification. Trade preference programs have been strikingly successful in boosting exports in some cases, but the benefits are often concentrated in a relatively small number of countries and sectors and all too many poor countries remain dependent on primary commodity exports that continue to suffer from short-term volatility. Moreover, among rich countries today, tariffs on imports are generally in the low single digits and preferential access is less valuable than it was when trade preference programs were adopted in the 1970s. Is there still scope, then, to use trade preferences as a tool for development, and, if so, what improvements are needed? There are three principal weaknesses in these programs identified in the literature: low average tariffs combined with restrictions or exclusions on ―import-sensitive‖ products; high administrative costs, including rules of origin; and uncertainty surrounding the stability of the commitments under these programs, which deters investment. But the highest barriers in the tariff schedules of most countries typically apply to agricultural products, textiles and apparel, footwear, and other light manufactures—exactly the products that many developin