Graduation From the EU GSP Scheme: The Effects of China

The European Union has a number of policies intended to stimulate growth and development of the less developed countries. This paper investigates EUs largest of this kind, the Generalized System of Preferences, and the effects of graduating from the scheme. When the development of a beneficiary country’s product sector is considered being competitive enough, the EU will no longer include the sector in the scheme, that sector is then being graduated. The biggest beneficiary of the scheme during the last decades has been China, which is also the EUs biggest trading partner. In 2015, China had all of its then still included products sectors graduated from the scheme. This paper empirically investigates the effects graduation has on China’s exports to the EU. The estimations are performed with a gravity model specified with the level of China’s exports as the dependent variable and the graduation of sectors from the GSP as the main explanatory variable. The study is not able to find any negative effect from graduation