Truly Preferential Treatment? Reconsidering the Generalized System of (Trade) Preferences

Empirical research focusing on preferential treatment for developing economies have not considered how preferential margins might influence market access particularly when competing non-members might be receiving preferential benefit of their own with a common trade partner. In this paper, we compute two indices (based on existing studies) to measure bilateral trade restrictions by considering product line tariff restrictions and the product line market participants. One index captures the restrictions bilateral tariff rates impose on market access conditions of a country as compared to the most favored nation rate, called Exponential Trade Restrictiveness Index (ETRI). The other index captures the relative ease with which a country can access foreign markets compared to its competing suppliers, called Exponential Relative Preferential Margin (ERPM). Second, we use these two bilateral indices in a gravity framework to re-evaluate the Generalized System of Preferences (GSP) in terms of relative preferences. The results show that the GSP programs do not improve the direct market accessibility but they do improve the relative market accessibility of low-income countries