Trade preferences for developing countries have been a feature of industrialized countries’ commercial policies for nearly 40 years. They are considered an important element of the overall set of policies that help to improve the prospects for economic growth in developing countries, and an instrument for achieving a better balance of economic conditions between those countries and the developed world. However, with the progress in overall trade liberalization, tariff preferences are gradually losing importance. At the same time, some preferential schemes for special groups of developing countries, such as the Lomé Convention between the EU and the African, Caribbean and Pacific (ACP) countries, have come under serious pressure in WTO. In this situation one may well ask what the future of trade preferences should be in the coming round of WTO negotiations. Should developing countries strongly defend their trade preferences, and try to improve them? What are the benefits and costs of such preferences and how do they compare to other forms of assistance for economic development?
In agricultural trade, tariff preferences for developing countries have a somewhat special status. On the one hand, many tariffs are still extremely high, and hence preferential arrangements are potentially valuable. On the other hand, because of the ‘sensitive’ nature of their agricultural policies, developed countries have usually been reluctant to provide deep preferences for agricultural products. Nevertheless, some special preferential regimes have provided significant tariff preferences for selected agricultural products, for limited groups of developing countries. The EU’s preferences for sugar imports from selected ACP countries are a case in point. Hence the picture is very diverse when it comes to preferential treatment of agricultural exports from developing countries. Moreover, now that the Uruguay Round has brought agricultural trade into the liberalization process the rules of the game in agriculture have fundamentally changed. Are developing countries going to lose a lot as agricultural trade is further liberalized and preference margins are eroded? If so, do they have a right to compensation, and in what form? What should be the role of trade preferences in the next round of WTO negotiations on agriculture?
This study attempts to respond to some of these questions. Given its limited scope, it cannot do so on a comprehensive basis, but has to concentrate on a number of selected issues. The literature on trade preferences, in particular for agricultural products, is surprisingly limited. Consequently, some of the discussion is necessarily of a tentative nature, but may stimulate a more intensive discussion of a broader set of issues.
The study starts by providing a short impression of the nature
of major preferential arrangements (Section 2). It then proceeds to discuss the
place of trade preferences in the overall framework of economic relations
between developed and developing countries (Section 3). On this basis, major
benefits and costs of trade preferences are discussed (Sections 4 and 5). The
changing role of trade preferences in the GATT/WTO legal framework is outlined
(in Section 6) before the future of trade preferences in WTO is considered
(Section 7). The study ends with a discussion of the issue of preference erosion
and potential compensation (Section 8) and sets out some conclusions (Section
9).
