The Impact of Preference Erosionon Middle-Income Developing Countries

Abstract

Preference erosion has become an obstacle to multilateral trade liberalization, as beneficiaries of trade preferences have an incentive to resist reductions in most-favored-nation (MFN) tariffs. This study identifies middle-income developing countries that are vulnerable to export revenue loss from preference erosion. It concludes that the problem is heavily concentrated in a sub-set of preference beneficiaries—primarily small island economies dependent on sugar, banana, and—to a lesser extent—textile exports. Accordingly, measures to help mitigate the impact of preference erosion can be closely targeted at the countries at risk.