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The Disadvantage of Membership: How Joining the GATT/WTO Undermines GSP

Published online by Cambridge University Press:  17 April 2018

JENNIFER L. TOBIN  and
MARC L. BUSCH
JENNIFER L. TOBIN*
Affiliation:
Georgetown University, USA
MARC L. BUSCH*
Affiliation:
Georgetown University, USA
*
*Email: jlt58@georgetown.edu.
**Email: Marc.Busch@georgetown.edu.
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Abstract

Scholars and policymakers have long debated whether the Generalized System of Preferences (GSP) enhances development through increased trade – i.e., whether the program is effective as a form of ‘trade-as-aid’. We argue that, by itself, GSP increases poor-country exports, but that when recipients join the General Agreement on Tariffs and Trade (GATT) or its successor, the World Trade Organization (WTO), they realize fewer imports, and less gains in total trade, than GSP recipients that do not join the multilateral trading system. The logic is that GATT/WTO membership makes GSP more predictable by making it non-discriminatory, in the sense that exporters in recipient countries are less vulnerable to the program's ad hoc conditionality. This leads these exporters to lobby less against domestic protectionism, yielding higher trade barriers at home, and thus fewer imports. We test this hypothesis using a gravity model of trade, and data on all GSP programs, and find strong support for the argument that the GATT/WTO's interaction with GSP undermines trade.

Type
Review Article
Information
World Trade Review , Volume 18 , Issue 1 , January 2019 , pp. 133 - 160
Copyright
Copyright © Jennifer L. Tobin And Marc L. Busch 2018 

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