An assessment of United Kingdom's trade with developing countries under the generalised system of preferences

Abstract

The European Union (EU) generalised system of preferences (GSP Scheme) grants preferential treatment to 88 eligible countries. There are, however, concerns that the restrictive features (such as rules of origin, low preference margin and low coverage) of the existing scheme indicate gravitation towards commercial trade agenda to which efficiency imperatives appear subordinated. Whether these concerns are genuine is an empirical question whose answer largely determines whether, after Brexit, the United Kingdom continues with the existing specifics of the EU scheme or develops a more inclusive United Kingdom‐specific GSP framework. This study quantitatively examines the efficiency of the EU GSP as it relates to United Kingdom beneficiaries from 2014 to 2017. We draw on the descriptive efficiency estimation (the utilisation rate, potential coverage rate and the utility rate) using import data across 88 beneficiary countries and agricultural products of the Harmonised System Code Chapter 1 to 24. Asides the Rules of Origin that, generally, harm the uptake of GSP, low preference margin is found to cause low utilisation rates in a non‐linear manner. Essentially, a more robust option (such that allows “global Cumulation” or broader product coverage) could, substantially, lower the existing barriers to trade and upsurge the efficiency of the GSP scheme.

Effect of Aid for Trade and Foreign Direct Investment Inflows on the Utilization of Unilateral Trade Preferences Offered by the QUAD Countries

“…According to Hakobyan (2015), low utilization rates of trade preferences likely indicate the absence of economic value of these trade preferences, or at best, that these preferences are providing little value to beneficiary countries. However, the utilization rate of a trade preference might not necessarily provide the best perspective of the value of a preferential regime (e.g., Akinmade et al, 2020): even though low utilization rates of a given trade preference may, to some extent, be informative (e.g., Persson and Wilhelmsson, 2016), it could still hide the existence of some (non-tariff) barriers to the utilization of this preference by the beneficiary country. These non-tariff barriers could be related to rules of origin requirements, as well as administrative and other compliance costs 23 that are to be met by the beneficiary country so as to benefit from the trade preference (e.g., Gitli, 1995;Gradeva and Martínez-Zarzoso 2016;Persson, 2015b, WTO, 2019.…”

Utilization of Trade Preferences in Zambia: Firm Specific Issues

“…The low utilization was attributed to certification of origin and/or transportation requirements. Furthermore, Akinmade et al (2020) in assessing the United Kingdom's (UK) trade with developing countries under the GSP scheme found that beneficiaries of the UK-GSP scheme failed to utilize the preferences to the full extent and this was mainly due to low preference margins.…”