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TRADE PREFERENCES "UNDER-UTILIZED" BY LDCs, UNCTAD FINDS

UNCTAD/PRESS/IN/2004/008
05 April 2004

Preferential tariff rates for developing-country exports are not fully utilized by many of the 49 least developed countries (LDCs), finds a new UNCTAD study, Trade preferences for LDCs: an early assessment of benefits and possible improvements (UNCTAD/ITCD/TSB/2003/8). It says that in 2001, imports from all LDC effective beneficiaries covered by the Quad initiatives - such as the EU´s "Everything but Arms" scheme and the US GSP scheme for LDCs -- totalled 66% of all dutiable imports. This left more than a quarter of LDC exports, mostly textiles and garments, not covered by some initiatives. Out of this potential coverage, only a fraction actually received trade preferences at the time of customs clearance in the preference-giving countries, mainly because of rules-of-origin constraints. Thus, the utility of the Quad initiatives recorded a low of 42% of all dutiable imports from LDCs in 2001.

Moreover, utilization and benefits of these trade preferences are concentrated in a few country/product pairs, as in the case of the US African Growth and Opportunity Act and the EU´s EBA. Beyond some relative success stories, the study says, "the picture is dismal", also because of the supply capacity constraints of LDCs.

Previous UNCTAD studies have shown that available trade preferences have not been fully utilized, but the extent of under-utilization and the reasons for it have not been well documented. Using new data sources on a time series basis, the new study provides the first quantifications of this under-utilization and indicates options for improving it.

It examines past and present features of the Quad countries´ preferential market access initiatives and analyses the reasons for their low utilization and the linkage with rules of origin. Significant trade effects could be generated, it says, by improved preferential market access. Specifically, it recommends that trade preferences should be stable and cover all products with rules of origin and related administrative procedures that reflect the supply capacity and industrial development of LDCs.




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