Trade Preferences Towards Developing Countries - Essay Example

The OECD3 conducted empirical research and concluded that multilateral trade liberalization implemented by the EU has resulted in comparatively higher sizeable corrosion of predilections than the liberalization processes implemented by countries like Canada, Japan, Australia, and the United States. Thus, the importance of the trade preferences provided by the EU proved to be relatively less in comparison with the preferential schemes provided by other countries.

The conclusion of OECD has also been maintained by Nilsson in his empirical research conducted in 2007. In the year 2007, Persson and Wilhelmsson4 put their effort to find that some particular EU preferential deals had produced great impacts, specifically the schemes that were offered to the Pacific countries as well as the African Caribbean nations. These kinds of findings had earlier been reported by Nilsson in 20025. However, the preference schemes of a donor country should be seen concerning the overall trade openness of the donor.

For instance, if a benefactor does not have a high figure relating to the imports covered under the preferential schemes, then this would result in the entrance of a bulky share of the donor’s imports under the mechanism of MFN-0 tariffs. In this case, the capacity for preferences is limited as well. As a result, no matter whether the utilization of the rate of preferences in such a state of affairs is high or low, it no longer becomes so vital. For getting an accurate picture of the openness of a donor to imports from less developed or developing nations, it is vital to study the share and the number of imported commodities entering the EU under the scheme of MFN-0, the proportion and volume of dutiable imports, the proportion of imports entitled to preferential arrangements, and, finally, the rate of preference utilization.

This paper will put its effort into examining the impact of EU trade preferences on developing countries with a special focus on India based on existing literature. However, before moving on to analyzing the impact, the paper will discuss the existing trade preference scheme. Then, it will consider the general impact on developing countries as a whole and finally, it will put its special focus on India. Scope and coverage of trade preferences forwarded by EU: The fundamental principle of the World Trade Organization is to practice non-discriminating attitudes among the trading partners.

However, it has been accepted that the developing nations should get favored treatment, compatible with their relatively disadvantageous economic situations. In 1971, following one of the UNCTAD’s (United Nations Conference on Trade & Development) recommendations, it was pointed out that the nations that had agreed on the GATT (General Agreement on Tariffs and Trade), the predecessor to what is now known as the WTO, had agreed upon on a waiver of ten-years for the prerequisites that require equal conduct of trading partners.