The impact of trade preferences removal: Evidence from the Belarus Generalized System of Preferences withdrawal

Abstract

Under the Generalized System of Preferences (GSP), high-income countries grant unilateral trade preferences to developing countries. These preferences are subject to political conditionality, but little is known about the trade impact of loss of preferential access. We study the EU's complete withdrawal of GSP preferences from Belarus in 2007 in response to labour rights violations to fill this void. The withdrawal caused a significant drop in trade for affected products (25%–27% trade decline) and some trade reduction at the extensive margin. For products where trade was affected at the intensive margin, there is some evidence of adjustment through falls in quantities but also through prices for larger export sectors. The impact was uneven across sectors, with textiles and plastics particularly strongly affected by the withdrawal.