Reforming Trade Preferences

Rich countries and emerging powers offer some developing countries preferential market access, but their programs are often flawed and lack coordination. This initiative aims to reform trade-preference programs to expand market access for the poorest countries. Image: flickr user Austin Yoder / cc

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Rich countries and some emerging powers offer poorer developing countries a hodgepodge of preferential market access arrangements intended to create opportunities for jobs, exports, investment, and development. But the programs are often flawed and lack coordination. This initiative aims to reform trade-preference programs to expand market access for developing countries, especially the poorest.

Persistent delays in concluding multilateral trade negotiations through the World Trade Organization (WTO), combined with the global economic crisis, increase the risk that the poorest developing countries will be further marginalized in the global economy. This is already happening to some degree as a result of the impact of the economic crisis on trade flows, and could be exacerbated if delays in concluding the Doha Round encourage the spread of regional and bilateral trade agreements. Unilateral trade preference programs are an important mechanism for mitigating these effects.

High-income countries have already committed, via the Millennium Development Goals and again at the 2005 WTO ministerial in Hong Kong, to provide duty-free, quota-free market access for the least developed countries. Those commitments could provide a foundation for effective preference programs. But existing programs are often overly restrictive and complex, and lacking in coordination within and across countries.

To address these problems, the Center for Global Development convened the Global Trade Preference Reform Working Group in April 2009 to make practical policy recommendations to make trade preference programs better serve development objectives. The group launched its final report, Open Markets for the Poorest Countries: Trade Preferences That Work, in April 2010 with the goal of  encouraging preference-giving countries, including emerging powers, to move jointly toward better and more coherent policies.

The core recommendations of the working group include the following:

  • Extend trade preferences to all exports from all LDCs.
  • Change program rules that raise costs and impede market access for LDCs, especially rules of origin restricting input sourcing.
  • Ensure program stability and predictability to encourage investment in potential export sectors, particularly by making the programs permanent or long-lasting.