Export Competitiveness of Developing Countries and U.S. Trade Policy

This paper examines the impact of the revocation of tariff exemptions on exports of developing countries using data from cases of the Competitive Needs Limits (CNL), a feature of the US Generalized System of Preferences (GSP). CNLs are arguably imposed on “super competitive” GSP beneficiaries and aim to reserve the GSP benefits for other “less competitive” GSP eligible countries. The empirical results show that being excluded from the GSP as a result of a CNL induces a large and significant drop in imports from affected countries, both in value and in their share in total US imports, and much of their market share is captured by non-GSP countries. Both findings are contrary to the policy objectives of CNLs.