GSP Expiration and Declining Exports from Developing Countries

This paper investigates whether the 2011 expiration of the most comprehensive trade preference program (Generalized System of Preferences or GSP) offered by the US had a detrimental impact on the exports from developing countries. The impact of GSP expiration is examined with a triple difference-in-differences estimation that controls for both countryand product-level export changes. Even though the duties collected during the period of expiration are ultimately refunded after GSP is reauthorized, the findings of this paper suggest that the expiration of GSP has a considerable impact on the level of exports to the US; on average exports dropped by 3 percent in 2011, with exports of agricultural products and textiles and clothing declining as much as 5 and 9 percent, respectively. The decline is increasing in the tariff rates and decreasing in the size of exports.