Export Competitiveness of Developing Countries and US Trade Policy

By Shushanik Hakobyan[1] (International Monetary Fund)

With rising US trade protectionism against its major trading partners, the Generalized System of Preferences or GSP, a long-running scheme of tariff exemptions meant to aid exporters in developing countries, may get less attention. While GSP imports account for about one percent of total US imports, they account for about ten percent of all imports from GSP beneficiaries with considerable heterogeneity across countries.[2] Since the early 1970s, the GSP has given a boost to these exporters by granting their products duty-free access to the US market thereby aiding the efforts to expand their industrial and exporting capacity. But as with any policy, the devil is in the details. Despite the benefits, uptake has been low due to a number of reasons, including a low margin of preference granted by GSP, uncertainty about the permanence of the GSP program, and the statutory caps on benefits designed to prevent “abuse” by successful exporters.[3] My research focuses on the latter and explores whether these caps are well-targeted and serve their designated purpose.[4]

One of the features of the US GSP, the so-called Competitive Needs Limits, or CNLs, act as caps on benefits by excluding exporters exceeding CNL thresholds. There are two criteria to identify country-product pairs that have exceeded CNLs: (1) imports exceeding a certain value threshold in a calendar year, set at $180 million in 2017, and increasing by $5 million every year; (2) import share of a country in a given product exceeding the percentage threshold set at 50 percent. Meeting either criteria triggers an automatic exclusion of a country-product pair from GSP in the following year. The range of imports that exceed these thresholds varies greatly in terms of value. For example, the eligibility of Indian exporters of gold necklaces and neck chains was revoked in 2008, following their exports reaching $266 million in the previous calendar year (the value threshold in 2007 was set at $130 million). Likewise, the Argentine exporters of green olives lost their GSP eligibility in 2008 after accounting for 66 percent of total imports of green olives into the US in 2007. It is worth noting that Argentina had not exported green olives in the previous five years prior to 2007.

There are three ways to avoid losing the GSP benefits due to the CNL. First, if total US imports of a given product are trivial, at most $23.5 million in 2017 (set to increase by $0.5 million every year), a de minimis waiver could be applicable. Second, the percentage threshold may be waived if a directly competitive product was not produced in the US on January 1, 1995 (504(d) waiver). Lastly, country-product pairs exceeding the value or percentage CNL may petition for a more “permanent” CNL waiver.

To evaluate the impact of these caps on exporters, I examine the universe of all country-product pairs that have been excluded for more than two years from GSP over the period of 1997-2010. There have been 202 country-product pairs that met the CNL criteria in this period and were excluded from the GSP, accounting for $7 billion in imports (in the pre-exclusion year) or about 31 percent of US imports claiming GSP on average over this period. I estimate country-product level regressions of the value and share of imports on a set of binary variables indicating the first, second and third year of exclusion.

I find that the CNL exclusions are associated with a continuous decline in exports and import shares for up to three years after the exclusion, leading to a 75 percent drop by the third year of exclusion relative to the pre-exclusion average. Similarly, import shares drop by 42 percentage points from an average of 63 percent prior to the exclusion. This drop is predominantly driven by exporters who meet the percentage threshold with lower valued exports. These results are robust to employing volume data instead of values. Furthermore, the effect is larger for products facing higher MFN tariff rates. By the third year of exclusion, the value of imports and import shares of exporters eligible for a de minimis waiver drop by 50 and 75 percent, respectively, relative to pre-exclusion averages. In contrast, the impact of CNLs on the largest country-product pairs that exceeded the value threshold is negligible.

A related question of interest is the potential impact of CNLs on imports from other GSP beneficiary countries. If CNL-affected countries are unable to continue exporting to the US, who fills the void — other GSP countries or non-GSP countries? I find that import shares rise considerably more for non-GSP countries. By the third year of exclusion, the share of imports from other GSP eligible countries increases by 7 percentage points from a pre-exclusion average of 7 percent, whereas the share of imports from non-GSP countries rises by 29 percentage points (pre-exclusion average share is 25 percent).

Arguably, CNLs do not serve their intended purpose of identifying exporters who no longer need the preferential market access and allowing other GSP beneficiary countries benefit more from the program. Instead, CNLs tend to target small exporters, forcing them to stop exporting to the U.S. altogether, and mostly benefit non-GSP exporters.

These findings call for tweaks to the design of the program. Two simple changes can be made to boost the utilization of the program. First, since percentage CNL fails to identify successful exporters, a more holistic approach that takes into account both the value of imports and market share is needed to accurately detect such exporters. Second, the analysis of exports over a longer period (instead of the statutory one year) could go in hand with the previous suggestion by capturing the export dynamics of given products. These simple changes would ensure a lasting market access for the countries whom the GSP scheme is intended to help.


Blanchard, E., and S. Hakobyan, (2015); “The U.S. Generalized System of Preferences in Principle and Practice,” The World Economy 38(3).

Hakobyan, S., (2015); “Accounting for Underutilization of Trade Preference Programs: U.S. Generalized System of Preferences,” Canadian Journal of Economics 48(2), 2015.

Hakobyan, S., (2017a); “Export Competitiveness of Developing Countries and U.S. Trade Policy,” The World Economy 40(7).

Hakobyan, S., (2017b); “GSP Expiration and Declining Exports from Developing Countries,” Working Paper, 2017.

Ornelas, E., (2016); “Special and Differential Treatment for Developing Countries,” in Handbook of Commercial Policy, Kyle Bagwell and Robert W. Staiger (eds.), Vol. 1B, Amsterdam, North-Holland: Elsevier.


[1] The views expressed in this column are those of the author and should not be attributed to the IMF, its Executive Board, its management, or its member country governments.

[2] See Ornelas (2016) for a general introduction to GSP, an aspect of special and differential treatment for developing countries under the World Trade Organization.

[3] See Blanchard and Hakobyan (2015), Hakobyan (2015, 2017b).

[4] See Hakobyan (2017a).

Welcome New Members June 2018

We would like to welcome the following new member of the InsTED network:

Prof Pol Antràs (Harvard University): His research interests are in International Economics and Applied Theory. His most recent work is focused on the analysis of global value chains and on the interplay between trade, inequality and costly redistribution.

Prof Prabhat Barnwal (Michigan State University): His research interests are in Development Economics, Environmental and Energy Economics, Public Finance and Health Economics.

Yang Liang (Syracuse University): His research interests are in International Trade, Labor Economics and Applied Microeconomics.

Prof Nina Pavcnik (Dartmouth College): Her research interests are in International Trade, Development and Industrial Organisation.

PhD position in Environmental Economics, Department of Economics, University of Kiel

The department of economics, Chair of Environmental and Energy Economics at Kiel Univer-sity, offers a position for

a PhD position

with a three year fixed term appointment starting September 1st, 2018, or later. The salary is based on the German public pay scale (TV-L 13) with a weekly workload corresponding to a three-fourth position with 29,025 hours.

Area of Activity:
The position in the collaborative project GoCoase – Governing climate change adaptation at the Baltic Sea Coast is funded by the German Federal Ministry of Education and Research (BMBF). The objective of GoCoase is to evaluate different adaptation paths to climate change impacts on the German Baltic Sea coast at the regional level. Together with two sen-ior researchers, the successful applicant will investigate the economic effects of protections measures. This includes the design, implementation and analysis of a choice experiment and a cost-benefit analysis of the measures.

You should have:

  • An excellent degree in economics (or a comparable subject),
  • Interest in quantitative research, in particular in the field of environmental eco-nomics,
  • Skills in data analysis is desirable but not a pre-requisite,
  • Excellent command of the Germany and English language, both written and spo-ken,
  • Cooperativeness, i.e., ability to work in a team,
  • Independence and commitment

What we offer:

  • A challenging and interesting research position with the possibility to shape your own research profile,
  • A sound academic supervision of the dissertation work,
  • Admission to the PhD program Quantitative Economics with a challenging course program (http://www.quantitative-economics.uni-kiel.de/en).
  • A stimulating academic environment with numerous researchers in the field of en-vironmental and resource economics
  • More information on the research done in the working group and current research projects can be found in the internet: https://www.e3.uni-kiel.de/en

For further information please contact Prof. Dr. Katrin Rehdanz, email: rehdanz@economics.uni-kiel.de.

The University of Kiel is an equal opportunity employer, aiming to increase the proportion of women in science. Applications by women are particularly welcome. Female applicants will be treated with priority if their qualifications and achievements are equal to those of male ap-plicants.

The University of Kiel has an equal opportunities policy for persons with recognized disabili-ties. Disabled persons with the necessary qualifications will therefore be given priority. Applications by people with a migration background are particularly welcomed.

Please send your application in one PDF document including motivation letter, CV, study cer-tificates and at least one reference letter before July 5th, 2018 to

Kiel University Institute for Economics, Chair of Environmental and Energy Economics Prof. Dr. Katrin Rehdanz
for the attention of Ms Hille Rowehl, E-mail: re2-sekretariat@economics.uni-kiel.de

Please refrain from submitting application photos.

Inaugural Trade Network Workshop “Global trade after the Great Recession: cyclical dynamics, structural changes and the new steady state”

The inaugural Trade Network Workshop is being organised by the European Central Bank and will be held in Frankfurt am Main, Germany, on 17 September 2018.

After years of low growth, global trade dynamics are gaining momentum again. At the same time, trade growth is likely to remain below pre-crisis averages. This gives rise to a number of questions, such as: What is the new steady state for global trade growth? What are the drivers of the cyclical developments? Which structural determinants will anchor trade growth going forward? To what extent are protectionist policies posing risks to world trade? The workshop will bring together central bankers, academics and market practitioners to discuss their views and empirical evidence on these topics.

Two keynote addresses will be delivered by Graham Slack, Chief Economist of A.P. Møller-Mærsk, and Bernard Hoekman, Robert Schuman Chair at the European University Institute.

We welcome any contributions on these topics, particularly those that focus on the following four areas:

  1. The cyclical position of trade: Empirical studies on the cyclical dynamics of trade, short- and medium-term forecasting models, and trend/cycle decompositions.
  2. Structural changes and steady state determinants: Studies that focus on structural breaks, time-variation in trade growth, and structural factors determining trade dynamics in the medium and long term.
  3. Trade and technology: Empirical and theoretical contributions that focus on the role of technology in global value chain participation, on- versus re-shoring, intra-firm trade, and provision and measurement of trade in services.
  4. Trade and protectionism: Studies that assess the impact on trade flows of protectionist policies and trade agreements and the potential impact of Brexit.

Please email your contributions to  by 31 July 2018.

The event is being hosted by the European Central Bank.

Organising Committee

  • Alexander Al-Haschimi ()
  • Frauke Skudelny ()
  • Björn van Roye ()

PEDL – 6th Call for MRG Proposals

Sixth Call for Major Research Grant Proposals

Deadline: 31 August 2018

The sixth call for PEDL Major Research Grants (MRGs) is now open!

About PEDL: The Private Enterprise Development in Low-Income Countries (PEDL) programme pursues a research agenda that aims to better understand what determines the strength of market forces driving efficiency in lower-income countries. The Initiative supports research related to firms, enterprises, and markets and gives priority to approaches that promise to produce credible research results relevant for policy-making in targeted countries. Projects carried out partly or entirely in non-focus countries will be considered if a convincing case is made that the results are applicable to the focus countries. See the list of DfID focus countries here.

Topics: We welcome proposals in any area related to private sector development in focus countries. We expect that many of the funded proposals will relate to one of PEDL’s four main research themes:

  • Market frictions, management and organizations.
  • Trade and macro models – agglomeration and spatial location of firms.
  • High growth entrepreneurship.
  • Social compliance and the environment.

PEDL also encourages proposals that address three cross-cutting issues: Gender; Fragile and Conflict-Affected States; and Unlocking Data for Understanding Markets and Firms. We also encourage projects that consider the exclusions/ barriers faced by people with disabilities as a component of the research. Applicants are encouraged to consider these cross-cutting issues in their projects. Projects that unlock or create data on firms in LICs that can be used by other researchers may be able to make a case for substantially more than average funding.

For a more comprehensive description of the new research agenda, please click here.

Major Research Grants:

The call has a lower limit of £100,000. While there is no upper limit, cost effectiveness and value for money are important evaluation criteria. Grants can be used to fund research assistance, data collection and new surveys in low-income countries, and teaching buyouts for the principal investigator. Proposals funded in this call may have a term of up to three years.

To date, PEDL has awarded 34 MRGs, with an average value of around £300,000. You can view the descriptions of these projects here.

Optional Expressions of Interest: Researchers are invited to submit a one or two-page description of their project in advance of the full proposal. We will aim to provide feedback on the fit of the proposal with the PEDL program within a week of submission.  We will not provide any feedback on the EOI with regard to the quality of the proposal or the likelihood of funding. The optional submission of an expression of interest is intended to reduce the initial effort required for those researchers who are unsure of their project’s alignment with PEDL’s themes. Expressions of interest should be submitted to.

The deadline for submissions is 31 August 2018. For more information on the submission requirement and procedure, please see the How to Apply for a Major Grant page. For more details regarding eligibility and full project details please see the PEDL Guide for Applicants. Please, send an email to confirming that you have submitted a proposal. In this way, a member of the PEDL Team will be able to assist you with your application if some relevant detail were missing.

David Atkin will chair the review panel for this MRG call.


Sustainability and Development Conference at the University of Michigan (U-M)

November 9-11, 2018
The conference is supported by several U-M departments, as well as the journal, World Development. It will cover a suite of key themes related to sustainability and development, but broadly focuses on the many global efforts to realize the SDGs and to assess the outcomes of SDG interventions. The conference is an opportunity for us to deepen our efforts to understand the breadth and depth of work on the subject and to facilitate collaborative conversation and action around sustainability and development relationships.
One of the objectives of the conference is also to strengthen World Development itself by helping potential authors gain insights into the editorial review process, and by encouraging potential authors to submit papers to World Development. To this end, we will select the top 10 papers submitted to the conference for expedited review and publication, and another top 25 papers whose full text is submitted to the conference to send out for review (provided submitting author(s) are interested in publishing in World Development).
In addition, in my capacity as Editor-in-Chief of World Development, I am offering a limited number of one-on-one expedited manuscript review sessions. As a way to say thank you for your contributions to the journal, priority will be given to existing World Development reviewers and those who have already prepared manuscripts for submission.
We welcome abstracts for posters, workshops, lightning talks, oral presentations, and full panels. See the webpage, umsustdev.org, for guidelines and other information.
The deadline is July 15, 2018, and we will communicate with all authors of selected abstracts before September 1, when registration will open for the conference and by when we will also provide invitation letters to those whose abstracts are accepted.
We hope very much that you will consider submitting an abstract  and that we will have the opportunity to engage with you in person.
Arun Agrawal