The European Union Trade Preferences towards Developing Countries

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There has a huge debate relating to the worth and use of trade preferential schemes imposed by the EU for many years in a variety of circumstances. For instance, in the year 2003, it was argued by the researchers Brenton and Manchin that EU preferential treatments for developing nations in the field of trade by EU have not succeeded in providing better entrance to the market of EU due to extremely stringent rules of source. On the other hand, in 2005, the OECD conducted an empirical research and reached to the conclusion that multilateral trade liberalization implemented by the EU has resulted in comparatively higher sizeable corrosion of predilections than the liberalization processes implemented by countries like Canada, Japan, Australia, and the United States. Thus, the importance of the trade preferences provided by the EU proved to be relatively less in comparison with the preferential schemes provided by other countries. The conclusion of OECD has also been maintained by Nilsson in his empirical research conducted in 2007. In the year of 2007, Persson and Wilhelmsson put their effort to find that some particular EU preferential deals had produced great impacts, specifically the schemes that were offered to the Pacific countries as well as the African Caribbean nations. These kinds of findings had earlier been reported by Nilsson in 2002. However, the preference schemes of a donor country should be seen with respect to the overall trade openness of the donor. For instance, if a benefactor does not have a high figure relating to the imports covered under the preferential schemes, then this would result in the entrance of a bulk share of the donor’s imports under the mechanism of MFN-0 tariffs. In this case, the capacity for preferences is limited as well. As a result, no matter whether the utilization of the rate of preferences in such state of affairs is high or low, it no longer becomes so vital. Forgetting an accurate picture of the openness of a donor to imports from less developed or developing nations, it is vital to study the share and the quantity of imported commodities entering the EU under the scheme of MFN-0, the proportion and volume of dutiable imports, the proportion of imports entitled to preferential arrangements, and, finally, the rate of preference utilization. This paper will put its effort to examine the impact of EU trade preferences towards developing countries with special focus on India on the basis of existing literature. However, before moving onto analyzing the impact, the paper will discuss the existing trade preference scheme. Then, it will consider the general impact on developing countries as a whole and finally, it will put its special focus on India.