The impact of trade preferences removal

Under the Generalized System of Preferences (GSP), high-income countries grant unilateral trade preferences to developing countries. These preferences are subject to political conditionality, but little is known about the trade impact of loss of preferential access and the implications for political leverage implied by it. We study the EU's withdrawal of GSP preferences from Belarus in 2007 in response to labour rights violations to fill this void. The withdrawal caused a significant drop in trade for affected products (26% to 29% trade decline) and some trade reduction at the extensive margin. However, there is little evidence of a GSP effect on total trade. This is due to the fact that the main exports of Belarus were not eligible for the GSP program.