GSTP TARIFF REDUCTION AND ITS EFFECTS ON SOUTH-SOUTH TRADE IN MANUFACTURES

Using a gravity model with import tariffs on manufactures as an explanatory variable both at the import and at the export side, the impact of tariffs on trade in manufactures is analyzed for a sample of 39 less developed country (LDC) importers. The consequences of an Agreement on a Global System of Trade Preferences (GSTP) for manufactures are estimated by lowering these tariffs for intra-LDC trade by 20% and 50%, alternatively. The short-term effects are found to be relatively modest, and the long-term effects considerably larger. Trade diversion from developed country (DC) to LDC suppliers has only limited impact. © 1991.