Mary Amiti & John Romalis:

This paper assesses the likely gains in market access for LDCs and developing countries
following proposals for tariff cuts under the Doha Round. This was analyzed by simulating changes in import demand by the United States and the European Union, following cuts in the MFN tariff rates of around 40 percent. In contrast to other studies, our model incorporates preference utilization rates rather than assuming that preferences are fully utilized. Since preference utilization rates are as low as 50 percent for some countries, this is an important contribution in order to avoid over-estimating losses from preference erosion. We take into account all available tariff, trade, and utilization information for all products.

The results show that a cut in MFN tariffs by the United States and the European Union leads
to improved access to their markets for many developing countries that more than offsets losses due to preference erosion. The small numbers of developing countries that are likely to lose market access as a result of multilateral tariff cuts are the ones that receive very large benefits under existing preference schemes. This result can be explained by noting that currently many developing countries actually have inferior market access to developed countries: average tariffs on non-African LDCs’ exports to the United States are higher than those on developed countries (13.1 percent compared with 1.2 percent).