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Abstract

The July Package of WTO agricultural trade negotiations and the recent Hong Kong WTO Ministerial declaration call for duty and quota-free access for imports originated from least developed countries, including the African LDCs (ALDCs). This paper discusses the merits of this proposal. The usefulness of preferences has been revealed by the high utilization rate of agricultural trade preferences and the case for improving trade preferences is supported by the possibility of preference erosions. Based on these, this paper interprets the July Package text as deepening, widening, broadening and strengthening trade preferences. A set of CGE simulations illustrates the potential impact of implementing this proposal. The first scenario confirms the ALDCs' vulnerability in multilateral liberalization. Deepening and widening trade preferences (scenario 2) would more than offset these negative effects. At the same time, harmonizing the preferences programs would help reveal true comparative advantages of the ALDCs. Adding selected advanced developing countries to the preference-granting group (i.e., broadening preferences) would further expand exports from the ALDCs. It should be noted that the added benefits from broadening preferences would be smaller than what could be achieved from the deepening and widening scenario. However, these estimated benefits would not be fully realized without strengthening the legal foundation of the preference programs and the ALDCs need to conduct domestic policies reforms aiming at creating an enabling environment for their exportoriented industry to take advantage of this opportunity.

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