Product coverage and economic welfare Essays on preferential trade liberalization in developing Asia

This dissertation is concerned with the static impact effect on economic welfare following trade liberalization on a discriminatory, or preferential, basis. An overview is firstly provided of the theoretical framework guiding the dissertation, highlighting the ambiguous welfare impact arising from preferential trade liberalization. Three substantive essays follow, which focus on the South-South preferential trade liberalization initiatives of developing Asian countries.;The interest of the first essay is in the welfare impact of a preferential trade agreement between China and India, a bilateral agreement which might be established in the near future. Using Verdoorn's (1960) partial equilibrium model in various tariff-cutting experiments, the analysis explores how an outcome that is welfare-enhancing can be obtained. In the second essay, Kreinin and Plummer's (1994) methodology is applied to determine the likely welfare impact of a preferential trade agreement for all of developing Asia, an idea which has been put forward by the United Nations Economic and Social Commission for Asia and the Pacific. The third essay has as its focus the non-reciprocal preferential schemes of developing Asian countries, the backdrop being a decision taken by the members of the World Trade Organization (WTO) to offer preferential market access to the products of the least-developed countries. In addition to using a measure proposed by Drysdale (1967) to identify welfare-enhancing outcomes, Finger and Kreinin's (1979) methodology is employed to explore how a possible fall in the exports of developing country WTO members not benefiting from preferential market access can be dealt with.;All three essays analyze the welfare impact of various product coverage scenarios. On the basis of the results from these essays, the dissertation concludes that full product coverage and zero-duty treatment is not necessary for developing countries to reap the gains from South-South preferential liberalization initiatives. Referring to the pressure that is often placed on developing countries in the WTO system to liberalize deeply and extensively, it is argued that these countries can justify limited-scope South-South liberalization initiatives on welfare grounds.