The European Union (EU) often conditions preferential access to its market on compliance with Non-Trade Policy Objectives (NTPOs), including human rights and labor and environmental standards. In this paper, we first systematically document the coverage of NTPOs across the main tools of EU trade policy: its (association and non-association) trade agreements and Generalized System of Preferences (GSP) programs. We then discuss the extent to which the EU can use these tools as a ‘carrot-and-stick’ mechanism to promote NTPOs in trading partners. We argue that, within trade agreements, the EU has limited scope to extend or restrict tariff preferences to ‘reward good behavior’ or ‘punish bad behavior’ on NTPOs, partly because multilateral rules require members to eliminate tariffs on substantially all trade. By contrast, GSP preferences are granted on a unilateral basis, and can thus more easily be extended or limited, depending on compliance with NTPOs. Our analysis also suggests that the commercial interests of the EU inhibit the full pursuit of NTPOs in its trade agreements and GSP programs.
This paper examines the responsiveness of firm productivity to investment in knowledge-based capital (KBC) including a range of intangible assets such as research and development (R&D), intellectual property assets, computer software, organizational, and branding capital. A dynamic econometric model is estimated with micro-data from Ireland over the period 2006-2012. Ceteris paribus, the estimated average elasticity of productivity with respect to investment in KBC per employee is 0.3. In comparison to previous empirical studies, this paper goes beyond the representative firm approach and accounts for the heterogeneous behavior of firms which differ by ownership, size, export participation, and sector of activity. Further, the analysis finds that investing simultaneously in multiple KBC assets has complementary as well as substitution effects on firm productivity, with different interdependence patterns for specific investment combinations across groups of firms and sectors.
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
We estimate the trade effect of removing uncertainty about future trading conditions in the context of the 2014 reform of the Generalized System of Preferences (GSP) of the European Union (EU). EU GSP members receive non-reciprocal trade preferences (NRTPs), but only as long as they are not too competitive; i.e. they will graduate in case their share of EU GSP imports in a sector exceeds a certain threshold. However, the 2014 reform removed the threat of these competitiveness-related graduations for members of the GSP+, a sub-scheme of the main programme. We find that the reform increased EU imports from GSP+ countries by about 7% on average whilst tariffs stayed the same. This trade impact is driven by the country-sector pairs most exposed to NRTPs uncertainty pre-reform. The effect is robust to taking into account other aspects of the reform, such as the reduction in GSP membership and changes in tariff margins, respectively.
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