Competitive Need Limits and the U.S. Generalized System of Preference

The United States uses competitive need limits to deny Generalized System of Preference (GSP) treatment to imports from developing countries. The analysis in this paper estimates the effect of competitive need limits on GSP imports in two ways. First, it uses ex post trade data to determine the effect on import values and shares. Second, it combines an ex ante model with trade and elasticity data to estimate the effect of competitive need limits. Results indicate that competitive need limits reduce affected imports by 10 to 17 percent. Benefits from this import reduction accrue almost exclusively to U.S. import competing firms