Structural Economic Vulnerability and the Utilization of Unilateral Trade Preferences: Does Development Aid Matter?

This article has investigated the effect of structural economic vulnerability on the utilization of non-reciprocal trade preferences (NRTPs) offered by the 'Quadrilaterals' and whether development aid flows alter this effect. It considers two major blocks of NRTPs, namely the Generalized System of Preferences (GSP) programs and 'other trade preferences programs'. The analysis uses a panel dataset of 84 beneficiary countries of both NRTPs and development aid, over the period of 2002-2019. Results reveal that a rise in the level of structural economic vulnerability reduces the utilization rates of both GSP programs and other trade preference programs. At the same time, when the level of structural economic vulnerability falls, countries tend to use both blocks of NRTPs in a complementarity way. While development aid inflows foster the utilization of the two blocks of NRTPs, the increase of these resource inflows in the context of greater structural economic vulnerability leads beneficiary countries to strengthen the utilization of other trade preferences programs at the expense of the utilization of GSP programs. The implications of these results are discussed in the conclusion section of the article.