Assessing the Economic Gains of Free Market Access for the Least Developed Countries in the QUAD

The purpose of this study is to evaluate the economic impact on the least developed countries (LDCs) of reduced trade barriers in their export markets. 48 countries are currently designated as “least developed” by the United Nations. We study the consequences of removing import tariffs and quotas on the imports of products from these countries in the QUAD-countries (i.e., the EU, the USA, Canada, and Japan), which represent 65-75% of the LDC export market. Potential benefits of duty-free and quota-free access to the QUAD include: (1) Higher prices on existing exports to the QUAD (2) Price gains from diverting sales from other markets (other export markets or domestic markets) to the QUAD countries, (3) Increased value added through expansion of production. We find that the aggregate benefits of duty-free and quota-free access for the LDCs are likely to be modest, even when measured relative to their present low levels of income. The main reasons are (1) that most LDCs presently enjoy quite liberal market access in important export markets, and (2) that the ability of LDCs to take advantage of trade preferences is limited, due to supply constraints and restrictive “rules of origin”.