Equalizing the Cost of Success: Equitable Graduation Rules and the Generalized System of Preferences

Equalizing the Cost of Success: Equitable Graduation Rules and the Generalized System of Preferences

The developing countries which are beneficiaries of the GSP have reason to seek an objectiviely specified graduation rule to minimize the discretion of the U.S. government regarding who graduates and when. Current rules based on per capita income, however, are not horizontally equitable across countries as they punish openness. We analyze this point in a stylized model of international trade and propose some alternative rules which may have some appeal to policy-makers in the U.S. and developing countries.

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