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

The United States uses competitive need limits to deny Generalized System of Preferences (GSP) treatment of imports from developing countries. The analysis here estimates in two ways the effect of competitive need limits on GSP imports. 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%. Benefits from this import reduction accrue almost exclusively to U.S. import competing firms.