Re-instating the European Union’s Generalized System of Preferences for Myanmar

Discussion Papers

No.813

by Kiyoyasu Tanaka, Toshihiro Kudo

March 2021

ABSTRACT

The European Union (EU) suspended the Generalized System of Preferences (GSP) for Myanmar in 1997 for a systematic violation of human rights, but re-instated it in 2013 following domestic reforms in Myanmar. By examining a political background of the EU’s re-instatement, we highlights a key role of President Thein Sein in the newly established “democratic” government for 2011 and Myanmar’s international relations with the U.S. and the EU. This paper also estimates the impact of duty-free access on Myanmar’s exports by exploiting a unique feature of the GSP re-instatement in which tariff cuts correspond to the MFN tariff rates in EU markets. The results show that the GSP re-instatement has a significantly large positive effect on Myanmar’s exports, with a pronounced impact on garment exports. Thus, democratic reforms in Myanmar improved political relations with the EU to promote industrial development.

Keywords: Democracy, human rights, GSP, trade, Myanmar

JEL classification: F14, F63

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