under preferences. Carpenter and Lendle (2011) used detailed information on tariffs and imports at the HS6‐digit tariff line level for the 20 largest importers to estimate how much of world trade was preferential. They found that only 16 percent of world trade was eligible for preferences and that preferential margins are often small.

The findings of this paper are in line with the literature assessing the extent of preferential liberalization but add to it in scope and substance. We investigate the significance of tariff preferences using a new data set on preferential tariffs at the HS6‐digit product level, imposed by 197 importers on 239 partners and representing approximately 97 percent of world imports in 2016. Two main questions are addressed in the analysis: (i) What tariff structure has emerged from unilateral and multilateral non‐preferential liberalization? (ii) How have preferential tariffs changed the trade regime?

We find – in line with Fugazza and Nicita (2010) – that whereas 42 percent of the total value of trade traded free under MFN rates in 2016, PTAs have fully liberalized an additional 28 percent of global trade. In fact, only 5 percent of global imports are subject to positive tariffs under PTAs. Our findings also suggest that the extent of preferential liberalization varies significantly across countries and sectors. In terms of preferential margins, we find that while the average preferential margin in PTAs is low, more than a quarter of world trade is subject to an average preference margin of 7.4 percent.

These results are based on potentially applied tariffs. In practice, preferential duties are not granted automatically to all eligible products. An assessment of the scope of preference utilization for the sub‐sample of EU imports from its trading partners suggests that more than 80 percent of preferences granted by the EU were fully utilized in 2016 – which is consistent with the findings for Australia, Canada, EU and US in Keck and Lendle (2012). However, the rate of utilization of preferences varies across countries and products. Key factors explaining low utilization rates include rules of origin as well as the related administrative burden and lack of knowledge of import and export processes.

The paper is organized as follows. Section 2 introduces the new data set on tariffs and preference margins that has recently been constructed by the International Trade Center (ITC) and the World Bank. Section 3 describes the multilateral trade regime and the scope for further liberalization. Section 4 discusses how preferential tariffs have changed the trade regime. Section 5 concludes.

2. A new database on preference margins and preferential trade This analysis is based on a new data set on tariffs and preference margins that has recently been constructed by the ITC and the World Bank. The data set includes information on most favored nation (MFN) and preferential tariffs imposed at the HS6 digit product level in 2016 and has been constructed by merging different sources of data. The ITC is the main source of information on ad valorem equivalents at the HS 6‐digit level for both MFN applied tariffs and preferential tariffs 3