**Table 2:  Effects of trade liberalization on exports identified from the size of trade preferences**

||Dependent<br>All<br>products|variable is l<br>Textile, a<br>leather|og(imports)<br>pparel, and<br>products|Depende<br>i<br>All<br>products|nt variable is<br>mport-dumm<br>Textile, a<br>leather|a discrete<br>y<br>pparel, and<br>products|
|---|---|---|---|---|---|---|
||(1a)|(2a)|(3a)|(1b)|(2b)|(3b)|
|(a) Effects of GSP|on EU imports||||||
|DIFF|0.7261***|1.9923***|1.7690***|0.0602***|0.4023***|0.3376***|
||(0.046)|(0.164)|(0.320)|(0.009)|(0.036)|(0.065)|
|- DIFF * Apparel|||0.1013|||0.0351|
||||(0.318)|||(0.065)|
|- DIFF * Textile|||-2.6749***|||-0.6707***|
||||(0.321)|||(0.066)|
|Observations|15,345,396|3,105,872|3,105,872<br>|15,345,396|3,105,872|3,105,872|
|(b) Effects of trade|preference thr<br>|ough AGO<br>|A on US imports<br>||||
||(1c)|(2c)|(3c)|(1d)|(2d)|(3d)|
|DIFF|0.3025***|0.7460***|0.1864*|0.0314***|0.0907***|0.0238|
||(0.028)|(0.066)|(0.093)|(0.005)|(0.012)|(0.021)|
|- DIFF * Apparel|||0.8176***|||0.1012***|
||||(0.131)|||(0.026)|
|- DIFF * Textile|||0.2651|||-0.0054|
||||(0.287)|||(0.059)|
|Observations|12,926,320|3,117,620|3,117,620<br>|12,926,320|3,117,620|3,117,620|

_Notes:_ Results are based on fixed effects regressions that include all double interaction dummies: exporterproduct, product-year, and exporter-year. The results in columns (1) include all products in the sample, except for oil, art objects, products with missing MFN tariffs in some years, and products with MFN tariffs equal to zero over the entire sample period. Results in columns (2) and (3) limit the sample to textiles, apparel, and footwear & headwear (HS 50-64). Results in column (3) use footwear & headwear as the excluded category. Standard errors are clustered at the country-product level. Significance at the 10%, 5%, and 1% levels are indicated by *, **, and ***.

To put these numbers in perspective, it is useful to know that the average value of DIFF, the absolute tariff preference, for EU imports is 0.041, if it is positive. The average response is thus around 3% (= 0.041*0.7261). For a product at the 90<sup>th</sup> percentile, the tariff reduction is 0.08 and the export response will be twice as large. The point estimate is a lot lower for US imports, but the average tariff reduction is slightly higher, at 0.047. The average effect is approximately half the size as in the EU.

Effects are two to three times larger on the sample of all textile products. In contrast with the results in Table 1 for the EU, exports of textiles are now estimated to be more responsive to trade liberalization. The average effects is also larger, given that the tariff advantage is slightly larger at 0.045. The results for the EU and the United States are now similar. The results in column (3) confirm that the export response within the broader textile category is largest for apparel products. For EU imports the elasticity with respect to each percentage point tariff cut is 1.87 and for US imports it is 1.00.

Results are similar at the extensive margin, reported in the three right-most columns of Table 2. Effects are larger for the EU than for the US; they are larger for textiles than for other products; and within textiles they are largest for apparel. All point estimates are estimated very precisely and they are plausible in terms of economic magnitudes.

27