preferential treatment to _many_ trading partners where they can; however, their tariff preference margins are typically quite small because their applied MFN tariffs are already so low. On the other hand, lower income countries have many more products for which they could offer preferential tariffs, and yet the patterns to their offerings are much different. Developing countries do sometimes offer lower tariffs; the main distinction is that their offerings are much more limited - to fewer selected partners and/or over fewer selected products. Not surprisingly, for the products in which developing countries do offer lower-than-MFN tariffs to someone, the tariff preference margin can actually turn out to be quite high. Finally, we document patterns in the _recipients_ of these tariff preferences. Developing country exporters are the most frequent recipients. Whether high-income country exporters receive lower-than-MFN tariffs varies widely across preference-offering countries; nevertheless, there are many fewer examples of lower-income countries granting tariff preferences to high-income countries.

Finally, in Section 2.3.3 we detail the tariff preferences offered by one country in particular. We utilize the United States to highlight additional margins along which countries can be shown to discriminate with respect to their applied preferential tariff policies.

# **2.3.1 Major economies and their preferential trading arrangements**

We begin with a brief definition of each of the four major types of PTAs. A free trade agreement is typically a reciprocal agreement in which two or more countries offer zero tariffs to one another for virtually all products. A customs union is an FTA with the additional feature that the members of the FTA have a common external trade policy, including a commonly applied MFN tariff, on imports from all non-members. Unilateral preferences are an arrangement whereby one country - typically a high-income country - offers lower-than-MFN tariffs to one or more developing countries for a selection of imported products. A partial scope agreement is an arrangement whereby two or more developing countries offer one another lower-than-MFN tariffs for a selection of imported products. For these last two forms of PTAs, in practice, the selection can be much less than 100 percent of products.

As of 2015, more than 250 regional trade agreements (free trade agreements, customs unions, partial scope agreements) covering international trade in goods were in force (WTO, 2015a); additionally, WTO members were offering nearly 30 different unilateral preference programs (WTO, 2015b).<sup>35</sup> Table 3 lists a number of prominent examples of different types of PTAs between countries in our 31 economy sample. The most common form of preferential arrangement is a free trade agreement (FTA). The United States is involved in a number of FTAs, including NAFTA (with Canada and

> 35Given that multiple agreements or preference schemes frequently apply to the same bilateral tariff relationship for a given product, it is difficult to interpret the economic meaning of the raw number of agreements or programs in effect. For example, within the regional trade agreement figures, Thailand is part of the original ASEAN agreement; ASEAN has an FTA with Australia, and Thailand has its own bilateral FTA with Australia. A separate example of redundancy in unilateral programs is some preference-offering countries make exporters from a certain country eligible for multiple unilateral schemes.

20