delaying trade liberalization by recipients. That is, developing countries withdrawn from GSP subsequently lower their trade barriers more than countries remaining eligible for such preferences. The reason is simple. Governments set trade barriers while balancing political support from import-competing and export sectors. GSP shifts the balance to the importcompeting sector. As Hudec [1987] observed, "the non-reciprocity doctrine tends to remove the major incentive that [developing country] export industries have ... for opposing protectionist trade policies at home ... instead of trying to enlist the support of the export sector for liberal trade policy." Furthermore, if there is a threat of removal from the GSP program when its exports increase significantly, then the recipient has the perverse incentive to implement even more protectionist policies to limit its exports and avoid such outcomes. On the other hand, if GSP is withdrawn and access to the export market becomes conditional on its own trade policy through the reciprocity rule, the recipient government's optimal level of protectionism declines.

We develop this argument using a simple two-sector general equilibrium model of a small country where the optimal trade policy may be influenced by political economy motivations. This paper's chief contribution is, however, empirical. We provide the first extensive evidence on the effects of the GSP program on beneficiaries' own trade policies. Specifically, we test the effects of GSP removal on beneficiaries' trade policies using a dataset of annual observations of 154 developing countries since the United States started the program in 1976. We demonstrate that countries dropped from GSP subsequently adopt lower trade barriers than those remaining eligible for nonreciprocal (as opposed to reciprocal) preferences. These findings control for income, market size, geography, growth, and other factors; they are robust to five different measures of trade barriers; and they hold when correcting for possible endogeneity of the US GSP program.

Writing before they were implemented, Harry Johnson argued that nonreciprocal preferences would fail if developing countries did not cease import substitution practices that create "cost disadvantages ... frequently ... far greater than the competitive advantage that could be conferred by preferences from the developed countries" (Johnson [1967]). We go one step further, in claiming that nonreciprocal preferences actually _delay removal_ of the very policies Johnson said would make GSP ineffective. To the extent that GSP's perverse effects are magnified by donors' protectionism, our findings support critics who argue against unilateral modification of GSP commitments. If increasing trade is indeed a key to development and growth, then developing countries would be better served by abandoning reliance on nonreciprocal preferences altogether, becoming members with full responsibilities and thus rights in the world trading regime. We accordingly conclude, with Roessler [1998], that "the cause of development was manifestly not served by releasing developing countries from their GATT obligations." Our results have farther-reaching implications, especially for the future of the multilateral trading regime. Recent decades have witnessed the proliferation of discriminatory and nonreciprocal practices that push both the letter and the spirit of the GATT/WTO rules to their limits. There can be little doubt that GATT/WTO's twin principles of non-discrimination 3