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It is through gains in access to foreign markets that the domestic market can be enlarged and that
specialization can be enhanced, leading to such possible beneficial consequences for growth as learning,
economies of scale, and technological improvements. More controversially, it is also through protection
of domestic markets that, at least in the earlier phases of development, domestic firms (whether nationally
or foreign owned) can be induced to establish, to expand and eventually to become competitive with their
larger, technologically more advanced foreign competitors. But how far individual countries can gain
access to other countries’ markets and how far they can gain their consent to protect their own markets,
are matters that have to be settled in their relations with other countries.⁹ Thus, the requirement of
distributive equity in the global trading system is presumably that the development of poor countries
should be favored through the common pursuit of measures that accord their firms preferred status in their
foreign or domestic markets or both.

In practice, developed countries have offered favorable access to their markets through their
several non-reciprocal preferential programs.¹⁰ Under the Generalized System of Preferences (GSP), the
developed countries have provided developing countries with preferential access to their markets since
the 1970s. In addition, both the U.S. and EU operate other, still more favorable, schemes for particular
groups of countries, such as the countries of Sub-Saharan Africa under the U.S. African Growth and
Opportunity Act (AGOA) or the EU’s Cotonou Agreement that favors the African, Caribbean, and
Pacific (ACP) former colonies. Further, the developed countries generally provide still more extensive
preferences to the least developed countries.¹¹

⁹ True, we cannot exclude the fact that countries may independently benefit from unilateral reductions in trade
barriers and that, indeed, this may be an integral part of their growth strategy. Thus, viewing trade benefits solely in
terms of national economic growth does not necessarily provide a comprehensive definition of all the benefits from
trade. But it is part of a comprehensive definition and does raise the issue of equity.

¹⁰ These preferential measures are sometimes discussed as though they were a means of redistributing current
income generated by trade to developing countries. A criticism of preferential programs is, for instance, that the rent
is sometimes captured by importers in the developed countries. But if the intent of the measure is to promote
development, what matters is not the effect on the current distribution of trade income but the effect on production
and exports in the developing country. Some long-standing preferential arrangements, however, clearly no longer
serve any development purpose and are no more than mechanisms for income transfers. The arrangement covering
the exports of a few developing countries under the Sugar Protocol of the EU is an example.

¹¹ For a review of the literature on the benefits of preferences for developing countries, see Hoekman and Ozden
(2005).

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