abstract: The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicate that this is the case, even for unilateral preferences that developed countries provide to small and poor countries, but there is no estimate of the resulting welfare costs. This stumbling-block effect can be avoided by replacing the unilateral preferences by a fixed import subsidy, which we argue generates a Pareto improvement. More importantly, we provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. By combining recent estimates of the stumbling-block effect of preferences with data for 170 countries and over 5,000 products we calculate the welfare effects of the United States, European Union, and Japan switching from unilateral preferences to least-developed countries (LDCs) to an import subsidy scheme. Even in a model with no dynamic gains to trade, we find that the switch produces an annual net welfare gain for the 170 countries that adds about 10 percent to the estimated trade liberalization gains in the Doha Round. It also generates gains for each group: the United States, European Union, and Japan ($2,934 million), LDCs ($520 million), and the rest of the world ($900 million).