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Preferential market access design: evidence and lessons from African apparel exports to the us and the EU

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  • de Melo, Jaime
  • Portugal-Perez, Alberto

Abstract

Least developed countries rely on preferential market access. Proof of sufficient transformation has to be provided to customs in importing countries by meeting Rules of Origin requirements to benefit from these preferences. These Rules of Origin have turned out to be complicated and burdensome for exporters in the least developed countries. Starting around 2001, under the United States Africa Growth Opportunity Act, 22 African countries exporting apparel to the United States can use fabric from any origin (single transformation) and still meet the criterion for preferential access (the so-called Special Rule), while the European Union continued to require yarn to be woven into fabric and then made into apparel in the same country (double transformation). This paper uses panel estimates over 1996-2004 to exploit this quasi-experimental change in the design of preferences. The paper estimates that this simplification contributed to an increase in export volume of about 168 percent for the top seven beneficiaries or approximately four times as much as the 44 percent growth effect from the initial preference access under the Africa Growth Opportunity Act without the single transformation. This change in design also mattered for diversity in apparel exports, as the number of export varieties grew more rapidly under the Africa Growth Opportunity Act special regime.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6357.

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Date of creation: 01 Feb 2013
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Handle: RePEc:wbk:wbrwps:6357

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Related research

Keywords: Free Trade; Markets and Market Access; Trade Policy; Economic Theory&Research; Debt Markets;

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  1. Anne O. Krueger, 1995. "Free Trade Agreements versus Customs Unions," NBER Working Papers 5084, National Bureau of Economic Research, Inc.
  2. Francois, Joseph & Hoekman, Bernard & Manchin, Miriam, 2005. "Preference erosion and multilateral trade liberalization," Policy Research Working Paper Series 3730, The World Bank.
  3. Miriam Manchin, 2006. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," The World Economy, Wiley Blackwell, vol. 29(9), pages 1243-1266, 09.
  4. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  5. Olivier Cadot & Céline Carrère & Jaime de Melo & Alberto Portugal-Pérez, 2005. "Market Access and Welfare under Free Trade Agreements: Textiles under," World Bank Economic Review, World Bank Group, vol. 19(3), pages 379-405.
  6. de Melo, Jaime & Portugal-Pérez, Alberto, 2008. "Rules of Origin, Preferences and Diversification in Apparel: African Exports to the US and to the EU," CEPR Discussion Papers 7072, C.E.P.R. Discussion Papers.
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