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Preferential Market Access Design: Evidence and Lessons from African Apparel Exports to the US and to the EU

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  • Jaime de Melo
  • Alberto Portugal-Perez

Abstract

With a quasi-identical preferential margin of 10%, the EU and the US offer apparently similar preferential market access for apparel exports to a group of African countries. Yet, effective market access under the two schemes has been very different due to implementation design because these agreements differ in their product-specific rules of origin (PSRO). While access to the EU market requires yarn to be woven into fabric and then made-up into apparel in the same country or in a country qualifying to satisfy origin requirements (double transformation), starting around 2001, the US Africa Growth Opportunity Act (AGOA) grants a “Special Regime” (AGOA-SR) to “lesser developed countries” allowing them the use of fabric from any origin and still meet the criteria for preferences (single transformation). We exploit this ‘quasi-experimental’ change in the design of preferences. Using several estimation methods, we estimate that the AGOA-SR contributed to an increase in export volume of about 42% for the top seven beneficiaries or approximately three times as much as the growth effect of the 10% preferential margin granted under AGOA. Design also mattered for diversity in apparel exports as the number of export varieties grew more rapidly under the AGOA-SR regime.

Suggested Citation

  • Jaime de Melo & Alberto Portugal-Perez, 2011. "Preferential Market Access Design: Evidence and Lessons from African Apparel Exports to the US and to the EU," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 11091, Institut d'Economie et Econométrie, Université de Genève.
  • Handle: RePEc:gen:geneem:11091
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    References listed on IDEAS

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    1. Miriam Manchin, 2004. "Preference Utilisation and Tariff Reduction in EU Imports from ACP Countries," Tinbergen Institute Discussion Papers 04-132/2, Tinbergen Institute.
    2. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: A new estimation strategy and policy experiments," Journal of International Economics, Elsevier, vol. 96(1), pages 18-36.
    3. Honore, Bo E, 1992. "Trimmed LAD and Least Squares Estimation of Truncated and Censored Regression Models with Fixed Effects," Econometrica, Econometric Society, vol. 60(3), pages 533-565, May.
    4. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," World Bank Economic Review, World Bank Group, pages 197-216.
    5. 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.
    6. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    7. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, pages 169-187.
    8. 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, September.
    9. 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.
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    Cited by:

    1. Sylviane Guillaumont Jeanneney & Ping Hua, 2015. "The impact of Chinese competition on Africa’s manufacturing," Working Papers halshs-01179283, HAL.

    More about this item

    Keywords

    Rules of Origin; Regional Integration; AGOA; EBA; ACP; African Least Developed Countries.;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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