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

  • Jaime de Melo
  • Alberto Portugal-Perez

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.

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Paper provided by Institut d'Economie et Econométrie, Université de Genève in its series Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva with number 11091.

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Length: 35 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:gen:geneem:11091
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  1. Joao Santos Silva & Silvana Tenreyro, 2005. "The log of gravity," LSE Research Online Documents on Economics 3744, London School of Economics and Political Science, LSE Library.
  2. Anne O. Krueger, 1995. "Free Trade Agreements versus Customs Unions," NBER Working Papers 5084, National Bureau of Economic Research, Inc.
  3. 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.
  4. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," World Bank Economic Review, World Bank Group, vol. 20(2), pages 197-216.
  5. 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.
  6. Cherkashin, Ivan & Demidova, Svetlana & Kee, Hiau Looi & Krishna, Kala, 2015. "Firm heterogeneity and costly trade: a new estimation strategy and policy experiments," Policy Research Working Paper Series 7156, The World Bank.
  7. 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.
  8. 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 533-65, May.
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