What are OECD trade preferences worth to sub-Saharan Africa?
Some developing countries may experience important trade losses if tariffs are liberalized on a general most-favored-nation (MFN) basis. Sub-Saharan Africa appears to be especially vulnerable to this problem. African countries receive important Lome Convention preferences in the European Economic Community (EEC), under which duty-free treatment, or tariffs below MFN and generalized system of preferences (GSP) rates, are applied to their exports. Other OECD countries normally apply GSP duties, or even more advantageous"least developed"country preferences to African exports. The proposed Uruguay Round reductions in MFN tariffs will erode those tariff preference margins and cause some African exports to be displaced by other suppliers. The author documents the importance of African countries of existing OECD preference, particularly those of the EEC. More than 95 percent of all African-tariff-line products shipped to the EEC receive duty-free treatment, while other exporters of the same products face tariffs as much as 20 percentage points higher. Similar favorable terms of preferential access also exist in Japan and the United States, although the preference margins are smaller than in the EEC. Using a trade projection model developed by the World Bank and the UNCTAD, the author estimates that eliminating EEC, Japanese, and U.S. MFN tariffs would cause African export losses of about $4 billion (estimated present value). The countries that seem to be most vulnerable to these adverse trade effects are Cote d'Ivoire, Ethiopia, Kenya, Malawi, Senegal, Uganda, and Zimbabwe. What about the possibility that the losses African countries could experience from erosion of tariff preferences could be offset by the liberalization of nontariff measures? The author discounts this likelihood. In general, few important OECD nontariff measures are applied to African products -- most African textile and clothing exports are even excluded from Multifibre Arrangement restrictions. And those that are applied (such as eco-labeling or licensing requirements) do not restrict trade very much. The author's observations accent the need for action to offset the impact of Africa's loss of preferences as a result of the Uruguay Round. What offsetting actions are possible and appropriate? Aggressive reform of the African countries'own trade regimes appears to be the most effective way to counter the effects of the erosion of OECD preferences.
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