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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.

Suggested Citation

  • de Melo, Jaime & Portugal-Perez, Alberto, 2013. "Preferential market access design: evidence and lessons from African apparel exports to the us and the EU," Policy Research Working Paper Series 6357, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6357
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. Krueger, Anne O., 1997. "Free trade agreements versus customs unions," Journal of Development Economics, Elsevier, vol. 54(1), pages 169-187, October.
    6. 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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    More about this item

    Keywords

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

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