Trading relations: is the roadmap from Lometo Cotonou correct?

Abstract

One of the reasons behind the re-negotiation of the Lome Convention, resulting in the Cotonou Agreement, was the alleged inability of the trade provisions of Lome to increase the African, Caribbean and Pacific (ACP) countries' market share of the European Union (EU) market. The Cotonou Agreement may lead to the more advanced ACPs being granted future market access to the EU under a generalized system of preferences (GSP), in conformity with World Trade Organization (WTO) rules. To this end, this paper makes a comparative analysis of the effects of the EU's Lome Convention and GSP on exports of developing countries using a gravity type of model. The results indicate positive and statistically significant export effects of the both the Lome Convention and the GSP. The export effects are greater in case of the Lome Convention throughout the study period running from 1973 to 1992. In addition, the paper illustrates the EU country distribution of the export effects and shows that Belgium and The Netherlands are the EU countries that most have increased their imports from the developing countries under both the Lome Convention and the GSP.