Integrating the least developed countries into the world trading system : the current impact of EU preferences under everything but arms

Trade preferences are a key element in industrial countries'efforts to assist the integration of least developed countries (LDCs) into the world economy. Brenton provides an initial evaluation of the impact of the European Union's recently introduced"Everything but Arms"(EBA) initiative on the products currently exported by the LDCs. He shows that the changes introduced by the EBA initiative in 2001 are relatively minor for currently exported products, primarily because over 99 percent of EU imports from the LDCs are in products which the EU had already liberalized, and the complete removal of barriers to the key remaining products-rice, sugar, and bananas-has been delayed. Brenton looks at the role EU preferences to LDCs in general have been playing and could play in assisting the integration of the LDCs. He shows that there is considerable variation across countries in the potential impact that EU preferences can have given current export structures. There is a group of LDCs for whom EU trade preferences on existing exports are not significant since these exports are mainly of products where the most-favored-nation duty is zero. Export diversification is the key issue for these countries. For other LDCs, EU preferences have the potential to provide a more substantial impact on trade. However, the author shows that only 50 percent of EU imports from non-ACP (Africa, Caribbean, and Pacific) LDCs which are eligible actually request preferential access to the EU. The prime suspect for this low level of use are the rules of origin, both the restrictiveness of the requirements on sufficient processing and the costs and difficulties of providing the necessary documentation. More simple rules of origin are likely to enhance the impact of EU trade preferences in terms of improving market access and in stimulating diversification toward a broader range of exports.Trade Policy,Economic Theory&Research,Export Competitiveness,Agribusiness&Markets,Markets and Market Access,Economic Theory&Research,Agribusiness&Markets,Trade Policy,Access to Markets,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

The Extent of Economic Integration in Europe: Border Effects, Technical Barriers to Trade & Home Bias in Consumption. CEPS Working Document No. 171, August 2001

This paper brings together two important facets of current debates concerning trade policy and trade modelling: the importance of estimated border effects and the impact of technical barriers to trade. Here we try and identify the effect of technical barriers on the imports of EU countries by estimating gravity equations applied to data in which sectors are grouped according to the approach adopted by the EU to the removal of technical barriers (New Approach, Old Approach, mutual recognition) as well as an aggregate of sectors for which technical barriers are deemed to be unimportant. Our results suggest substantial border effects for all groups of sectors except for those subject to mutual recognition. The border effect is mitigated but remains considerable against trade with EU partners. High and persistent border effects are found for sectors where technical barriers are not important suggesting that factors other than policy-induced barriers are important determinants of the intensity of internal relative to external trade flows. The paper discusses the interpretation of these border effects in the context of measuring the extent of economic integration and argues that more information on the nature of preferences and on factors promoting local networks of buyers and suppliers is required before we can proceed to examine the policy implications

The initial and potential impact of preferential access to the U.S. market under the African Growth and Opportunity Act

The ability to export clothing products under preferences with liberal rules of origin is the key factor currently determining whether the African Growth and Opportunity Act (AGOA) has a significant impact on non-oil exporting African countries. At present only a small number of countries receive substantial benefits and least developed countries that do not receive preferences for clothing have yet to see an impact of AGOA on their overall exports. However, the benefits from exporting clothing under AGOA appear fragile in the face of the removal of quotas in the United States on major suppliers, such as China, at the end of 2004, and the planned removal of the liberal rules of origin that allow for the global sourcing of fabrics from least-cost locations. To entrench and enhance the benefits of AGOA, it is important that the scheme be extended over a much longer period, if not made permanent, and the special liberal rules of origin for clothing products be extended considerably beyond 2004. The effective inclusion of textile products and a number of high-duty agricultural products would also help to broaden the range of opportunities for African exporters in the U.S. market. Nevertheless it is important that the opportunities created by AGOA are integrated into a broader framework for promoting trade and that it be recognized that if the opportunities offered by more open trade are to be exploited, there must be concerted efforts to improve the environment for investment countries covered by AGOA.Markets and Market Access,Agribusiness&Markets,Economic Theory&Research,Water and Industry,Agricultural Knowledge&Information Systems,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Water and Industry,Agribusiness&Markets,Economic Theory&Research,Agricultural Knowledge&Information Systems

Watching more than the Discovery channel : export cycles and diversification in development

This paper examines the export performance of 99 countries over 1995-2004 to understand the relative roles of export growth through"discovery"of new products and growth during post-discovery phases of the export product cycle -- acceleration and maturation -- in existing markets and expansion into new geographic markets. The authors find that expanding existing products in existing markets (growth at the intensive margin) has greater weight in export growth than diversification into new products and new geographic markets (growth at the extensive margin). Moreover, growth into new geographic markets appears to be more important than discovery of new export products in explaining export growth. Of particular importance is whether an exporting country succeeds in reaching more national markets that are already importing the product it makes. This geographic index of market penetration is a powerful explanatory variable of export performance. This suggests that governments should not focus solely or even primarily on the discovery channel, but also seek to identify and address market failures that are constraining exporters in subsequent phases of the export cycle.Economic Theory&Research,Emerging Markets,Markets and Market Access,Free Trade,Debt Markets

Clothing and export diversification : still a route to growth for low-income countries ?

Can the clothing sector be a driver of export diversification and growth for today's low-income countries as it was in the past for countries that have graduated into middle income? This paper assesses this issue taking into account key changes to the market for clothing: the emergence of India and especially China as exporting countries; the rise of global production chains; the removal of quotas from the global trading regime but the continued presence of high tariffs and substantial trade preferences; the increasing importance of large buyers in developed countries and their concerns regarding risk and reputation; and the increasing importance of time in defining sourcing decisions. To assess the importance of the factors shaping the global clothing market, the authors estimate a gravity model to explain jointly the propensity to export clothing and the magnitude of exports from developing countries to the E U and US markets. This analysis identifies the quality of governance as an important determinant of sourcing decisions and that there appears to be a general bias against sourcing apparel from African countries, which is only partially overcome by trade preferences.Economic Theory&Research,Free Trade,Trade Policy,Emerging Markets,Transport Economics Policy&Planning

The African Growth and Opportunity Act, exports, and development in Sub-Saharan Africa

The African Growth and Opportunity Act (AGOA) is the flagship of U.S. commercial and development policy with Sub-Saharan Africa. This paper looks at the impact of the trade preferences that are the central element of AGOA on African countries'exports to the U.S. and puts them in the perspective of the development of the region. The paper finds that, while stimulating export diversification in a few countries, AGOA has fallen short of the potential impetus that preferences could otherwise provide African exporters. The impact of AGOA would beenhanced if preferences were extended to all products. This means removing tariff barriers to a range of agricultural products and to textiles and a number of other manufactured goods. There also needs to be a fundamental change in approach to the rules of origin. Given the stage of development and economic size of Sub-Saharan Africa, nonrestrictive rules of origin are crucial. For all countries in Africa, those that have and those that have not benefited from preferences, there are enormous infrastructure weaknesses and often extremely poor policy environments that raise trade costs and push African producers further away from international markets. Effective trade preferences (those with nonrestrictive rules of origin) can provide a limited window of opportunity to exports while these key barriers to trade are addressed. But dealing with the barriers is the priority.Free Trade,Economic Theory&Research,Trade Policy,Agribusiness&Markets,Markets and Market Access

The Declining Use of Unskilled Labour in Italian Manufacturing: Is Trade to Blame? CEPS Working Document No. 178, December 2001

As in other industrialised countries, the manufacturing sector in Italy has recently experienced a substantial increase in the use of skilled relative to unskilled workers - skill upgrading. In this paper we estimate a model, based upon the notion of outsourcing, of the relative demand for skilled labour which allows identification of the roles of technological change and trade, the two main culprits, in skill upgrading. Compared to previous studies of Italy the model is applied to highly disaggregated industrial data and in addition the impact of trade is more precisely measured through the separate identification of import flows from low-wage labour abundant countries and those from OECD partners. Furthermore we also introduce a measure of trade variability. Our results show firstly that economic variables played little or no role in determining the relative demand for unskilled workers in the 1970s in Italy, reflecting the nature of Italian labour market institutions in the period. Subsequently, in the 1980s and 1990s, following some labour market reforms, we find that international competition, in terms of import penetration and the variability of trade prices, had a significant effect on the relative demand for blue-collar workers in Italy in skilled intensive sectors. In unskilled intensive sectors, such as textiles and clothing, where the impact of imports from low-wage countries might be expected to be more pronounced, we do not find a significant effect from imports but rather that the most important role has been played by technological change. The result is consistent with previous studies that indicate that Italian textile and clothing firms have remained internationally competitive by increasingly switching to high quality segments of the industry

Making EU Trade Agreements Work: The Role of Rules of Origin

A key element of the EU’s free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the EUs foreign policy objectives towards developing countries and neighbouring countries in Europe, including the countries of the Balkans. Previous preferential trade schemes have been ineffective in delivering improved access to the EU market. The main reason for this is probably the very restrictive rules of origin that the EU imposes, coupled with the costs of proving consistency with these rules. If the EU wants the ‘Everything but Arms’ agreement and free trade agreements with countries in the Balkans to generate substantial improvements in access to the EU market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed upon by a careful safeguards policy.

Technical Barriers to Trade in the European Union: Importance for the Accession Countries. CEPS Working Document No. 144, April 2000

With trade in industrial products between the EU and the CEECs now essentially free of tariff and non-tariff restrictions, the principal impact of accession to the EU on trade flows will be through access to the Single Market of the EU. A key element of this will be the removal of technical barriers to trade. In this paper we try and highlight the importance of technical barriers to trade between the EU and the various CEECs, distinguishing sectors according to the different approaches to the removal of these barriers in the EU: mutual recognition, detailed harmonisation (old approach) and minimum requirements (new approach). We utilise two sources of information on technical regulations: a sectoral classification from a previous study of the impact of the Single Market and our own detailed translation of EU product related directives into the relevant tariff codes. The analysis suggests that the importance of technical barriers varies considerably across the CEECs. The adjustment implications of access to the Single Market are likely to be greatest for those most advanced in their accession negotiations

De-fragmenting Africa

Regional integration in Africa has long been recognised as essential to address the issues of the small economic size of many countries and the often arbitrarily drawn borders that pay little heed to the distribution of natural endowments. But, as is often noted, Africa trades little with itself, at least to the extent that is recorded in official customs statistics. For example, the share of intra-regional goods trade in total goods imports is only around 5% in the Common Market for Eastern and Southern Africa, 10% in the Economic Community of West African States and 8% in the West African Economic and Monetary Union. This compares with over 20% in the Association of Southeast Asian Nations, around 35% in the North American Free Trade Agreement and more than 60% in the EU. On the other hand, intra-regional trade in MERCOSUR is about 15% of total imports and less than 8% in the Central American Common Market (see Acharya et al 2011)