AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions

Lawrence Edwards and Robert Lawrence

No WP13-11, Working Paper Series from Peterson Institute for International Economics

Abstract: While exports of clothing from Africa to the United States responded impressively to the preferences they were granted under the African Growth and Opportunity Act (AGOA), this performance was not accompanied by some of the more dynamic benefi ts that might have been hoped for. Benefi ciary countries still do not have viable internationally competitive industries that could survive without the preferences, or that have diversifi ed horizontally into new products and markets or vertically into greater domestic value addition. In this paper we demonstrate that this outcome is a predictable consequence of incentives under the Multi-Fiber Arrangement (MFA) quotas and the AGOA trade preferences. Th e paper fi rst extends standard trade models and predicts that, in equilibrium, the MFA encouraged exports of low quality and low value added products by AGOA countries and higher quality and higher value added products by quotaconstrained countries. AGOA preferences further encourage specialization in clothing products with high fabric cost shares in the least developed countries receiving the preference. Th e paper then tests these theoretical predictions using diff erence-in-diff erences estimations by looking at changes in the value-added and fabric intensity of AGOA apparel exports in response to the ending of the MFA in January 2005 and the granting of AGOA preferences from 2001. Th e results show that MFA quotas and AGOA preferences caused least developed AGOA recipients to specialize in fabricintensive products with low value added as well as rising fabric content.

Keywords: African Growth and Opportunity Act; AGOA; Multi-Fiber Arrangement; trade preferences; exports; apparel; industrial development; value chains; rules of origin (search for similar items in EconPapers)
JEL-codes: F13 F14 F63 O14 O24 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-int
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Related works:
Chapter: AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions (2014)
Working Paper: AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions (2011)
Working Paper: AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions (2011)
Working Paper: AGOA Rules: The Intended and Unintended Consequences of Special Fabric Provisions (2010)
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