Uncertainty in Preferential Trade Agreements: Impact of AGOA Suspensions on Exports

Habtamu Edjigu, Shushanik Hakobyan and Woubet Kassa

No 10424, Policy Research Working Paper Series from The World Bank

Abstract: This study examines the impact of the abrupt suspension of African Growth and Opportunity Act benefits on exports from eligible African countries. The study uses a triple difference-in-differences estimation that controls for both country- and product-level export changes. The results suggest that the suspension of the African Growth and Opportunity Act has had a considerable negative impact on the level of exports to the United States. The impact appears to be bigger for countries with a high African Growth and Opportunity Act utilization rate. The suspension is associated with a 39 percent decline in exports to the United States. At the product level, the suspension hurt apparel and textile exports, leading to a decline of their exports by about 88 percent. Understanding the impact of withdrawing access to a nonreciprocal trade agreement is particularly important now, as the European Union began negotiating Economic Partnership Agreements with African countries, as a sign of a shift to reciprocity; the United States is considering a similar path of negotiating free trade agreements with individual African countries. These developments underscore the need to prepare for a post–African G rowth and Opportunity Act period with more reciprocity, as trade uncertainty is becoming rampant.

Date: 2023-04-27
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