Assessing the impact of unilateral trade policies EBA and AGOA on African beneficiaries' exports using matching econometrics

Abstract

The existing literature studying the impact of non‐reciprocal preferential trade agreements (NRPTAs) assumes implicitly NRPTAs are non‐randomly assigned without showing the evidence of that. Using a matching methodology, this paper investigates whether the “African Growth and Opportunity Act” (AGOA) and the “Everything But Arms” (EBA) unilateral trade concessions have had an impact, and in what magnitude, on the exports of African beneficiary countries in the light of the evidence of the non‐random nature (endogeneity) of NRPTAs. Methodologically, previous studies using the matching procedure focused on bi or multilateral trade agreements. Our work focuses on NRPTAs that depend only on donors' conditions. Accordingly, we show that for NRPTAs, gravity covariates cannot be used for the matching procedure. We propose to use political variables as determinants for obtaining non‐reciprocal trade preferences in order to address the endogenous nature of NRPTA assignment. Our main results confirm that a country becomes eligible for a NRPTA only when it meets certain conditions, defined by their donors, such as political stability and economic regulation (for AGOA), and freedom of expression and human development (for EBA). Results also show that both AGOA and EBA policies have had a positive impact on African beneficiary countries' exports to NRPTA's providers, even if the magnitude impact of EBA is significantly lower than that of AGOA.

Explaining Export Duration in Kenya

“…Alternatives of DiD such as propensity score matching (PSM) and synthetic control approach (SCA) should be explored in the context of export survival. Sorgho and Tharakan () have assessed the effect of AGOA and EBA using PSM approach, while Kassa and Coulibaly () have used SCA to study the effect of AGOA on eligible countries. With the availability of firm‐level data like the World Bank's Exporter Dynamics Database, more studies, besides Chacha and Edwards (), should approach this subject from a micro‐perspective.…”

The African Growth and Opportunity Act and growth in sub‐Saharan Africa: A local projection approach

“…Didia, Nica, and Yu (2015) also find evidence that AGOA has stimulated exports to the US, but find a disproportionate impact of crude oil exports from oil‐producing countries. Sorgho and Tharakan (2019) also find that AGOA has significantly increased beneficiaries’ exports to the US.…”

“…Typically, this is due to domestic political instability. Sorgho and Tharakan (2019) show that political stability is a condition for AGOA eligibility. If political instability is associated with lower‐than‐normal growth rates and correlated with delayed/loss of eligibility for AGOA preferences, our measure of changes in AGOA eligibility might be inadvertently capturing these relationships.…”

African Growth and Opportunity Act and trade performance in Nigeria

“…The study by Sorgho and Tharakan (2019) applied the Logit regression and the Propensity Score Matching (PSM), shows that though, AGOA has a positive impact on the economy, however, one of the reasons, while most African countries did not experience a positive impact of AGOA trade policy, is as a result of an institutional framework. The study found Note: The HS Codes H0 to H4 is the classification of goods as indicated by the "Harmonised System (HS)" which was created and administered by the Brussels-based World Customs Organisation (WCO).…”

“…The comparatively satisfactory economic performance, discovery of various natural resources, and conducive political environment have provoked the interest of many advanced countries including the USA, the European Union (EU), China, Russia, India, Japan, Brazil, among others to initiate trade relations with several African countries ( Davies and Nilsson, 2020 ; Hurreeram and Little, 2004 ; Mahabir et al, 2020 ; Sorgho and Tharakan, 2019 ; Thompson, 2004 ). The establishment of multilateral frameworks in Africa countries has become a significant feature in international relations among major economic powers and various regional economic communities as they strive to deepen their economic cooperation and address the challenges faced in a globalised world ( Davis and Nilsson, 2020 ; Mahabir et al, 2020 ; Musah et al, 2020 ; Osabuohien et al, 2019 ; Salau, 2018 ).…”