US Trade Preference and Export Performance of Sub-Saharan Africa (SSA): Evidence from the African Growth and Opportunity Act (AGOA)

Abstract

The African Growth and Opportunity Act (AGOA) was signed into law in May 2000 to encourage increased trade and investment between the United States and Sub-Saharan Africa (SSA). It provides eligible countries with duty free access to the US market for over 1800 products in addition to those available under the Generalized System of Preferences (GSP). The benefits extend through 2025. This study explores the link between US trade preferences under AGOA and beneficiary country exports. Using a large US import database, the study examines the extent to which AGOA influences export performance. It also examines the moderating roles of rule of law and foreign direct investment. The results largely indicate that AGOA has a positive and significant effect on beneficiary country exports. It also shows that rule of law moderates the relationship between AGOA and export performance. We believe that AGOA will target foreign direct investment (FDI) to SSA from other advanced regions such as the EU to take advantage of the US market. However, the role of FDI appears to be weak in moderating the relationship between trade preferences (tariff concessions) and exports from beneficiary countries to the US market.

OECD Ülkelerinde Ekonomik Özgürlüklerin İhracat Sofistikasyonuna Etkisi

“…The positive effect of the rule of law on export sophistication consistent with Hwang & Rodric (2007), Zhang & Yang (2016), Hüseyni & Çakmak (2019), Zarzoso & Ramos (2019), Atasoy (2020) and Seyoum & Abraham (2022). Rule of law property rights and corruption prevention.…”

The Impacts of the African Growth Opportunity Act on the Economic Performances of Sub-Saharan African Countries: A Comprehensive Review

“…Employing treatment and control-group estimates via a pseudo-maximum likelihood approach, the authors show a 260% boost, specifically in exports of apparel products from eligible SSA countries compared to the pre-AGOA levels. Using a panel data regression analysis of exports from 44 SSA countries to the US from 1996-2018, disaggregated by major product categories, Seyoum and Abraham [5] investigate the impact of AGOA preferences extended to the beneficiary countries. Comparing export growth trends before and after the implementation of AGOA and controlling for country and year-fixed effects, the authors report that the act had a statistically significant positive effect on total merchandise exports from SSA countries to the US, primarily driven by rising exports of apparel, agricultural goods, and manufacturing products that received duty-free access.…”