The effects of EU preferential treatment on exports of developing Countries

Thèmes abordés

European Union effects of EU preferential treatment on exports of developing Countries African Pacific And Caribbean ACP GSP

Résumé du document

After the World War II, the European Union wanted to maintain tight economic links with its ex-colonies.
Therefore, the EU granted preferential access to its market to these independent countries with the main goal to promote their exports. The set of these trade preferences can be divided into ACP, Mediterranean and GSP preferences. Preferences for ACP countries found their origin in the Treaty of Rome in 1957, which included provisions for the colonies of EU members to form a free trade area with the EU.

Lome Convention of 1975 unlike the Yaounde, provided a mainly former non-Asian British colonies with duty free access on a non-reciprocal basis to the European market for most products except those covered by the Common Agricultural Policy (CAP). Since 2000, ACP countries are governed by the Cotonou Agreement which provide non-reciprocal trade preferences under WTO resignation even though these preferences have been renegotiated into WTO compatible free trade agreements.

Since the late 1960s and the early 1970s, Tunisia, Egypt, Morocco and Israel signed agreements with the EU; followed by Cooperation Agreements signed with the Maghreb and Mashrek. Those agreements took the form of Mediterranean preferences. It was a bilateral cooperation, which provided non-reciprocal trade preferences and duty free access for most industrial and many agricultural goods; An Euro-Mediterranean Free Trade Area is attempted to be created by 2010.

In parallels to these regional schemes, the EU started its Generalized System of Preferences in 1971 which is the most important trade agreement in terms of products coverage and number of countries. Under the GSP, the EU conceded preferences mostly in manufactures and semi manufactured sectors and by 1986, 149 countries were covered by the scheme.

Among all those schemes, we can notice that ACP countries receive the most preferences followed
by MED then GSP countries. However, trade preferences for MED countries were designed to be
similar to the ACP preferences, but two important exceptions to this were textile and agricultural
products covered by the CAP, where ACP countries were given better access to the EU market.

Comparing ACP to GSP countries, the biggest difference is that the preference margin and commodity coverage are wider for ACP countries. In addition, ACP countries are contractual which makes market access more certain and Lome Convention have less restrictive safeguard clauses.

Tags: European Union, preference margin, commodity coverage, Lome Convention, economic links, non-Asian British colonies .

Extraits

[...] In addition, the year 1997 reflects the awareness of the fact that a financial, technical and organizational support was needed beyond the trade preferences that the EU grants to least developing countries2. Inama (2003) shows that utilization rate of ACP*LDCs was above 70% for the whole period of 1998-2002. Low utilization rate seems to be a cross cutting problem for all European preferential trade agreement since they result of a number of several factors such as the extent of the preference, supply capacity of a given beneficiary, and rules of origins ( RoO) implications. [...]

[...] For instance, regarding the OLS, LSDV and ZIP regressions, the GSP preferential scheme show a positive and significant impact on beneficiary countries. The best performing estimators were the Poisson and the NBR. It was only then some variables were not only statistically significant, but also showed the expected signs of some variables like distance, colony ties and common language. It can also be noticed on the one hand that the only clear indication comes in the form of the positive impact exerted by the ordinary GSP. [...]

[...] The ACP variable is also significant and positive in 8 of the 10 periods covered which means that extending the study does not change Nilsson's results. Results for the GSP variable are also similar and significant and like Nilsson, he found that the impact on ACP countries was stronger. However, the MED variable still remains insignificant in 7 out of 10 periods. The reason to that is that MED countries faces direct competition from European producers on their agricultural products which decreases the value of their preferences. [...]

[...] Graph 1 shows the real exports to the EU from those countries. We can see that all groups of countries have increased their exports to the EU in the last 40 years, which is a first positive indicator of the effects of preferences. However, ACP and MED countries didn't increased much their exports whereas they were supposed to as ACP countries are the most favored nations and MED countries have an advantageous geographical situation. On the other hand, GSP countries had a significant increase of real exports but when taking into account that China is the main exporter to Europe, it reduces consequently the increase level of exports by other beneficiaries under the GSP. [...]

[...] In their paper, trade preferential agreements enhance the imports of developing countries? Evidence from the EU Francesco Aiello and Federica Demaria, adopt another method to measure the effect of PTAs on developing countries exports, taking in account the trade diversion caused by the EU enlargement process. They refers to sectorial data or exploit data on tariffs to control the effects of PTAs taking in account the fact that it is different whether it concern industrial goods or agricultural goods. The results are consistent with the one of Wilhemson. [...]