Price Effects of Preferential Market Access: The Caribbean Basin Initiative and the Apparel Sector
Preferential trade arrangements should be evaluated by analyzing their effect on prices, rather than the total value of trade, as emphasized in the theoretical literature but rarely implemented empirically. The authors analyze the impact of the uni...
| Main Authors: | , |
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| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/03/4097589/price-effects-preferential-market-access-caribbean-basin-initiative-apparel-sector-price-effects-preferential-market-access-caribbean-basin-initiative-apparel-sector http://hdl.handle.net/10986/14118 |
| Summary: | Preferential trade arrangements should
be evaluated by analyzing their effect on prices, rather
than the total value of trade, as emphasized in the
theoretical literature but rarely implemented empirically.
The authors analyze the impact of the unilateral preferences
granted by the U.S. Caribbean Basin Initiative (CBI) on the
prices received by eligible apparel exporters. They use
fixed effects generalized least squares (GLS) estimation to
isolate the effects of various other factors (such as
quality, exchange rates, and transactions costs) and
identify the effects of tariff preferences. The authors find
that CBI exporters only capture around two-thirds of their
preference margin, despite the fairly competitive nature of
the apparel market. This translates into a 9 percent
increase in the relative prices they receive, but these
numbers vary across countries and years. Countries
specializing in higher-value items capture more of the
preference margin while implementation of the North American
Free Trade Agreement has a negative effect. The authors
analyze the effect of Multi-Fibre Agreement (MFA) quotas
imposed on third countries (such as China) and find that the
benefits of CBI preferences will be significantly reduced
once the quotas are fully removed in 2005. |
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