Price Effects of Preferential Market Access : Caribbean Basin Initiative and the Apparel Sector
Preferential trade arrangements should be evaluated by their effect on prices rather than by their effect on the total value of trade. This point is emphasized in the theoretical literature but rarely implemented empirically. This article analyzes...
| Main Authors: | , |
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| Format: | Journal Article |
| Language: | English en_US |
| Published: |
Oxford University Press on behalf of the World Bank
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2006/05/17753309/price-effects-preferential-market-access-caribbean-basin-initiative-apparel-sector http://hdl.handle.net/10986/16429 |
| Summary: | Preferential trade arrangements should
be evaluated by their effect on prices rather than by their
effect on the total value of trade. This point is emphasized
in the theoretical literature but rarely implemented
empirically. This article analyzes the U.S. Caribbean Basin
Initiative's (CBI's) impact on the prices received
by eligible apparel exporters. The CBI's apparel
preferences are the most important and heavily used
unilateral preferences because of high trade barriers
imposed on exports from the rest of the world. A fixed
effect generalized least squares (GLS) estimation is used to
isolate the effects of other factors (such as quality,
exchange rates, and transaction costs) and to identify the
effects of tariff preferences. CBI exporters capture only
about two-thirds of their preference margin despite the high
degree of competition among importers. This translates into
a 9 percent increase in the relative prices they receive,
with some variance across countries and years. Countries
specializing in higher value items capture more of the
preference margin, and the implementation of the North
American Free Trade Agreement (NAFTA) has a negative effect.
Removing multifibre arrangement quotas significantly lowers
the benefits of CBI preferences. |
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