AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?

Marcelo Olarreaga · Çağlar Özden

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Abstract

The United States grants preferential (tariff‐ and quota‐free) market access to a list of products from eligible countries in sub‐Saharan Africa through the African Growth and Opportunity Act (AGOA). We analyse the increase in prices received by apparel exporters who benefited from AGOA preferences. In the presence of competitive markets, export prices should increase as much as the tariff which was previously collected by the US government. We refer to this price increase as the ‘tariff preference rent’ since exporters receive this income as the rent for their preferential status. The results show that exporters receive only one‐third of this rent and smaller exporters receive less than larger and established ones. We then provide evidence that suggests this may be due to the degree of market power enjoyed by US importers when facing African exporters.

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2006Globalization and the Gains From Variety 1992Innovation and growth in the global economy 1992Innovation and growth in the global economy 2004The Impact of Trade Liberalisation on Exports, Imports and the Balance of payments of Developing Countries

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2005Trade Preferences and Differential Treatment of Developing Countries : A Selective Survey 2007Why OECD Countries Should Reform Rules of Origin 2004The Initial and Potential Impact of Preferential Access to the U.S. Market under the African Growth and Opportunity Act 2007Market Structure And Market Access 2006Doha Merchandise Trade Reform: What Is at Stake for Developing Countries?2005Economic Policy Responses To Preference Erosion : From Trade As Aid To Aid For Trade 2006Would Multilateral Trade Reform Benefit Sub-Saharan Africans?2005Preference Erosion And Multilateral Trade Liberalization

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