Rethinking Trade Preferences: How Africa Can Diversify its Exports

Abstract

This paper argues that the contribution of trade preferences to economic development needs to be reappraised in light of the growth of globalized trade in manufactures. Trade preferences may be able to act as a catalyst for manufacturing exports, leading to rapid growth in exports and employment. To do so, preferences need to be designed to be consistent with international trade in fragmented 'tasks' (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs such as skills and infrastructure. Recent experience with the African Growth and Opportunities Act shows that, in the right conditions, Sub-Saharan African countries have had large manufacturing export supply response to trade preferences.

Keywords: AGOA, EBA, export diversification, rules of origin, Trade preferences

JEL Classification: F12, F13, F14, O14