1. Price Effects of Preferential Market Access: Caribbean Basin Initiative and the Apparel Sector
- Author
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Caglar Ozden and Gunjan Sharma
- Subjects
BORDER PRICE ,PRICE LEVELS ,CUSTOMS ,MARKET ACCESS ,PREFERENTIAL MARKET ACCESS ,MARKET POWER ,APPAREL SECTOR ,PREFERENTIAL TREATMENT ,Market access ,EXPORT VOLUME ,FREE MARKET ,INVENTORY ,VALUE ADDED ,ECONOMIC GROWTH ,EXCHANGE RATES ,MOST FAVORED NATION ,DOMESTIC PRICE ,PRICE EFFECT ,PREFERENTIAL TRADE ARRANGEMENTS ,TRANSACTION COSTS ,Economics ,RETAILING ,IMPORT PRICE ,Free trade ,INCOME ,TRADE NEGOTIATIONS ,APPAREL EXPORTS ,IMPACT OF TRADE POLICIES ,TARIFF RATE ,PRODUCTION COSTS ,IMPACT OF TRADE ,WORLD TRADING SYSTEM ,ECONOMIC RECOVERY ,IMPORT DATA ,PRICE INCREASES ,FREE MARKET ACCESS ,GEOGRAPHIC PROXIMITY ,DEVELOPMENT ECONOMICS ,WORLD MARKETS ,Development ,Relative price ,APPAREL MARKET ,EXPORT PRICES ,Trade agreement ,EXPORTERS ,ZERO TARIFFS ,PREFERENTIAL TARIFF ,WAGES ,EXPORT PROCESSING ,APPAREL ,TARIFF REDUCTION ,Caribbean Basin Initiative ,TRADE AGREEMENT ,LOWER PRICES ,International economics ,PRICE INCREASE ,PRICE INDEX ,RELATIVE PRICES ,EXPORT PRICE ,POLICY IMPLICATIONS ,PREFERENTIAL ARRANGEMENTS ,PRICE OF IMPORTS ,TRADE POLICIES ,AVERAGE PRICE ,FREE TRADE AGREEMENT ,TRADE ¸ POLICIES ,PREFERENTIAL TARIFFS ,AGRICULTURE ,GENERALIZED SYSTEM OF PREFERENCES ,PRICE CHANGE ,UNILATERAL PREFERENCES ,FREE TRADE ,CONSUMERS ,TRADING PARTNERS ,VOLUNTARY EXPORT RESTRAINTS ,Regional integration ,TRADE PARTNERSHIP ,SPECIALIZATION ,INTERNATIONAL ECONOMICS ,Commercial policy ,EXPORTS ,POSITIVE EFFECTS ,REGIONALISM ,INTERNATIONAL TRADE ,RECIPROCITY ,HIGH TRADE BARRIERS ,REGIONAL INTEGRATION ,TARIFF CHANGES ,EXCHANGE RATE ,INSURANCE ,SUPPLY CHAIN ,PREFERENTIAL ACCESS ,RULES OF ORIGIN ,TRADE COMMISSION ,CUSTOMS VALUE ,TRADE FLOWS ,FREE TRADE AGREEMENTS ,VALUE OF IMPORTS ,Economics and Econometrics ,VALUE OF TRADE ,TARIFF PREFERENCES ,EXPORT VOLUMES ,DEVELOPING COUNTRIES ,COMPETITIVE MARKET ,MARKET SHARE ,TRANSPORT COSTS ,Accounting ,IMPORT PRICES ,APPAREL PREFERENCES ,EXPORT PROCESSING ZONES ,FREE TREATMENT ,Market power ,PREFERENTIAL TRADE ,DOMESTIC PRICE INDEX ,DOMESTIC SOURCES ,APPAREL QUOTAS ,IMPERFECT COMPETITION ,COMPARATIVE ADVANTAGE ,EXPORT VALUE ,RELATIVE PRICE ,INTERNATIONAL TRADE COMMISSION ,CLIMATE ,EXPORT PERFORMANCE ,VER ,Finance - Abstract
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.
- Published
- 2006
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