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 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.

Bibliographic Details

Main Authors:	Özden, Çaglar, Sharma, Gunjan
Format:	Journal Article biblioteca
Language:	English en_US
Published:	Oxford University Press on behalf of the World Bank 2006-05-01
Subjects:	AGRICULTURE, APPAREL, APPAREL EXPORTS, APPAREL MARKET, APPAREL PREFERENCES, APPAREL QUOTAS, APPAREL SECTOR, AVERAGE PRICE, BORDER PRICE, CLIMATE, COMPARATIVE ADVANTAGE, COMPETITIVE MARKET, CONSUMERS, CUSTOMS, CUSTOMS VALUE, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DOMESTIC PRICE, DOMESTIC PRICE INDEX, DOMESTIC SOURCES, ECONOMIC GROWTH, ECONOMIC RECOVERY, EXCHANGE RATE, EXCHANGE RATES, EXPORT PERFORMANCE, EXPORT PRICE, EXPORT PRICES, EXPORT PROCESSING, EXPORT PROCESSING ZONES, EXPORT VALUE, EXPORT VOLUME, EXPORT VOLUMES, EXPORTERS, EXPORTS, FREE MARKET, FREE MARKET ACCESS, FREE TRADE, FREE TRADE AGREEMENT, FREE TRADE AGREEMENTS, FREE TREATMENT, GENERALIZED SYSTEM OF PREFERENCES, GEOGRAPHIC PROXIMITY, HIGH TRADE BARRIERS, IMPACT OF TRADE, IMPACT OF TRADE POLICIES, IMPERFECT COMPETITION, IMPORT DATA, IMPORT PRICE, IMPORT PRICES, INCOME, INSURANCE, INTERNATIONAL ECONOMICS, INTERNATIONAL TRADE, INTERNATIONAL TRADE COMMISSION, INVENTORY, LOWER PRICES, MARKET ACCESS, MARKET POWER, MARKET SHARE, MOST FAVORED NATION, POLICY IMPLICATIONS, POSITIVE EFFECTS, PREFERENTIAL ACCESS, PREFERENTIAL ARRANGEMENTS, PREFERENTIAL MARKET ACCESS, PREFERENTIAL TARIFF, PREFERENTIAL TARIFFS, PREFERENTIAL TRADE, PREFERENTIAL TRADE ARRANGEMENTS, PREFERENTIAL TREATMENT, PRICE CHANGE, PRICE EFFECT, PRICE INCREASE, PRICE INCREASES, PRICE INDEX, PRICE LEVELS, PRICE OF IMPORTS, PRODUCTION COSTS, RECIPROCITY, REGIONAL INTEGRATION, REGIONALISM, RELATIVE PRICE, RELATIVE PRICES, RETAILING, RULES OF ORIGIN, SPECIALIZATION, SUPPLY CHAIN, TARIFF CHANGES, TARIFF PREFERENCES, TARIFF RATE, TARIFF REDUCTION, TRADE AGREEMENT, TRADE COMMISSION, TRADE FLOWS, TRADE NEGOTIATIONS, TRADE PARTNERSHIP, TRADE POLICIES, TRADE ¸ POLICIES, TRADING PARTNERS, TRANSACTION COSTS, TRANSPORT COSTS, UNILATERAL PREFERENCES, VALUE ADDED, VALUE OF IMPORTS, VALUE OF TRADE, VER, VOLUNTARY EXPORT RESTRAINTS, WAGES, WORLD MARKETS, WORLD TRADING SYSTEM, ZERO TARIFFS,
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
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