Uncertainty in Preferential Trade Agreements : Impact of AGOA Suspensions on Exports

This study examines the impact of the abrupt suspension of African Growth and Opportunity Act benefits on exports from eligible African countries. The study uses a triple difference-in-differences estimation that controls for both country- and product-level export changes. The results suggest that the suspension of the African Growth and Opportunity Act has had a considerable negative impact on the level of exports to the United States. The impact appears to be bigger for countries with a high African Growth and Opportunity Act utilization rate. The suspension is associated with a 39 percent decline in exports to the United States. At the product level, the suspension hurt apparel and textile exports, leading to a decline of their exports by about 88 percent. Understanding the impact of withdrawing access to a nonreciprocal trade agreement is particularly important now, as the European Union began negotiating Economic Partnership Agreements with African countries, as a sign of a shift to reciprocity; the United States is considering a similar path of negotiating free trade agreements with individual African countries. These developments underscore the need to prepare for a post-African Growth and Opportunity Act period with more reciprocity, as trade uncertainty is becoming rampant