Unilateral Preferential Trade Agreement

The starting point is the assumption that the price of the same products on the UNION market is the same on the EU market for imports under the MFN and under the preferential regime. Therefore, given that most of the products in the sample are primary raw materials, it is plausible to think that these are homogeneous products. However, to account for some quality differences that may occur when using alternative reference MFN prices, we allow a quality adjustment (3). We assume that the difference in quality is product specific and constant over time and that it is zero if the same reference price for MFN is used. This is illustrated in (3) where the price of the property from the country in the year that is not eligible for preferences and therefore through MFN corresponds to the price of the property originating from the country in the year that is eligible for preferences, plus the time to adapt quality. Figure 4 shows the probability distribution functions of Margin_price1 to Margin_price4. With respect to a large number of comments, the price paid to Mozambican exporters is actually lower than the MFN reference prices used. With, we have a positive price range only for 53% of the observations, because, 34% of the observations have a positive margin, and, for , about 44% of the observations are positive. However, this figure has increased to 85%. As expected, price margins 3 and 4 tend to be lower because we compare them to the average and larger value of the export unit, which will likely be a richer country producing better quality goods. While the ratio 2 tends to be positive, because we use the minimum value of the unit as a reference. This implies a potential distortion of quality in the use of these conditions. However, the most interesting result is the comparison of the sub-price ratio 1, the unit values using and the non-use of preferences over the same period and the product for the control of quality differences.

In this case, the probability of a higher preferential price is only 53%. The question we raised at the beginning of the document is whether unilateral EU preferences are valuable to exporters based on use and price advantage. In the case of Mozambique, a first point is that the common coverage of Cotonou and the EBA reaches 100% of the exports and that the vast majority of these exports are exempt from tariffs under these two regimes. On the other hand, more than 42% of Mozambique`s exported customs positions and 5.4% of Mozambique`s export value do not enjoy a “preferential advantage” over world exports (MFN zero). Thus, for these products, Mozambican companies are able to compete with global exporters, without the advantage of preferences. For other exports, Mozambique has a large preferential de jure margin of between 9% and 12% (on average). The results of this document have a considerable political impact. Unilateral preferences are one of the most important instruments the EU offers to stimulate export growth in developing countries.

However, the results of the paper indicate that the “value” of these systems and their potential effects are likely to be overstated. This is because many of the products exported by developing countries do not have a positive preferential margin and, more importantly, because exporters are unable to enter the preference price range. In view of these results and the increasing evolution of preference erosion due to continued liberalisation of the EU market in the future, the focus is on other export support instruments for developing countries. The existing narrow export base in Mozambique implies that each product is likely to be exported by one or two companies. At the same time, preferential margins have been relatively stable over time. If the cost of compliance had a significant impact on the choice of trade regime, we would expect a reduction in the rate of use of products that face low tariffs on the MF

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