Abstract:
In the quest to improve the economic fortunes of developing countries, varieties of
trade preferences have been introduced. This mechanism appears to be in support
of the ‘trade not aid’ campaign. The AGOA trade preference enacted by the US in
the year 2000 is one that has received much recognition in Sub Saharan Africa as a
means of boosting export hence economic development. The importance of trade,
especially in the developing countries calls for the need to study the effects of such
a trade preference. This study is motivated by the relatively limited literature
investigating the effects of trade preferences on regions and respective countries as
well. Since results for a region might not be true for the individual countries this
study focuses on how AGOA has affected exports of the zone and individual
WAMZ member states to the US. Using gravity covariates and other export
determinants for the period 1980 to 2016 sourced from IMF DOTS, WDI and
CEPII, the study employs the gravity model and the fixed and random effects
estimation techniques. After correcting for heteroscedasticity and a possible serial
correlation, the study reveals that the AGOA trade preference has a negative effect
on the exports of the WAMZ to the US. It also shows that exports from Ghana,
Guinea and Liberia to the US have significantly reduced while exports from Nigeria
and Sierra Leone to the US have increased significantly under AGOA. It is
therefore suggested that WAMZ states renegotiate for relaxation of rules of origin
and as well expansion of product coverage to include products in which the WAMZ
member states have comparative advantage.
