Unilateral Preferential Trade Agreement

In principle, we can distinguish between unilateral trade agreements and systems (offered from one side to the other) and reciprocal trading systems (negotiated and approved by both parties). Finding the List of Preferential Trade Agreements in the World Through the Trade Act of 1974, the United States introduced the Generalized Preference System (GSP), which introduced unilateral trade policies that benefit the world`s poorest countries. The GSP enables developing countries to develop their economies through trade and ultimately lift themselves out of poverty. On average, the preferential margin for Mozambican exports is between 5% and 7% (see Table 2). MFNs and preferential tariffs were slightly modified during the period11 and part of the change is also explained by a small number of tariff lines subject to seasonal or specific tariffs (agricultural products). Excluding tariff lines already liberalized at the MFN level, the average margin of preference is between 8.5% and 13.3%. Unilateral preferences should therefore have two major effects. First, they allow the exporter to record a higher price than it would normally have recorded in the tariff-induced price market. Second, the price range allows the preferred exporter to export more quantities. Keep in mind that this corresponds to the case of trade diversion, in which unilateral preferences aim to redirect commercial revenues and transfer to DCS. This paper examines this problem as a case study on the basis of Mozambican exports to the EU. We focus on three main elements that can make unilateral preferences “valuable”: (i) if unilateral preferences have been used; (ii) whether preferences offer a significant price margin; (iii) the degree of ownership of the price range, which is theoretically induced by the preferential margin. 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). Unilateral trade preferences are tariff concessions granted by developing countries that do not require reciprocity from recipient countries. There are several reasons for justifying these preferences (see Hoekman and Ozden [1] for a comprehensive investigation). The main reason for this is the concept of special and differentiated treatment (SDT) for developing countries (DC) in multilateral trade agreements. The SDT principle is based on the widely influential idea in the 1950s and 1960s that DC must protect its markets to support the child industry and develop industrial export sectors.1 The World Trade Organization unilaterally designates preferential trade agreements and reciprocal trade agreements as regional trade agreements.

Existing unilateral export preferences were streamlined in 1968 at the United Nations Conference on Trade and Development (UNCTAD) with the introduction of the Generalized Preference System (GSP) and GATT articles were amended to allow discrimination. Since then, several other programs have multiplied.

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