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Are Trade Preferences more Effective than Aid in Supporting Exports? Evidence from the ‘Everything But Arms’ Preference Scheme
Author(s) -
Gradeva Katerina,
MartínezZarzoso Inmaculada
Publication year - 2016
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12289
Subject(s) - economics , international economics , gravity model of trade , european union , panel data , international trade , preference , export performance , gravity equation , bilateral trade , econometrics , political science , microeconomics , law , china
This study examines the effect of the ‘Everything But Arms’ ( EBA ) trade preferences regime on exports from the African, Caribbean and Pacific countries ( ACP ) to the European Union ( EU ). With this aim, an augmented gravity model is estimated for exports from the 79 ACP countries to the EU ‐15 for the time period of 1995—2013 using panel data techniques. The results are used to quantify the effect of the eligibility for EBA preferences on the export performance of the ACP least developed countries ( LDC s) and to relate it to the impact of official development assistance on exports. In addition to their separate effects, the combined impact of EBA and aid flows is examined. The main results do not provide evidence for an additional positive effect of the EBA agreement on the export performance of the ACP LDC s. However, receiving aid shows a significant and positive effect on exports from EBA ‐eligible ACP countries to the EU ‐15, supporting an EU development strategy that includes both sorts of assistance, aid and trade preferences.