Advantages And Disadvantages Of Preferential Trading Agreement

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Napsala: admin | Kategorie: Nezařazené | Datum: 09. září 2021

Despite all the advantages of a free trade area, there are also some drawbacks, including: 1 An industry-oriented export strategy (EOI) plays a key role in facilitating economic and social development. For developing countries, it can also help to penetrate the markets of industrialized countries. This is probably the case for the garment industry in the context of globalization and preferential trade agreements. Historical evidence shows that the sector has played an important role in the economic development of countries that are now considered highly industrialized, such as the United Kingdom, Taiwan and the United States [Palpacuer, Gibbon, Thomsen, 2004]. In the context of global efforts to combat international poverty, facilitating access for poor countries to the markets of industrialized countries through specific trade agreements is often seen as a viable policy instrument. While, in the context of globalization and trade liberalization, this should reduce the marginalization of poor countries, it can paradoxically continue their exclusion [Winters, McCulloch, McKay, 2004]. 8AGOA can be institutionally conceived as a preferential trade instrument granted by the United States to facilitate access to their markets for African countries. In theory, AGOA should benefit exporting countries, as long as they respond appropriately to the opportunities offered by the law. However, the degree of responsiveness depends on a number of factors that mention the restrictions of the offer, the terms of the agreement, and the extent and longevity of Condon and Stern`s [2010] preferences. This article identified other exogenous factors and grouped them under the opportunistic behavior of investors. According to Condon and Stern [2010], AGOA can influence import demand on the buyer side – the United States – and exports on the producer side – Lesotho and Swaziland.

Collier and Venables found a significant effect of AGOA on apparel exports from sub-Saharan Africa to the United States [2007, to Condon, Stern 2010, p. 59]. While Seynoum [2007] came to the same conclusion, this positive view had previously been challenged by Nouve [in 2005, in Condon, Stern, 2010, p. 63]. The textile and clothing sector appears to benefit the most from AGOA because of its high preferential margins [van Grasstek, 2003; Brenton, Ikezuki, 2004; Dean, Wainio, 2006]. Other studies, which have investigated the impact of AGOA on the local economy, show limited scale. For Condon and Stern [2010], this limited effect can be explained by the fact that exporting firms are not fully integrated into the local economies of AGOA-qualified countries. Although the jobs created in the clothing and textile sector are considered considerable, they are mostly unskilled.

Progress in skills transfer is insignificant, as is the improvement of the sector. In Kenya, for example, it has been observed that production in this sector generally requires marginal capacity and minimal value added. Supervisory and management positions are entirely occupied by overseas employees [Condon, Stern, 2010]. 20The impact of exchange rate fluctuations on clothing exports from African countries is a well-documented topic [Coughlin, Rubin, Darga, 2004]. AGOA is primarily driven by demand in the U.S. market, so there is no doubt about the impact of a slowdown in the U.S. economy on these exports. The business cycle is linked to fluctuations in the exchange rate of the United States dollar, which have a significant impact on the expected benefits for eligible African countries. For Swaziland and Lesotho, a strengthening of the South African margin against the US dollar increases the vulnerability of the country`s industries to shocks when exports decline. .

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