April 14, 2021
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 utilization rate of products that face low tariffs on the MFN. On the other hand, in our data, we see high utilization rates on products and few one-time declines in utilization rates. Therefore, unforeseen administrative problems may be a much more likely explanation for discontinuous utilization rates in Mozambique, and estimates of the average cost of compliance would ignore the fact that we observe the use of preferences in very low preferential margins. 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, where unilateral preferences are aimed at redirecting revenues from trade and transfers to DCS. Regional Trade Agreements (RTA) – The WTO uses the term “regional trade agreements” as a generic for all reciprocal agreements, such as trade agreements, free trade agreements and partial agreements. This is because such agreements were primarily within the jurisdiction of the WTO Regional Trade Agreements Committee. In reality, such trade agreements should not include members. B from the same region (e.g., EU-Canada or Peru-South Korea free trade agreements).
The authors thank Channing Arndt, Finn Tarp and Alan Winters for their helpful comments and suggestions, Ramon Ynaraja for providing relevant data and DANIDA for financial support. This document was produced as part of the commercial component of the “Capacity Building and Technical Assistance to the National Directorate of Policy Studies and Analysis” in Mozambique, as part of the commercial component of the “Capacity Building and Technical Assistance to the National Directorate for Policy Studies and Analysis” project. A. Alfieri thanks USAID for its financial support. As a multilateral trade agreement, GATT calls on its signatories to extend the status of the Most Preferred Nation (MFN) to other trading partners participating in the WTO. MFN status means that each WTO member enjoys the same tariff treatment of its products in foreign markets as the “preferred” country that competes in the same market, thus excluding preferences or discrimination from a Member State. As a result, many countries have shifted from the multilateral process to bilateral or regional trade agreements. Such an agreement is the North American Free Trade Agreement (NAFTA), which came into force in January 1994. Under NAFTA, the United States, Canada and Mexico agreed to eliminate all tariffs on merchandise trade and reduce restrictions on trade in services and foreign investment for more than a decade.
The United States also has bilateral agreements with Israel, Jordan, Singapore and Australia and negotiates bilateral or regional trade agreements with countries in Latin America, Asia and the Pacific. The European Union also has free trade agreements with other countries around the world. Several factors may explain this lack of success in unilateral preferences. First, some authors have suggested that the costs of strict rules of origin associated with these agreements can offset any benefit granted by tariff concessions (see Carrere and Melo  and Cadot et al.
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