Does the African Growth and Opportunity Act (AGOA) impact EU-15 imports from Africa?

At the heart of the African Growth and Opportunity Act (AGOA) are substantial trade preferences which, coupled with the Generalised System of Preferences (GSP), grant a wide range of goods produced in qualified African countries duty-free access to USA. To be AGOA-eligible, countries are assessed annually on their progress in undertaking appropriate economic, institutional and human rights reforms. Our paper seeks to cover new grounds by exploring whether exports of apparel to US crowds out EU-15’s imports from Africa over the period 2001-2016. Two-stage least squares estimates of our gravity model provide no evidence of trade displacement but, instead, provide support for the hypothesis of complementarity of African exports to the two key markets. A stronger positive impact of bilateral trade between US and Africa on EU-African trade is evident mainly before the phasing out of the Agreement on Textiles and Clothing. We examine whether the more relaxed special waiver embodied in AGOA’s apparel provision cause Non-Knitted exports to EU-15 to be crowded out. We find that Special Rule beneficiaries' exports to the two markets still complement each other, but for every percentage increase in exports to USA, there is a less than proportionate increase in exports to EU-15, indicating a higher utilisation of the special waiver. We also find some evidence of complementary apparel exports to both LDCs (least developing countries) and non-LDCs, with stronger effects for non-LCDs and in non-knitted sector