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Unilateral Preferential Trade Agreements

Unilateral Preferential Trade Agreements

The following section assesses the impact of EU trade preference regimes for least developed countries and DCs, with Mozambique being considered a case study. 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). A unilateral trade agreement is a trade agreement imposed by one nation with no regard for others. It benefits only one country. It is one-sided because other nations have no choice in this matter. It is not ready to negotiate. The main challenge in the analysis of price ranges is the absence of counterfactuals. This means that we do not respect the MFN price for most periods, as most exports use preferential regimes.

It is interesting to note that we find in our sample cases of Mozambican companies exporting the same property through the MFN and preferential regimes in the same year or month. These would be cases where the use and non-use of preferences occur during the same period. That is why we use non-use prices as one of the most important reference prices to further reduce the potential distortion of quality and compare results using alternative MFN prices.12 We define:13 (i) – the unit value paid to Mozambican exporters if they do not use preferences. This reference price eliminates potential distortions of quality, as it is the same product that is exported for preferential purposes; (ii) – the minimum value of the unit paid to MFN exporters in the same month; (iii) – the average unit value paid to MFN exporters in the same month; (iv) – the unit value paid to MFN`s largest exporter in the same month. We then build price ratios as unit values, which are accounted for under preference over the MFN reference unit values: the unit value is paid for the export of property per month and the denominator is one of the four reference prices described above.