Trade preferenes and industrial export dynamism: conceptualising the nexus between asymmetric market access priviledges and social capability deficits
Suyuti, Na-Allah Abdelrasaq
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The 1996 Singapore Ministerial Declaration refocused attention in the international community on the idea of non-reciprocal system of trade preferences as a means of development assistance. Authors of the initiative had hoped that such policy would among others, help promote industrial exports and facilitate sustainable development in developing countries. However, this happened against the background that previous schemes could not be particularly associated with any form of sustainable export successes that were usually contemplated and expected from beneficiaries. In view of the developmental implications of this renewed focus, the imperativeness of an reconsideration of the economics of the programme cannot be overemphasized. While extant trade preference studies have made important contributions to our understanding of their effectiveness, the limited focus of research on direct impact like, static increases in exports, foreign direct investment (FDI) and employments does not seem to provide satisfactory assessment. Very often, the expected indirect or dynamic impact on productivity improvements needed to strengthen competitive capacities and make gains (export performance) sustainable is neglected. In this study an attempt is made to address this issue. The main objective of the research is therefore to analyse the relationship between nonreciprocal system of trade preferences and industrial export performance sustainability in beneficiary countries. This is accomplished by utilising a new analytical insight from the global production network literature. The advantages of this analytical departure lie not just in the fact that it allows us to accommodate the dynamic dimension of impact assessment into the study framework, but also helps reflect the concerns of globalisation advocates in the contemporary analysis of development issues. These advocates argue that research on economic development in general and industrial development in particular in the new era of global capitalism must as a matter of necessity, be informed by the literature on globalisation. After conceptualising an analytical model which has both static and dynamic dimension, it is then applied and tested for the US African Growth and Opportunity Act (AGOA) Trade Initiative of 2000. Lesotho’s apparel export under the scheme serves as the case study for this investigation. Results of the econometric estimation for the static impact assessment reveal that AGOA has been effective in stimulating Lesotho apparel exports to the US market. The dynamic impact assessment dimension is carried out within the context of the debate on economic growth and convergence. Specifically, it is argued that the conditions necessary for export performance to be sustainable require that national social-capability in a beneficiary economy be adequate and sufficient. The estimated regression confirms this hypothesis for the reference case study. Overall, the dissertation has shown that research in economics can benefit from analytical insights borrowed from other disciplines. More important however, is the study’s contribution to the trade policy debate on the impact of trade preferences on export development. On one hand, the static impact analysis addresses a key gap in existing works which seems to place so much emphasis on aggregated national level data and cross-country regression as bases for empirical evidence. By utilising disaggregated firm level data for a specific country, analysis here finds relevance in the continuing policy debate on trade preference impact assessment. On the other hand, the dynamic aspect of the analytical model has not only helped us to shift the frontier of knowledge beyond its current static boundary, but also to inform the debate on economic growth and convergence. As efforts to unravel the puzzle over the non-convergence of cross-country growth performances continue to flourish, findings here lend credence to the hypothesis that social capability matters for economic performance of nations.