EU Trade Preferences and Developing Countries : A Gravity Model Investigation of the Everything But Arms Treaty
Abstract: This thesis analyses the effects of EU’s Everything But Arms agreement on the leastdeveloped countries (LDC’s) and a set of other developing countries left outside thetreaty. It searches to prove if the LDC’s are capable of benefitting from the agreementor if they remain at the same level of exports. The change between the year before thereform; 2000, and 2004 is considered. Many studies of trade preferences make use of exante General Equilibrium models; yet there are not many executed on ex post results.This examination therefore provides an interesting outcome, applying the gravity modelof trade to evaluate the results of the EBA agreement. The hypothesis is that the EBAinitiative has increased the import value to the EU from the least developed countries, andcomparatively diminished import value from the other developing countries. However,the empirical analysis disproves that the EBA initiative had a significant effect on the leastdeveloped countries’ exports. For the time period studied, trade with the European Unionhas not increased more for the countries within the EBA agreement, compared to thoseoutside it. With the result that the EBA initiative has been ineffective in its initial stages,the duplicitous policy of the EU is considered; helping the LDC’s by liberalizing trade, yethindering them from entering their market, through subsidizing domestic agriculture andmaintaining protectionist regulations on imports.
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