Uncertainty in Preferential Trade Agreements: Impact of the African Growth and Opportunity Act (AGOA) Suspension on Exports

This study examines the impact of an abrupt suspension of the benefits of the US African Growth and Opportunity Act (AGOA) on exports from eligible African countries to the USA. The study uses a triple difference-in-differences estimation that controls for both country- and product-level changes in exports. The results suggest that suspension of the AGOA has a considerable negative impact on the level of exports to the USA. The impact appears to be bigger for countries with a high rate of utilization of AGOA. On average, suspension is associated with a subsequent 39% decline in exports to the USA. At the product level, the suspension affects exports of apparel and textiles the most, which decline by about 88%. Understanding the impact of withdrawing access to a nonreciprocal trade agreement is particularly important now, as the European Union has begun negotiating economic partnership agreements with African countries. This is a sign of a shift to reciprocity, and the USA is considering a similar path. These developments underscore the need to prepare for a post-AGOA period with more reciprocity as trade uncertainty is becoming rampant.