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The effects of EU preferential treatment on exports of developing Countries

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  1. Introduction
  2. Descriptive statistic
  3. Empirical evidence from previous studies
    1. New developments in the model
    2. The impact of the European Union enlargement process
  4. Under utilization of PTA's: the case for LDC's
  5. Conclusion

After the World War II, the European Union wanted to maintain tight economic links with its ex-colonies. Therefore, the EU granted preferential access to its market to these independent countries with the main goal to promote their exports. The set of these trade preferences can be divided into ACP, Mediterranean and GSP preferences. Preferences for ACP countries found their origin in the Treaty of Rome in 1957, which included provisions for the colonies of EU members to form a free trade area with the EU. Lome Convention of 1975 unlike the Yaounde, provided a mainly former non-Asian British colonies with duty free access on a non-reciprocal basis to the European market for most products except those covered by the Common Agricultural Policy (CAP). Since 2000, ACP countries are governed by the Cotonou Agreement which provide non-reciprocal trade preferences under WTO resignation even though these preferences have been renegotiated into WTO compatible free trade agreements. Since the late 1960s and the early 1970s, Tunisia, Egypt, Morocco and Israel signed agreements with the EU; followed by Cooperation Agreements signed with the Maghreb and Mashrek. Those agreements took the form of Mediterranean preferences. It was a bilateral cooperation, which provided non-reciprocal trade preferences and duty free access for most industrial and many agricultural goods; An Euro-Mediterranean Free Trade Area is attempted to be created by 2010. In parallels to these regional schemes, the EU started its Generalized System of Preferences in 1971 which is the most important trade agreement in terms of products coverage and number of countries. Under the GSP, the EU conceded preferences mostly in manufactures and semi manufactured sectors and by 1986, 149 countries were covered by the scheme. Among all those schemes, we can notice that ACP countries receive the most preferences followed by MED then GSP countries. However, trade preferences for MED countries were designed to be similar to the ACP preferences, but two important exceptions to this were textile and agricultural products covered by the CAP, where ACP countries were given better access to the EU market. Comparing ACP to GSP countries, the biggest difference is that the preference margin and commodity coverage are wider for ACP countries. In addition, ACP countries are contractual which makes market access more certain and Lome Convention have less restrictive safeguard clauses. Tags: European Union, preference margin, commodity coverage, Lome Convention, economic links, non-Asian British colonies .

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