Trade preferences and manufacturing export response; lessons from theory and policy

This paper argues that the contribution of trade preferences to economic development needs to be reappraised in light of the growth of globalised trade in manufactures. Trade preferences may be able to act as a catalyst for manufacturing exports, leading to rapid growth in exports and employment. To do so, preferences need to be designed to be consistent with international trade in fragmented ‘tasks’ (as opposed to complete products) and need to be open to countries with sufficient levels of complementary inputs such as skills and infrastructure. Recent experience with the African Growth and Opportunities Act shows that, in the right conditions, Sub-Saharan African countries have had large manufacturing export supply response to trade preferences. * This work was supported by the UK ESRC funded Centre for Economic Performance at the London School of Economics. Thanks to Stefanie Sieber for research assistance. Authors Addresses: P. Collier Centre for Study of African Economies Manor Road Oxford OX1 3UQ [email protected] A.J. Venables Department of Economics LSE Houghton Street London WC2A 2AE [email protected]