The effectiveness of development-oriented nonreciprocal trade preferences in promoting agricultural trade

Abstract

Nonreciprocal trade preference (NRTP) programs have proliferated in recent decades as a means to facilitate export-led growth for beneficiary countries. However, evidence on the efficacy of NRTPs in promoting agricultural exports from preference beneficiaries to preference donors has been mixed. We investigate the impacts of NRTPs on such trade in a structural gravity setting for 23 major agricultural commodities prominent in the export baskets of developing countries. Based on estimates from a commodity-level gravity model and the structural foundation of the gravity framework, we quantify the trade impacts of NRTP programs in a counterfactual simulation analysis. Our results show that NRTPs were responsible for around $833 million in elevated annual exports (a 1.7% increase) from NRTP beneficiary countries to donor countries as of 2018, and we document considerable heterogeneity in the countries and commodities that undergo the largest impacts. Our findings thus highlight the evolving role of trade policy as a facilitator of export-driven growth and suggest that NRTP programs are often limited in their capacity to promote agricultural trade.