Duty-Free and Quota-Free Market Access for Ethiopia: An Analysis of AGOA and EBA Generalized System of Preference Initiatives

Abstract

Ethiopia is the beneficiary of AGOA and EBA Duty Free Quota Free market access in US and EU markets. There have been some attempts, in the empirical literature, to examine the effect of the DFQF preference schemes on SSA's export performance. These studies have usually relied on country level export data and mainly conducted macro panel analysis for SSA. However, to the best of our knowledge, none of the study has provided an empirical back up to the firm level micro panel analysis, particularly based on Ethiopia’s firms. This study tries to fill this gap in the literature by exploring empirically whether the Ethiopia’s firms have really enjoyed higher export performance since the adoption of the DFQF market access.
The descriptive analysis shows that Ethiopian export to US both under AGOA preferential scheme and no programmed claimed has been increasing. Commodity wise, Ethiopia is the AGOA beneficiary with the largest volume of exports to the United States in the Apparel and Footwear subsectors. Utilization rate is very divergent across the exportable products and over time. For the econometric analysis panel econometric analysis with Fixed Effects Estimation technique is used as a method of analysis. The estimation result revealed that EU and US DFQF scheme has, on average, exerted a positive impact on firms export performance. The sector specific effects of AGOA & EBA shows that the export performance of textile, clothing, apparel, footwear sectors under AGOA-EBA exceed the remaining export sectors tremendously. Overall these findings suggest that the composition of export and the utilization rate of Ethiopia under EBA and AGOA schemes are relatively low. Moreover, the schemes are effectively utilized by the foreign owned companies while the share of local firms is meagre.