The Effects of Agoa and Eu-Acp Trade Preferences on Ghana’s Bilateral Exports: A Comparative Study

Abstract

Ghana has been a recipient of several trade preferences fashioned to increase its export earnings and diversify its exports. Among these trade preferences are the notable EU-ACP and AGOA adopted by the EU and US respectively. The study draws motivation from the relative sparcity of literature that seeks to investigate the effect of these preferences on individual developing countries and the inconclusiveness of existing studies. The main objective of the study is to find out if the EU-ACP and AGOA trade preferences have had any effects on the total bilateral exports of Ghana. Estimating a gravity model augmented with measures of trade preference agreements and a multilateral resistance term, the study uses bilateral export flows and key gravity covariates from the CEP II, UN-COMTRADE and WDI on Ghana’s export destinations over the period 1960-2013. After taking into account the unobserved individual heterogeneity, controlling for the potential endogeneity of the trade preference dummies, and correcting for serial correlation and heteroskedasticiy, the study finds that EU-ACP and AGOA trade preferences have a negative and insignificant impact on Ghana’s total bilateral exports. The results therefore indicate the need for Ghana to focus on expanding its export base in order to significantly benefit from the two PTAs. It is also recommended that the EU and US expand the product coverage of their respective preference schemes to cover commodities in which Ghana has a comparative advantage.