Trade Impact of the AGOA: An Aggregate Perspective 55
effect of the AGOA on all eligible countries included in the study. Although the measure hides extensive variations across time and countries, the significantly large trade-creation impacts suggest that the results are in line with those of previous studies (Cirera, Foliano, and Gasiorek 2016; Frazer and Van Biesebroeck 2010; Mattoo, Roy, and Subramanian 2003). The results are similar to those of earlier studies that found a significantly large, positive impact of the AGOA. What explains the AGOA’s successes and failures in Sub-Saharan African countries? The next section explains the observed variation in the impact of the AGOA in order to derive useful policy lessons for Sub-Saharan African countries seeking to expand their export capacity and take advantage of preferential access opportunities such as the AGOA.
Main Drivers of Exports under the AGOA External trade barriers continue to be vital in understanding trade flows among countries. Despite the easing of trade barriers through preferential access such as the AGOA, fundamental supply-side factors could still limit a country’s capacity to engage robustly in international trade and exports. Using the AGOA’s estimated trade effects, we provide a test to identify countries’ fundamental characteristics in the effort to evaluate the heterogeneity in the effects. The goal is to understand which factors, after controlling for basic country characteristics, are more important in explaining variation in the AGOA’s impact. We control for specific features of countries that could determine their participation in trade with the United States. Using country fixed effects might help account for some of these time-fixed variations across countries. It is important to exercise caution in considering the results as robust causal mechanisms because most of the determinants are correlated and endogenous. However, the similarities in the countries considered suggest that any significant difference in the determinants could be useful in understanding the heterogeneity in exploiting the AGOA and other export opportunities. Tables 1.3 and 1.4 present the results of fixed-effect models using panel data for Sub-Saharan African countries covering the post-AGOA years, 2001–15. The data form an unbalanced panel because the years of eligibility vary across countries (as detailed earlier in table 1.1). All the coefficients in tables 1.3 and 1.4 have been standardized to allow comparisons of the relative strength of each factor. A 1-standard-deviation increase in an independent variable leads to a rise or fall in the trade impact by the value of the coefficient. Samples are included for the period after AGOA eligibility because the focus is on analyzing the correlates to the trade impact of the AGOA. We include only AGOA-eligible countries because we are interested in explaining the variations in the estimated trade gains. The dependent variable is the estimated trade impact due to the AGOA following our SCM estimations, after accounting for potential trends in trade in the AGOA’s absence.
