Advantages of Preferential Trade Agreements

6For developing countries such as Swaziland and Lesotho, preferential trade agreements (TFA) are an important mechanism for boosting exports through foreign direct investment (FDI) (Goldar, Banga, 2007). This importance is emphasized, especially for countries with low domestic savings rates, as is often the case in the African context, where the technological and financial bases are so weak that countries are rarely able to use such agreements to increase their exports [Niki, 2010]. Foreign direct investment is therefore important to compensate for capital and technology deficits. There is a well-established relationship between trade agreements and foreign direct investment [Easterly, 2009]. Buthe and Milner [2008] suggest that an APT increases access for products from a less developed country to a smaller number of foreign markets in developed economies. This is one of the objectives of AGOA. To some extent, AGOA is an international institution such as the WTO and GATT, which increases the credibility of African countries vis-à-vis private investors and facilitates international cooperation. Buthe and Milner [2008] argue that TPAs could attract foreign investors because participation in trade agreements opens up the country`s economy to foreign direct investment. Thanks to this attraction, economic growth is improving. AGOA lowers trade barriers, which could lead to increased incentives for vertical foreign direct investment.

39 However, absorption has had a two-way impact on the lives of the thousands of women who have joined the industry. Taiwan`s FDI has displaced masses of women from poor farms in rural areas to work in the garment industry under the AGOA regime. By joining this industry, most women have found ways to ensure the survival and personal prospects of their families. However, women employed in industry are mostly uneducated and these jobs have a short lifespan. The non-inclusion of premises poses a serious threat to the future of this industry, which is necessary for sustainable development. Analysts see the lack of political leadership as one of the main reasons why people are not helped to compete globally. Women do not have viable options to achieve their prospects, as chronic unemployment is widespread in both countries, especially in rural areas from where most of these women have emigrated. The development of the industry under AGOA has led to increased exposure to inhumane work.

At the heart of these interconnected sub-processes is the poverty trap in which these women find themselves. These inefficiencies need to be addressed, as they sufficiently confirm that export-oriented industry and trade liberalization are not always the main determinants of poverty reduction, or that the static and micro-effects of liberalization will always benefit the recipient country. Poverty cannot be adequately combated in the beneficiary country if investors do not respect the rules of good business practice. The speech, mediated by international organizations such as the WTO and the World Bank, urges African countries to open their economies to the integration of foreign drugs and join the trade liberalization movement to develop. However, it should be noted that the international framework of the PTA tends to offer greater protection to foreign investors than to countries receiving foreign direct investment. Given the positive impact of the country`s accession to the PTA to attract foreign direct investment, as noted in Buther and Milner [2008] and Easterly [2009], monitoring investor behaviour should also be part of the trade agreement. Although they cannot be considered economically prosperous, Swaziland and Lesotho are two places of foreign direct investment with the least possible risk, as they are politically and socially stable. The only major risk applicable to economic issues is exchange rate fluctuations.

Thus, these countries can use these lower risks to attract more profitable foreign direct investment from other investors for their industrial development. Second, the term “preferential trade agreements” can be used to refer to partial agreements. These agreements provide preferential market access by reducing import duties on a limited quantity of goods. 8AGOA can be institutionally conceived as a preferential trade instrument granted by the United States to facilitate access to their markets for African countries. In theory, AGOA should benefit exporting countries as long as they respond appropriately to the opportunities offered by the law. However, the extent of responsiveness depends on a number of factors, including supply-side constraints, terms of the agreement, and the scope and longevity of Condon and Stern`s [2010] preferences. This article identified other exogenous factors and grouped them under the opportunistic behavior of investors. According to Condon and Stern [2010], AGOA can influence import demand on the buyers` side – the United States – and exports on the producer side – Lesotho and Swaziland. A significant effect of AGOA on apparel exports from sub-Saharan Africa to the United States was found by Collier and Venables [2007, in Condon, Stern 2010, p. 59]. Although Seynoum [2007] came to the same conclusion, this positive opinion had already been denied by Nouve [2005, in Condon, Stern, 2010, p.

63]. The textile and clothing sector appears to benefit the most from AGOA because of its high preferential margins [van Grasstek, 2003; Brenton, Ikezuki, 2004; Dean, Wainio, 2006]. Other studies that have examined the impact of AGOA on the local economy prove its limited scope. For Condon and Stern [2010], this limited impact can be explained by the fact that exporting companies are not fully integrated into the local economies of countries qualified for agoa. Although the jobs created in the clothing and textile sectors are considered substantial, they are mainly unskilled. The increase in the transfer of skills is insignificant, as is the appreciation in this sector. In Kenya, for example, it has been observed that production in this sector generally requires marginal skills and minimal value added. Supervisory and management positions are held exclusively by foreign employees [Condon, Stern, 2010].

In principle, we can distinguish between unilateral (offered by one party of the other) and reciprocal (negotiated and agreed by both parties) trade agreements and systems. 1An industry-oriented export (EOI) strategy plays a crucial role in facilitating economic and social development. For developing countries, it can also help penetrate the markets of developed countries. This should be the case for the garment industry in the context of globalization and preferential trade agreements. Historical data show that the sector has played an important role in the economic development of countries that are now considered highly industrialized, such as the United Kingdom, Taiwan and the United States [Palpacuer, Gibbon, Thomsen, 2004]. In the context of global efforts to combat international poverty, facilitating poor countries` access to developed markets through special trade agreements is often seen as a viable policy tool. While this is intended to reduce the marginalization of poor countries in the context of globalization and trade liberalization, it can paradoxically perpetuate their exclusion [Winters, McCulloch, McKay, 2004]. As mentioned earlier, these include regimes in which one country unilaterally offers preferential tariffs to another country or group of countries. The country offering the preference eliminates or lowers import duties on imports from those countries without receiving the same preferences in return. These agreements generally focus only on trade in goods. 37The textile and clothing industry in Lesotho and Swaziland continues to be characterized by a very low level of productivity, which offers little prospect of significant improvement compared to similar establishments in East Asia. Productivity does not seem to be determined by the equipment used and the organizational style of production, as these are similar in East Asia.

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