By Nathan Loper, Philip Abbott, and Ken Foster

The U.S. engages in nonreciprocal preferential trade arrangements with many developing countries via programs like the Generalized System of Preferences (GSP), the Caribbean Basin Initiative (CBI), and the African Growth and Opportunity Act (AGOA). Under these programs tariff concessions are offered to select beneficiary countries. Their objectives are to foster economic growth in those countries by granting concessions that give those countries improved access to U.S. markets. Unlike free trade agreements and outcomes under multilateral trade negotiations, these market access improvements are granted without requiring concessions from beneficiary countries.

This paper investigates the performance of agricultural exports under the Caribbean Basin Economic Recovery Act (CBERA), the trade component of the CBI, and GSP programs to the U.S. from beneficiary countries.

At first glance, CBERA and GSP programs appear to be unsuccessful because agricultural exports from CBI countries have not returned to peak levels attained in 1997. However, preferenced exports from CBI countries have become a larger component of total agricultural exports, increasing from 38.3 percent in 1989 to 54 percent in 2002. Additionally, by disaggregating the trade data, we found six goods – live tree slips or cuttings, dasheens, fresh or dried pineapples, cantaloupes, frozen orange juice, and ethyl alcohol – for which these preferential trade programs have been continuously successful, and have expanded at faster than 10 percent per year from 1989 to 2002. These goods now account for 31 percent of CBI agricultural exports to the U.S.

The successful goods appear to be differentiated and satisfy a niche market in the United States. Other goods’ exports diminished. Exports of politically sensitive goods (meat and sugar) fell because trade barriers were revised to further limit CBI access to U.S. markets. U.S. import demand reductions for other goods, notably high value cigars, account for part of the declining trend. Also, many other goods with decreasing export trends appear to be homogenous and were crowded-out by more price competitive exporters.

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