In principle, we can distinguish between unilateral trade agreements and systems (proposed from one side to the other) and reciprocal trade agreements and systems (negotiated and agreed between the two parties). Several factors may explain this lack of success of unilateral preferences. First, some authors have proposed that the costs of strict rules of origin related to these agreements can offset any benefit granted by tariff concessions (see Carrere and de Melo  and Cadot et al.). Second, some authors propose that progressive liberalization in OECD countries and the resulting preferential erosion (see Hoekman et al. ) significantly reduce the preferential margin, to the point that it no longer offers a competitive advantage for certain products. Finally, the price margin is not necessarily passed on to the exporters. Due to the market power of importers, a large part of the price margin created by preferences can be acquired by importers and not by exporters (Olarreaga and Özden  and Özden and Sharma . This paper examines this issue from Mozambican exports to the EU as a case study. We focus on three main elements that can make unilateral preferences “valuable”: (i) whether unilateral preferences have been used; (ii) whether the preferences offer a significant margin of duty; (iii) the degree of appropriation of the price range, which is theoretically induced by the preferential margin.
The analysis of unilateral export preferences is comparable to that of free trade agreements.2 In a simple framework of partial equilibrium, which starts from perfect competition and the homogeneity of products beyond import sources, we should expect that a small country that benefits from preferences and is not able to influence the international price exports the product at the international price, plus customs duties (Figure 1). Concretely, on the EU market, if there is no customs duty on this product, equilibrium trade would be determined by the intersection between world supply at international prices and net import demand at point g. However, by introducing a customs duty, the international price rises and the new equilibrium in which world supply meets net demand for imports reduces imports into the EU by up to. In this case, Mozambican exporters, represented by the delivery plan, can deliver, while global suppliers supply the remaining imports from the EU. A trade agreement (also known as a trade pact) is a large-scale fiscal, customs and trade agreement, which often contains investment guarantees. There are two or more countries that agree on terms that help them trade with each other. The most common trade agreements are the types of preferences and free trade concluded to reduce (or eliminate) tariffs, quotas and other trade restrictions for goods traded between signatories. The second is classified as bilateral (BTA) when signed between two parties, each party being a country (or other customs territory), a trading bloc or an informal group of countries (or other customs territories). Both countries are easing trade restrictions to help businesses thrive better between countries.
It certainly helps to reduce taxes and helps them discuss their business status. Typically, these are subsidized domestic industries. The sectors are mainly covered by the automotive, oil or food industry.  The authors thank Channing Arndt, Finn Tarp and Alan Winters for helpful comments and suggestions, Ramon Ynaraja for providing relevant data, and DANIDA for financial support. . . .