Advantages And Disadvantages Of Preferential Trading Agreement

Customs Union Customs UnionA customs union is an agreement between two or more neighbouring countries to reduce trade barriers, reduce or abolish tariffs and remove quotas. These unions have been defined in the General Agreement on Tariffs and Trade (GATT) and are the third stage of economic integration. It also allows the free movement of imports within the zone and among its members. For example, goods from a third country imported by a member of a customs union may also be imported duty-free into other EU countries. Despite all the advantages of a free trade area, there are also some drawbacks, including: countries can insist that foreign companies build local factories under the agreement. They may require these companies to become part of the technology and to train a local workforce. The main conditions of free trade agreements and free trade zones are: 6For developing countries such as Swaziland and Lesotho, preferential trade agreements (ATPs) are an important mechanism for stimulating exports through foreign direct investment [Goldar, Banga, 2007]. This importance is emphasized, especially for countries with low national 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]. Businesses are therefore important to fill capital and technology gaps. There is a strong relationship between trade agreements and foreign direct investment [Easter, 2009]. Buthe and Milner [2008] suggest that an EPA increases access to products from a less developed country to a smaller number of foreign markets in developed economies. This is one of AGOA`s objectives.

To some extent, AGOA is an international institution, like the WTO and GATT, that strengthens african countries` credibility with private investors and facilitates international cooperation. Buthe and Milner [2008] argue that PTAs could attract foreign investors because participation in trade agreements opens the country`s economy to THE FDIs. As a result of this attraction, economic growth is improving. AGOA lowers trade barriers, which could lead to increasing incentives for vertical IF. 2The article examines the dynamics of investment agreements established by the governments of Swaziland and Lesotho - two small kings of the interior of southern Africa of 17,945 km2 and 30,000 km2 - and Asian investors in the clothing industry under the African Growth and Opportunity Act (AGOA). The law introduced a privileged trade policy in 2000, promoted by the U.S. administration led by former President Bill Clinton. The AGOA regime allows aid-eligible sub-Saharan African countries to export duty-free clothing from yarn and substances not available in the United States to U.S.

markets and process them in Africa duty-free from U.S. yarn and textile materials. It is important to note here that this U.S.-Africa Partnership Act addresses the issue of market access by AGOA, one of the three areas where the negative effects of Western trade policy are most pronounced, the other two being liberalization policies and subsidies [DATA, 2003].

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