Importer price effects of tariffs in the context of preferential trade agreements: The case of poultry in South Africa

In the case of South Africa, this would mainly impact the country’s trading relationships with the EU.11 Evidence of this dynamic has been found by Olarreaga and Özden (2005), who exploit the AGOA treaty of 2000 to analyse the impact of tariff preferences extended by the AGOA on the import prices of African-country apparel exporters. [...] Adding to the complexity is the consideration of across-country heterogeneity, where the presence of preferential trading arrangements can distort the level of pass-through between member and non-member countries, and of product varieties, which are important in evaluating the overall welfare implications of trade policy measures in new trade theory models. [...] The unit value data are cleaned to remove outliers.13 For the purposes of our econometric estimations and analysis, we are concerned mainly with the period 2012 to 2019.14 First, 2012 represents the start of the EU–South Africa free trade area and this allows us to exploit the heterogeneous response to tariff and other trade measures. [...] The results indicate that the number of firms serving MFN countries decreases in response to higher MFN tariffs, a finding that extends to the other restrictive trade measures, while the number of firms importing from the USA increases significantly due to the US TRQ. [...] For preference countries, in Figure 9, the price index trends are quite stable until the end of 2016, when there is a noticeable decrease in the number of varieties, as evidenced by the significant increase in the variety-adjusted price index above the exact price index.