Sharma, GunjanÖzden, Çaglar2013-12-202013-12-202006-05-01World Bank Economic Reviewdoi:10.1093/wber/lhj008https://hdl.handle.net/10986/16429Preferential trade arrangements should be evaluated by their effect on prices rather than by their effect on the total value of trade. This point is emphasized in the theoretical literature but rarely implemented empirically. This article analyzes the U.S. Caribbean Basin Initiative's (CBI's) impact on the prices received by eligible apparel exporters. The CBI's apparel preferences are the most important and heavily used unilateral preferences because of high trade barriers imposed on exports from the rest of the world. A fixed effect generalized least squares (GLS) estimation is used to isolate the effects of other factors (such as quality, exchange rates, and transaction costs) and to identify the effects of tariff preferences. CBI exporters capture only about two-thirds of their preference margin despite the high degree of competition among importers. This translates into a 9 percent increase in the relative prices they receive, with some variance across countries and years. Countries specializing in higher value items capture more of the preference margin, and the implementation of the North American Free Trade Agreement (NAFTA) has a negative effect. Removing multifibre arrangement quotas significantly lowers the benefits of CBI preferences.en-USCC BY-NC-ND 3.0 IGOAGRICULTUREAPPARELAPPAREL EXPORTSAPPAREL MARKETAPPAREL PREFERENCESAPPAREL QUOTASAPPAREL SECTORAVERAGE PRICEBORDER PRICECLIMATECOMPARATIVE ADVANTAGECOMPETITIVE MARKETCONSUMERSCUSTOMSCUSTOMS VALUEDEVELOPING COUNTRIESDEVELOPMENT ECONOMICSDOMESTIC PRICEDOMESTIC PRICE INDEXDOMESTIC SOURCESECONOMIC GROWTHECONOMIC RECOVERYEXCHANGE RATEEXCHANGE RATESEXPORT PERFORMANCEEXPORT PRICEEXPORT PRICESEXPORT PROCESSINGEXPORT PROCESSING ZONESEXPORT VALUEEXPORT VOLUMEEXPORT VOLUMESEXPORTERSEXPORTSFREE MARKETFREE MARKET ACCESSFREE TRADEFREE TRADE AGREEMENTFREE TRADE AGREEMENTSFREE TREATMENTGENERALIZED SYSTEM OF PREFERENCESGEOGRAPHIC PROXIMITYHIGH TRADE BARRIERSIMPACT OF TRADEIMPACT OF TRADE POLICIESIMPERFECT COMPETITIONIMPORT DATAIMPORT PRICEIMPORT PRICESINCOMEINSURANCEINTERNATIONAL ECONOMICSINTERNATIONAL TRADEINTERNATIONAL TRADE COMMISSIONINVENTORYLOWER PRICESMARKET ACCESSMARKET POWERMARKET SHAREMOST FAVORED NATIONPOLICY IMPLICATIONSPOSITIVE EFFECTSPREFERENTIAL ACCESSPREFERENTIAL ARRANGEMENTSPREFERENTIAL MARKET ACCESSPREFERENTIAL TARIFFPREFERENTIAL TARIFFSPREFERENTIAL TRADEPREFERENTIAL TRADE ARRANGEMENTSPREFERENTIAL TREATMENTPRICE CHANGEPRICE EFFECTPRICE INCREASEPRICE INCREASESPRICE INDEXPRICE LEVELSPRICE OF IMPORTSPRODUCTION COSTSRECIPROCITYREGIONAL INTEGRATIONREGIONALISMRELATIVE PRICERELATIVE PRICESRETAILINGRULES OF ORIGINSPECIALIZATIONSUPPLY CHAINTARIFF CHANGESTARIFF PREFERENCESTARIFF RATETARIFF REDUCTIONTRADE AGREEMENTTRADE COMMISSIONTRADE FLOWSTRADE NEGOTIATIONSTRADE PARTNERSHIPTRADE POLICIESTRADE ¸ POLICIESTRADING PARTNERSTRANSACTION COSTSTRANSPORT COSTSUNILATERAL PREFERENCESVALUE ADDEDVALUE OF IMPORTSVALUE OF TRADEVERVOLUNTARY EXPORT RESTRAINTSWAGESWORLD MARKETSWORLD TRADING SYSTEMZERO TARIFFSJournal ArticleWorld Bank10.1596/16429