AGOA AND APPAREL: PREFERENTIAL MARKET ACCESS 63 © Blackwell Publishing Ltd 2005 © Blackwell Publishing Ltd 2005, 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA 63 AGOA and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access? Marcelo Olarreaga and Çaglar Özden Development Economics Research Group, The World Bank 1. INTRODUCTION T HE African Growth and Opportunity Act (AGOA) was signed by President Clinton in May 2000 and quickly became one of the most high-profile Special and Differential Treatment (SDT) programmes implemented. AGOA intends to encourage ‘higher levels of trade and direct investment in support of positive economic and political developments’ throughout sub-Saharan Africa (US Congress, 2000). Thirty-six countries were designated to be eligible for the AGOA preferences for 2003. The main feature of AGOA, like other SDT programmes such as the United States version of the Generalised System of Preferences (GSP), is the duty-free access granted to certain products. However, AGOA goes beyond the standard GSP provisions and includes a wide range of textiles and apparel in the list of products to receive preferential market access. The trade data indicate that a small group of apparel exporters have been the main beneficiaries of AGOA preferences so far and there has not been significant change in the exports of any other product from the eligible countries. In this paper, we analyse the impact of AGOA’s preferences on prices re- ceived by apparel exporters. In a perfectly competitive market (with homogeneous goods), exporters who enjoy duty-free access should benefit from a price increase The views expressed are personal and should not be attributed to any of institutions with which the authors are affiliated. The authors are grateful to Tarek Soueid for his research assistance in collecting US customs data. They also thank Ataman Aksoy, Paul Brenton, Caroline Freund, Bernard Hoekman, Will Martin, Maurice Schiff, Philip Schuler, David Tarr, Claire Thirriot and two anonymous referees for very helpful comments.