Academic journal article Journal of Comparative International Management

Trade Facilitation and Africa's Manufactured Goods Export

Academic journal article Journal of Comparative International Management

Trade Facilitation and Africa's Manufactured Goods Export

Article excerpt

This paper examines the issues of why; even in the light of reductions in tariff and non-tariff barriers in many African countries in recent times, government policies, including restrictive trade and poor customs regulations and administration--issues of trade facilitation--still continue to discourage exporting. A panel data analysis was undertaken to consider a variety of indicators of trade facilitation and test their relative efficacy on trade flows in a multi-country framework. Time series data on 20 selected African countries were pooled in this regard. Our conclusions are that policy-regime improvements and conscious efforts at removing all forms of constraints to the free flow of goods--reducing trade and customs regulations--from current levels, could have a significant impact on trade expansion in Africa.

Introduction

The role of international trade in industrialization, economic growth and development has long been a topic of interest to economists and policy makers worldwide. A large number of studies have examined this relationship empirically (Myrdal, 1957; Harberler, 1959; Maizels, 1968; Michaely, 1962; Reidel, 1984; Singer and Grey, 1988; Ng and Yeats, 1997), and the results from these empirical studies confirmed Kravis (1970) conclusions that international trade provides an important stimulus to growth. Economic theory therefore seems to suggest a relatively direct and simple chain of causality: human development is enhanced through income growth; income growth is greater with more cross-border trade; trade is increased through all conscious and indirect efforts at trade facilitation. Consequently, interest has been high in identifying factors constraining a country's capacity to fully engage in trade and examining policy options towards increasing such capacity. It is widely recognised that high foreign tariffs and non-tariff restrictions reduce a country's trade below potential levels. Equally important, perhaps, self-imposed restrictions and overregulation, as well as high production and transaction costs can have similar adverse effects of reducing trade volume, and therefore the ability to compete efficiently in global commerce. Given the fact that in more recent times, the increasing move towards globalization, the adherence to the World Trade Organization (WTO) rules as well as membership in many regional trade blocs, has led to gradual dismantling of tariff and non-tariff barriers to trade, the removal of other form of constraints and technical barriers to trade (TBT) in the way of free flow of goods and services--fostering trade through trade facilitation--remain one major hurdle that needs to be scaled to attain expanded trade and competitiveness in Africa.

Countries in Africa often export narrow range of products (Collier, 1998; Wohlmuth, 2005). A recent study (Morrissey and Filatotchev, 2000) noted that in the late 1990s, 39 of 47 African countries depended on two primary commodities for over half of their export earnings. As a result, these countries are highly vulnerable to commodity terms-of-trade shocks. Diversifying exports away from primary commodities into labor-intensive manufacturing, which currently accounts for only a relatively modest share of gross domestic product (GDP) and even more modest share of exports, could reduce this vulnerability. In addition to reducing vulnerability to shocks, increasing exports might boost income by increasing economic growth (Soderbom and Teal, 2003). Exporters have also been found to be more efficient than non-exporters in sub-Saharan Africa (World Bank, 2004a).

Although there is no conclusive answer as to what might better explain the higher productivity and competitiveness of exporters, recent enterprise-level studies (Bigsten et al., 2004: Mengistae and Pattillo, 2004) found that direct exporters and firms that export outside sub-Saharan Africa are more productive than other exporters. Similarly, studies that utilized data from other regions of the world (Fajnzylber, 2004: Hallward-Driemeier et al. …

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