An Analysis of Trend and Determinants of Intra-ECOWAS Trade in Agricultural Products

By Onogwu, G. O.; Arene, C. J. et al. | Indian Journal of Economics and Business, December 2011 | Go to article overview

An Analysis of Trend and Determinants of Intra-ECOWAS Trade in Agricultural Products


Onogwu, G. O., Arene, C. J., Chidebelu, A. N., Indian Journal of Economics and Business


Abstract

The integration arrangement of Economic Community of West African States (ECOWAS) was aimed at expanding the volume of intra-Community trade implemented through the removal of both tariff and non-tariff barriers to trade. The objectives include to: review Nigeria's merchandise trade; assess the simultaneous exports and imports of prepared foodstuff (HS) (section (IV); evaluate the share of intra-industry trade in the total trade between Nigeria and the partner nations; and determine the effects of national and partners' characteristics on the intra-ECOWAS trade. The results revealed that intra-trade in Cereal preparations was positively and negatively influenced by partners' gross national income (GNI) per capita by partners" and foreign direct investment (FDI), respectively. Trade in miscellaneous edible preparations was "influenced positively by partners" GNI per capita and negatively by partners' household final consumption expenditure. In residue from food industry, trades were influenced positively by partners' gross national product (GDP), partners' population, and national value added by manufacturing, and negatively influenced by national population, partners' value added by manufacturing, and national agriculture value added in case of miscellaneous edible preparations within the ECOWAS sub-region.

Efforts to increase foreign direct investments in cereal preparation, GDP and GNI per capita to reduce cost per unit of good through the adoption of cost saving options in the value chain during production; processing and packaging of miscellaneous edible preparations were recommended to promote trade.

Keywords: Intra-Trade; Agricultural Products; ECOWAS Sub-region

INTRODUCTION

The promotion of intra-trade is predicated on the danger posed by the protectionist measures adopted by the developed countries. Indeed, in spite of the various trade negotiations, particularly under the auspices of the General Agreement on Tariff and trade, the European Union (the largest importer of West African products) maintained an average tariff of 9.8 per cent on imports from developing countries up to the Uruguay Round of negotiations in 1994. To worsen matters, developing countries in whose markets exports of manufactures from other developing countries are likely to be initially competitive also impose restrictions on certain types of manufactures and primary products (Amsden, 1976). For instance, the tariff rates on imports of primary and manufactured products adopted by a selected number of developing countries ranged from 30.2 and 36.3 per cents in 1984-88 to 24.7 and 27.3 per cents in 1991-94.

Also, in spite of the implementation of the ECOWAS trade liberalization scheme, which aimed at boosting intra-regional trade, evidence showed that the intra-ECOWAS trade, as a percentage of total ECOWAS trade, was highly insignificant. Between 1999 and 2006, the total intra-ECOWAS trade was 12% of the total ECOWAS trade (intra and inter-ECOWAS trade) compared to the European intra-regional trade which is about 60% of total trade. While ECOWAS total external trade was 45.7% of the regional GDP over the period 1999 to 2006, the intra-ECOWAS trade was a mere 5.5% of the regional GDP over the same period (ECOWAS Statistical Bulletin, 2008). Supposedly, ECOWAS member nations engaged in little trade among themselves, and without sufficient intra-regional trade, economic integration might be limited and the need for a common currency might not be justifiable. So, which factors were responsible for low intra-industry trade in the prepared foodstuffs? What policy options should be offered in a bid to improve intra-ECOWAS trade in these products?

In this study, the prepared foodstuffs were defined as the groups comprising products from Harmonized System (HS) section (IV) of the trade classification. This section consisted of product subsections: (i) Preparations of cereals; (ii) Flour, starch or milk; (ii) Miscellaneous edible preparations; (iii) Residues from food industries, animal feed. …

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