A country’s export performance is influenced by its natural endowments, by exogenous factors, and by its macroeconomic and structural policy environment. Strong export performance requires an appropriate macroeconomic incentive environment, complemented by structural reforms—including liberal trade policies—that enhance the supply response. Africa’s export and growth performance has been hobbled by the restrictiveness of its trade regimes, as well as by the slow growth of per capita income, the region’s distance from major markets, and high transport costs.
On the domestic front, African countries should give priority to liberalizing trade and adopting complementary macroeconomic and structural reforms. On the international front, African countries—which account for 27 percent of the members of the World Trade Organization (WTO)—should use their influence in the WTO to effect changes in the global trading environment that would facilitate the integration of poor countries into the world trading system. During the round of trade talks launched in Seattle, African nations should join forces to persuade industrial countries to liberalize agriculture and open their markets to Africa’s exports.
According to international monetary fund, despite substantial progress during the 1990s, Africa’s trade policies remain, on average, more protectionist than those of its trading partners and competitors. In a recent study of trade liberalization in countries with IMF-supported programs, the IMF developed an index of trade restrictiveness with three categories—restrictive, moderate, and open—to facilitate cross-country comparisons and track the evolution of trade policy over time. The study showed that in the early 1990s more than 75 percent of African countries had restrictive trade regimes; none had a trade regime that could be classified as open. Many of the countries have since undertaken ambitious trade reforms; by the end of 1998, the proportion of countries with restrictive regimes had fallen to 28 percent, while nearly 40 percent had open trade regimes. Nevertheless, trade regimes in Africa remain more restrictive than those in other regions (Chart 1). Tariffs, the most widely used measure of trade restrictiveness, are higher—20 percent, on average—in Africa than elsewhere.
One problem with Africa’s regional trading arrangements is the number of overlapping and internally inconsistent initiatives. The various regional groupings (including the Common Market for Eastern and Southern Africa, the Cross-Border Initiative for Eastern and Southern Africa, the Southern African Development Community, and the Southern African Customs Union), have overlapping memberships (Chart 3); conflicting obligations, rules, and administrative strategies; and different strategies and objectives. The complexity of Africa’s arrangements reduces the potential trading gains from regionalism and undermines incentives for increased investment, because the internal inconsistencies and conflicting regulations hinder the creation of a larger market. Moreover, regional policies that are not effective may dissipate the political capital countries need to pursue outward-oriented reforms and may foster the very favoritism and special interests that trade liberalization is supposed to overcome.
By Sam Mchunu