Why is African Trade so Limited?
Main Article Content
Abstract
This paper studies the determinants of the low participation of African countries to international trade. We point out the under-trading status of Africa, then we estimate a gravity equation in order to identify the determinants of trade in general. As we characterize the level of these explanatory variables in Africa as compared to the rest of the world, we identify the main variables behind the low participation of Africa to trade in general. Usual gravity factors play an important role, but we show that non-tariff measures and the quality of infrastructure and institutions are important. Import duties does not significantly impede African exports. We test the impact on African countries’ exports of a counterfactual scenario where infrastructure and institution variables in African countries are changed to the world average and conclude that the most important leverage effect to be expected from investment in infrastructure would be from mobile cellular telephone subscriptions. If we consider only countries where exports are positively affected, this counterfactual exercise implies a change by 31.0% of national exports on average by African country. While this result is interesting it has to be considered with caution since the exact form of the relation between trade and mobile cellular telephone subscriptions is largely unknown.
Keywords:
Africa, international trade, gravity equation
References
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[2] World Bank, Can Africa Claim the 21st Century?, Washington, D.C., 2000.
[3] Subramanian, A., and Tamirisa, N., “Africa’s Trade Revisited”, IMF Working Paper, 01/33 (2001).
[4] Bouët, A., Cosnard, L., and Laborde, D., “Measuring Trade Integration in Africa”, Journal of Economic Integration, 32 (4) (2017) 937-77.
[5] Coe, D. T., and Hoffmaister A. W., “North-South Trade : Is Africa Unusual?”, IMF Working Paper, No. 98/94 (1998).
[6] Rodrik, D., The New Global Economy and Developing Countries: Making Openness Work, Overseas Development Council, Washington, D.C, 1999.
[7] UNECA, AUC, AFDB, Assessing Regional Integration in Africa IV: Enhancing Intra-African Trade, UNECA, Addis Ababa, Ethiopia, 2010.
[8] Brenton, P., and Isik, G., De-Fragmenting Africa : Deepening Regional Trade Integration in Goods and Services, Washington, D.C: World Bank, 2012.
[9] Barka, H. B., “Border Posts, Checkpoints and Intra-African Trade: Challenges and Solutions”, Abidjan, Côte d’Ivoire: Chief Economist Complex, African Development Bank, 2012.
[10] Brenton, P., Portugal-Perez, A., and Regolo, J., “Food Prices, Road Infrastructure, and Market Integration in Central and Eastern Africa”, World Bank Policy Research Working Paper, No. 7003 (2014).
[11] Foroutan, F., and Pritchett, L., “Intra-Sub-Saharan African Trade: Is It Too Little?”, Journal of African Economies, 2 (1) (1993) 74–105. http://dx.doi.org/10.1093/oxfordjournals.jae.a036775.
[12] Yang, Y., and Gupta, S., “Regional Trade Arrangements in Africa: Past Performance and the Way Forward”, African Development Review, 19 (3) (2007) 399–431. doi:10.1111/j.1467-8268.2007.00169.x.
[13] Iapadre, L., and Luchetti, F., “Trade Regionalisation and Openness in Africa”, EUI Working Papers RSCAS, 2010/54 (2010).
[14] World Bank, “World Development Indicators”, 2017. https://data.worldbank.org/products/wdi (Accessed October 1, 2021).
[15] Anderson, J. E., and van Wincoop, E., “Gravity with Gravitas: A Solution to the Border Puzzle”, The American Economic Review, 93 (1) (2003) 170–92. DOI:10.1257/000282803321455214.
[16] Hummels, D., “Toward a Geography of Trade Costs”, Global Trade Analysis Project Working Paper, 1162 (2001).
[17] IMF, Direction of Trade Statistics (DOTS), 2017. http://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-59B2CD424B85 (Accessed September 30, 2021).
[18] Mayer, T., and Zignago, S., “Notes on CEPII’s Distances Measures: The GEODIST Database”, CEPII Working Paper, 2011-25 (2001).
[19] Head, K., Mayer, T., and Ries, J., “The Erosion of Colonial Trade Linkages after Independence”, Journal of International Economics, 81 (1) (2010) 1–14. doi:https://doi.org/10.1016/j.jinteco.2010.01.002.
[20] Guimbard, H., Sébastien, J., Mimouni, M., and Pichot, X., “MAcMap-HS6 2007, An Exhaustive and Consistent Measure of Applied Protection in 2007”, International Economics, 130 (2012)
99–121.
[21] Kee, H. L., Nicita, A., and Olarreaga, M., “Estimating Trade Restrictiveness Indices”, The Economic Journal, 119 (534) (2009) 172–99. http://www.jstor.org/stable/20485299.
[22] Gourdon, J., “CEPII NTM-MAP: A Tool for Assessing the Economic Impact of Non-Tariff Measures”, CEPII Working Paper, 24 (2014).
[23] Disdier, A. C., Fontagné, L., and Mimouni, M., “The Impact of Regulations on Agricultural Trade: Evidence from the SPS and TBT Agreements”, American Journal of Agricultural Economics, 90 (2) (2008) 336–50. http://dx.doi.org/10.1111/j.1467-8276.2007.01127.x.
[24] Bougheas, S., Demetriades, P. O., and Morgenroth, E. L. W, “Infrastructure, Transport Costs and Trade”, Journal of International Economics, 47 (1) (1999) 169–89. doi:https://doi.org/10.1016/S0022-1996(98)00008-7.
[25] Francois, J., and Manchin, M., “Institutions, Infrastructure, and Trade”, World Development, 46 (2013) 165–75. doi:https://doi.org/10.1016/j.worlddev.2013.02.009.
[26] Bouët, A., Santosh, M., and Roy, D., “Does Africa Trade Less Than It Should and Why? The Role of Market Access and Domestic Factors”, IFPRI Discussion Paper (2008) 770.
[27] Edwards, L., and Odendaal, M., “Infrastructure, Transport Costs and Trade: A New Approach”, TIPS Small Grant Scheme Research Paper Series (2008).
[28] World Bank, “Logistics Performance Index (LPI)”, 2017. https://lpi.worldbank.org/ (Accessed October 20, 2021).
[29] World Bank, Doing Business 2015 Going Beyond Efficiency, Washington, D.C., 2015.
[30] Santos, S., and Tenreyro, J. M. S., “The Log of Gravity”, The Review of Economics and Statistics, 88 (4) (2006) 641–58. doi:10.1162/rest.88.4.641.
[31] Eakins, B. W., and Sharman, G. F., Volumes of the World’s Oceans from ETOPO1, NOAA National Geophysical Data Center, Boulder, CO, 2010.
[32] Rose, A. K., and van Wincoop, E., “National Money as a Barrier to International Trade: The Real Case for Currency Union”, American Economic Review, 91 (2) (2001) 386–90.
[33] Frankel, J. A., and Rose, A. K., “An Estimate of the Effect of Common Currencies on Trade and Income”, The Quarterly Journal of Economics, 117 (2) (2002) 437–66. http://dx.doi.org/10.1162/003355302753650292.
[34] Persson, T., “Currency Unions and Trade: How Large Is the Treatment Effect?”, Economic Policy, 16 (33) (2001) 435–48..
[35] Serlenga, L., and Shin, Y., “Gravity Models of Intra‐EU Trade: Application of the CCEP‐HT Estimation in Heterogeneous Panels with Unobserved Common Time‐specific Factors”, Journal of Applied Econometrics, 22 (2) (2007) 361–81. doi:10.1002/jae.944.
[36] Traoré, F., and Mitaritonna, C., “African Trade Databases”, WTO Seminar on Tracking and Promoting Agricultural Trade Performance by African Countries, WTO, Geneva, 2016.
[37] Bensassi, S., Jarreau, J., and Mitaritonna, C., “Determinants of Cross Border Informal Trade: The Case of Benin”, AGRODEP Working Paper, 0034 (2016), IFPRI, Washington D.C.