Tuesday, October 14, 2008

Economic Development in Africa report - UNCTAD

Export Performance following trade liberalization. Some Patters and Policy Perspectives.

The objective of this year’s report is to examine Africa’s export performance after trade liberalization in order to draw lessons for use in the design of future development strategies. The main message is that the efforts made by African countries in terms of trade liberalization over the last 25 years ! have removed most of the policy barriers considered to be the main impediments to these countries’ export performance.

Though there has been some improvement in
Africa’s export performance after trade liberalization, the level and composition of the continent’s exports have not substantially changed. The performance of the export sector after trade liberalization fell short of expectations and the improvement has been small relative to the experience of other developing regions.

African countries have not diversified their exports towards more
dynamic primary commodities and manufacturing goods, which are less prone to the vagaries of international markets.

Africa as a whole has even lost export
market share, which was down from 6 per cent of world exports in 1980 to about 3 per cent in 2007. Hence, it is clear that the recent substantial rises in African countries’ export earnings have not allowed Africa to recover its lost market share.

The report identifies Africa’s weak supply response as the most
important impediment to the continent’s export performance, suggesting that future export policies should focus more on ways to increase production for export. The report proposes some policies that could help Africa to refocus its development priorities on structural transformation in order to increase the continent’s supply capacity and export response.

The discussion in this report is timely for several reasons. First, it takes place at a juncture when many African countries are deriving substantial benefits from the current commodity boom. For the first time in 30 years, several countries have a good opportunity to accumulate financial resources which, if prudently used, could allow these countries to build a strong and diversified productive sector that is more responsive to export opportunities. Nevertheless, the current boom should not lure African countries into a false sense of prosperity.

booms have tended to be cyclical and it is doubtful if the current one can last forever.

Second, Africa, like other regions, is affected by the current severe food
crisis. Over the last five years, Africa’s cereal import bill has trebled, putting household and State budgets under immense stress. Given that the region was consistently a net food producer until 25 years ago, this is an opportune time to reflect on what has happened to Africa’s agricultural production and on how to reconstruct its agricultural export sector.

Third, African countries have been
implementing trade liberalization measures for a long period now, so it is perhaps time to take stock of trade performance after liberalization in order to propose remedial actions where needed. The report argues that improvements in trade policies have not in themselves been sufficient to increase exports from Africa.

Based on the lessons learned, some policy proposals are suggested. The theme of the report also presents an opportunity to continue the analysis of some of the issues raised in the 2007 Economic Development in Africa report, particularly the nexus between firm investment and export performance.

Specifically, the report seeks to answer a number of questions, including the following: Have export volumes increased after trade liberalization? How does export performance in Africa compare to export performance in other developing regions? Why has Africa not diversified its export products, particularly in terms of increasing the share of manufactures vis-à-vis primary exports? Should Africa
specialize according to its comparative advantage in the production and export of primary commodities?