Transcript Is trade policy openness good for growth?

GLOBALISATION AND
AFRICA - TRADE
Professor Oliver Morrissey
School of Economics, University of Nottingham
Context
African countries have liberalised trade policies,
but exports have not grown significantly.
Arguments:
A.‘Openness is good for growth’ (encourages
competitive exports)
B. Free trade exposes countries to cheap
imports that undermine economy.
What is the problem?
 Some issues:

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Declining share in World trade
Declining export prices
Access to World markets
Structure of trade
Trade policy and trade performance
Declining share in World trade
Table 1: Regional Shares of World Merchandise Trade, 1990 and 2000
Region
North America
Western Europe
Asia
Latin America
Africa
Source: WTO (2001).
Exports (%)
1990
15.4
48.3
21.8
4.3
3.1
2000
17.1
39.5
26.7
5.8
2.3
Imports (%)
1990
18.4
48.7
20.3
3.7
2.7
2000
23.2
39.6
22.8
6.0
2.1
Rising volume of exports
Volume Index of Exports, 1990-2002 (1990=100)
World
SSA
LDCs
1990
100.0
100.0
100.0
1994
126.5
104.8
132.4
1998
177.6
127.0
186.5
Calculated from UNCTAD Statistical Yearbook, 2004
2002
208.2
161.9
216.2
But value not pace
Figure 1: UNCTAD Volume and Value Index of Exports of SSA, and Terms of Trade,
1980-2002 (1980=100)
180.0
160.0
Volume index of exports
Value index of exports
Terms of trade
140.0
120.0
100.0
80.0
60.0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: UNCTAD Handbook of Statistics 2004, on cd rom.
Perhaps it is what they export
Table: Sector % Share in Regional Total Exports, 2002
Region
North America
Western Europe
Asia
Latin America
Africa
Agriculture
10.7
9.4
6.6
19.3
15.8
Source: WTO (2003).
Minerals
7.2
6.9
7.1
20.3
55.1
Manufactures
76.9
80.7
83.6
59.5
25.2
Commodity Prices
Table: Trends in Primary Commodity Export Prices (1995 = 100)
Commodity
All Primary
Food and Beverages
Cereals
Sugar
Coffee
Cocoa
Tea
Agriculture Raw Materials
Cotton
Minerals
Copper
Crude Petroleum
Source: WTO (2003).
1998
79
89
79
73
82
117
145
76
67
74
56
76
2000
116
77
67
66
50
63
151
81
60
82
62
164
2001
106
78
70
67
35
76
121
77
49
74
54
141
2002
106
79
80
56
36
124
109
78
47
72
53
145
But trade is important
Table: Trade Performance in Africa
Imports/GDP
90-92
98-00
Exports/GDP
%
90-92 98-00
change
%
change
Regions
North Africa (4)
34.1
32.1
-5.9
29.5
29.9
1.4
West Africa (10)
32.3
38.4
18.9
26.5
29.5
11.3
Central Africa (6)
27.3
30.8
12.8
23.6
28.4
20.3
East Africa (5)
33.4
35.5
6.3
23.0
26.1
13.5
Southern Africa (4)
30.6
37.2
21.6
26.6
30.8
15.8
Notes: Columns give average import/GDP and exports/GDP ratios averaged over
1990-92 and 1998-2000, and percentage change in ratios.
Structural features
 Depend on a narrow range of primary
commodities. In the late 1990s, 39 African
countries depended for more than half of their
export earnings on just two primary
commodities.
 Declining, at least relatively, export prices.
 Difficult to increase production quickly (export
supply response).
 Natural barriers to trade (transport costs)
High transport costs
Global Patterns of Transport Costs, by Region, selected years
Region
Sub-Saharan Africa
Asia
Middle East
Latin America
Western Europe
cif/fob ratio
1980
1990
1.112
1.115
1.093
1.086
1.124
1.103
1.094
1.091
1.056
1.053
1994
1.157
1.086
1.108
1.083
1.047
The Gains from Trade
Trade does not guarantee net benefits, rather it
provides opportunities.
 exports access the global market and permit
increased production.
 trade encourages efficient allocation of
resources.
 imports increase consumption possibilities.
 trade contributes to economic growth by
generating long-run gains.
Are not a fee lunch
Trade also presents challenges, and producers
must be enabled to respond
 Exporters face competitors on a world market
 Competition from imports challenges local
producers.
 Imports may increase faster than exports,
resulting in a balance of payments deficit that
imposes macroeconomic adjustment costs on
the economy.
In brief
 Globalisation has had a limited effect on
increasing African trade because…
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Weak policy (especially towards agriculture)
Wrong products and limited diversification
High trade costs
Lack of trust in Governments
Low productivity
Not all bad news
There are successes:
 Mauritius has done well from exporting sugar
and garments to the EU (but …)
 Botswana has managed its diamonds well
(but the scourge of AIDS)
 Uganda has done quite well since the early
1990s, but with limited diversification beyond
coffee.
Questions
 Should Africa liberalise more?
 Will the WTO help?
 What can Africa do?
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Facilitate trade
Reduce trade costs
The manufacturing problem
The agriculture dilemma
Supply raw materials to China?