Trade Liberalisation and Economic Development in Africa

Gift Mugano, Michael Brookes, Michael Brookes

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000457940
• Edition: 1
• Topic: Economía
• Subtopic: Economía del desarrollo

This book provides a thorough and rigorous discussion on the impact of trade liberalisation on economic development with a special focus on the African continent. The author presents the rationale for trade liberalisation, trade liberalisation frameworks, the trade liberalisation economic development nexus, impediments to trade, and contemporary issues of international trade.

In this book, notwithstanding the benefits from trade liberalisation, the author shows that African trade as a share of global trade has remained flat at 3% as in 1975, while the continent's exports have remained raw materials and its intra-regional trade at less than 15% of total trade, which is the lowest in the world (UNCTAD, 2020). With respect to key economic development indicators such as economic growth, poverty levels, and employment levels, this book shows that, ironically and in direct contrast with the conventional views that trade liberalisation alleviates poverty, trade liberalisation in Africa has resulted in high levels of unemployment and low economic growth which ultimately lead to increased poverty. In addition, this book provides a detailed analysis of why trade liberalisation has failed to yield meaningful benefits to Africa. The binding constraints and blockages which prevent positive spin-offs on trade liberalisation in Africa are discussed in detail in this book.

In the same vein, the author provides practical strategies which must be adopted by African countries in order to gain from trade liberalisation, making this work a must-read for African governments, academia, trade experts, regional trading blocs, the World Trade Organization, and development partners. In view of this, and as part of the disruptive and structural transformation policies, the author discusses case studies and international experience contextualised to Africa as well as strategies for addressing the trade-related infrastructure gap, production capacities, export promotion, and aid for trade.

Part I

Trade liberalisation paradox

1 The rationale of trade liberalisation

DOI: 10.4324/9781003160199-1

1.1 Introduction

Trade liberalisation refers to policy measures undertaken by countries to eliminate constraints on the free movement of goods and services (Odhiambo and Otieno, 2005). Thus, trade liberalisation includes the elimination of tariffs and non-tariff barriers (NTBs) to trade, such as embargoes, subsidies, import quotas, and export taxes (Odhiambo and Otieno, 2005; ILO, 2001). International institutions (for example, the International Monetary Fund (IMF), World Bank, European Central Bank, Asian Development Bank, and World Trade Organization (WTO)) and various scholars such as Balassa (1985), Krueger (1980), and Pugel (2007) argue in favour of trade liberalisation, because it provides a platform for the integration of economies into the global economy which results in the expansion of market access, and it promotes economic growth and improvement in people’s lives. In unpacking the rationale for trade liberalisation, this chapter discusses the context of trade liberalisation, the Chinese experience, and the global experience of trade liberalisation.

1.2 The context of trade liberalisation

Market-oriented economic reforms and trade liberalisation were sponsored under the “Washington Consensus” which, although intensified in the 1990s, started in the early 1980s in developing countries (United Nations Conference for Trade and Development (UNCTAD), 2005). These reforms varied in content and ownership in different countries (UNCTAD, 2005).

As noted by the World Bank, trade liberalisation was undertaken by three groups of countries. The first group of countries is made up of East Asian member states which initiated trade liberalisation in the 1960s. The second group of countries is made up of mostly African countries which undertook structural adjustment programmes (SAPs) which were sponsored by the Bretton Woods institutions, that is, the World Bank and the IMF. The third group comprises Latin American countries which, under the guidance of the Bretton Woods institutions, undertook economic reforms in the early 1980s.

The philosophy and content of the trade liberalisation agenda undertaken by these three categories of countries highlighted above were, however, similar to the SAPs (UNCTAD, 2005). Uniform and universal trade reforms were a part of that “Washington Consensus”.

The trade reforms were “universal” because, regardless of different levels of development and industrial capacity, all developing countries were required to pursue the same process of trade liberalisation (UNCTAD, 2005). Likewise, the trade reforms were “uniform” because all industries and sectors were subjected to the same tariff rates – preferably zero rates, or low rates (UNCTAD, 2005).

Since the reforms which were sold through SAPs included some elements beyond trade liberalisation, developing countries, over and above trade reforms, were required to undertake policy reforms such as capital-account liberalisation, privatisation, interest rate liberalisation, budget cuts, and exchange rate liberalisation (UNCTAD, 2005).

Trade liberalisation was taken as a panacea after the dismal failure of the import substitution strategi...