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GLOBALISATION AND AFRICA - TRADE

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)

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GLOBALISATION AND AFRICA - TRADE

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  1. GLOBALISATION AND AFRICA - TRADE Professor Oliver Morrissey School of Economics, University of Nottingham

  2. 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.

  3. What is the problem? • Some issues: • Declining share in World trade • Declining export prices • Access to World markets • Structure of trade • Trade policy and trade performance

  4. Declining share in World trade

  5. Rising volume of exports

  6. But value not pace

  7. Perhaps it is what they export

  8. Commodity Prices

  9. But trade is important

  10. 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)

  11. High transport costs

  12. 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.

  13. 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.

  14. In brief • Globalisation has had a limited effect on increasing African trade because… • Weak policy (especially towards agriculture) • Wrong products and limited diversification • High trade costs • Lack of trust in Governments • Low productivity

  15. 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.

  16. Questions • Should Africa liberalise more? • Will the WTO help? • What can Africa do? • Facilitate trade • Reduce trade costs • The manufacturing problem • The agriculture dilemma • Supply raw materials to China?

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