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The Power of the Rising Development Generation Africa
The Power of the Rising Development Generation Africa
Africa Needs Trade But Not Aid
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Despite its strong trade orientation in the 1960s, Africa has been the only region to experience erosion of world trade in the last three decades. Africa's share of world trade declined from more than 3 per cent in the 1960s to less than 2 per cent in the mid 1990s. Part of this loss reflected the erosion of the trade share of traditional exports, and also due to policies that discouraged investment and diversification into products for which world demand was growing. Therefore, whereas other developing regions were increasing their shares of world trade, Africa was losing. Researchers like Sachs and Warner (1997) assert that Africa has been left out of the process of globalisation, while the World Bank (2000) states that losses in world trade have cost Africa almost $70b a year, reflecting lack of product diversification and shrinking market shares for traditional goods. Subramanian and Tamirisa (2001) also find evidence for the marginalisation of Africa in world exports.



Separating the continent into two distinct regions, they find that Central and West Africa has exhibited increasingly low trade performance over time, whereas East and Southern Africa has shown average performance with indications that it also may not be keeping pace with global integration. In response to this declining share of world trade, many African countries have embraced trade reforms, especially opening up to international trade and removing domestic impediments to resource allocation, as well as value addition to the local exports. This I think, was in recognition of the fact that a trade regime which is open to the world economy is vital for sustained economic growth, development and poverty reduction.



In addition, trade with the world economy is also 'Pro-Poor' because the type of economic growth which trade promotes is distributional in most African countries, with the exception of a few oil and mineral exporters, the natural comparative advantages of most African countries lies in agriculture. The growth of the agriculture sector makes maximum use of the main assets of the poor; land and labour. Trade allows countries to specialise in producing goods and services in which they have a comparative advantage on world markets, thereby increasing the efficiency of resource use in the economy and improving welfare. Trade is a powerful stimulus to economic growth. The expansion of markets brought about by trade boosts investment and the increase in competition induced by trade improves productivity yet for long, instead of being given a chance to trade, Africa has always been given aid, which aid has its consequences to the economy.



Should African countries therefore reject aid? No. Aid should be accepted and used to build Africa's capacity to trade. To derive maximum benefits from trade, African countries require major government investment in public goods, especially infrastructure as well as in the development of human skills. Trade will make its strongest contribution to growth and development in Africa if producers are linked to markets, both domestic and foreign, through good and reliable infrastructure facilities. There is also a need to make regional trade arrangements work, as a way of main-streaming trade policy into development. Most of African markets taken into isolation are very small and therefore limit investment and growth, but grouping together into trading blocks enlarges African markets. Take for example, if Uganda stayed out of the recently formed EAC; producers in Uganda would be limited to a total market size of about 25 million people but by joining, producers are now exposed to a total market of about 95 million people.


January 16, 2008 | 10:35 AM Comments  0 comments

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