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Concluding Remarks: Enhancing Africa’s Trade: From Marginalization to an Export-Led Approach to Development
| Guest post by: African Development Bank |
Article Overview: In the 19th and 20th centuries, trade has by and large been an engine of economic growth for the global economy. It has also acted as an engine of growth for particular national economies -- in the 19th century, Canada and Australia and in the 20th century, Japan. In recent years, trade has acted as an engine of growth for the newly industrializing countries of Southeast Asia, the so-called "Gang of Four", namely, South Korea, Taiwan, Hong Kong, and Singapore.
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Free Download - References: Human Capital and Economic Development By African Development Bank |
Concluding Remarks: Enhancing Africa’s Trade: From Marginalization to an Export-Led Approach to Development
In the 19th and 20th centuries, trade has by and large been an engine of economic growth
for the global economy. It has also acted as an engine of growth for particular national
economies -- in the 19th century, Canada and Australia and in the 20th century, Japan. In
recent years, trade has acted as an engine of growth for the newly industrializing countries
of Southeast Asia, the so-called "Gang of Four", namely, South Korea, Taiwan, Hong Kong,
and Singapore. Briefly, the dynamic gains from trade arise from the effects of trade on the
level of investment, and on the state of technical knowledge in the country. The increase in
investment and improvements in innovations and technical progress will then lead to
increased productivity and competitiveness, and trigger a further increase in trade. This
positive feedback effect continues and brings about a "virtuous circle" of increased trade and
economic growth.
However, the marginalization of many African countries especially during the last two
decades shows clearly that Africa needs to adopt and prosecute a policy of structural
transformation in order to achieve rapid and sustainable economic growth, raise living
standards, and reduce the incidence of poverty. Since African countries are generally
primary producing, structural transformation involves diversifying into manufacturing for
export. Export diversification refers to a deliberate policy to expand number and type of
exported items. This is important for primary producing countries that obtain the bulk of
their export earnings from one or two primary commodities. Dependence on one or a few
primary commodities leads to instability of export receipts and foreign exchange earnings
especially in a world of volatile primary commodity prices. Instability of commodity
prices inevitably leads to balance-of-payments problems and inability to steadily finance
development expenditures.
The obvious solution is to encourage exportation of other products or, more importantly,
the exportation of manufactured goods. Dependence on manufactured exports is more
beneficial as manufactured goods tend to have high price and income elasticities of
demand. Consequently, foreign exchange earnings from manufactured exports tend to
rise more rapidly over time and to be less volatile. Thus, a major benefit of export
diversification is that the country will become less susceptible to internationally transmitted shocks, particularly commodity trade cycles, and in general, the volatility of
global primary commodity prices. This will enhance development programming and
boost the rate of economic growth. Export diversification often goes hand in hand with
export promotion, which refers to the set of measures and policies used by a country to
boost the volume, value and variety of its exports in order to increase foreign exchange
earnings, ensure balance-of-payments viability and promote economic development.
African Development Bank
Economic Research Working Paper Series
Enhancing Africa’s Trade: From Marginalization
to an Export-Led Approach to Development
Milton A. Iyoha
Professor, Department of Economics & Statistics
University of Benin, Nigeria
Economic Research Working Paper
No 77 (August 2005)
Export Promotion Strategies for Primary Products: New Approaches to Trade Development in Africa
Forms of Regional Integration
Implications of the New Agreement for Africa’s Export Trade
Export Subsidies by Developed Countries: Barriers to African External Trade
Benefits of Regional Economic Integration
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