Is Africa a poor trader? Just why is Africa's international--and internal--trade at such a dismally low level? Is market access the problem or is it what we take (or don't take) to market that is the real culprit?

Author:Siddiqi, Moin
 
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The example of China during the 1980s clearly illustrates that increased external trade and inward foreign direct investment (FDI), by raising living standards, has a vital contribution to make towards poverty reduction.

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The renewed pledges of the global community to channel greater resources to Africa are, of course, welcome but more effort is still required on the trade front to improve Africa's chances of eventually achieving its Millennium Development Goals.

The total benefit of the debt cancellation of the Heavily Indebted Poor Countries Initiative is estimated at $55bn, but spread over 40 years. The substantial increase of official development assistance to Africa will also be relatively medium-term. The extra $25bn a year that has been pledged will only materialise by 2010.

Therefore, most development economists believe that the real priority on the development agenda must be to promote improved trade.

Trade has been, and remains, the bedrock of the East Asian economic success story where countries like Malaysia, South Korea and Thailand, all with limited natural resources, achieved rapid expansion by diversifying from low-value exports of unprocessed commodities to exporting high-value manufactured goods.

By contrast, Africa has been largely marginalised in international trade. During the 1960s, Africa's average share of total merchandise exports was 5.3%. By 2005, this share had fallen to below 2%. In monetary terms, each 1% drop in Africa's global share of trade is equivalent to losing $40bn in income.

A marked shift in the structure of exports towards a higher share of manufacturing has occurred in all developing regions, but at markedly different rates of increase. According to the UN Conference on Trade and Development (Unctad) figures, manufactured goods as a share of exports in South America and Southeast Asia rose to reach 57% and 85% respectively by 2003. Africa's manufactured exports, meanwhile, rose from 13% in 1980-83 to just 23% in 1999-2003. Only a handful of countries, namely South Africa, Morocco, Tunisia, Mauritius, Senegal and Lesotho, accounted for the lion's share of this rise.

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Around 75% of Africa's exports are still primary commodities dominated by crude oil, natural gas, precious and base metals and agricultural produce, specifically cocoa, coffee and tea.

In general, price fluctuations of tradable goods, as well as changes in the volume and product composition of...

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