Trade Structure as a Constraint to Multilateral and Regional Arrangements in Sub-Saharan Africa: The WTO and the African Union

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UNU Insitute on Comparative Regional Integration Studies
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UNU-CRIS Working Papers
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A crucial factor explains the poor economic performance of Sub-Saharan Africa, i.e. the risky market and trade structure that is entailed by commodity dependence, because of the volatility of commodity prices, therefore the volatility of earnings and its negative fiscal effects, which in turn threaten to create poverty traps. This structure is compounded by additional constraints stemming from globalisation, and trade reforms that are conditional on programmes with the international financial institutions (IFIs) and WTO membership. The paper shows that the detrimental factors of commodity dependence and lack of an industrial base, though they constitute crucial obstacles to long-term growth in Sub-Saharan Africa, have not been addressed in depth by the IFI programmes and the WTO rules and negotiations, including albeit welcomed decisions on the enhancing of market access and the removal of agricultural subsidies. The latter, particularly when some form of tariff escalation is maintained, does not transform the commodity-exporting structure of Sub-Saharan Africa. The disappointment with multilateralism that emerged in the 1990s has reinforced the thrust towards regional and bilateral agreements. The paper argues that these agreements do not constitute a preferable alternative to trade liberalisation on a multilateral basis because they are often ineffective in helping Sub-Saharan African countries to diversify and reinforce their industrial sectors. North-South agreements such as the EPAs with the EU do not appear to bring about improvements. The highest level of regional agreement, the African Union, is affected by several inefficiencies and is not likely to bring about significant changes. The increasing presence of China may represent a major factor for change. China, however, is mainly driven by the securing of the inputs that are vital to its growth: it is therefore also unlikely, the paper argues, to change the specialisation of SSA in commodity production and exports. The effectiveness of multilateral and regional trade policies therefore depends on allowing room for developmental policies, e.g., fostering the import of industrial products from low-income countries and a policy space for their domestic industrial policies.

trade liberalisation; commodity dependence; regional agreements; Sub- Saharan Africa