Trade liberalization has resulted in export growth but imports have grown faster

30/10/2013
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The post-liberalization era has witnessed faster growth of imports than exports reveals a study on the impact of trade liberalization on export growth and import growth across 28 Sub-Saharan African countries from 1981 to 2010.

Presenting his findings during a seminar on the impact of trade liberalization at the three-day Africa Economic Conference, which runs from October 28-30 in Johannesburg, South Africa, PhD scholar Lanre Kassim of the University of Kent, said that export growth has been slower compared to import growth in the post-liberalization era. “From the empirical results obtained, trade liberalization has significantly raised the growth of exports in Sub-Saharan Africa, however, import growth has risen faster by approximately two percentage points which gives a prima facie evidence that the trade balance in the region has deteriorated in the post-liberalization era,” he said.

Kassim said his findings are robust to the different estimation techniques applied and are consistent with other studies on developing countries. “Trade liberalization significantly raises the price elasticity of demand for exports and imports; however, it does not significantly affect income elasticity of demand,” he added.

Meanwhile, another research paper assessing the performance of intra-COMESA trade integration in comparison with the success of ASEAN integration reveals trading below regional trade potential. Research by Ebaidalla Mahjoub Ebaidalla, Assistant Professor at University of Kassala, Sudan, found that countries of the selected sample are far from their potential trade level. “The ratio of potential to actual trade has a downward trend for most of country pairs, suggesting a decreasing gap between actual and potential trade over time. These results are implying unfavourable performance of the regional trade integration among COMESA members.”

Of the eight COMESA countries assessed and paired by Ebaidalla, only the Kenya-Uganda pair is found as the most successful bilateral trade integration among the COMESA members. The two countries share a common border and language, among other similarities.

Another research paper by Malcolm Spence, a research fellow at the Ministry of East African Community Affairs in Uganda, came to a similar conclusion regarding intra-regional Africa trade in the Tripartite free-trade area covering 26 countries, with a combined population of over 530 million people and an estimated USD 650 GDP. Trade remained dismally low in the region.

Among the policy recommendations offered by the researchers included the strengthening and implementation of domestic policies on regional trade and investment in transportation infrastructure as well as building the industrial sector.