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2007 AEC - Is that a Dragon or Elephant on your Ladder: The Potential Impact of China and India on Export Led Growth in African Countries?

15-Nov-2007

 Present approaches to development emphasize an export‐led strategy, if not a free trade approach.   The success of the East Asian countries in obtaining rapid growth from an export‐led strategy is often used as an example of the potentials of that approach.  What is often missed in this discussion is the ability of importing countries to absorb Africa’s imports along with the imports of the most recent rapidly industrializing countries namely China and India.  These two large countries pose a unique problem for all poor countries, that earlier East Asian success stories did not have to confront.  The East Asian countries expanded imports in a series of waves that begun first with Japan, then South Korea and Taiwan and so on and so forth.  As each country developed and labour costs rose there was a shift from labour intensive production to more capital intensive production and a shift in output as well from simple electronics to more heavy industrial output as well as more sophisticated electronics.  This continual graduations in production processes and output left niches open which were taken up by succeeding nations that had lower labour costs, this was often assisted by the relocation of industry from the high labour cost country to the lower labour cost countries.  This paper examines the effect of the large populations of China and India on their graduation and their ability to out‐compete African countries in labour‐ intensive production.  We find that at the 3 digit SITC level most African countries face substantial competition from exports from India and China.  However this competition does depend on the market for the good and where African countries have long trading relationships with a market they face less competition from China or India.

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