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AEC 2008 - Trade, Infrastructure and Regional Integration

30-Nov-2008

This paper provides a perspective to some puzzling dynamics of market access initiatives for Africa’s export competitiveness in global trade. At the beginning of the 1980s, African countries contributed marginally and narrowly to the global trade. As the difficulties with trade got deep, some partners of the region, particularly the ’Triad nations’, adopted legislated/ exogenously-driven trade advantages, granting up to 30 percent cost reduction and 6,400 items duty-free and quota free, in some cases, to regional exporters against exclusion from and narrow participation in the global economy. Over time, preference erosion has meant that the impacts of some of the initiatives, particularly those related to extensive margins of trade, were short-lived as their provisions ran into other problems or expired. The paper applies the logic of Area of Influence and Influence Mobility models to add a « magnification » perspective, a micro-macroeconomic relationship between the legislated export advantages and competitiveness, and the erosion of these advantages. In the algorithm of models, the binding theme is that for trade initiatives to be sound and economic growth sustainable, they must not only meet short-term intensive trade margins, but also help catalyse long-term domestic factor input competitiveness. Later developments strongly suggest that the export boom due to GSP initiatives proved to be short-lived because legislated advantages were dominating the region’s margin of exports related to these initiatives. We propose Törnqvist index methodology as an innovation for evaluating « magnification » effects (domestic human capital inputquality changes) of the legislated export advantages. Generally, the initiatives have not been complemented by domestic base knowledge and an iterative productive development process through vertical specialisation. Thus, there

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