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AEC 2012 - Export Diversification and Intra-Industry Trade in Africa

16-Oct-2012

Intra-African trade, which has remained under 12 per cent in the last decade, is low compared to other major regions of the world. In January 2012, the African Union (AU) Summit of African Heads of State and Government endorsed the theme of ‗Boosting Intra-African trade‘ and called on Member States, Regional Economic Communities (RECs) and the AU Commission to promote industrial development with a view to diversify economies and moving away from heavy reliance on traditional primary commodities for export. Using disaggregate export and import statistics Harmonized System at the 6-digit level from BACI and COMTRADE data sets between 1998 and 2009, measures of export diversification (using Harfindahl-Hirshman Index) and intra-industry trade (using Grubel-Lloyd Index) are computed for 49 African economies for which data is available. Preliminary results tend to indicate that while both export diversification and intra-industry trade in Africa are generally low, there are exception cases. In addition, a positive correlation between export diversification and intra-industry trade is found for the sample of African countries. This has implication for policy dialogue suggesting that any future trade policy designed to favor export diversification has positive implications for intra-industry trade and vice versa. Other findings from the technical work provide two important contributions to the direction of current trade policy dialogue on boosting Intra-African trade. First, export diversification and intra-industry trade policies should not be treated in isolation. Second, we identify constraints towards export diversification and intra-industry trade in Africa crucial towards better understanding and subsequently developing effective program of actions for boosting Intra-African trade.

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