Chapter

8 Africa’s Role in Multilateral Trade Negotiations: Past and Future

Editor(s):
Zubair Iqbal, and Mohsin Khan
Published Date:
December 1998
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Author(s)
Zhen Kun Wang and L. Alan Winters 

There is now a very broad consensus that open economies grow faster than closed ones, and nowhere is this message more important than in Africa. While opinions differ about exactly what constitutes openness and integration with the world economy, there is also little disagreement that most African economies need to liberalize their international trade regimes significantly during the next decade. Multilateral trade negotiations cannot lead or force that process of reform, but they can almost certainly assist it. Thus this chapter looks at the role of African countries in the last, Uruguay Round of multilateral trade negotiations and their potential role in the next one. It also argues that, in terms of access to partners’ markets, trade preferences are no substitute for bound MFN tariff reductions, and that Africa should focus its negotiating efforts on the latter rather than the former.

The chapter is organized as follows. The second section briefly presents the background to the study. It reviews the arguments and evidence that African economies need to open up to world trade to stimulate their economic growth, drawing and elaborating upon a major program of research in the World Bank—Amjadi and Yeats (1995a, 1995b); Amjadi, Reincke, and Yeats (1996); Ng and Yeats (1996); and Yeats (1997b).1 The evidence suggests that it is African countries’ own trade policies and not those of their partners that must be changed to promote growth.

The third section analyzes the African economies’ role in the Uruguay Round. It briefly notes that they undertook rather little liberalization themselves and then quantifies the concessions that they received from their trading partners in the round. It concludes that, while African countries achieved less in the round than did other developing countries (possibly because they offered less), they still emerged from it facing fewer or lower trade barriers than others.

The fourth section asks what role African countries might play in the next round of trade negotiations. Despite their very small size economically, they still have negotiating rights, under GATT-WTO Principal Supplier conventions, on the tariffs levied on between one-third and one-half of their exports to the European Union. By offering suitable reciprocal concessions, they should be able to achieve significant liberalization in these areas. Following the second section, we believe that ideally trade reform should be started—or, rather, accelerated—unilaterally as soon as possible in Africa. Nonetheless, it is still useful to consider the role that multilateral trade negotiations could play, for they can support domestic reform efforts by providing reciprocal concessions from trading partners that help to turn exporters into a more coherent force for import liberalization. Negotiations probably also improve the general atmosphere for liberalization and, of course, generate some direct benefits as well. We consider, therefore, how African countries have, and might in the future, use concessions in periodic rounds of trade negotiations to underpin their own reform efforts.

The fifth section notes that African exports receive tariff preferences in their major markets. It argues that preferences are not a constructive way of pursuing long-run integration with the global economy, and that instead African countries should use their negotiating rights to achieve unfettered access to markets on a bound-MFN basis. The sixth section concludes.

One important caveat is in order. Analysis of the type conducted here is very data intensive and thus depends critically on data availability and quality. It is widely recognized that data on sub-Saharan Africa are weak not only in terms of collection and quality within the countries of the region themselves, but also in terms of reporting to international organizations. Indeed, the failure of many sub-Saharan African countries consistently to report their international trade data to the United Nations—see Yeats (1997a)—and their trade and trade barriers to the WTO and the United Nations Conference on Trade and Development (UNCTAD) is itself one aspect of their weak commitment to integrating with a world in which “information is king.”2 The failure of sub-Saharan African countries to collect and report data undermines efforts to understand the nature of African economic problems and opportunities, and could clearly lead to misperceptions in important areas such as the effectiveness of policy, the sustainability of growth, and the eligibility for debt packages. To pressure governments to give higher priority to data collection and reporting—including seeking relevant technical assistance—would be a feasible and useful contribution that the African research community could make toward African well-being.

Throughout this chapter, we define “Africa” as sub-Saharan Africa, not because North Africa is unimportant, but to keep the topic manageable. We use the World Bank’s definition of sub-Saharan Africa.3

Background: Open Economies Work Better

Many scholars have analyzed the impact of openness on economic growth, and the majority have concluded that more open or liberal regimes achieve higher rates of economic growth than closed ones. Among the more recent studies are Dollar (1992), Sachs and Warner (1995), and World Bank (1996). These have used different countries, different periods, and different measures of openness, but all have concluded that outward orientation fosters growth. All also argue that one element of openness is the trade regime and that, at some level, having lower and fewer barriers to trade is likely to enhance growth.

Nowhere are growth-enhancing policies more important than in sub-Saharan Africa. On average, the region’s GDP per head was about $509 in 1995 ($297 excluding South Africa) and it has hardly changed during the past three decades. Sub-Saharan Africa accounts for approximately 1.1 percent of world GDP (0.6 percent) and 1.4 percent of world exports (0.8 percent)—according to the World Bank (1997). The region’s poor growth performance has been reflected not only in static income per head, but also in a rapidly declining share of world commerce. Ng and Yeats (1996) show that the decline in the sub-Saharan African share of world exports between 1962–64 and 1991–93 has reduced the absolute value of its exports by more than $11 billion per year. This result reflects declining shares in nearly all subsectors of world trade, plus a tendency for sub-Saharan African exports to be concentrated in products whose share of world trade is declining. The top 30 3-digit Standard International Trade Classification (R1) commodity groups that accounted for the largest shares of sub-Saharan Africa’s exports in 1962–64 had displayed huge losses of market share by 1991–93, with shares of OECD imports falling from 20.8 percent of these commodities to 9.7 percent.4

Ng and Yeats’s result might be taken as evidence of poor performance, but it could equally well reflect great dynamism in sub-Saharan African export bundles; after all, Hong Kong’s current shares in the products it exported in 1962–64—toys, clothing, and so forth—have fallen dramatically. Unfortunately, however, the latter interpretation does not hold up for sub-Saharan Africa. We have examined the region’s performance in the 30 commodities that had the largest shares of its exports in 1991–93.5 These are the region’s major exports at the present time, and if dynamism explained the decline in market shares for traditional exports, these newer ones should show spectacular growth rates. (Also, just as any randomness in market shares would tend to reduce the growth rates of the exports that were largest at the start of the period, it would tend to exaggerate those that were largest at the end of the period.) These 30 commodities accounted for 42 percent of sub-Saharan African exports in 1991–93, compared with 72 percent in 1962–64, which evidences considerable export diversification. Unfortunately, however, even in these “newer” commodities, sub-Saharan Africa’s shares of OECD imports have fallen more often than not, and its overall share in them has fallen from 9.4 to 6.3 percent.

Thus the loss of sub-Saharan African market share in the OECD stems from a generalized loss of competitiveness, rather than from the emergence of a particular competitor or change in circumstances. This is important in seeking to understand and address the problem. It is also important to recall sub-Saharan Africa’s very small size. Together, these two features mean that even major improvements in the region’s export performance will be pinpricks to the rest of the world and hence should be easy for it to accommodate. We do not argue that it is up to others to turn sub-Saharan Africa around—indeed, just the opposite—but it is comforting to see that a turnaround will not generally have serious adjustment consequences for other countries and hence stimulate their opposition.

Having stressed the poor economic performance of the sub-Saharan African countries and the general importance of openness in stimulating exports and growth, it is natural to ask whether the two phenomenons are related. The answer is “almost certainly so.” It is well known that during the periods for which analysis is available, most sub-Saharan African countries have maintained extremely restrictive trade regimes. Many studies suggest a strong anti-export bias in sub-Saharan African countries’ trade policy, which is frequently further compounded by domestic tax regimes and monopoly marketing arrangements, both of which typically impinge disproportionately on agriculture—sub-Saharan Africa’s major export sector. Moreover, although since the mid-1980s considerable progress has been made in liberalization—see, for example, World Bank (1994), Nash and Foroutan (forthcoming), and Oyejide, Ndulu, and Gunning (1997)—sub-Saharan African countries are mostly still substantially less open than those of East Asia and the Western Hemisphere. Updating data in Ng and Yeats’s appendix suggests that tariffs average 26 percent in sub-Saharan Africa, compared with 17 percent in other developing countries; total charges on imports average 33 percent, compared with 26 percent; and NTB coverage ratios average 34 percent, compared with 18 percent. Also, as Oyejide, Ndulu, and Gunning observe, even the reforms that have been achieved to date are subject to reversal. In some cases, this has already occurred—for example, Nigeria and Côte d’Ivoire—but even where it has not, questions remain about the credibility and sustainability of the reforms.

An understandable and instinctive reaction to the evidence on sub-Saharan Africa’s falling trade shares is to believe that OECD markets are, if not actually closed, hostile to sub-Saharan African exports. There is clearly some truth to these claims so far as temperate agricultural exports are concerned, for they face explicit and, frequently, high barriers in most OECD countries—for example, on beef or sugar. There are doubtless also some cases of tight restrictions on manufactured exports—for example, U.S. QRs on Kenyan exports of shirts. However, as a general explanation of the failure to industrialize and supply manufactured exports, the “hostile markets” hypothesis is not adequate. Several pieces of evidence lead to this conclusion.

First, access to OECD markets is fairly uniform across developing countries, especially when one recognizes that many simple manufactures are footloose in the sense of being as well suited to one developing-country location as another. Thus market access cannot, by itself, explain the huge variance in performance across countries.

Second, the tariffs facing developing-country exporters now are far lower than those ruling in the early 1960s when the first “Asian tigers” took off. To be sure, the MFA was not as deep or as broad then, but few sub-Saharan African countries are subject to the MFA today and there are other manufactured goods than clothing. Moreover, in these other goods, it is probably true that OECD countries were more likely then than now to resort to NTBs—for example, in footwear.

Third, most sub-Saharan African countries receive preferential access to OECD markets through the Generalized System of Preferences (GSP) and/or the Lomé Convention. We shall argue below that these schemes are less beneficial than they seem at first blush, but they do nonetheless offer low, and frequently zero, tariffs on many sub-Saharan African exports. Fourth, sub-Saharan African countries appear to fare relatively better than other developing countries in the face of OECD countries’ NTBs (Amjadi, Reincke, and Yeats, 1996).

To conclude, there is, in fact, rather little evidence that hostile markets are the primary cause of sub-Saharan African countries’ poor export performance. Indeed, much evidence points to the alternative of these countries’ policies themselves. However, if it does not detract from the important business of reforming its own policy stance, trade liberalization abroad will generally confer benefits on a trading country. Regardless of its own policies, lower tariffs abroad will generally allow more trade and/or better terms of trade. For this reason, therefore, and because many commentators link sub-Saharan African liberalization with that of its partners, we now turn to the question of what sub-Saharan African countries did achieve, and might in the future achieve, through international trade negotiations.

Africa and the Uruguay Round

One hears regularly that Africa got little or nothing out of the Uruguay Round—see, for example, Weston (1995). Statements like this depend heavily on what elements of the round one considers and how one evaluates their benefits. For example, the Single Undertaking—which means that all members of WTO are now bound by more or less the same set of rules—newly constrains trade and related policies in sub-Saharan Africa. To some commentators, this is a cost, whereas to others (including ourselves), it is a benefit (Blackhurst, Enders, and François, 1996; Finger and Winters, 1998).

Turning to dimensions that can be quantified relatively easily, a major study conducted by the World Bank concluded that sub-Saharan Africa will make a small loss from the round, reflecting its lack of liberalization, the small increases in world prices for some foods, and the higher prices of imported textile and apparel products (Martin and Winters, 1996, p. 13). There is now a wide body of evidence that suggests that open economies prosper more than closed ones (see above), so it is not surprising that the first factor, which essentially denies sub-Saharan African countries the main benefits that others reaped in the round, should be important. The second and third factors—food and clothing prices—are quantitatively less significant; they reflect the fact that sub-Saharan Africa has previously benefited from the costs that other countries imposed on themselves by protecting agriculture and textiles/clothing and thus driving down world prices in those sectors. No one would wish to argue that the rest of the world should not seek to correct these manifestly large distortions, and so while the (small) income losses for sub-Saharan Africa are real enough, they do not really constitute grounds for criticizing the round per se. At most, they are ammunition for arguing that the transfers implicit in the previous policies should be continued by other, more efficient, means. Overall, therefore, while sub-Saharan Africa may have fared poorly in the round, this was not because the process was biased but because sub-Saharan Africa on the whole stood aside from the general liberalization.6

The results of the previous paragraph are, of course, predictions, and thus reflect what economists think will happen rather than what has actually happened on the ground. In this section we ask a simpler, and more empirical, question about how sub-Saharan Africa did in the Uruguay Round. We ask whether, on average, there were larger or smaller cuts in the tariffs on the goods that the region exports than in those exported by other developing countries. Drawing on the analysis of Finger, Ingco, and Reincke (1996), we base this analysis on the tariff concessions made by the 40 major markets that reported data on the Uruguay Round to the WTO’s Integrated Data Base. These include all the industrial and transition economies that took part in the round plus 26 developing countries: they cover 100 percent of the non-oil imports of North America, Western Europe, and GATT members in Central and Eastern Europe, 90 percent of Asia’s, 80 percent of Latin America’s, and 30 percent of Africa’s.7 The last figure is small because only three African countries, Senegal, Tunisia, and Zimbabwe, reported data, a fact that in itself is indicative of Africa’s weak integration with the world economy.

Table 1 reports five measures of liberalization from the round for three groups of countries: sub-Saharan Africa, other low-income countries (OLICs), and other low–and middle-income countries (OLMICs), as defined by the World Bank (1996). The figures are simple averages of the corresponding measures for individual countries. In summarizing information over countries, we prefer simple to weighted averages because we are interested in how the typical sub-Saharan African country fared relative to other countries rather than in how the region as a whole fared relative to other continents or blocs. Thus each country is an observation of equal value for our purposes. The data for each country, however, are averages weighted by the value of trade undertaken in each tariff code heading or tariff line. Finger, Ingco, and Reincke (1996) report the corresponding weighted averages over countries, which for sub-Saharan Africa differ significantly from our figures because they are dominated by South Africa.

Table 1.Major Importers’ Most-Favored-Nation Tariff Reductions on Exports(Percentage of CATT-bound exports; average levels and changes weighted by countries’ exports)
SectorTotal Pre–Uruguay RoundIncrease Due to the RoundPercentage of Exports AffectedTariff Reduction2Post–Uruguay Round Bound RatePost–Uruguay Round Applied Rate
(A) From Sub-Saharan Africa
Agriculture, excluding fish: estimate 1180.819.24.10.718.614.9
Agriculture, excluding fish: estimate 2179.120.955.32.410.04.8
Fish and fish products79.020.551.22.57.76.6
Petroleum oils50.01.010.40.61.93.1
Wood, pulp, paper, and furniture83.88.130.51.42.72.7
Textiles and clothing90.44.273.61.610.69.8
Leather, rubber, footwear85.68.647.00.84.44.8
Metals87.66.617.40.52.01.7
Chemical and photographic supplies70.416.245.42.57.76.0
Transport equipment94.83.027.00.86.46.0
Nonelectric machinery91.35.469.12.42.51.8
Electric machinery88.34.467.71.85.64.4
Mineral products, precious stones, and metals88.34.48.90.21.31.1
Manufactured articles83.79.718.30.65.82.7
Industrial goods86.78.918.50.43.22.2
All merchandise traded78.413.529.71.44.12.7
(B) From Other Low-Income Developing Countries
Agriculture, excluding fish: estimate 1159.939.89.91.028.515.9
Agriculture, excluding fishrestimate 2155.144.727.71.219.99.0
Fish and fish products68.225.951.81.74.43.7
Petroleum oils38.83.80.30.06.71.7
Wood, pulp, paper, and furniture62.032.342.42.16.03.2
Textiles and clothing83.87.072.21.611.810.8
Leather, rubber, footwear74.420.251.21.09.05.6
Metals74.513.220.30.77.13.4
Chemical and photographic supplies66.824.745.72.612.47.8
Transport equipment60.18.421.10.49.28.6
Nonelectric machinery64.824.348.31.56.53.9
Electric machinery55.921.028.80.88.95.2
Mineral products, precious stones, and metals63.014.721.90.73.94.3
Manufactured articles81.214.338.51.57.02.1
Industrial goods76.414.239.51.17.45.9
All merchandise traded70.518.336.01.18.95.8
(C) From Other Developing Countries
Agriculture, excluding fish: estimate 1157.442.67.31.430.319.7
Agriculture, excluding fish: estimate 2159.640.332.71.519.09.5
Fish and fish products72.224.739.21.55.84.5
Petroleum oils52.49.14.00.17.33.0
Wood, pulp, paper, and furniture75.720.439.52.16.93.1
Textiles and clothing85.510.573.91.914.913.3
Leather, rubber, footwear78.516.347.91.210.59.5
Metals75.917.528.61.16.43.0
Chemical and photographic supplies66.427.041.32.211.86.7
Transport equipment74.712.327.50.710.57.0
Nonelectric machinery75.619.455.11.77.94.3
Electric machinery
Mineral products, precious stones, and metals75.215.127.10.75.93.6
Manufactured articles81.614.338.21.76.52.9
Industrial goods78.315.840.21.28.35.8
All merchandise traded70.618.731.21.09.25.7
Source: Authors’s calculations based on Finger, Ingco, and Reincke (1996).Note: Unweighted averages across countries.

See Finger, Ingco, and Reincke (1996), p. 5–6, for the explanation of differences between estimate 1 and estimate 2.

Weighted average tariff reduction measured by dT/(1 + T), in percent.

Source: Authors’s calculations based on Finger, Ingco, and Reincke (1996).Note: Unweighted averages across countries.

See Finger, Ingco, and Reincke (1996), p. 5–6, for the explanation of differences between estimate 1 and estimate 2.

Weighted average tariff reduction measured by dT/(1 + T), in percent.

The first two columns of Table 1 report the percentage of sub-Saharan Africa (OLICs or OLMICs) exports that entered partners’ markets under bound tariff rates before the round and the increase in this percentage as a result of the round. The trade data all come from 1988, the negotiating base year for the round, so the changes in the coverage of bindings reflect only the increases in the numbers of tariff lines that partners bound and the amount of trade in those lines. Since bound MFN tariffs apply to all exporters (the data exclude trade occurring within free trade areas, or FTAs), the differences between exporters reflect only the differences in their export bundles. But if we take the latter as given, we might view the increase in bindings as a prima facie measure of success in—or at least a measure of the returns to—negotiating in the Uruguay Round.8

The striking thing about the second column is that sub-Saharan Africa achieved less by way of new bindings on its exports than did either the OLICs or the OLMICs. Indeed, in no cases in our aggregations of goods did sub-Saharan Africa do better, and in the majority of cases it did significantly worse statistically.9 But the reason for this is perfectly clear in the first column: in every case, sub-Saharan Africa started off from a more favorable position, that is, with a higher percentage of exports already bound, and these differences were also frequently statistically significant. The round more or less brought other developing countries up to parity with sub-Saharan Africa with respect to bindings. If we consider the percentage of exports bound after the round (that is, the sum of the first two columns), there are only five statistically significant differences between sub-Saharan Africa and OLICs (all in sub-Saharan Africa’s favor) and one between sub-Saharan Africa and the OLMICs.

The remaining columns of Table 1 give similar statistics for other dimensions of the Uruguay Round outcome; again, they are simple averages across countries. The third column is constructed from country data on the percentage of exports affected by a reduction in a partners’ tariff; it pays no heed to the depth of the reduction. The fourth column, conversely, is based on the reduction in tariffs faced by countries’ exports, averaged (weighted by exports) across all export headings for which a reduction is made. Unlike in WTO documents, percentage tariff reductions are measured here by their effect on the landed price of imports, [dT/(1+ T¯)]*100, where T¯ is the mean of the “before” and “after” tariffs; hence a halving, say, of a tariff of 2 percent is “worth” five times less than halving of one of 10 percent. To illustrate these two columns, the “average sub-Saharan African country” obtained tariff reductions of 51.2 percent on its exports of fish and fish products, and these reductions potentially reduced the landed prices to customers of those products by 2.5 percent. The average reduction in the landed prices of all fish and fish products was the product of these two numbers, namely, 1.3 percent.

In terms of the coverage of tariff reductions at commodity-group level, there is no systematic difference between sub-Saharan Africa, the OLICs, and the OLMICs: sub-Saharan Africa does better in some classes and worse in others, with about half of the differences being statistically significant. One interesting and statistically significant contrast, however, is for all industrial goods, in which sub-Saharan Africa obtains only about half the coverage of reductions of the other groups (20 percent compared with 40 percent). This reflects sub-Saharan Africa’s heavy reliance on product groups with low coverage rates generally, such as wood, metals, minerals, and manufactures. In this sense, sub-Saharan African countries achieved less on average in the round than did other developing countries, because its principal exports received cuts less frequently than did other products.

This story is compounded by a similar one on the depth of the cuts. There are no major differences at the level of commodity groups, and sub-Saharan Africa obtains larger cuts than the other groups as often as not. However, taking industrial goods overall, sub-Saharan Africa’s concentration on sectors with weak liberalization leaves it with an average tariff cut of 0.4 percent, compared with 1.1 or 1.2 percent for the other aggregates.10 Averaging the tariff reductions over all exports of industrial goods leaves sub-Saharan Africa looking even more worse with cuts of 0.07 percent compared with 0.45 percent for the OLICs and 0.48 percent for the OLMICs.

One should not get carried away with these apparent disadvantages, however, for two reasons. First, once we turn to the aggregate of all exports (and, why focus exclusively on industrial goods?), sub-Saharan Africa does not appear to be unduly discriminated against: on the coverage of cuts, compare 29.7 percent for sub-Saharan Africa with 36.0 percent for the OLICs and 31.2 percent for the OLMICs; on depth, compare 1.4 percent with 1.1 percent and 1.0 percent, respectively, and on the average over all exports, 0.42 percent with 0.40 percent and 0.31 percent.

Second, turning to the final two columns of Table 1, we report the levels of tariffs faced by different exporters after the Uruguay Round: the fifth column is constructed from the average of bound rates (weighted by each country’s exports), and the sixth column from that of applied rates projected for the end of the transition period. For each trade heading, the latter equals the minimum of the post–Uruguay Round bound and the pre-Uruguay Round (1988) applied rate, which we assume would continue indefinitely into the future if the Uruguay Round binding did not force it down.11 Here the story is very clear.

Africa faces lower bound tariffs on average than do other developing countries—that is, its exports are concentrated, on average, on low-tariff products—and the differences are all significant. At the aggregate levels, for industrial goods, compare 3.2 percent for sub-Saharan Africa with 7.4 percent for the OLICs and 8.3 percent for the OLMICs, and for all goods 4.1 percent with 8.9 and 9.2 percent. Similarly for applied rates, the corresponding triples of (significantly different) figures are 2.2, 5.9, and 5.8 percent for industrial goods, and 2.7, 5.8, and 5.7 percent for all goods, although the individual goods aggregates do not display many significant differences.

In a real and quantifiable sense, the countries of sub-Saharan Africa achieved less in the Uruguay Round than did other developing countries. Following Finger (1979) we might speculate that this is because they gave less by way of their own concessions. Conversely, however, we must also recognize that they had less to achieve, because they started the round with “better” treatment than other countries. Moreover, they finished it in the same condition, facing lower MFN tariffs on their exports on average than did other developing countries.

The Next Round

Rather than considering the Uruguay Round, this section looks forward to the next round of trade negotiations and asks whether the sub-Saharan African countries can reasonably expect to achieve anything. It considers whether they are significant enough partners for other countries to make it worth the latter’s while negotiating with them at all. Given our comments above about how small sub-Saharan Africa is economically, it would not be surprising to find that there was no significant way in which they could participate. But in fact the answer is not completely negative. Sub-Saharan Africa may well be able to achieve some useful objectives by contributing actively to the next round.

We focus on two measures of the significance of a country to trade negotiations. First, to what extent are sub-Saharan African countries, either singly or jointly, the largest or principal suppliers of particular goods to the major trading powers of the world. Second, to what extent are those powers’ own exports oriented toward sub-Saharan Africa? The first statistic reflects sub-Saharan African countries’ “rights” to negotiate; the second, their power or leverage in doing so. In discussing both, we adopt the common, but at best very partial, mercantilist yardstick that sees exports as good and imports as necessary evils, and that interprets reducing one’s partners’ tariffs as a victory, and reducing one’s own tariffs as unavoidable collateral damage.

The WTO’s predecessor, the GATT, developed two approaches to tariff negotiation. In the Kennedy Round (1963–67) and Tokyo Round (1972–79), as well as in the recent Information Technology Agreement, tariffs on industrial goods were reduced by formula subject to a complex negotiation (usually bilateral) of exceptions, exemptions, and transitional periods. Small countries benefited from the general reduction in tariffs without having to take any specific action, but would of course have little power to prevent or discourage a large power from claiming exceptions on their main exports if other major powers did not object.

The technique used in the earlier GATT rounds, and also in the Uruguay Round for tariffs on industrial goods, was the so-called request and offer system, whereby one country made a specific request of another to reduce a particular tariff in return for a reciprocal concession. From the early days of the GATT, the convention grew up that only the principal supplier of a particular good to a particular country could request the latter’s government to reduce the relevant tariff (see Dam, 1970). Thus a vital part of getting tariffs on your exports reduced was being the principal supplier of those goods. This suggests that small countries would have only a minor role in the process, since they would rarely be principal suppliers. Even if a particular good figured very highly in a small country’s export bundle to a market, the small country could not initiate negotiations if some other country supplied absolutely more, even if that flow accounted for a minor proportion of the latter’s total exports (see Winters, 1987).

Table 2 reports on sub-Saharan African countries’ principal supplier status to the European Union.12 We use 1995 data from the EU’s Comext data base which defines products at the 8–digit level of the Harmonized System (HS). The situation varies somewhat from year to year, but the data analyzed here are probably fairly representative. A full listing of the affected trade headings is available from the authors.13

Table 2.Sub-Saharan African Countries as Principal Suppliers to the European Union, 1995
Country or BlocNumber of Headings for which Principal SupplierTrade Flows in These Headings, (millions of ECUs)These Headings as Percentage of Total Exports to EUAverage Share of Principal Supplier in EU Imports in These HeadingsAverage Share of Total Sub-Saharan African Countries in EU Imports in These HeadingsEU Average Post- Uruguay Round Bound Tariff in These HeadingsTwo Major Products (HS-2)1
Angola11.00.232.450.91.5Fish
Benin210.618.376.394.4Meats and oil seeds
Burundi151.935.934.142.90.5Gold
Camero7160.313.857.799.3Wood
Congo110.71.562.092.70.6Sheets for plywood
Côte d’Ivoire241,129.854.645.575.63.7Cocoa, wood, fish
Gabon5162.520.360.678.96.3Manganese ores, wood
Ghana759.57.122.349.010.7Cocoa, oil seeds
Guinea1169.856.958.061.70Aluminum ores
Kenya17204.531.634.850.06.4Tea, fruits, vegetables
Liberia1578.290.712.433.90Diamonds
Madagascar1079.823.147.161.15.2Fruits, clothing (handkerchiefs, scarves)
Malawi132.623.183.387.2Unmanufactured tobacco
Mauritania14.91.98.539.7Frozen fish
Mauritius7308.330.228.551.614.0Sugar, clothing (shirts and pullovers)
Namibia746.312.638.462.315.5Fish, meat
Niger183.769.268.484.6Radioactive chemicals
Nigeria1178.02.346.663.22.8Sheep skin leather, others
Reunion71.71.434.935.04.4Prepared meats, others
South Africa1434,289.855.735.138.50.8Gold, fruits, wine, iron and steel
Senegal584.322.848.964.47.9Nut oil, oil-cake and residuals
Somalia10.73.653.380.8Molluscs
Sudan443.225.138.262.2Oil seeds and natural gums
Tanzania63.41.736.847.122.3Dried leguminous vegetables, rope and cables
Togo11.11.526.869.1Other goods
Uganda214.64.135.475.44.6Fish, raw hides and skins
Zaïre4505.060.053.254.210.6Diamonds, plants
Zambia151.828.545.651.2Others goods
Zimbabwe1018.22.938.756.0Pepper, powders of pig iron
CEAO371,43447.945.671.55.1
ECOWAS633,21838.137.549.73.9
UDEAC1442714.771.689.11.7
COMESA/PTA671,10822.242.852.19.2
SADC1765,05550.136.038.25.5
CBI731,17927.944.552.49.1
All of region32613,61553.540.9
Note: CEAO is West African Economic Community: Benin, Burkina Faso, Côte d’Ivoire, Mali, Mauritania, Niger, and Senegal. Economic Community of West African States (ECOWAS): all seven members of CEAO and Cape Verde, The Gambia, Guinea, Guinea-Bissau, Liberia, Sierra Leone, Nigeria, and Togo. UDEAC is Central Africa Economic and Customs Union: Cameroon, Central African Republic, Chad, Congo, Gabon, and Equatorial Guinea. Common Market for Eastern and Southern Africa (COMESA)/Preferential Trade Area for Eastern and Southern African States (PTA): Angola, Burundi, Comoros, Djibouti, Ethiopia, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe. South Africa Development Community (SADC): Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe. Cross-Border (CBI): Burundi, Comoros, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Tanzania, Uganda, Zambia, and Zimbabwe.

“HS” is harmonized system.

Note: CEAO is West African Economic Community: Benin, Burkina Faso, Côte d’Ivoire, Mali, Mauritania, Niger, and Senegal. Economic Community of West African States (ECOWAS): all seven members of CEAO and Cape Verde, The Gambia, Guinea, Guinea-Bissau, Liberia, Sierra Leone, Nigeria, and Togo. UDEAC is Central Africa Economic and Customs Union: Cameroon, Central African Republic, Chad, Congo, Gabon, and Equatorial Guinea. Common Market for Eastern and Southern Africa (COMESA)/Preferential Trade Area for Eastern and Southern African States (PTA): Angola, Burundi, Comoros, Djibouti, Ethiopia, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Somalia, Sudan, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe. South Africa Development Community (SADC): Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe. Cross-Border (CBI): Burundi, Comoros, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Tanzania, Uganda, Zambia, and Zimbabwe.

“HS” is harmonized system.

In all, 29 sub-Saharan African countries are principal suppliers of at least one product (heading), and together they account for 289 (out of approximately 9,000) headings in the 8–digit HS trade classification. The distribution over countries is much as expected, with half of the headings stemming from South Africa. The bulk of the headings are in food and agriculture, but of course, given that this is where the highest tariffs are to be found, this might be an advantage rather than the contrary.

It is striking in the third column of Table 2 how large a proportion of certain sub-Saharan African countries’ total exports to the EU fall into the principal supplier headings. This reflects the commodity concentration of sub-Saharan African exports noted above, but it also indicates the strong interest, at least on the basis of current trade, that countries of the region have in the advantageous treatment of this subset of their exports.

It is also notable (fourth column) that, on the whole, sub-Saharan African principal suppliers account for between one– and two-thirds of EU imports in the relevant headings. These are relatively high numbers (compare with Finger, 1979, Table 5), which is usually viewed as an advantage in trade negotiations, for it maximizes the degree of internalization in any concession that the EU makes. Internalization is the proportion of the total benefits of a concession that accrues to the negotiating partner requesting that concession. The higher it is, the higher the proportion of the concession that is working toward obtaining reciprocation from the requester, and the smaller the spillover to partners who are not required to offer direct reciprocation when the concession is extended to all partners through the MFN clause. Thus negotiators are attracted to highly internalized concessions because they offer greater returns per unit of concession than do diffuse ones. In the GATT’s mercantilist tradition, “benefit” is the product of the proportionate tariff cut and the trade it affects. Clearly the distribution of benefit over partners is proportional to their shares of total imports. The conclusion is, therefore, that generally speaking, a fair proportion of the benefit of EU tariff cuts in these products will accrue to the sub-Saharan African principal suppliers; this will set up fairly strong incentives for the latter to reciprocate, which in turn will help to make the EU correspondingly more sympathetic to requests for tariff reductions.

The fifth column explores the spillovers more directly. It calculates the share of EU imports in headings with a sub-Saharan African principal supplier that comes from the region as a whole. The difference between the fifth and fourth columns is the spillover from each sub-Saharan African country’s potential negotiation that accrues to other countries in the region. In general, in goods for which one sub-Saharan African country is the principal supplier, the region supplies at least half of EU imports. Thus this is a set of commodities in which sub-Saharan Africa has quite a strong collective interest.

The final column reports the EU’s (weighted) average post-Uruguay Round bound tariff in each sub-Saharan African country’s principal supplier exports.14 This column suggests that in several cases there is little left to negotiate, for MFN tariffs are already nearly or actually zero. Conversely, there are also cases where substantial tariffs on substantial trade flows remain to be negotiated downward—for example, for Mauritius, Namibia, and Tanzania. The goods, in these sets on which Africans have more or less exclusive negotiating rights, are the important opportunities for sub-Saharan African negotiators in the next round.

The top rows of Table 2 treat sub-Saharan African countries as single entities negotiating separately, but the bottom rows combine them into blocs based on current regional trading agreements. If the principal regional blocs in the region negotiated as blocs, they would have stronger principal supplier rights in the EU. Whenever one of their member countries was a principal supplier in its own right, and hence included in the country rows of the table, the bloc would automatically be a principal supplier and would have a market share no less, and probably greater, than that of the individual country. In addition, there would be trade headings for which the bloc collectively was a principal supplier without any individual sub-Saharan African country having that status.15

The results for the blocs confirm that, by acting in concert, blocs of sub-Saharan African countries would have a few more negotiating rights and a somewhat greater degree of internalization. Two blocs—the West African Economic and Monetary Union (UEMOA) and South African Development Community (SADC)—have about half of their exports in principal supplier categories and thus have, in some sense, significant influence over the treatment of their exports. The degree of internalization for all blocs is relatively high, as is the spillover to the rest of the region in the case of Western Africa. As might be expected from above, the major EU tariff barriers that are “vulnerable” to sub-Saharan African bloc-based principal supplier negotiations are for Eastern and Southern Africa, especially including those on fish.

One theoretical complication evident in the note to Table 2 is multiple bloc membership. The countries of UEMOA are also members of ECOWAS, while many from the CBI and some from SADC also belong to COMESA. These countries would need to decide with whom to combine. In fact, however, neither ECOWAS nor COMESA looks sufficiently coherent or active to negotiate with the EU, so this problem will probably not arise for some time.

The last row of Table 2 treats sub-Saharan Africa as a single negotiating unit. Again, it is clear that negotiating collectively would give countries of the region somewhat greater negotiating “rights,” but again the difference is not huge. Even acting as a single bloc, they would have only 326 principal supplier items accounting for $13.6 billion of exports compared with 289 accounting for $8.2 billion of exports acting individually. Given the complexities of coordinating bloc positions, it is not clear that the bloc approach would be worthwhile.

Negotiations are, almost by definition, about reciprocity. When sub-Saharan African negotiators approach those from the EU to negotiate on the principal supplier headings just identified, the latter will seek reciprocity in headings for which the EU is the relevant sub-Saharan African country’s or group’s principal supplier. We do not have sub-Saharan African data with which to identify these headings (presumably sub-Saharan African negotiators will have them), but we are confident that many will exist and that they will have tariffs sufficiently high that the EU will have reasonable incentives to negotiate.

Table 3 looks at EU exports to sub-Saharan African countries from a different perspective that is somewhat informative even if it has no formal role in GATT/WTO traditions. It asks in which commodities (again defined at 8-digit level of HS) is a sub-Saharan African country the EU’s principal market. That is, in which commodities will the EU be relatively most interested in liberalizing sub-Saharan Africa rather than other markets? Note that we persist with the GATT mercantilist calculus, which values concessions by the volume of existing trade that they affect. Note also that the comparison here is of the relative market sizes for a given export commodity, and not of the relative values of exports of different commodities to a given market, which would be another valid metric.

Table 3.Sub-Saharan African Countries as Principal Markets for European Union Exports, 1995
CountryNumber of HeadingsTrade Flows in These Headings, (millions of ECUs)These Headings as Percentage of Total EU Exports to the CountryExports to Principal Market as Percentage of Total EU Exports in These HeadingsExports to Sub-Saharan Africa as Percentage of Total EU Exports in These HeadingsTwo Major Products (HS–2)1
Angola17201.625.262.464.6Starches, etc., ships
Benin430.011.118.348.6Cotton, pearls
Botswana12.02.315.350.0Vehicles
Burkina Faso11.30.718.531.3Machinery
Burundi21.41.930.255.1Fertilizer, iron/steel
Cameroon427.64.97.646.9Other textiles, zinc
Comoros10.166.776.2Fats, vegetables/ fruit preparations
Congo315.13.211.526.1Vegetables/fruit preparations
Cape Verde41.81.235.439.3Iron/steel, machinery
Côte d’Ivoire953.84.535.858.2Fish, iron/steel
Djibouti10.033.366.7Cereals
Ethiopia43.80.826.134.4Stone, machinery
Gabon31.10.27.534.3Explosives, electrical equipment
Gambia, The11.22.170.893.5Fats
Ghana99.91.333.840.8Meat, railway equipment
Guinea10.30.131.936.7Beverages
Kenya67.30.927.132.6Organic chemicals, machinery
Liberia3897.672.455.055.2Soaps, ships
Madagascar10.70.336.037.0Silk
Mali20.30.137.640.3Fish, organic chemicals
Mauritania24.01.717.229.7Cotton, iron/steel
Mauritius14.00.625.329.2Cotton
Mozambique212.89.026.840.8Cereals, aluminum
Nigeria32110.95.423.534.8Fish, inorganic chemicals
Rwanda10.120.741.5Photo/cinema products
Reunion2625.11.721.729.3Iron/steel, ships
South Africa69298.93.522.024.9Machinery, electrical equipment
Senegal82.80.420.339.9Fats, misc. chemicals
Sudan20.80.310.513.4Inorganic chemicals, glass
Tanzania20.50.27.929.8Vegetables/fruit preparations, machinery
Togo10.10.030.534.7Meat preparations
Uganda43.11.713.633.1Essential oils, stone
Zaïre92.40.729.768.3Meat, other textiles
Zimbabwe23.50.929.242.8Staple fibers
All of region4914,526.618.622.122.1

“HS” is harmonized system.

“HS” is harmonized system.

Table 3 presents information similar to Table 2 on sub-Saharan African imports: the number of “principal market” commodities, the value of trade within them, the percentage of the EU’s total exports to the country falling in those headings, the average percentage of total EU exports of these headings going to the principal market, the average percentage of these exports going to sub-Saharan Africa as a whole, and the main commodities. Perhaps the most striking fact about Table 3 is that it has any entries at all: it turns out that, after all, sub-Saharan African matters to the EU in a mercantilist sense in at least some trade headings. Unfortunately, however, these headings are mostly for very small trade flows—even by the standards of EU-sub-Saharan African trade. Frequently less than 1 percent of EU exports to a sub-Saharan African country fall in headings for which the country is the principal market, and very commonly less than 5 percent does. The main exceptions to this are Angola, which in 1995 was dominated by imports of drilling equipment (HS 89052000), and Liberia, which was dominated by imports of passenger ships (HS 89011010).

The next two columns show that individual sub-Saharan African countries accounted for quite large shares of EU exports of the principal market headings and that in some cases the region as a whole accounted for well over half. These include the major exports to Angola and Liberia.

While sub-Saharan African countries are principal markets for some 238 trade headings in EU exports (491 if we take the region as a whole), these are mostly quite insignificant. Nonetheless, exporters of these commodities are natural allies for sub-Saharan African countries in trade negotiation and should be mobilized to seek concessions on EU imports in return for sub-Saharan African liberalizations on these exports. Sub-Saharan African countries should also identify major imports from the EU in absolute terms and consider how liberalization of these may also be used to improve their access to EU markets. Note yet again, however, that the principal benefit from such exchanges of concessions would be from what sub-Saharan African countries “gave” on their own barriers rather than from what they “gained” on EU barriers.

It would be foolish to view the results of this section as showing that sub-Saharan African countries will have significant power in the next round of trade negotiations. It does show, however, that even on the most bilateral of issues (tariff negotiations) and even with the old-fashioned operating rules—which were frequently criticized for excluding developing countries—(e.g., Johnson, 1967)—sub-Saharan Africa has some role. To us, at least, this was a surprise.

Building upon the base of request and offer tariff negotiation, we believe that sub-Saharan African countries have much to gain by understanding and actively representing their broader interests in the next round. Following the Uruguay and Tokyo rounds, we would expect this to be fairly heavily focused on multilateral activities such as formulaic approaches to liberalization and the negotiation of rules, and there are good reasons to believe that these offer more scope to well-informed small players than do bilateral negotiations. It is a challenge to policy economists in Africa and to those elsewhere who care about Africa to provide the necessary information. The Development Economics Vice Presidency of the World Bank is committed to doing so, but the job will be much more effectively achieved locally than from Washington.

Preferences

The previous two sections have argued that sub-Saharan African countries emerged from the Uruguay Round facing lower tariffs than other developing countries and that, according to GATT conventions, the countries of the region might be expected to have at least some negotiating rights over their major partners’ tariffs in the next round. But both pieces of analysis considered partners’ MFN tariffs rather than the tariffs that sub-Saharan African countries actually face. The latter are currently mostly governed by arrangements under the GSP or, for the EU, the Lome Convention, and as a result are fairly commonly zero. Thus our analysis of the Uruguay Round might be considered irrelevant and that of the principal supplier relationship actually perverse in the sense that it suggests that sub-Saharan African countries should be pleased to have the opportunity to negotiate down the tariffs that apply to their competitors but not to themselves!

We respond on two levels. First, on preferences in general—or perhaps on the concept of preferences—it should be noted that they generally deliver very little. First, for most goods, and particularly manufactured ones, the margin of tariff preference granted to sub-Saharan African (and other developing) countries is very small. Amjadi, Reincke, and Yeats (1996) show that, at the end of the Uruguay Round transition period, sub-Saharan African countries will have preference margins averaging slightly under 2.5 percentage points. (One should consider preferences in terms of the price advantage they confer—that is, percentage points—rather than, as is quite common, the percentage of the tariffs they remit. To have 100 percent remission of a 1 percent tariff is worth far less—1 percentage point—than a 50 percent remission of a 10 percent tariff—5 percentage points.)

Moreover, even putting aside their low average level, preferences will be eroded by future multilateral liberalization. The Uruguay Round cut the measured average margin of preference for sub-Saharan African countries from 4.3 percentage points to 2.5. We interpret this not as further evidence of the hardship that the round imposed on sub-Saharan Africa, but as evidence that, in the long run, preferences will be squeezed even further. As the evidence that openness promotes economic performance becomes more deeply and widely accepted around the world, no one is going to arrest the removal of MFN trade barriers for the sake of the sub-Saharan African countries’ preferences.

Second, there are cases where tariffs are higher and where, as a result, preferences are deeper and potentially more valuable. Among these cases, there are undoubtedly some for which short-term interests dictate against seeking to erode present agreements (see below on long-run aspects of preferences), but these are not as common as they may appear on the surface. Consider, for example, textiles and clothing. This simple and labor-intensive sector is one in which developing countries clearly have some competitive advantage, and which as a result of having some of the highest MFN tariffs potentially offer the greatest margins of preference. Unfortunately, however, the United States does not grant preferences on textiles and clothing, so that sub-Saharan African countries face the full average tariff of 16.75 percent on all their exports. The EU does grant tariff preferences to sub-Saharan African textile and clothing exports under the Lome Convention, but they are subject to strict rules of origin. The cumbersomely enforced rules of origin under Lome, for example, which allow duty-free access only if at least 85 percent of a product’s value originates from a beneficiary country, have the effect of denying effective preferences even where the latter exist formally on the books.16 In addition, the complicated procedures of the rules of origin cost poor-country exporters dearly in paperwork.

It is also worth noting that, while the Lomé Convention places sub-Saharan African textile and clothing exports to the EU outside the purview of the MFA, such commitments have not in the past prevented the EU from seeking and receiving “voluntary” restraint agreements on such exports, as it did with the Mediterranean Associated States.

Turning to agriculture, the EU applies tariff quotas to sub-Saharan African agricultural products covered by the Common Agricultural Policy (CAP). Tariff quotas restrict the volume of imports that receive preferential treatment, so that once a country has exhausted its quota the preference it receives on marginal exports is zero. In addition, primary exports face even stricter rules of origin than manufactures under Lomé. For example, 100 percent of origin—all materials for manufacturing must originate from the African, Caribbean, and Pacific (ACP) countries—applies to fish products and processed fish, a product in which sub-Saharan African countries such as the Seychelles and Cape Verde have comparative advantage. It is true that derogations from these rules of “originating products” are sometimes granted, as for example for the Seychelles, but only at the cost of facing an annual quota limit.17

Even if preferences are small on average, some economists argue that they are desirable, or even important. We disagree. First, preferences to sub-Saharan African countries do nothing to enhance the consumption of the goods concerned in a preference-granting market. In almost all cases, the latter continues to import some of the good from nonpreferred sources and so experiences no decline in its internal price. All that the preferences do is (1) transfer tariff revenue to the sub-Saharan African country on the exports that it would have made in the absence of preferences and (2) allow it to displace some exports from other sources as it expands up its supply curve in response to the higher price received for its exports.18 As the sub-Saharan African country’s supply expands, its costs increase, so that the effect of the preference is to induce inefficiency—to transfer to sub-Saharan Africa the production inefficiencies created by protection in the preference-granting market. If there were no difficulty in reversing such inefficiencies or in restructuring economies when the preferences are removed, it might still be advantageous to sub-Saharan Africa to take advantage of preferences while it may. But, in fact, policymakers generally argue that such restructuring is painful—perhaps very painful, for example, moving out of bananas in the Windward Islands—and so it is arguably best to avoid the distortion in the first place.

Second, and closely related to the previous point, preferences are granted unilaterally, usually one year at a time.19 This makes them very insecure and also opens the recipient countries to considerable pressure to meet various conditions—for example, labor standards—to continue them. Such insecurity encourages short-termism among sub-Saharan African entrepreneurs and governments. Another insecurity derives from the Article 177 of Lomé Convention IV, which allows the EU to take “safeguard measures” if imports from the ACP countries cause “serious disturbances” in a sector of the EU or a sector of one member country, or if they may result in a deterioration in “external financial stability” of a member. These are less restrictive than the conditions for safeguard protection under GATT Article XIX.

Thus overall preferences represent a very poor basis for investment, and thus probably have very little effect on the incentives for industrialization. They create incentives quite foreign to the notion of longterm development—for example, for investment, learning, efficiency—and instead foster behavior designed to seek and perpetuate the rents that they generate. In the past, developing countries, including many in sub-Saharan Africa, have focused disproportionate diplomatic effort on achieving and maintaining preferences at the expense of identifying and pursuing constructive long-term objectives. For example, the internal politics of trade policy and trade negotiation are far easier to handle if they are focused on trying to persuade OECD countries to provide a free lunch for certain exporters with no obvious costs to anyone else.20 They are much more difficult if the policy involves liberalizing your own trade. Worse, preferences not only distract attention from sub-Saharan Africa’s own liberalization, but have sometimes led commentators in the region to oppose other countries’ liberalizations as a means to preserving sub-Saharan African preferences.

Third, the various quantitative limits, exclusions, and tight rules of origin that we have noted above not only reduce the average depth of preferences but do so in a quite perverse fashion. They apply mostly to sensitive items such as clothing, leather, and agricultural products, which, being relatively simple and labor-intensive, are the very goods in which one would expect developing countries to have comparative advantage. These are the products that one typically associates with the first steps in industrialization and development, and thus it appears that the system of preferences tilts relative prices, and hence resource allocation, in developing countries away from rather than toward the critical sectors for development. To our knowledge, no estimates exist of the extent of distortions such as these. However, de Melo and Winters (1990, 1993) study the related problem of the effects of VERs on certain developing countries’ footwear exports and find that the costs arising from the distortion of the production structure can easily outweigh the benefits of the increased rents that are collected.

To summarize, the preferences granted to sub-Saharan African countries under the GSP and Lomé Convention seem to confer little benefit on them.21 They are not particularly deep quantitatively but to the extent that they are effective, they are probably perverse. To be sure, preferences transfer some tariff revenues from OECD taxpayers and other exporters to sub-Saharan African exporters, but they do so in ways that could subvert long-run development. They divert resources from critical sectors, create inefficiencies, encourage rentseeking rather than productive investment, and undermine incentives for trade liberalization. This analysis of the difficulties created by preferences throws the previous sections into perspective. Both on positive grounds (because preferences are not particularly deep), and on normative grounds (because they are probably harmful in the long run), the sub-Saharan African countries should turn away from the GSP and Lome and focus instead on their partners’ MFN tariffs and NTBs. They should ask how these barriers affect their development aspirations and whether they are amenable to negotiation. Those are the tasks initiated in the previous two sections.

Conclusions

Our conclusions are very simple:

  • Sub-Saharan Africa’s small size economically and the generalized nature of its decline in competitiveness mean that attempts to improve its performance should not unduly disturb other members of the world economy.

  • Openness and liberal trade policies are associated with higher exports and economic growth. Sub-Saharan African countries are mostly closed, and one of their top priorities should be to open up. With some (important) identifiable exceptions, African exports are not disproportionately restricted in OECD markets.

  • Sub-Saharan African countries won fewer concessions in the Uruguay Round than did other developing countries—possibly because they seem to have offered fewer. Nonetheless, they still emerged from the round facing fewer or lower restrictions than other developing countries.

  • In the next round of trade negotiations, sub-Saharan African countries have some rights to negotiate (according to GATT-WTO traditions) and a little leverage. They should be active in this round, both giving and requesting concessions, and economists should help them to prepare the ground.

  • Preferences are not the route to integrating with the world economy.

Appendix: The Simple Analytics of Preferences

Consider the market—in, say, the EU—for a single good supplied by imports from two sources (see Figure 1): a sub-Saharan African country with supply curve SS and the rest of the world (RoW), which is large enough to have a horizontal supply curve at price Pw. If the EU levies a tariff t on both suppliers and has demand curve DD, consumption C is met by imports OS0 from sub-Saharan Africa and (C – So) from RoW. Now exempt sub-Saharan Africa from the tariff. Since imports from RoW continue, the EU’s internal price remains (Pw + t), but now the whole of this price accrues to the sub-Saharan African exporters rather than, as previously, just Pw with t going to the EU authorities. That is, sub-Saharan African exporters receive a higher price. On exports OS0, this is pure rent, amounting to area a. In addition, however, sub-Saharan African exporters can now afford to increase their exports to S1, diverting an equivalent amount of imports from RoW. The extra exports drive up sub-Saharan Africa’s marginal costs to Pw + t, above the efficient level in the absence of preferences. Total cost increases by c and producer surplus increases by b—both at the expense of EU taxpayers, who would otherwise have received (b + c) in tariff revenue—and the sub-Saharan African export industry has now expanded beyond its sustainable level.

Figure 1.The Simple Analytics of Preferences

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The authors are grateful to Ying Lin, Francis Ng, Ulrich Reincke, and Alexander Yeats for help with some of the calculations, to Audrey Kitson-Walters for first-rate logistical assistance, and to Alan Gelb, Jan Gunning, and Ademola Oyejide for comments on the first draft. The findings, interpretations, and conclusions expressed in this chapter are entirely those of the authors. They do not necessarily represent the views of the World Bank, its Executive Directors, or the countries they represent.

In addition to their printed form, the later papers of this series are available at the World Bank’s International Trade Division website (http://www.worldbank.org/html/iecit/archive.html).

We recognize that data collection and reporting entail costs, but these are not huge relative to the benefits of understanding the economy.

Sub-Saharan Africa is made up of Angola, Benin, Botswana, Burkina Faso, Burundi, Côte d’Ivoire, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo, Democratic Republic of the Congo (see next paragraph), Djibouti, Equitorial Guinea, Eritrea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Mozambique, Namibia, Niger, Nigeria, Rwanda, São Tomé and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Uganda, Zambia, and Zimbabwe.

In May 1997, the official name of Zaïre was changed to Democratic Republic of the Congo. Data in this book for years before 1997 will refer to “Zaïre.”

Part of sub-Saharan Africa’s loss of share to OECD countries in products such as cocoa, coffee, and tea presumably reflects an increased tendency to trade processed varieties between OECD countries rather than the displacement of raw product exports.

We are grateful to Alexander Yeats for making these calculations.

Harrison, Rutherford, and Tarr (1997) argue that to generate gains sub-Saharan African liberalization would have had to address not only tariffs but also domestic taxes on agriculture. Indeed they suggest that reducing the former but not the latter would have slightly reduced economic welfare.

High-income economies: Australia, Austria, Canada, European Union, Finland, Hong Kong, Iceland, Japan, New Zealand, Norway, Singapore, Sweden, Switzerland, United States; Eastern Europe: Czech and Slovak Customs Union, Hungary, Poland, Romania; East Asia: Indonesia, Republic of Korea, Macao, Malaysia, Philippines, Thailand; Latin America: Argentina, Brazil, Chile, Colombia, El Salvador, Jamaica, Mexico, Peru, Uruguay, Venezuela; North Africa: Tunisia; rest of Europe: Turkey; South Asia: India, Sri Lanka; sub-Saharan Africa: Senegal, Zimbabwe.

Let us reiterate that winning concessions in partners’ markets is only one way—probably a minor way—in which trade negotiations raise welfare generally. Far more important is the degree of liberalization that a country undertakes itself.

This is based on a statistical test of the difference in means between two samples assumed to have equal variances. Since the change in the percentage of exports bound for each country is derived by weighting together export flows (assumed to be stochastic) across many tariff headings (with weight 1 if there is a new binding and zero otherwise), we can assume that the individual country data are normally distributed. Thus the group averages will also be normal, and the test is justified.

These differences are not significant, however.

In fact, since 1988 many importers have further reduced their applied rates, so this column overestimates the average tariffs that exporters face now and at the end of the Uruguay Round phase-in period.

Europe takes more than half of sub-Saharan Africa’s exports, so the EU is clearly the principal partner to concentrate on.

The authors are grateful to Lin Ying for help with these calculations.

The tariffs are taken from the WTO’s Integrated Data Base and refer to the bound rates at the end of the transition phase of the Uruguay Round—that is, to the base for the next round. Applied tariffs are occasionally lower. Since the tariff data are on a 1988 classification and the trade data on a 1995 classification, there are some principal supplier commodities for which we cannot identify bound tariffs. We ignore these in the averaging.

One way in which the blocs might negotiate jointly is by forming a customs union—the expressed intention of most of them. Another way, however, is for them to coordinate negotiation on particular headings ad hoc. All that the GATT requires for such coordinated negotiation is that each member of the bloc offer reciprocation for the concession so obtained (Dam, 1970, p. 62).

UNCTAD (1994) reports that in the EU only 68 percent of dutiable imports from beneficiary countries qualify for GSP preferences, of which only 33 percent (slightly below half) actually take them up. The corresponding figures for Japan are 35 and 16 percent, and for the United States 36 and 18 percent.

For more detail, see Official Journal, L137, 31.12.1994.

The simple analytics of preferences are set out in the appendix to the chapter.

Lomé preferences are more secure than this.

We do not say “with no costs,” for other industries will suffer as resources are bid away from them into the preferred sectors.

In spite of more than two decades of Lome preferences, the ACP countries have generally failed to diversify and have even been unable to maintain their share of the EU market, which has fallen from 6.7 percent in 1976 to 3.4 percent in 1994. Meanwhile, some less preferred developing countries have actually gained market share.

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