Bridges Weekly Trade News Digest • Volume 12 • Number 30 • 18th September 2008

UNCTAD: African Nations Missing Potential Gains of Liberalisation

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African nations are largely failing to enjoy many of the potential gains of more than two decades’ worth of trade liberalisation, a recent UN report found. Despite governments’ concerted efforts to dismantle import controls, re-value their currencies, cut regulatory barriers and eliminate other impediments to trade, the continent saw its market share drop from 6 percent of world exports in 1980 to 3 percent last year.

The report, which was released by the UN Conference on Trade and Development (UNCTAD) on 15 September, recommended that African governments invest heavily in agriculture production, while also encouraging their economies to diversify into manufactured goods to improve upon their “modest” export performance.

UNCTAD identified a weak ’supply response’ as a primary problem in African economies, meaning that the continent’s producers are largely unable to churn out the quantity and quality of goods required to respond to global demand. While analysts had hoped that liberalisation policies would enable African economies to react quickly to market signals, in practise, “structural problems” continue to prevent producers from adjusting to fluctuations in demand.

The report also criticised African governments for under-investing in agriculture, pointing out that the continent’s farm production has declined dramatically in recent decades. Indeed, over the course of the past half century, many African nations have gone from being net exporters of food to relying heavily on food imports.

Although their agriculture sectors remain weak, African economies have, as a whole, failed to diversify into manufactured goods, which leaves them especially vulnerable to the sudden changes that are relatively common in primary commodities markets, the report said. Manufactured goods account for roughly one quarter of total exports from Sub-Saharan Africa - the lowest of any region in the world.

But beyond diversification, infrastructure and human capital investments will also be needed to strengthen the continent’s export performance. African nations “need such building blocks as well-trained workforces, reliable electricity supply, research and development skills, flexible investment and banking services, and efficient transportation” before they can truly take advantage of opportunities on the world market, UNCTAD said in a statement released in conjunction with the report.

Macroeconomic and political stability, as well as “policy predictability,” are also critical to stronger economic performance, the report found.

The release of the report comes at the beginning of a two-week session of UNCTAD’s Trade and Development Board. The meeting, which will continue through 26 September, will focus on ways to help strengthen developing-country economies; participants will also discuss the global food crisis and the future of the multilateral trading system (see related story, this issue).

To download the UNCTAD report, visit http://www.unctad.org/Templates/webflyer.asp?docid=10370&intItemID=1397&lang=1&mode=downloads.

ICTSD reporting.