Free African Trade, Free Africa from Poverty

In 1955, Africa accounted for 3.1% of total global exports, but by 1990 its share had fallen to only 1.2%. Why?

Francis Ng and Alexander Yeats, economists with the World Bank, argue that it is in part due to the protection policies African nations adopted in the post-colonial period which explain Africa’s wretched economic performance.

The key problem with those projectionist policies in Ng and Yeats view is that the generally high tariffs on raw materials and capital equipment placed African entrepreneurs and producers at a distinct disadvantage.

As they summarize their findings,

The key point that emerges … is that African tariffs on those production inputs are often very high and place domestic producers at a substantial direct cost disadvantage vis-à-vis the fast growing exporters. For the 11 product groups listed (agricultural materials, crude fertilizers and ores, all chemicals, manufactured fertilizers, iron and steel, machinery and equipment, non-electric machinery, electric machinery, transport equipment, professional equipment) … the greatest discrepancy between Africa’s tariffs and those of the fast growing exporters occur for the agricultural raw materials and the crude fertilizer groups. In the former, African duties average 23.6% which is more than 3.2 times their corresponding level in the fast growing countries, while duties for crude fertilizers are 3.6 times higher. This undoubtedly has major adverse implications for Africa’s trade and growth prospects.

This makes eminent sense, but it’s amazing the extent to which many people believe the key to making places like Africa prosper is through protection of local markets. I regularly read leftist accounts which complain about cheap imports being available in developing nations.

Think about it, though — how are African farmers supposed to prosper and feed that continent’s growing population when their own government makes it more expensive for them to buy fertilizer and farm equipment than someone in Singapore or Thailand has to pay? Who benefits from high tariffs which temporarily preserve some local industries while ensuring that many businesses will simply never be created due to high marginal costs?

Ng and Yeats concede this is not the whole explanation of Africa’s sorry state. Political instability and other factors also play major roles in reducing economic growth. But high tariffs are just one more nail in the coffin that has kept Africa destitute while the developing world is on the path to prosperity.

The full text of Ng and Yeats article, “Open Economies Work Better! Did Africa’s Protectionist Policies Cause its Marginalization in World Trade?,” was published in World Development, Vol. 25, No. 6, pp. 889-904, 1997.

Leave a Reply