Introduction

OVERVIEW Market Access Strategy in a New Trade Environment

Souleymane Coulibaly, Woubet Kassa, and Albert G. Zeufack

Introduction

Sub-Saharan Africa faces an international trade environment that is ever changing, bringing new challenges and opportunities for increasing growth and reducing poverty. Among the latest developments, the COVID-19 (coronavirus) pandemic since January 2020 has crippled economies around the world—including in Africa—through the direct health shock, the effects of pandemic containment measures on domestic economies, and the consequent disruption of global trade in goods and services.

Even before COVID-19 struck, however, a steady string of developments had been affecting the trade environment faced by African economies. These included the resurgence of protectionist rhetoric, a global economic slowdown, proliferation of regional trade agreements at the expense of the global trading system (as represented by the World Trade Organization), increased global fragmentation of production across borders, and the Fourth Industrial Revolution (whose disruptive, labor-saving technologies include the Internet of Things, artificial intelligence, and advanced robotics).

The effective participation of Sub-Saharan African countries in this everevolving global trade environment remains central to boosting growth and development in the region. Indeed, the economic growth success stories of the recent past (including China, the Republic of Korea, and Malaysia) are largely attributed to their participation in international trade. Participation of firms in global trade is effective in spreading the benefits of new technology to improve overall welfare (Melitz 2003; Segerstrom 2013). Increased access to foreign markets yields increases in productivity and is central to industrialization prospects and job creation.

Because of these gains from trade as well as the special economic challenges that low- and middle-income countries (LMICs) face, preferential treatment has been considered as the most strategic instrument to promote export-led development in such economies. In 2000, the United States launched the African Growth and Opportunity Act (AGOA), specifically aimed at Sub-Saharan African countries. A year later, the European Union (EU) put into effect the Everything but Arms (EBA) preference, focusing on all least developed economies.1 By the sheer size of these two global markets, there were heightened expectations of the AGOA’s and EBA’s impact on trade and growth. Yet rigorous evaluations of these preference schemes at the aggregate and product levels (using synthetic control methods and difference-in-differences analysis) show mixed results. The utilization rates for these preferences are also found to be systematically low.

This book suggests a strategic shift: while trying to maximize gains from these preferential schemes, Sub-Saharan African economies should undertake bold domestic structural reforms to scale up their supply capacity while also pursuing new market opportunities to secure market access. Indeed, with the rise of Asia as a solid third global market, exploring export opportunities in China, India, and the Association of Southeast Asian Nations (ASEAN) countries would seem to be a sound strategic move. However, given the generally small size of Sub-Saharan African economies, deeper regional integration, anchored around the continent’s largest middle-income countries, is a prerequisite. To that end, Africa has embarked on the world’s largest free trade project—the African Continental Free Trade Area (AfCFTA).

Recent Trade Dynamics in Sub-Saharan Africa

Sub-Saharan Africa’s exports and imports of goods and services have grown rapidly over the past decade, but the volumes are still low. Though Africa accounts for a small share of global trade, the share of trade in the national income of most economies in the region is large relative to other regions. In 2019 the share of total exports in gross domestic product (GDP) was 30 percent in North America, 39 percent in South Asia, 53 percent in Sub-Saharan Africa, and 58 percent in East Asia and Pacific.2 From 2000 to 2017, Africa’s share of exports to the rest of the world made up 80–90 percent of its total exports, higher than any other region.

These data suggest the high dependence of the region’s economy on international trade, making the region more vulnerable to external shocks. In the earlier phases of the COVID-19 pandemic, despite having a relatively low percentage of the world’s confirmed cases, the region felt its severest economic shocks mainly through the channel of trade—pandemic-related demand and supply shocks in the region’s major trading partners. Overall, Sub-Saharan Africa accounts for about 2 percent of global production and