North-South Trade-Is Africa Unusual?


WP/98/94-EAWP/98/94


Summary

The importance of international trade in economic development has been
highlighted by the success of many developing countries that have adopted
outward-oriented development strategies. Countries in East Asia and, more
recently, in Latin America have led the way in opening up their economies.
African policymakers, however, have generally been more skeptical about the
value of adopting outward-oriented development strategies. Partly reflecting
this, Africa.s share in world trade has fallen dramatically. Other factors
contributing to its marginalization in world trade include the continent.s
relatively low stage of development, its lagging performance in terms of output
growth, and a variety of geographic, historical, and structural factors. In
this paper, we examine empirically some of the determinants of Africa.s
bilateral trade with industrial countries and look more closely at the question
of whether it is or is not unusual.


We estimate a gravity model of bilateral trade between developing countries in
the south and industrial countries in the north. The estimates are based on a
very large sample, consisting of 48,048 observations on bilateral trade between
84 developing countries and 22 industrial countries from 1970 to 1995. Our main
finding is that the unusually low level of African trade is explained by the
standard gravity model determinants of bilateral trade.economic size and
geographical distance.and population. This result holds after controlling for a
country.s access to the sea, composition of exports, linguistic ties with
industrial countries, and trade policies. Thus, Africa.s bilateral trade is not
unusually low. If anything, the average African country tends to overtrade
compared with developing countries in other regions, although the degree to
which Africa overtrades has steadily declined over the past two-and-one-half
decades.