Estimation of Missing Intra-African Trade

Abstract

Missing trade is defined as the exports and imports that may have taken place between two potential trading partners, but which are unknown to the researcher because neither partner reported them to the United Nation’s COMTRADE, the official global repository of trade statistics. In a comprehensive sample of African countries, over 40% of the potential trade flows fit this definition. For a continent whose trade integration remains an important avenue for development, this lack of information hinders the analysis of policy mechanisms -- such as the Economic Partnership Agreements with the EU -- that influence intra-regional trade patterns. This paper estimates the likely magnitude of the missing trade by modeling the manufacturing trade data in the GTAP Data Base using a gravity approach. The gravity approach employed here relates bilateral trade to country size, distance, and other trade costs while explicitly considering that high fixed costs can totally inhibit trade. This last feature provides an adequate framework to explain the numerous zero-valued flows that characterize intra-African trade. The predicted missing exports are valued at approximately 300 million USD. The incidence of missing trade is highest in the lowest income countries of Central and West Africa.