Working Paper 60 - Trade Liberalization and Growth: Policy Options for African Countries in a Global Economy

Abstract

African countries have not embraced trade liberalization in the manner thatother developing regions have. Protectionist measures have taken various forms,including tariffs, quantitative restrictions, exchange controls and downrightimport bans. A significant number of researchers have attributed, in part, thepoor performance of African economies to the protectionist trade practices.Economists have made sustained efforts at cataloguing the welfare costs oftrade barriers and emphasizing the gains from trade in order to advance policiesto reverse protectionist practices. In fact new growth theorists contend thattraditional analysis tended to consistently underestimate the welfare costs ofprotectionism, because they ignored the effects of the introduction of new goodson technological progress, domestic production and growth associated withfree trade. In this paper we conclude that while opening an economy to trademay not provide the desired quick fix, the removal or relaxation of quantitativeimport and export restrictions and lowering of tariffs would result in increasedexports and growth. The dawn of a global economy ushered in by universaltrade liberalization, therefore, need not spell catastrophe for African economiesas is widely feared.“In a major report in the late 1950’s T.K. Whittaker wrote ‘Sooner or later,protectionism will have to go, and the challenge of free trade accepted, if Irelandwishes to keep pace with the rest of Europe’ ”Former US President Bill Clinton, in his Remarks to the People of Dundalk,Ireland, Courthouse Square, Dundalk, 12 December 2000 (http://www.whitehouse.gov/WH/new/december2000/speech12_12c.html)