Trade Performance and Structural Transformation

Kym AndersonUniversity of Adelaide and Australian National University

kym.anderson@adelaide.edu.au

IFPRI Workshop on Economic Transformation in West Africa: What it Means for Food Security and Poverty Reduction,

Dakar, Senegal, 15 May 2013

The issue

If we accept that:poverty reduction boosts food security,economic growth reduces poverty, andtrade contributes to economic growth,

then expanding trade would be a good thing

Caveat: if openness leads to uneven gains from trade, a pro-poor outcome also requires a commitment and capacity to efficiently re-distribute some of trade gain

Why the caveat?

Gains from trade openness typically are sectorally (even sub-sectorally) biased

helping some groups, but hurting others if not compensated

Outline

How open are West African economies?What scope for lowering trade costs and govt trade restrictions?

How much has openness contributed to region’s recent econ growth?What can governments do to maximize future contributions of trade to poverty reduction and food security?

How open are African economies?

Higher trade costs than other regions

internally & at border

How open are African economies?

Higher trade costs than other regions

internally & at border

SSA govts discourage agricultural (relative to non-agric) production more than other regions

RRA was less negative pre-1990 but now is more negative in Africa than in other regions

How open are African economies?Higher trade costs than other regions

internally & at border

SSA govts discourage agricultural (relative to non-agric) production more than other regions

But, trade reforms of recent decades, that drove RRA towards zero, were growth-enhancing

• See “Distortions to Agriculture and Economic Growth in Sub-Saharan Africa” , World Bank Policy Research Working Paper 6206, Sept 2012

African recent growth experience

Its rapid econ growth was accompanied by trade growth

During 2000-10, Africa increased its share of world trade by 1/3rd • petroleum explains 55% of it,• minerals 20%, • agriculture only 9% (as agric prices rose less, its

supply response slower than in mining, and SSA comparative advantage is rel. weak in agric/food)

Nominal rate of assistance to West African countries before & after reforms began (%)

1960-84 1985-2010

Cameroon -9 -2Cote d’Ivoire

-28 -24

Ghana -19 -3Nigeria 11 3Senegal -17 4

Real international price indexes, 1960 to 2012 (World Bank, 2005 = 100)

Trade specialization indexes [net exports/(exports+ imports)]

Prospective African growth and structural transformation

GTAP modeling to 2030 suggests SSA’s share of global agric will grow, but far less than its share of other primary prod’n

With agric+food self-sufficiency still near 100%

SSA’s shares of global GDP, by sector (%)

If SSA growth is concentrated in energy/mineral-rich countries ...

... it is less likely to be pro-poor, based on recent SSAfrican experience

Elasticity of poverty to income growth is -2.4 in resource-rich nations, vs -3.2 in other SSA

Fall in $1.25 poverty headcount (%)

If SSA growth is concentrated in energy/mineral-rich sectors ...

... again, it is less likely to be pro-poorSee SSA modelling by IFPRI, in its 2012 book: Strategies and Priorities for African Agriculture

... especially if little redistribution of resource rents to benefit poor households

To ensure SSA growth is pro-poor ...... need govt commitment and capacity to efficiently re-distribute some of gains from openness to tradee.g. by investing more in agric R&D and rural infrastructure, esp. as it affects small/poor rural households and food staples

Much higher social payoff than providing output or input subsidies, which help mostly commercial farmers unless capped