This document discusses how trade openness can contribute to economic growth and poverty reduction in West Africa. While expanding trade is generally good, the gains are often uneven, helping some groups while hurting others. Governments need to commit to redistributing some of the gains from trade to ensure outcomes are pro-poor. West African economies currently have higher trade costs than other regions. Government policies have historically discouraged agriculture more than other sectors. Recent trade reforms that reduced these distortions have been growth-enhancing. For trade to have the greatest impact on poverty and food security, governments need to invest gains in agriculture research, rural infrastructure, and programs that directly benefit small farmers and poor households.

1. Trade Performance and
Structural Transformation
Kym Anderson
University 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

2. The issue
If we accept that:
poverty reduction boosts food security,
economic growth reduces poverty, and
trade 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

3. Why the caveat?
Gains from trade openness typically are
sectorally (even sub-sectorally) biased
helping some groups, but
hurting others if not compensated

4. 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?

5. How open are African economies?
Higher trade costs than other regions
internally & at border

6. 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

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

8. 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

9. 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)

10. Nominal rate of assistance to West African
countries before & after reforms began (%)
1960-84 1985-2010
Cameroon -9 -2
Cote d’Ivoire -28 -24
Ghana -19 -3
Nigeria 11 3
Senegal -17 4

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

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

13. 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%

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

15. 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

16. Fall in $1.25 poverty headcount (%)

17. If SSA growth is concentrated in
energy/mineral-rich sectors ...
... again, it is less likely to be pro-poor
See 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

18. To ensure SSA growth is pro-poor ...
... need govt commitment and capacity to
efficiently re-distribute some of
gains from openness to trade
e.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