How Facilitating Trade would Benefit Trade in Sub-Saharan Africa

Abstract

Despite a significant trade expansion that has been above the world average in the recent period, Sub-Saharan Africa still remains relatively marginalized in the world trading system. This paper sets out to analyze the extent to which various elements of the trade cost landscape in the sub-continent may have contributed to shape trade patterns both within the region and with the outside world. Different trade facilitation measures such as border efficiency, physical infrastructure, regulatory environment, information and communication technology, and the World Bank's Logistics Performance Index are related to bilateral trade flows in a gravity framework. The study finds, based on the Poisson pseudo-maximum likelihood estimation, that raising (raising) the quality of the trading environment of (the subcontinent) the sub-continent to the level of the world average would generate significant export gains that amount to reducing bilateral geographical distance by between 1.7 to 10.1 percent or cutting ad valorem tariff by between 1.4 and 10.2 percentage-points. The extent of the gains varies greatly across the trade facilitation measures, commodity sectors, export destinations, as well as which trading partner undertakes the corresponding reforms. These results offer a strong basis for designing targeted trade facilitation reforms that would improve Africa's international trade position in the wake of the recent success of WTO's trade negotiations.