Services Trade Restrictions and Trade Performance in Africa: Some Insights
We live in a world where the production and consumption of services has been growing faster than that of merchandise for some time now. However whilst considerable gains await the adoption of new services modes and types, some countries lag others in the adoption, rollout and uptake of these services. Under-development and investment risk limit the extension of many services types in developing countries and there are both these supply-side and demand constraints on the growth of services sectors in these country groups.
Consumers and producers pay a premium for services that are often sub-par and the economy is denied the gains that should accrue to the improving production possibilities related to better services. There is therefore a strong case for services trade liberalisation in much of the developing world, and this paper examines the potential benefits for a subset of African countries.
Using historical and cross-sectional data, this paper attempts to identify patterns of relationship between services trade restrictions (STRs) and real trade merchandise growth, in order to identify where gains could be made through liberalisation. The paper looks at a group of African countries as a whole, and thereafter in groups disaggregated by export specialisation product group. Both informal, semi-formal, and formal quantitative techniques are used.
Despite limitations in the data, meaningful patterns that are consistent with expectations based on economic theory could indeed be identified. The relationships vary among the services sectors and the export specialisation groups, and when analysed in aggregate these patterns were less discernible. Within each export specialisation category, the African countries with below average STRs tend to enjoy above average trade growth. Liberalisation of services trade should therefore be on the agenda of Africa’s exporting nations and should be part of a supply-side policy package to boost production and trade.
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