Driving factors of Intra-regional trade in agricultural goods: The case of West African Economic and


Proposal for the Seventh Annual Conference on Regional Integration in Africa (ACRIA 7) on the theme: External Sector and Inclusive Development in West Africa

Toussaint Houeninvo, t.houeninvo@afdb.org

and

   Philippe Sèdédji, sphilos2000@yahoo.fr

Abstract

Since the 2008 financial crisis and the European debt since 2010, and their impact on African exports, strengthening regional integration appears as an alternative to build resilience to shocks and promote economic development in West Africa. Experience shows that the debt crisis in Europe has affect negatively exports of several African countries. Similar effect has been observed during the recent decrease in commodity prices.  In this context, and given that countries of the Economic and Monetary Union of West Africa (UEMOA) are agriculture dominant countries with the share of agricultural value added in the GDP representing between 20% and 46% of Countries, boosting Intra regional trade in agricultural products can serve as a key factor for inclusive  development of countries in West Africa.

The inclusiveness of the development is strengthened by the fact that most of the population in West Africa live in rural area do not mainly benefit from the growth. Intra-regional trade in agricultural products in such a condition could contribute to reduce, inequality and poverty. 

Beside value chain development and the level of processing, one of the constraints to trade in West Africa is the quality of transport and the related cost of transportation and logistics including Non-Tariff Barriers that jeopardize competitiveness of West African products as compared to imported goods.  Most of the time several goods imported from out of the continent have been more competitive than the intra WAEMU products.

The main research question is on the impact of transport and logistical cost on intra-WAEMU trade. The paper analyzes the determinants of intra-WAEMU trade in agricultural products and therefore the variables on which policymakers could act to promote intra-regional trade. The analysis uses panel data in a gravity model for the period 2001-2012 covering height (8) West African Countries. The results indicate that the two gravity factors meaning the level of development measured by GDP as well as the distance are highly significant at 1% with the expected signs.

As far as the three variables added in the extension of the model, meaning population, Foreign Direct Investment and the level of integration, are concerned, FDI have a strongly positive effect at 1%, population has a negative impact at 5% and the level of integration has a positive but non-significant effect on the intra-regional trade in agricultural goods. The level of development measured by the GDP is strongly positive

Overall, a 1% increase in GDP leads to 1.2% increase in intra-regional export of agricultural goods while a 1% increase in the distance leads to 2.3% decrease in intra-regional trade.   As for FDI, a 1% increase in FDI leads to 0.2 increase in intra-regional export. The negative effect of the population is consistent with the Lindert Hypothesis according to which countries of similar level of development trade among themselves. The level of integration has a positive effect but non-significant probably because the eight (8) countries considered belong all to WAEMU.

These results call for some policy recommendations including the following:

-Construction/modernization of West African Corridors to facilitate connection among Wes African Countries

-The implementation of structural reforms in West Africa that can make the West African environment more attractive for Foreign Direct Investment

-This suppose that some of the governance issues have been resolved including the conflicts/wars, the security issues (including Islamic State in West Africa and other rebellious groups).


 


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