THE SHIFT TO LIBERALISATION AND
THE AFRICAN ECONOMY
ESTHER F. GOLAKAI/ IPE/ 2014!"

INTERNATIONAL ACKNOWLEDGEMENT OF STATUS QUO! There has been widespread acknowledgement of a “crisis” inAfrican development.

! (It has been called: Stagnant, Non-performing, Regressive)! In clarifying reasons for this, theories have ranged from:! Poor Governance/ Low Democracy/ Conflict/ Latentindustrialisation/ Difficult Environmental conditions! While it is generally agreed that all these factors play a role- by far

the most contentious area in correctly diagnosing (& thereforetreating) this ‘crisis of development’ has been whether economic
structural reforms undertaken in previous decades have impacted
negatively on African development. In particular, the area of trade ishighlighted for this study, to investigate whether “Free Trade” andpresent day trade liberalisation policies can have an effect oferadicating or exacerbating the problem.

! Free Trade: The “Unregulated operation of market forces acrossborders”; also defined as “International trade (i.e. imports andexports) left to its natural course without tariffs, quotas, or otherdomestically imposed restrictions.”

HYPOTHESIS! H0: Free Trade favour strong economies over weak ones, andcreates imbalances that widen disparities instead of convergence! H1 Trade Liberalisation creates an even market platform that ismutually beneficial to all economies, and creates minimal diversities
between economies at best.

! Prominent Arguments for Free Trade! Trade liberalisation argues for the increase in market activity by:

Removing barriers to trade such as quotas, tariffs, subsidies! Giving poorer countries access to international markets, incentive todiversify their exports, increase imports, and wean off aid! Encouraging a competitive approach to market expansion byincreasing FDI, which in turn will boost GDP & growth! Domestic consumers benefit from a wider range of goods &services.

! Goods sold brings expansion to a nations foreign currency reserve

PROBLEM STATEMENT! Trade- especially more liberalised, globalised trade subject to fewer

government regulations, subsidies and tariffs- has been aggressively
advanced as one of the most frequently recommended and ‘fail-safe’
methods of policy reform that African countries should implement toturn the tide on rising inequality, endemic poverty, and a generally
abysmal quality of life.
! However, these economies are often hampered by macroeconomic

imbalances, rooted and growing poverty levels, high dependence on
debt, and a contemporary level of external involvement in policy
which is not present in developed nations- these factors present aunique set of features for consideration in the matter of the shift toFree Trade.
! Given the commonalities of African countries with regard to aparticular set of factors, would the acceptance of Free Trade regimes
be a beneficial (positive) or detrimental (negative) policy shift?

ANTICIPATED VALUE OF RESEARCH! The international norms informing economic policy in andbetween states have undergone a radical transformationin the last 40 years.
! The emphasis on globalised trade policy, based on theidea that convergence and interdependence are primarymeans of reducing conflict, encouraging specialization
within nations, and realizing mutual gains from exportimport parity, have left little room for countries to pursue
the national agenda where necessary, or opt out of a
global trade regime to shape domestic policies which set
forward on the basis of pressing national interests

RESEARCH PARAMETERS! How do historical, exogenous factors contribute to aneconomy’s current state?
! How do historical, SAPs contribute to an economy’scurrent state?
! How does conflict affect the suitability to international

trade? How does macroeconomic disequilibria affect thestatus of trade? How does high public & external debt
affect macroeconomic health?
! How does the aggregate snapshot of an economy, once

established according to the above-listed paradigms,
give an indication of whether trade liberalisation isrecommended in the case of that country?

DATA ANALYSIS! An initial sample of 54 countries was used, and reduced bycertain equal requirements to 48, which were then randomly
selected, and finally reduced to 25 countries.
! Parameters:! Countries that are sovereign and recognised by all international

governments: (54)! Countries that were traditionally identified as one African nation: (52)
! Countries that are members of the African Union: (48)
! 3 random outputs of 48 were then reduced to a final 25.
! Data was collected from the following sources: World Mundi Index,UNCTAD, IMF, WB, WTO Working Papers, Fact Sheets and Country
Statistics. Data listed in the final paper for Literature Sources were also
be assessed and employed.

FINDINGS! Factors like war, debt, and forced structural adjustments,

affect the robustness of the trading regime in a country! However war/ armed conflict does not always have theexpected effect on trade. It can cause it to grow very
rapidly even though, because it is outside of thelegitimate state mechanism, the gains are wasted andused for the benefit of a sliver of the population.
! Conventional wisdom in liberal economic theorsy has

greatly deviated from the historical trajectory, leaving
modern day states that want to realise gains from trade
stuck with “laissez-faire” open market advice that was
not relied on by developed countries for their ownadvancement.

Has Policy Really Changed?

CONCLUSION! The results of this study would indicate that internal

macroeconomic coordination is required in the areaof policy, developed more in tandem with the precise
needs of individual states rather than conductedfrom a distanced, assumption model of what should
happen is a certain recipe is applied. It is not at all
impossible for developing nations of Africa toregenerate over time into dynamic liberalised
economies that are well integrated into the global
market, but ratifying first and working the details out
later is not a wise approach for such a vastlydifferent group of countries.

SAMPLE OF SOURCES! Trade Liberalisation And Economic Performance: An Overview,

L. Alan Winters (2004)! What Did Structural Adjustment Adjust? The Association Of

Policies And Growth With Repeated IMF And World Bank
Adjustment Loans, William Easterly (2003)! The Globalisation Paradox; Dani Rodrik (2011)! A New International Order; Fair Redistribution Of World

Resources; J Singh (1977)! Fifty Years is Enough: The Case Against the World Bank andthe International Monetary Fund; Danaher & Yunus (1999)! Democracy and the Washington Consensus; Williamson J.

(1993)