Does Trade Facilitation Promote Bilateral Trade in Sub-Saharan Africa? Policy and Issues

Abstract

The chapter analyzes the impact of trade facilitation on bilateral trade flows within sub-Saharan Africa to help appreciate the need to formulate and implement trade facilitation policies to promote the integration of developing countries into the global trading system and international markets. The study employs country-specific data for business environment, information and communication technology, port efficiency and infrastructure for 29 countries over the period (2004–2014). Using an augmented gravity model, findings from the study show that a well-regulated business environment is vital for African countries to fully gain from other trade facilitation measures. It also provides evidence of the marginal effect of air transport as an alternative means to move goods across borders. The study also highlights the need for government and policymakers to prioritize ICT as it significantly expands trade particularly with regards to the contribution of the private businesses investment in ICT. The inclusion of zero trade flows in the analysis also brings to light the need for African countries to ensure governments are accountable in all aspects of their dealings by adopting strategies that would ensure a well-regulated business environment. The results reveal the essence of appropriate checks and verification procedures at ports and other revenue collection posts to control for inefficiencies in the system particularly corruption. Finally, it provides evidence indicating that enhanced port efficiency has a positive effect on trade volumes, especially with custom clearance procedures and the ease at which competitively priced shipments could be arranged for transport. Recommendations emanating from findings of the study indicate that improvement in infrastructure quality will bring huge benefits in terms of intra-regional trade. The essence of the study is to provide useful information to guide policymakers in formulating and implementing policies targeted at improving these trade indicators to promote bilateral trade among SSA countries.KeywordsTrade facilitationInformation and communication technologySSABusiness enviromentInfrastructure