Implications of Isolationist Policies on Regional Integration in Africa

Abstract

The renewed isolationist rhetoric among countries in the global north has implications for global trade integration. This study investigated the effect of isolationist measures on regional trade integration in Africa. Export supply function was estimated with dynamic Markov switching model utilising data between January 2005 and December 2018 for five African countries (Nigeria, Kenya, South Africa, Uganda and Morocco). The results showed that the recent isolationist policies has made Kenya and Uganda to conduct more of intra-African trade; Uganda and South Africa to be more integrated to their regional economic trade blocs; and has also generated significant shift in trade direction of Nigeria, South Africa and Morocco in favour of non-traditional extra-African trade. The key drivers of intra-Africa trade integration are industrial production and relative prices. Hence, African countries need to deepen and synchronise industrial policies, target low inflation and reform their equity markets to foster higher industrial performance which is required for deeper intra-African trade integration.