Rethinking the Africa-China Trade: Some Policy Considerations and Implications

Abstract

Trade between China and Sub-Saharan Africa (SSA) is characterized by China’s importing mining and extraction from SSA and SSA’s importing manufactured goods from China. We perform accounting and simulation exercises to analyse how trade policy and productivity shocks will reduce SSA's dependency on raw material export to China. Scenarios include tariff elimination by China, common external tariff in SSA, and free regional trade in SSA. We also include shifts in labour productivity in SSA’s manufacturing sectors and simulate technology spillover from SSA imports from China. Results show that tariff elimination by China increases SSA’s employment and welfare with limited effects on China. Raising tariffs on manufactured goods from China will reduce welfare and employment by harming consumers and the agriculture sectors dependent on intermediate goods from China. Increase in labour productivity and technical progress in SSA’s manufacturing sectors are welfare improving, but will not alter the high share of mining and extraction export to China.