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Tariff Preferences As a Determinant for Exports from Sub-saharan Africa

Discussion paper by UNCTAD, 2013

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This paper examines the impact of market access conditions as a determinant of exports from sub-Saharan Africa. The analysis focuses on tariffs and considers both direct market access (the tariffs faced by exports from sub-Saharan Africa) and relative market access conditions (the preferential margin of African exports relative to that of other competitors). The results find that both direct market access conditions and relative market access conditions matter, although relative market access conditions matter in a larger number of cases. This suggests that the exports from the countries of sub-Saharan Africa often face more competition from foreign competitors than from domestic industries in their destination markets. It also finds that, given the relatively large tariffs currently applied to intraregional trade, complete tariff liberalization within the countries of sub-Saharan Africa represents a significant incentive for intraregional trade.

U n i t e d n at i o n s C o n f e r e n C e o n t r a d e a n d d e v e l o p m e n t


TARIFF PREFERENCES AS A DETERMINANT
FOR EXPORTS FROM SUB-SAHARAN AFRICA


POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES
STUDY SERIES No. 60













POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


STUDY SERIES No. 60






TARIFF PREFERENCES AS A DETERMINANT


FOR EXPORTS FROM SUB-SAHARAN AFRICA




by



Alessandro Nicita


UNCTAD, Geneva


and


Valentina Rollo
Graduate Institute of International
and Development Studies, Geneva














UNITED NATIONS
New York and Geneva, 2013


U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T





ii


Note


The purpose of this series of studies is to analyse policy issues and to stimulate discussions in
the area of international trade and development. The series includes studies by UNCTAD staff and by
distinguished researchers from academia. This paper represents the personal views of the authors
only, and not the views of the UNCTAD secretariat or its member States.



This publication has not been formally edited.



The designations employed and the presentation of the material do not imply the expression of
any opinion whatsoever on the part of the United Nations Secretariat concerning the legal status of any
country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or
boundaries.

Material in this publication may be freely quoted or reprinted, but acknowledgement is
requested, together with a reference to the document number. It would be appreciated if a copy of the
publication containing the quotation or reprint could be sent to the UNCTAD secretariat at the following
address:



Alessandro Nicita


Trade Analysis Branch
Division on International Trade in Goods and Services, and Commodities


United Nations Conference on Trade and Development
Palais des Nations, CH-1211 Geneva 10, Switzerland


Tel: +41 22 917 5685; Fax: +41 22 917 0044
E-mail: alessandro.nicita@unctad.org






Series Editor:
Victor Ognivtsev
Officer-in-Charge


Trade Analysis Branch
DITC/UNCTAD













UNCTAD/ITCD/TAB/61









UNITED NATIONS PUBLICATION


ISSN 1607-8291









© Copyright United Nations 2013
All rights reserved





iii


Abstract




This paper examines the impact of market access conditions as a determinant of exports from


sub-Saharan Africa. The analysis focuses on tariffs and considers both direct market access (the tariffs


faced by exports from sub-Saharan Africa) and relative market access conditions (the preferential


margin of African exports relative to that of other competitors). The results find that both direct market


access conditions and relative market access conditions matter, although relative market access


conditions matter in a larger number of cases. This suggests that the exports from the countries of


sub-Saharan Africa often face more competition from foreign competitors than from domestic


industries in their destination markets. We also find that, given the relatively large tariffs currently


applied to intraregional trade, complete tariff liberalization within the countries of sub-Saharan Africa


represents a significant incentive for intraregional trade.







Keywords: Trade policy: international trade flows; tariffs; sub-Saharan Africa


JEL Classification: F1

















iv






Acknowledgements





We wish to thank Richard Baldwin and Nicolas Berman for helpful comments and


discussion. We also would like to thank participants at the United Nations Conference on


Trade and Development (UNCTAD) and the World Trade Organization (WTO) seminars for


their comments. The authors accept sole responsibility for any errors remaining. The views


expressed in this paper are those of the authors and do not necessarily represent the views


of the UNCTAD secretariat or of UNCTAD members.







v


Contents




1 INTRODUCTION .......................................................................................................................... 1




2 DATA AND DESCRIPTIVE STATISTICS .................................................................................... 2




2.1 Export performance and market access of the countries of sub-Saharan Africa ............. 3




3 EMPIRICAL APPROACH ............................................................................................................ 8




4 RESULTS ..................................................................................................................................... 9




4.1 Economic results ............................................................................................................... 9


4.2 Regional integration and probability of exports ............................................................... 13




5 CONCLUDING REMARKS ........................................................................................................ 16




REFERENCES ......................................................................................................................................... 17






vi


Figure




Effects of regional integration on the probability of exporting ................................................................. 15






Tables




Table 1. Exports from sub-Saharan Africa in 2011 ............................................................................. 4


Table 2. Growth of exports from sub-Saharan Africa, 2001–2011...................................................... 4


Table 3. Number of product-destination export flows in 2011 ........................................................... 5


Table 4. Tariff and RPM faced by exports from sub-Saharan Africa, by destination .......................... 6


Table 5. Tariff and RPM faced by exports from sub-Saharan Africa, by type of flow ......................... 7


Table 6. Probit estimates for the effect of direct and relative market access conditions


on export status ..................................................................................................................... 9


Table 7. Probit estimates for export survival and of initiating new trade flows ................................. 11


Table 8. Robustness checks with alternative estimation models and data sample .......................... 12


Table 9. Robustness checks with alternative specifications of the market access


variables and omitting small trade flows ............................................................................. 13


Table 10. Change in tariffs and RPM (simple average between 2001 and 2011) ............................... 14












Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 1


1. INTRODUCTION


Exports originating from sub-Saharan Africa are highly concentrated in a very limited number


of products, largely raw materials and agricultural commodities, which are exported to a limited


number of destinations, mainly developed countries. The lack of product and geographic diversification


of exports from sub-Saharan Africa represent a concern for the sustainability of an export-led


economic growth strategy. In practice, the export growth of the last decade has been mostly due to


the increase in value and/or volumes of pre-existing trade flows (the intensive margin). Trade growth


due to new trade flows (the extensive margin), has been more modest.1 The limited export


diversification of countries in sub-Saharan Africa is due both to the low number of new export products


and geographic destination introduced each year and to the generally low survival rate of the majority


of export flows. In practice, although some diversification takes place, it is not sustained in the long


term. Thus, the exports of countries in sub-Saharan Africa remain not diversified.




Although higher survival rates are essential for achieving aggregate export growth (Besedes


and Prusa, 2006 CJE; Brenton, Pierola, and von Uexkull, 2009), trade at the extensive margin is very


important for the sustained economic growth of poor countries. In fact, export diversification is


essential to reduce volatility associated with external economic shocks (Cadot, Carrere and Strauss-


Khan; 2011).




Export diversification is problematic for many developing countries as it requires


competitiveness in different sectors and foreign markets. The literature has pointed to several


constraints that developing countries face in achieving export diversification, many of which are often


more severe for sub-Saharan Africa countries (Rodrik, 1998; Edward and Alves, 2006; Johnson, Ostry


and Subramanian, 2007). These constraints include a natural resource curse (Deaton, 1999), high costs


of starting and conducting cross-border transactions (Djankov, Freund and Pham, 2010; Freund and


Rocha, 2009), weak rule of law (Meon and Sekkat, 2004), inadequate infrastructures, as well as lack of


regional growth poles (Collier and Venables, 2008), poor implementation of trade facilitation


mechanisms (Wilson and Portugal-Perez ,2008; Dennis and Shepherd, 2011), unfavourable trade


policies (Hoekman, Ng and Olarreaga, 2002; Shepherd, 2010) and the lack of supply capacity


(Fugazza, 2004; Redding and Venables, 2004; Mayer and Fajarnes, 2008).




Our study contributes to the better understanding of the determinants of exports from sub-


Saharan Africa by focusing on the role of market access, in particular tariffs. While exports from sub-


Saharan Africa often face relatively low tariffs in high-income markets, these exports generally face


high tariffs in developing countries and even regionally. In this regard, the system of trade preferences


is an important determinant of exports because it creates both favourable and unfavourable conditions


for sub-Saharan Africa exporters. On the one hand, preferential access in high-income markets


generally provides the countries of sub-Saharan Africa with favourable preferential margins. On the


other hand, this is not the case in many developing markets where those countries often face relatively


higher tariffs vis-à-vis foreign competitors. Diverse market access conditions are found not only across


destinations but also across typologies of products. While exports of primary products from sub-


Saharan Africa face very low tariffs in most markets, the market access conditions faced by


intermediate and especially consumer products are generally more restrictive as well as more varied


across destinations.




The empirical approach of this paper, examining whether market access conditions affects


export flows, is based on a probabilistic model. In particular, one contribution of this paper is that it


assesses not only the impact of the tariff on the probability of exports, but also the impact of the


preferential margin relative to foreign competitors. The importance of the system of preferences in


explaining trade flows relates our paper to the literature on relative preferential margins (Carrere, 2011;


Hoekman and Nicita, 2011; Fugazza and Nicita, 2013). Because diversification requires not only entry




1 Pre-existing trade flows are defined product-destination flows which were already occurring both in 2001 and 2011. New
flow ore those that were occurring in 2011 but not in 2001.





2 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


into new export products and markets but also the survival of pre-existing export flows, in the analysis


we also explore whether market access conditions affect both the probability of initiating new trade


flows and that of survival for pre-existing trade flows. We also distinguish whether these effects are


different across primary, intermediate and consumer products. Finally, the analysis of this paper is


used to quantify the extent to which a free trade area in sub-Saharan Africa would enhance regional


trade opportunities.




The results indicate that market access conditions have significant, although small,


implications for exports from sub-Saharan Africa. We find that direct market access conditions (the


tariffs faced by exporters) contribute only to the probability of initiating new trade flows and not to the


probability of the survival of pre-existing trade flows. On the other hand, we find that relative market


access conditions (the gap between the tariff faced by exporters and the tariff applied to foreign


competitors) matter in all cases. We also find a positive effect on the probability of trading related to a


hypothetical regional free trade area among the countries of sub-Saharan Africa.




The reminder of this paper is as follows. Section 2 presents the data and provides some


descriptive statistics for exports and market access in sub-Saharan Africa. Section 3 presents the


estimating framework, assessing the extent to which market access affects the probability of exports


from sub-Saharan Africa. Section 4 discusses the results and Section 5 concludes.




2. DATA AND DESCRIPTIVE STATISTICS


To assess the impact of market access conditions on exports from sub-Saharan Africa, this


paper utilizes detailed bilateral data at the 6-digit level of the Harmonized System (HS88) classification


comprising 28 sub-Saharan African exporting countries2 and 94 importing countries (33 of which are in


sub-Saharan Africa). The trade data is from the UNSD COMTRADE database, and the tariff data is from


UNCTAD TRAINS database. Trade agreement data originates from the NSF-Kellogg Institute Database


on Economic Integration Agreements (EIA)3. The data utilized for the construction of the exchange rate


variable originates from UNCTAD Globstat.




For the purpose of this paper, we organize the data in several ways. First, as the analysis relies


on changes in trade and trade policy, we use data at only two points in time. In doing so we use two-


year average data based on 2000-2001 and 2010-2011.4 The use of the average will minimize


omissions and gaps in the data, which are not uncommon for the statistics on the countries of sub-


Saharan Africa.5 We also omit any trade flow of little magnitude (less than $10,000). We split the data


into three distinguished data sets, each covering a broad product group: primary products, comprised


of about 330 HS 6-digit products; intermediate goods, comprised of almost 2,500 products; and


consumer goods, almost 1,200 products.6 This split permits the investigation of possible differences in


the effects of the covariates of interest across these broad product groups. The splitting of the data set


is also necessary for computational purposes as a data set with a full product range would make the


estimation of a fixed-effect estimation computationally challenging. Finally, we further reduce the data




2 The countries included as exporters are: Benin, Burkina Faso, Botswana, Cameroon, Chad, Côte d’Ivoire, Ethiopia,
Gabon, Ghana, Kenya, Madagascar, Malawi, Mali, Mauritania, Mozambique, Mauritius, Namibia, Niger, Nigeria, Rwanda,
Sierra Leone, Senegal, South Africa, Swaziland, Togo, Uganda, United Republic of Tanzania and Zambia.


3 The EIA Data Base is available at http://nd.edu/~kellogg/faculty/fellows/bergstrand.shtml. As our sample goes to 2011
we update the data for the cases where the countries in our sample signed an agreement after 2005 (i.e. Rwanda and
Burundi entering the Eastern African Community).


4 For simplicity, in the reminder of the paper we refer to these averages as 2001 and 2011 unless otherwise specified.


5 In constructing bilateral trade we mainly use more reliable import data. We use export data only when the importing
country does not report any statistics.


6 The classification across primary, intermediate and consumer goods is based on the Broad Economic Categories (BEC)
classification.







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 3


set by not including HS 6-digit products which do not have enough within-product variance (products


that are not exported at all or are exported only by one country in our sample).7




Before describing the data, we briefly discuss the two variables of interest used in the analysis.


Market access conditions are captured by two variables: the first variable captures direct market


access conditions (the tariff faced by exports), and the second variable captures relative market access


conditions (the tariff faced by an exporter relative to the tariff faced by foreign competitors). Both


measures are calculated for each HS 6-digit product at the bilateral level. The first measure, direct


market access, is simply the bilateral applied tariff at the HS 6-digit level. The relative market access


condition is measured by the relative preferential margin (RPM) (Hoekman and Nicita, 2011; and


Fugazza and Nicita, 2013). The RPM takes into account that preferential rates granted to a given


country, although lower than most-favoured nation (MFN), could still penalize the given country relative


to other countries that benefit from even lower preferential tariffs. The RPM is calculated as the


difference, in tariff percentage points, that a given good faces when exported from a given country


relative to being exported from any other.8 In formal terms the RPM is calculated as follows:




jv
v


v


RPM jkg
v


vkg


v


vkgvkg


jkg ≠−=



,


,


,


,,


,
τ


τ


t


t


(1)


where the subscript j denotes the exporter, k denotes the importer, v denotes countries competing with


country j in exporting to country k, and g denotes the HS 6-digit product; and where tv is export value
and where τ is the bilateral tariff. In other words, the RPM for a product g exported from country j to
country k is the difference between the average HS 6-digit (trade weighted) tariff applied by country k


to imports originating from each country v and the direct tariff applied by country k to country j.




2.1 EXPORT PERFORMANCE AND MARKET ACCESS OF THE COUNTRIES OF


SUB-SAHARAN AFRICA


Exports from sub-Saharan Africa are concentrated in a limited number of products, largely


minerals and agricultural commodities. For the 28 countries in our sample primary products accounted


for about two thirds of total exports from sub-Saharan Africa in 2011, or about $105 billion. Exports of


semi-processed intermediate goods accounted for about $55 billion. Consumer goods were only about


$16 billion. Table 1 reports some statistics on exports from sub-Saharan Africa for the three broad


categories of goods.






7 Omitting these HS 6-digit products does not affect the econometric results as they would be captured by the fixed effect
model.


8 Note that any measure of preferential margin could be positive or negative, depending on the advantage or disadvantage
of the country with respect to other competing exporters. The RPM varies between the negative of the tariff trade
restrictiveness index (maximum negative bias, i.e. only one trading partner faces tariffs while all other exporters enjoy duty
free access) and the MFN tariff rate (maximum positive bias, i.e. only the trading partner enjoys duty free access while all
other exporters face MFN tariffs). RPM is exactly zero when there is no discrimination (i.e. the importing country applies
identical tariffs across all existing trading partners). In summary, the RPM provides a measure of the tariff advantage (or
disadvantage) provided to the actual exports from country j to country k, given the structure of the tariff preferences of
country k.





4 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Table 1


Exports from sub-Saharan Africa in 2011


Primary Intermediate Consumer


Exports (billion USD) 105 55 16


Percentage to:


Developed countries 73% 64% 65%


Non-regional developing countries 21% 19% 4%


Sub-Saharan Africa 5% 17% 31%




In terms of geographic diversification, exports from sub-Saharan Africa are largely bound to


developed countries markets (mainly the European Union). However, non-regional developing


countries, especially in Asia, represent an increasingly important export market. Intraregional trade in


sub-Saharan Africa is very limited and accounts for only 5 per cent of primary goods exports and about


17 per cent of intermediate exports. Consumer products are exported relatively more within the sub-


Saharan Africa region (31 per cent), but these represent in value only about $5 billion.




Although these figures may not appear impressive, exports from sub-Saharan Africa greatly


increased in the last decade. For the 28 countries in sub-Saharan Africa in our sample, total exports


went from about $60 billion in 2001 to more than $180 billion in 2011. Most of the growth in exports


has been in primary products; exports of intermediate and consumer products have also grown but at


a slower pace. Table 2 reports some statistics on the increase in exports from sub-Saharan Africa.


Table 2


Growth of exports from sub-Saharan Africa, 2001-2011




Primary Intermediate Consumer


Growth in trade value 185% 136% 93%


at the intensive margin 152% 98% 66%


at the extensive margin 34% 38% 27%


Growth in the number of trade flows 22% 27% 24%




Percentage of exports at the extensive margin


Developed countries 6% 15% 11%


Non-regional developing countries 33% 16% 39%


Sub-Saharan Africa 15% 20% 17%


All countries average 12% 16% 14%




One important feature of export growth in sub-Saharan Africa is that export diversification has


been largely absent. The increase in exports has been mostly due to the intensive margins (the


increased value and/or volume of pre-existing product-destination flows). Trade growth at the


extensive margin (the increase in value due to new product-destination flows) has been much more


modest. In 2011, more than three-quarters of export growth in sub-Saharan Africa was in products and


destinations that were already exported to in 2001. In aggregate levels, the growth of export flows in


2011 at the extensive margin was around 13 per cent, with most new trade flows occurring vis-à-vis


non-regional developing countries.




The lack of diversification is generally observed also at the level of exporters. Table 3 reports


the number of product-destination flows for each country in 2011. Most countries export only a very


limited number of products to a very limited number of destinations. The median number of export







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 5


flows is 157 product-destination flows for primary, 320 for intermediate and 312 for consumer


products. Diversification is largely related to the degree of economic development, with low-income


countries generally less diversified than middle-income and larger countries.


Table 3


Number of product-destination export flows in 2011




Primary Products Intermediate Products Consumer Products



New


Flows
Surviving


Flows
Disapp.
Flows



New


Flows
Surviving


Flows
Disapp.
Flows



New


Flows
Surviving


Flows
Disapp.
Flows


Benin 55 32 17


44 69 18


43 34 15


Botswana 28 6 8


221 33 8


88 84 18


Burkina Faso 40 37 27


94 51 20


69 51 24


Cameroon 98 86 122


235 131 155


186 97 61


Chad 14 21 21


28 4 2


5 2 0


Cote d'Ivoire 124 116 141


419 374 357


257 241 257


Ethiopia 87 28 77


122 83 34


226 45 45


Gabon 46 33 55


161 75 68


37 17 5


Ghana 117 88 107


599 245 275


397 128 194


Kenya 232 119 166


1379 441 649


1003 335 592


Madagascar 96 84 106


129 124 78


476 292 522


Malawi 86 36 98


74 26 16


82 104 73


Mali 47 53 23


95 113 25


64 68 22


Mauritania 26 15 10


34 32 11


58 92 83


Mauritius 54 26 27


664 215 118


699 463 618


Mozambique 174 58 52


192 66 55


107 57 42


Namibia 57 33 35


168 70 21


152 102 99


Niger 26 13 1


70 69 5


49 30 5


Nigeria 131 103 116


497 283 199


257 92 122


Rwanda 31 20 21


17 12 2


25 9 5


Senegal 76 51 38


261 98 34


309 132 201


Sierra Leone 55 21 10


156 96 15


65 62 8


South Africa 670 692 969


7541 5191 8142


3187 2332 4159


Swaziland 19 4 4


284 183 59


212 116 86


Togo 54 53 45


177 57 25


163 74 41


Uganda 151 44 89


330 40 57


275 48 70


United Republic
of Tanzania


238 97 140 498 145 76 347 134 147


Zambia 128 57 71


258 175 84


89 40 28



Average (simple) 106 72 93



527 304 379



319 189 269


Median 67 41 49


185 90 45


158 88 66




An important characteristic of the export structure that is common across many countries in


sub-Saharan Africa is the relatively large share of new and disappearing flows. This indicates that


although some diversification takes place (as shown by the relatively large number of new trade flows),


it is not sustained in the long term (as shown by the large number of disappearing flows). Thus the


overall number of product-destination export flows remains relatively small. This suggests that to better


understand the poor diversification of exports from sub-Saharan Africa, it is important not only to


examine what determines the occurrence of new flows, but also what determines the survival of pre-


existing export flows.




Although there are numerous reasons relating to the pattern of diversification of exports from


sub-Saharan Africa, we investigate the role of market access. Exports from sub-Saharan Africa face


very different market access conditions depending on their destination. On the one hand, they





6 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


generally benefit from duty-free treatment in the markets of many developed countries.9 On the other


hand, a large number exports from sub-Saharan Africa still face relatively high tariffs, especially on the


exports of manufacturing to developing countries. In addition, while preferential access in high-income


markets generally provides sub-Saharan Africa with substantial preferential margins, this is not the


case in many developing markets where the countries of sub-Saharan Africa often face relatively higher


tariffs vis-à-vis foreign competitors. In practice, the structure of preferences provides exporters in sub-


Saharan Africa with favourable market access vis-à-vis foreign competitors in developed countries,


while penalizing exporters in sub-Saharan Africa in many non-regional developing country markets,


especially in those countries that are part of extraregional trade agreements, such as ASEAN or


MERCOSUR. Table 4 reports the tariffs and RPM faced by exports from sub-Saharan Africa in 2011


and their change since 2001 (in parenthesis).


Table 4


Tariff and RPM faced by exports from sub-Saharan Africa, by destination




Primary Intermediate Consumers


Tariff


Developed Countries 0.7% (0.3) 0.3% (-0.5) 1.0% (-5.2)


Non-Regional Developing Countries 0.6% (-2.4) 1.5% (-5.4) 7.2% (-7.2)


Sub-Saharan Africa 1.5% (0.1) 2.4% (-3.6) 3.2% (-6.6)


All Countries 0.7% (0.0) 0.9% (-1.1) 1.9% (-5.2)




RPM


Developed Countries 0.0% (0.0) 0.1% (0.2) 1.4% (3.0)


Non-Regional Developing Countries 0.0% (0.9) 0.0% (1.7) -0.5% (2.4)


Sub-Saharan Africa 0.3% (0.0) 4.3% (1.8) 10.8% (4.3)


All Countries 0.0% (0.1) 0.8% (0.6) 4.2% (4.2)


Note: changes from 2001 to 2011 are in parenthesis. Figures are trade weighted averages.






Market access conditions for the countries of sub-Saharan Africa have greatly improved in the


last decade, particularly with respect to access to the markets of non-regional developing countries.


However, largely because of preferential schemes, as of 2011 the most favourable conditions for


exports from sub-Saharan Africa are still found in the markets of developed countries. In those markets


exports from sub-Saharan Africa face virtually zero tariffs on intermediate products, an average 0.3 per


cent tariff for primary and a tariff of 1 per cent for consumer products. In spite of recent improvements,


the countries of sub-Saharan Africa still face higher tariffs in the markets of developing countries. Most


unfavourable conditions are for extraregional exports of consumer products, which face an average


tariff of almost 7.2 per cent. However, tariffs are also relatively high in the case of intraregional trade,


especially for intermediate and consumer products. In regard to relative market access, the system of


preferences generally provides the countries of sub-Saharan Africa with positive tariff margins vis-à-vis


foreign competitors, both in developed countries and in regional markets, but not in non-regional


developing countries, where the RPM is virtually zero or even negative for consumer products.




The data shows an improvement in market access conditions for sub-Saharan Africa across


pre-existing, new and disappearing export flows. Table 5 reports simple average statistics on tariffs


and RPM for each of these flows.






9 Because of their least developed country status, many countries in sub-Saharan Africa are beneficiaries of preferential
access in high-income markets such as the United States of America or the European Union.







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 7


Table 5


Tariff and RPM faced by exports from sub-Saharan Africa, by type of flow




Primary Intermediate Consumer


Tariff


New flows 3.5% (-1.6) 4.4% (-3.3) 8.1% (-5.3)


Continuing flows 1.3% (-1.2) 3.9% (-3.0) 5.9% (-5.2)


Disappearing flows 1.0% (-0.8) 2.2% (-1.6) 2.7% (-3.6)


RPM


New flows -0.7% (0.4) -0.3% (1.3) -0.7% (2.1)


Continuing flows 0.5% (0.3) 1.8% (1.2) 2.5% (3.1)


Disappearing flows 0.4% (0.0) 1.9% (0.4) 5.0% (1.9)


Note: changes from 2001 to 2011 are in parenthesis. Figures are trade weighted averages.




In regard to both direct and relative market access conditions, the data shows no clear


difference between new and continuing flows. However, disappearing flows appear to have


experienced a smaller reduction (increase) in tariffs (RPM), possibly suggesting a correlation between


these indicators and the probability of export. Although market access conditions faced by the


countries of sub-Saharan Africa have on average improved, there are a substantial number of products


for which market access conditions have not changed or have even deteriorated, both in direct and


relative terms. In numbers, direct market access conditions have improved for around 40 per cent of


flows for consumer and intermediate products and about 26 per cent in the case of primary products.


On the other hand, tariffs have been increasing in a very small number of cases (less than 8 per cent of


cases for consumer and intermediate goods and about 5 per cent for primary products). In the majority


of cases tariffs have not changed. The observed no change in the applied tariff is often related to the


already large number of products (especially in primary products) where tariffs were already zero in


2001. As the change in RPM depends not only on the applied tariff but also on competitors’ tariffs, the


RPM is subject to more variance than the applied tariff. In this regard, we observe about an equal


number of instances where the RPM has increased and decreased, although there are still a large


number of cases where there is no change in RPM, especially in primary products. The observations


with no changes in RPM are largely related to the products already facing a zero MFN tariff in 2001.




In terms of correlation between the two market access measures, any reduction (increase) in


tariffs is generally reflected in an improvement (deterioration) in the RPM. However, as the RPM is


related to the tariff applied to other competitors, the relationship between the two measures does not


always hold. In practice, we observe a substantial number of cases (about 10 per cent) where an


improvement in direct market access conditions is not accompanied by an improvement in relative


market access conditions. This implies that the competitive benefit of the lower tariff has been eroded


by the even lower reduction in the tariff applied to other foreign competitors (say, because a reduction


in the MFN tariff was accompanied by a trade agreement among third countries). Similarly, there are


some cases (although quite limited in number) where the higher tariff is not accompanied by


deterioration of relative market access conditions, implying that the negative effect of the higher tariff


has been compensated by an even higher increase in the tariffs applied to foreign competitors.






8 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


3. EMPIRICAL APPROACH


The empirical strategy to measure the impact of market access on the probability of exporting


relies on a comparative static approach. The econometric model is similar to the one used by Debaere


and Mostashari (2010), who analyse the contribution of tariffs in the extensive margin of imports of the


United States. However, our set-up has two main differences. One difference is in the panel structure.


In our data sets the analysis is based on the export structure of 28 countries in sub-Saharan Africa,


rather than on the import structure of a single country. The second is in the variables explaining market


access conditions, where we consider both tariffs and preferential margins. In summary, the


econometric model investigates whether the probability of countries in sub-Saharan Africa exporting a


product is related to changes in bilateral market access conditions, controlling for various


determinants. We use a probit estimation, where we include a number of variables and fixed effects to


control for other possible changes in the determinants of the probability of exporting.10 In practice, the


analysis relies on differences in trade patterns and trade policy variables between the beginning and


the end of our time span. In formal terms the dependent variable 1
,


t
jkgP is defined as:


[ ]01
,,


1 >= jkg
t


jkg tvP (1)


where the subscript g denotes the HS 6-digit level product, j denotes the exporter and k the importer,


while tv stands for the level of bilateral trade. 11
,


=
t


jkgP when 0, >jkgtv in 2011. The same reasoning
applies to 0


,


t
jkgP in 2001. The econometric estimation consists of comparing product-level bilateral


trade patterns between these two time periods 0t and 1t , accounting for differences in trade policy
and other determinants. More formally, the estimating equation is given by a model in difference:11




jkgkjgjkjk


k
jkg


j
jkgjkgjkg


t
jkg


t
jkg


ERAG


tvtvRPMPP


,87


,6,5,4,3,21,


)ln(


)ln()ln()1ln(01


εϕφθββ
βββτβββ


+++++∆+


∆+∆+∆++∆++= ∑∑
(2)




In equation (2), the probability of a non-zero product-level bilateral trade flow in ( 1
,


t
jkgP ) depends on the


existence of trade in 0t (
0
,


t
jkgP ) and on changes (between the two periods) in the trade policy variables


and in other factors that may have influenced the likelihood of bilateral trade.




In this specification the trade policy variables of interest are the change in the log of the


bilateral applied tariff jkg ,1ln( τ+∆ ) and the change in the relative preferential margin ( jkgRPM ,∆ ).
The specification includes a number of control variables. Changes in product-country specific effects


on supply are controlled for by adding the change in exporter j total exports of product g


(∑∆
k


jkgtv ,ln ). Similarly, changes in demand conditions in the importing countries are controlled for


by adding a change in the total imports of importer k of product g (∑∆
j


jkgtv ,ln ). A dummy variable




10 As explained in Greene (2004), the fixed effects estimator shows a large finite sample bias in discrete choice models
when T is very small. Nevertheless Greene shows that the bias is persistent but it drops off rapidly as T increases to 3 and
more. Since our panel is not of small size, this is not an issue in our case.


11 In the difference model the dependent variable is 01
,,


t
jkg


t
jkg PP − . As we are interested in the probability of exporting in


1t we take
0
,


t
jkgP to the right hand side, thus controlling for the status of exports in 0t .







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 9


( jkAG∆ ) controls for the effect of trade agreements that have been established or modified between
the two periods. The log of the cross exchange rate )ln( jkER controls for changes in the real exchange
rate. A series of fixed effects controls for importer, exporter and product time unvarying determinants


that could affect the results. Also note that the estimation in first difference controls for unobserved


characteristics at the level of the importer-exporter-product.






4. RESULTS


In this section we first discuss the results of the estimations from the probability model


described above. Then we use the estimating coefficients and the changes in the variables of interest


to calculate to what extent further regional tariff liberalization could promote trade flow within sub-


Saharan Africa.






4.1. ECONOMETRIC RESULTS


First, we report the estimates of the probit model with fixed effects on the overall probability of


exporting. Then we make a distinction between pre-existing and newly traded goods. Table 6 reports


the results of the probit model for the three broad categories of goods: columns (1), (3) and (5) report a


specification where we only include the tariffs, while columns (2), (4) and (6) also include the RPM, so
as to capture the impact of relative market access conditions.


Table 6


Probit estimates for the effect of direct and relative market access conditions on export status




Primary products Intermediate products Consumer products


VARIABLES (1) (2) (3) (4) (5) (6)




∆log(1+tariff) -0.113*** -0.037 -0.249*** -0.056*** -0.268*** -0.065***


(0.000) (0.146) (0.000) (0.000) (0.000) (0.000)


∆(RPM) 0.253*** 0.379*** 0.272***


(0.000) (0.000) (0.000)


Status 2001 0.231*** 0.229*** 0.137*** 0.134*** 0.196*** 0.192***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Imports) 0.012*** 0.012*** 0.012*** 0.012*** 0.014*** 0.015***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Exports) 0.015*** 0.015*** 0.015*** 0.015*** 0.016*** 0.015***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆(AG) 0.054*** 0.050*** 0.038*** 0.033*** 0.032*** 0.027***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(crossrate) -0.037** -0.035** -0.054*** -0.053*** 0.008 0.008


(0.011) (0.017) (0.000) (0.000) (0.537) (0.543)




Observations 43,796 43,779 228,009 227,968 131,349 131,325


*** p<0.01, ** p<0.05, * p<0.1

Note: The coefficients represent the average marginal effects of a probit model with dummies for exporters,
importers, and products. All covariates represent the difference between 2011 and 2001.





10 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


In regard to the control variables, they are all significant and have the expected sign. The


probability of exporting from sub-Saharan Africa largely depends on whether the good was already


exported in the initial period (Status 2001). The probability of exporting also depends both on the


change in demand in the importing country, as well as on the change in supply in the exporting


country. Finally, trade agreements and the exchange rate also have a significant effect on the


probability of exporting: both the creation/deepening of a trade agreement and a depreciation of the


exchange rate have a positive effect on the probability of exporting. As per the market access


variables, the overall results indicate that both tariff and RPM have a significant effect on the probability


of exporting. Moreover, the inclusion of the RPM reduces the magnitude of the tariff coefficient,


indicating that part of the effect of the change in the tariff does not operate directly on the probability of


exporting, but works through the relative market access conditions. Although the coefficients on the


market access variables are all significant, we find small effects. More specifically, the average


marginal effect on the probability of exporting of a change in tariff is about 0.1 for primary and 0.25 for


consumer products and for intermediates. These coefficients are further reduced once we control for


the RPM. According to these results a one percentage point drop in the tariff of intermediate and


consumer products would increase the probability of exporting of about 0.06 percentage points. Direct


market access conditions are not significant for primary products. A reason for this lack of significance


is that primary products cannot be easily replaced with domestic producers in importing countries and


thus direct market access conditions are less relevant, since domestic competition is absent in this


category of goods. On the other hand RPM is significant in all cases, indicating that exports from sub-


Saharan Africa face competition from other foreign suppliers. In numbers, one unit increase in the RPM


would increase the average probability of exporting of about 0.25 percentage points for primary


products, 0.38 percentage points for intermediate products and 0.27 for consumer goods.



We now turn to investigate whether market access variables have similar effects depending on


whether trade flows are pre-existing or not. That is, whether market access differently affects the
probability of exports for the already traded products versus products that were not previously
exported. Table 7 presents the results of the benchmark specification for the three categories of goods
where the sample is split between pre-existing and new trade flows. We define pre-existing trade flows


as flows at the exporter-importer-product level that were exported in 0t and new trade flows as trade


flows that were not exported in 0t .


Because new trade flows represent the large majority of export flows from sub-Saharan


Africa, the results for new trade flows closely mimic the results for the overall sample (as per table 6),


and therefore a similar interpretation applies. Most important is to investigate whether the market


access variables similarly affect the probability of export survival for the smaller sample of pre-existing


trade flows. In fact, although fewer in number, these flows are critically important as they represent the


bulk of exports from sub-Saharan Africa in terms of value/volume. One important finding is that direct


market access conditions do not significantly affect the probability of survival of pre-existing trade


flows, but in the case of intermediate products whose coefficient is weakly significant, only at the 10


per cent significance level. One reason that may explain this result is that tariffs may not matter much


in the case of existing flows because of the large sunk costs of exporting (Baldwin and Krugman, 1989;


Alessandria and Choi, 2007, Albornoz et al. 2012). This hypothesis is also confirmed by firm-level


studies such as Bernard and Jensen (2004) and Das, Roberts and Tybout (2007), which find large fixed


costs for beginning to export. This implies that incumbent exporters could, at least to some extent,


internalize an increase in the tariff. In regard to the impact of relative market access conditions on the


probability of survival for pre-existing trade flows, the coefficient on the RPM remains significant, thus


suggesting that deterioration in relative market access conditions does play a role in determining


whether trade flows continue or are taken by foreign competitors. The above results have important


implications for exports from sub-Saharan Africa. The first is that tariffs are important, but generally


only for initiating new trade flows. Export survival of pre-existing trade flows does not appear to


depend on the change in tariffs but in the case of intermediates. However, the level of significance of


such a coefficient is marginal. Most importantly, the results suggests that many of the existing export


flows from sub-Saharan Africa may be fungible (importing countries may be able to easily switch these


from most competitive suppliers). Therefore, any change in preferential access for sub-Saharan Africa







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 11


can result in trade diversion effects.12 This also implies that any erosion of preferential margins (say,


due to the proliferation of RTAs) would imply a reduction in the probability of exports from sub-Saharan


Africa, both for existing flows and for potential flows. We will discuss some of the implications for


regional trade of these results in section 5.


Table 7


Probit estimates for export survival and of initiating new trade flows




Entry into exporting Survival


(1) (2) (3) (4) (5) (6)


Primary Intermediate Consumer Primary Intermediate Consumer




∆log(1+tariff) -0.034 -0.055*** -0.086*** -0.189 -0.136* -0.055


(0.151) (0.000) (0.000) (0.217) (0.070) (0.514)


∆(RPM) 0.221*** 0.306*** 0.206*** 0.371** 0.441*** 0.560***


(0.000) (0.000) (0.000) (0.028) (0.000) (0.000)


∆log(1+Imports) 0.009*** 0.010*** 0.012*** 0.072*** 0.057*** 0.060***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Exports) 0.012*** 0.012*** 0.012*** 0.065*** 0.057*** 0.070***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆(AG) 0.046*** 0.032*** 0.025*** 0.058* 0.016 -0.009


(0.000) (0.000) (0.000) (0.100) (0.363) (0.709)


∆log(crossrate) -0.033** -0.044*** 0.004 0.007 -0.127* 0.039


(0.012) (0.000) (0.723) (0.941) (0.068) (0.694)




Observations 38,329 205,572 115,878 4,569 19,866 12,619


Robust pval in parentheses


*** p<0.01, ** p<0.05, * p<0.1

Note: The coefficients represent the average marginal effects of a probit model with dummies for exporters,
importers, and products. All covariates represent the difference between 2011 and 2001.


Robustness check


Before discussing the implication of these results for intraregional trade we present some


robustness checks related to the specification of the model. Table 8 reports the results of the same


specification used in table 6 where we perform a linear probability model, a logit model and a probit


model estimated on a more restricted sample.13 The results are qualitatively similar, confirming what we


found in the original probit model.




12 For example, a free trade agreement between a country in sub-Saharan Africa and the European Union does not directly
affect the probability of export survival for exports from sub-Saharan Africa (although it does affect the probability of new
entry and may very well affect the magnitude of trade flows). However, the trade agreement will still indirectly increase this
probability of survival (as well as new entry) because the reduction in tariff provides the signatory country with a
competitive edge versus other foreign competitors. On the other hand, a trade agreement between foreign countries (say a
regional trade agreement) would negatively affect the probability of exports from sub-Saharan Africa, both for existing and
new trade flows because such trade agreement would make countries in sub-Saharan Africa relatively less competitive
vis-à-vis foreign competitors.


13 We restrict the sample by defining the probability of exporting in a stricter way: instead of defining the probability of
exporting as one when a triplet (exporter-importer-product) exports in any of the two years 2010 and 2011, we consider
only the year 2011 and 2001 (instead of 2000 and 2001).





12 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Table 8


Robustness checks with alternative estimation models and data sample




Logit LPM Probit Single Year


Primary Intermediate Consumer Primary Intermediate Consumer Primary Intermediate Consumer




∆log(1+tariff) -0.028 -0.042*** -0.066*** -0.021 -0.027** -0.039*** -0.036* -0.064*** -0.070***


(0.307) (0.000) (0.000) (0.368) (0.025) (0.001) (0.080) (0.000) (0.000)


∆(RPM) 0.256*** 0.377*** 0.265*** 0.312*** 0.595*** 0.368*** 0.248*** 0.368*** 0.255***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


status (2001) 0.217*** 0.127*** 0.184*** 0.442*** 0.288*** 0.397*** 0.238*** 0.139*** 0.204***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Imports) 0.012*** 0.012*** 0.015*** 0.011*** 0.012*** 0.013*** 0.010*** 0.011*** 0.013***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Exports) 0.014*** 0.014*** 0.016*** 0.013*** 0.011*** 0.012*** 0.012*** 0.013*** 0.013***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆(AG) 0.049*** 0.028*** 0.025*** 0.063*** 0.054*** 0.036*** 0.008 0.025*** -0.018***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.480) (0.000) (0.005)


∆log(crossrate)
-


0.035** -0.052*** 0.010 -0.029** -0.006 0.026***
-


0.047*** -0.063*** 0.010


(0.019) (0.000) (0.509) (0.028) (0.273) (0.000) (0.003) (0.000) (0.481)




Observations 43,779 227,968 131,325 43,881 228,075 131,334 40,599 223,533 127,899





As a further check, in table 9 we estimate two specifications where market access variables


are differently constructed and report the estimation on trade values larger than $1 million. In the first


specification, instead of using ∆log(1+tariff), we use a specification where the tariff enters linearly


(∆tariff), as is the case for the RPM. The results are similar to those in table 6, confirming that what we


find is not led by the non-linearity in the tariff variable compared to the linearity of the RPM.




A second specification regards the structure of the RPM. This is constructed as the difference


between the tariff faced by foreign competitors and the applied tariff. This may create some concern of


multicollinearity, as the applied tariff is already included in the specification as an independent


regressor. However, the correlation between the two variables is not large (about 0.3 for primary


products and 0.4 for intermediate and consumer products) and the correlation between the coefficients


does not indicate multicollinearity as a serious problem (about 0.4 for primary, 0.5 for intermediate and


0.6 for consumer products). Nevertheless, we perform a further check by using in the regression,


instead of the RPM, simply the average change in the tariffs faced by all competitors. Although the


results are generally in line with those of table 6, the coefficients on the applied direct tariff are


substantially larger and always significant. The larger coefficients are due to the fact that by not


explicitly controlling for relative market access, its effect is confounded in the direct market access


variable. In principle, there is no reason why competitors’ tariffs should affect the probability of exports


of the given country other than through the preferential margin, which we isolate in the RPM.




Finally, to ensure that our findings are not driven by small trade flows we also perform a probit


regression on a sample where we keep only observations with trade flows of a magnitude superior to


$1 million. Results are, once again, qualitatively similar to those reported in table 6.










Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 13


Table 9


Robustness checks with alternative specifications of the market access variables and omitting


small trade flows




∆log(1+tariff)=∆(tariff) RPM=∆log(1+competitor tariff) Only Trade flows > 1 Million USD


Primary Intermediate Consumer Primary Intermediate Consumer Primary Intermediate Consumer




∆log(1+tariff) -0.006 -0.036*** -0.039*** -0.376*** -0.490*** -0.385*** -0.033 -0.069*** -0.073***


(0.602) (0.000) (0.000) (0.000) (0.000) (0.000) (0.196) (0.000) (0.000)


RPM 0.269*** 0.389*** 0.284*** 0.346*** 0.436*** 0.324*** 0.239*** 0.362*** 0.271***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


Status (2001) 0.229*** 0.134*** 0.192*** 0.228*** 0.133*** 0.192*** 0.226*** 0.131*** 0.187***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Imports) 0.012*** 0.012*** 0.015*** 0.012*** 0.012*** 0.015*** 0.017*** 0.012*** 0.014***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(1+Exports) 0.015*** 0.015*** 0.015*** 0.015*** 0.015*** 0.015*** 0.015*** 0.014*** 0.014***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆(AG) 0.050*** 0.033*** 0.027*** 0.049*** 0.032*** 0.026*** 0.044*** 0.033*** 0.025***


(0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) (0.000)


∆log(crossrate)
-


0.035** -0.053*** 0.008 -0.034** -0.053*** 0.008
-


0.048*** -0.050*** 0.010


(0.016) (0.000) (0.545) (0.018) (0.000) (0.547) (0.001) (0.000) (0.459)




Observations 43,779 227,968 131,325 43,779 227,968 131,325 41,586 214,005 122,654




4.2 REGIONAL INTEGRATION AND PROBABILITY OF EXPORTS


The overall results of Section 4.1 have important implications for intraregional trade. The trade


of countries in sub-Saharan Africa is far from liberalized as many of those countries still maintain


relatively high tariffs on both regional and non-regional imports. In this regard, any step towards


regional liberalization would imply a substantial decrease in the applied regional tariffs and a


consequent increase in the RPM faced by each country in sub-Saharan Africa. Consequently, ceteris


paribus, these improved intraregional market access conditions would have a positive effect not only


on the magnitude of trade flows but also on the probability of exports. In order to simulate what the


effect could be, in light of our main results from table 6, we calculate the change in the probability for


each given country in sub-Saharan Africa j in export product g to country k as:




jkgjkg
t


jkg RPMP ,4,3, )1ln(1 ∆++∆=∆ βτβ (3)


where ( ) )1(ln1∆ln 0
,,


t
jkgjkg ττ +−=+ , since intraregional tariffs are assumed to be fully liberalized in t1, and


jkg
RTA


jkgjkg RPMRPMRPM ,,, −=∆ , where the superscript RTA indicates the RPM calculated assuming


zero intraregional tariffs in t1. The beta coefficients are those estimated according to equation (2) and


reported in table 6.




Before assessing how a free trade area among all the countries of sub-Saharan Africa would


increase the probability of intraregional exports, we need to calculate how much tariffs and RPM would


change. Table 10 reports the average change in tariff and RPM consequent to full tariff liberalization


among the countries of sub-Saharan Africa in t1.14




14 Table 10 reports simple averages so as to take into account products that are not traded, but could be potentially be so.
Moreover, to take into account the production possibilities of each country, only products that are exported at least to one
destination are included (e.g. liberalization in the tariffs on coffee does not enter in the aggregate statistics if the country
does not export coffee at all).





14 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


Table 10


Change in tariffs and RPM (simple average between 2001 and 2011)





Primary



Intermediate



Consumer


Country Code


Change


in


Tariffs


Change


in


RPM


Change


in


Tariffs


Change


in


RPM


Change


in


Tariffs


Change


in


RPM



Benin


BEN -7.9% 6.6%


-11.0% 10.1%


-14.8% 13.9%


Botswana BWA -8.2% 6.5%


-8.2% 7.2%


-11.8% 9.7%


Burkina Faso BFA -10.5% 8.7%


-10.5% 9.9%


-16.7% 15.7%


Cameroon CMR -10.3% 9.1%


-10.4% 9.8%


-19.4% 18.9%


Chad TCD -9.6% 8.0%


-6.9% 5.9%


-19.0% 17.6%


Côte d’Ivoire CIV -8.7% 7.0%


-8.4% 7.7%


-16.4% 15.6%


Ethiopia ETH -8.0% 7.1%


-7.6% 7.2%


-17.3% 17.0%


Gabon GAB -7.7% 6.6%


-8.6% 7.9%


-16.0% 15.0%


Ghana GHA -10.2% 8.8%


-10.7% 10.0%


-19.2% 18.4%


Kenya KEN -5.1% 3.8%


-5.2% 4.6%


-13.1% 12.5%


Madagascar MDG -6.8% 5.5%


-9.1% 8.5%


-20.7% 21.7%


Malawi MWI -4.4% 3.5%


-5.6% 4.7%


-6.6% 6.8%


Mali MLI -10.2% 8.5%


-9.2% 8.6%


-16.4% 15.6%


Mauritania MRT -7.6% 6.9%


-8.8% 8.2%


-19.1% 19.2%


Mauritius MUS -4.1% 3.1%


-4.6% 4.1%


-5.9% 5.9%


Mozambique MOZ -7.0% 5.6%


-7.5% 6.9%


-11.4% 10.6%


Namibia NAM -6.2% 4.5%


-6.4% 5.9%


-10.9% 9.8%


Niger NER -9.4% 8.1%


-8.7% 8.1%


-14.9% 14.1%


Nigeria NGA -9.5% 8.2%


-10.0% 9.5%


-17.8% 17.1%


Rwanda RWA -7.9% 6.3%


-5.0% 4.6%


-10.0% 9.8%


Senegal SEN -8.4% 6.8%


-8.9% 8.2%


-16.3% 15.4%


Sierra Leone SLE -8.8% 8.4%


-10.3% 10.9%


-20.2% 24.3%


South Africa ZAF -5.8% 5.3%


-5.8% 5.5%


-9.2% 8.1%


Swaziland SWZ -6.5% 4.8%


-5.2% 4.6%


-7.8% 7.5%


Togo TGO -9.2% 7.3%


-10.1% 9.3%


-17.6% 16.5%


Uganda UGA -6.0% 4.2%


-6.3% 5.7%


-11.6% 10.7%


United Republic
of Tanzania


TZA -3.8% 2.6% -4.6% 4.2% -7.3% 6.6%


Zambia ZMB -3.8% 2.2%


-4.2% 3.5%


-6.9% 5.9%




Full tariff liberalization in sub-Saharan Africa would have a substantial impact on the tariffs


faced by all countries, although to a different extent depending on the country and product category.


Because of the higher tariffs applied, consumer products are those that would be most affected by


tariff reduction, ranging from about 6 per cent for products potentially exported by Mauritius, to about


20 per cent for those of Sierra Leone and Madagascar. Exports of intermediate and even primary


products would be affected too, but to a lesser extent, with overall reductions in the range of 5 to 10


percentage points. Tariff liberalization would also have a large impact on the RPM with average gains


in the order of about 6 percentage points for primary products, about 7 percentage points for


intermediates and 14 percentage points for consumer products. In practice, intraregional tariff


liberalization would have the double positive effect of reducing internal barriers while giving member


countries a higher preferential margin versus non-member competitors.




Intraregional tariff liberalization translates into the probability of exporting according to


equation (3). The change in the probability of exporting is illustrated in figure 1, where these results are


averaged by country across pre-existing trade flows and potential trade flows.







Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 15


Effects of regional integration on the probability of exporting


BEN


BFA


BWA CIV


CMR


ETH
GAB


GHA


KEN


MDG


MLI


MOZ
MRT


MUSMWI


NAM


NERNGA


RWA
SEN


SWZ


TCD


TGO


TZA


UGA


ZAF


ZMB


BEN
BFA


BWA


CIV


CMR


ETH
GAB


GHA


KEN


MDG
MLI


MOZ


MRT


MUS
MWI


NAM


NER


NGA


RWA


SEN


SWZ


TGO


TZA


UGA


ZAF


ZMB


BEN


BFA


BWA


CIV


CMR


ETH


GAB


GHA


KEN


MDG


MLI


MOZ


MRT


MUS
MWI


NAM


NER


NGA


RWA


SEN


SWZ


TGO


TZA


UGA


ZAF


ZMB


0
.


02
.


04
.


06
Pr


o
ba


bi
lit


y
o


f E
n


try


0 .02 .04 .06 .08 .1 .12
Probability of Survival


Primary Intermediate Consumer






The changes in the probability of intraregional exports are not negligible. As most observations


are above the 45 degree line, the change in probability of entry is higher than the change in the


probability of survival for the majority of cases. The average effects are about 2.6 per cent in case of


existing flows and about 2.8 per cent for the probability of entry. As the extent of the change depends


on the pre-existing level of tariffs applied on products potentially exported by each country, there are


important differences across countries. In particular, some countries such as Cameroon, Ghana,


Ethiopia, Mauritania, Madagascar and Nigeria are expected to be among the top beneficiaries of


regional tariff liberalization. On the other hand, Botswana, Malawi, Mauritius, Rwanda, the United


Republic of Tanzania and Zimbabwe are expected to benefit much less. In general, for the majority of


countries the results are more mixed with some countries expected to gain more than others in some


categories of products. Results are also different across typologies of products. Higher probabilities


are generally found for consumer products, and lower for primary goods.






16 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


5. CONCLUDING REMARKS




In this paper we investigate whether changes in market access conditions affect the


probability of exports of the countries of sub-Saharan Africa. The analysis examines two components


of market access: direct (the tariff faced by exports) and relative (the tariff faced by an exporter relative


to that faced by foreign competitors). We also examine whether the effects are different between the


probability of initiating new trade flows and that of making pre-existing flows survive.




The overall results support the overall findings of Debaere and Mostashari (2010), indicating


that change in market access conditions have significant, although small, implications for exports; and


also the results of Foster, Poeschl and Stehrer (2011) on the positive effects of regional trade


agreements on the extensive margin of trade. In more detail, our analysis finds that the change in direct


market access conditions affects only the probability of initiating new trade flows but not the


probability of survival of pre-existing trade flows for sub-Saharan Africa. On the other hand, we find


that relative market access conditions matter in all cases. This suggests that the exports of sub-


Saharan Africa may face more competition from foreign competitors than domestic industries in


destination markets. This result has the implication that any change in preferential access for sub-


Saharan Africa can lead to trade diversion effects. This also implies that any erosion of preferential


margins due to the proliferation of RTAs outside sub-Saharan Africa would imply a reduction in the


probability of exports from sub-Saharan Africa, both for existing flows and for potential flows (ceteris


paribus).




We lastly use these results to simulate the extent to which a potential complete tariff


liberalization brought about by a free trade area in sub-Saharan Africa would contribute to enhancing


regional trade opportunities. Given the relatively large tariffs applied to intraregional trade, we find that


free trade would have the effect of substantially reducing tariff barriers while giving member countries a


higher preferential margin versus non-member competitors. In magnitude, the average changes in the


probability of intraregional trade resulting from complete tariff liberalization among the countries of


sub-Saharan Africa are, on average, an increase of about 2.7 percentage points.








Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 17


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UNCTAD study series on


POLICY ISSUES IN INTERNATIONAL TRADE
AND COMMODITIES










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20 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


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Tariff Preferences as a Determinant for Exports from sub-Saharan Africa 21


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22 POLICY ISSUES IN INTERNATIONAL TRADE AND COMMODITIES


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measures: Emerging cases from selected developing countries, 2012, 38p.




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on non-tariff measures, 2013, 31 p.




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and Economic policies for developing countries, 2013, 33 p.




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empirical evidence, 2013, 33 p.




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clothing quotas, 2013, 54 p.




No. 60 Alessandro Nicita and Valentina Rollo, Tariff preferences as a determinant for
exports from sub-Saharan Africa, 2013, 30 p.




































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