18/sce Graham Hancock Lffl^OrtiJte TTfestvle^, power, prestigp and
aid_business, Macmillan, London,
to by both the formal and informal sectors, linkages with other supportive sectors such as trade financing. As a matter of fact, the lack of specific provision in trade policy for "trade financ ing" is perhaps its weakest link in the chain.
(a) Trade Formulation : State Monopoly or Prerogative?
45. So much has been said about the international side of this issue. Nonetheless, it is still worth making further mention of other equally important positive developments. This is why the recent initiatives by such major creditors like the IMF and the World Bank make interesting reading. These two world bodies have on their own found it necessary to impress upon any developing country needing their assistance in coping with the problem of balance of payments to accept as one of the conditions that the country reform package must not only indicate but also contemplate reforms covering trade policy. In point of fact that is the origin or underlying objective of the World Bank's Structural Adjustment Loan
(SAL) programme.
46. The World Bank launched its SAL in 1980, expecting it to last a relatively short time. The programme was focused on achieving macro-economic balances. Hence, the inclusion of policies that were to enhance economic efficiency, provide growth and ensure that resources were allocated according to free policy of market forces.
In the period since the programme was launched, no less than 30 developing countries have been assisted by the programme. However by 1984, 6 African countries (Kenya and Senegal in 1980; Cote d'lvoire, Malawi and Mauritius in 1981; and Togo in 1983) had received such assistance. Another 12 African countries had been added to the list by the close of 1987. But this does not imply that these countries had made the expected headway.
47. in the light of the foregoing, the above question is more than timely. To a large extent, many of the issues that ought to form the main departure point have been alluded to in the preceding chapters. Not least of all, reference made to the country head
count of those that have undertaken structural adjustment as a way to attracting external financial assistance. However, the review m this analysis will focus on the trade component.
48. From a country point of view, the starting point is the existence of shall we say the coming into existence of ministries or departments charged with the responsibility of overseeing trade and commercial activities. In a few African countries, the tendency has been to create two ministries i.e. one responsible for domestic trade activities and the other for external or foreign trade. In some other countries however, only one ministry of commerce exists and it is made responsible for both functions. Administratively however, the ministry then creates two separate departments for
each of those functions.
49. It is an indication of the significance of this activity that in all African countries is without exception, shown by cabinet appointment of who ever heads these responsibilities. What is yet to be established is what rank he or she occupies in the cabinet hierarchy? For other cabinet ministers like those that run foreign affairs, finance and justice - it is relatively easy to perceive by the frequency the respective Heads of State and Government seem so readily accessible to the holders of those offices.
50 A casual perusal of several national development plans (NDPs) in Africa does not convince one as to how trade policies are arrived at in terms of background used and the orientation itself.
Perhaps to better understand some of the issues that seem to complicate the subject, it might be necessary to read these NDPs m tandem with each country's constitution. Nonetheless, the preceding
analysis, especially at paragraph 2 has provided the general framework and some of its main components. Not least of all, linkages with the exchange rate policy and pressures brought to bear through the activities of the exchequer. It follows from this that trade or commercial policy combines with the former to effect and influence a country's export and import regimes, and including
the domestic sector.
51. One is then tempted in the light of the above to discover how the individual African governments have gone about formulating their trade policies in order to make them capable of moving the trade regime forward. On the basis of available information, the commonest avenues have included an element of instituting liberal mechanisms. For example, through reducing controls, replacing direct restrictive controls with price mechanisms. Similarly, lowering export and import restrictions through tariff reductions and export subsidies, rather than export support intervention.
There are several reasons why resort to export subsidies is unpopular. At the national level, it has proved rather expensive particularly where inefficient and uneconomic productive sectors are unnecessarily protected from the reality of the economic
situation. On the international plane, such action often attracts retaliation (countervailing duties) whose adverse impact may not be
easily discernible.
52. one other missing element at least from the African stand point is the apparent absence of the involvement of the private sector by Africa's policy makers. This reluctance on the part of most policy makers in governments is difficult to understand but not difficult to explain. Wrongly or rightly, some policy makers in Africa seem afraid to solicit the views of such bodies as the chambers of commerce and industry. Somehow the element of secrecy has been taken to ridiculous limits and has as a result become
counter-productive.
51 This is the very opposite in other developing countries that have made significant economic progress. There is a living example of collective action and not one where only governments claxm to know the total national economic heartbeat. In Singapore for example, both the ministries of commerce and finance are in.
constant touch with the business community either individually or collectively through their various chambers of commerce and industry. The government makes its actions as transparent as possible and the latter also feel duty bound to reciprocate in equal measure. The end result is that the trade policy that xs finally put in place has much greater chance of achieving its set
objectives.
(b) ronciusion or- »"■ T.ifmns Paper Test?
54 There can be no doubt in the light of the preceding analysis that formulation of trade policy is indeed a prerogative of any national government. This is because formulation of trade policy passes through national legislature in order to have the necessary
backing of the law enforcing agents. The fact that some of the economic operators in the informal sectors flout the regulations by not registering their activities does not in the least subtract the significance that the process stands for. But that is not the same thing as preventing the contribution of other sectors of the
economy.
55. Among the many objectives of trade policy is its contribution to creating an enabling economic climate. Consequently, mechanisms like price control of certain products, licensing of business premises, categorization of commercial activities, import and export regulations are basically part of this effort. In other words, they are intended to provide for order and a sense of business security that facilitates economic growth and development.
56. it therefore follows from this that formulation of trade policy that affects both domestic and international commercial activities is discernible at several levels and in various ways: by sectors; the use of prices or quantities as variables to be manipulated; effect on that private incentives; and the freedom of choice it brings to bear in general.
57. As a matter of fact, strong cases can and have been made in support of each of the above, especially as instruments for effecting trade policy as is for general economic policy. In the latter case however, it sometimes borders of on choice between use of the pricing system or controlling the quantity. In which case, tariffs are preferred to quotas. Similarly, differential interest rates as opposed to capital rationing. Alternatively also, subsidies to private producers instead of production by the government through the parastatals. However, some of these measures have been found to differ in terms of their effectiveness, particularly on prices and consumer choices. One of the reasons for the observed differences stems from administrative convenience, let alone the great measure of unpredictability of the results
themselves.
58. it is possible in the light of the above analysis to put forward certain conclusions on this rather complex subject. One of the ways is to reiterate in a more refined manner some of elements that the analysis has focused attention. It is quite clear from what is contained in this paper that formulation of trade policy is intended to achieve certain perceived or desired goals. However for trade policy to effective and let alone to achieve its objectives, it has to be part and parcel of other supportive economic activ ities. However, perhaps the litmus paper t.<**+ might be the extent to which its activities must work towards the following:
(a) First, help towards moving the national surplus above mere mass-consumption into productive avenues. In other words, it must be capable of sterilizing tendencies in
society that are attempted to hoard, increase the ( purchase of luxury goods and services as well as low ,
productivity investment;
(b) Second, be such that it encourages the emergence of of institutions that can provide cheap and adequate capital both by the private and the public sectors. The Nigerian example of the Peoples Banks that were created to lend to the less advantaged of society that are unable to put up modern normal traditional bank collateral, instead it was decided to substitute for this with the guarantee provided by virtue of the applicant belonging to recognisable society that naturally confers identity
example;
(c) Third, while trade policy aims at giving the necessary impetus to all sectors of the economy, it should however be such that it is capable of inducing rapid growth of those other sectors that appear more capable of leading others in the process of industrialization, especially the production of tradeable goods and related service
industries;
{d) Furthermore, entrepreneurs in those rapid growing or lead sectors should be able to continue to plough-back into the economy a substantial part of the profits in further
productive investment.