ISSUES IN INDUSTRIALIZING THROUGH TRADE

ion re basic lIy wo I S

br- ir c ion I r I tlon stup:

s rade. nd r d also

ISSUES IN INDUSTRIALIZING THROUGH TRADE

Two but related challenges facing h con In nt r to m int in the s rong co no mic grow h n to transform it to prod uct ivit y-ind uced sus in bl , inclusive, em ploymen t-gen rating, poverty-r du In , and en ironme n ally-friendly growth. Th gr t d ciency of the curren grow h ep isod I I S

ina bi lity to prom ote structural r nsform lion of the economies of h r gion. Rudimen

ricul t ur I pr ct ices and provision of s rvic domin te the struc t ure of African eco no mies. Tlus ove rt pen ence on trad itio nal griculture nd servic s sectors can only support limited growt h.

Industrialization with its cap bility to gen r t dir ct an indirect emp loyment, s rong for w r and back ard linkag es with other secto rs 0

the economy incl uding eternal sect o r not onl pr mises to tran sform frican conomi s bu Is to ensure th t growth t anslates into sust inabl d velo pm ent.

o doubt, Afric 's industri liza ion should adva ntage of its bund n nd div r r sourc inc luding gricu l ural nd miner I r sourc s.Thu .

s a voca e in previous ed it io ns of th Eco nom ic Repo rt on Af ica (ERA), h can ine n t should e plai t its comp r tiv dv nt g in com ma I y bas indus rializa ion and add-v lu to h resourcesusing its abundant human c pi I. Fin II , con inuous upgr ding, h 11m r of mod In indus ry, is impor an or sus ain bill y a A

nc

indus ri li a ion. In all his, ind us i I policy h n impor n rol a pi y so h in us ri liz Ion is spo nsiv a he y rning s of th can In n

s ci lIy in h promo 10 of InCIU SIV nd tr nsform iv ro v h.

Tr d nd in us n liz a h s m coin. A Indus ri II ion f cili

ARY

e -

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rru SI n r ^rI ml

EXECUTIVE SUM

Trad

a e ⁰

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rmc

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p f rm ce a d i as o en ial ⁰ promo e ra ind e i u ializa i

Trad con inu s 0 play maj o r rol e in Africa's conomic grow h performa ce and it h s oten tia l o promo tr de-indue d industri liz tion of the con in n provided i is eliber t Iy direct d at industri liz ion. For his purpose,tr de policy mus b consciously d si ned , effectively im p l m n ed

nd m n d wi h regular moniorin nd v lu Ion . Such policy mus r cog n ise nd e In 0 v lopm n s in h global produc ion sys m

spec:

Ily In rn ion

hs

Ion 0 produc io n sys m i h i 0 prom o ing v lu ddi ion hrough ro c ssin nd m nu c urin . Fin lIy, h go I 0

-ind uc d indus n Ii Ion m s Isoquid he conduc ,n 0 I Ions nd rrnpl io n0 r

nd In s m n agr m n s n rr n m n s.

Indust ializ tion rom ises to add ress this p rado b promo ing econo mic diversification, inc lusive grow th, fficien utili sat ion of ab und nt hysical, min eral n hum n resou rces nd in the process eliminate pover y and hence st ruct u r Ily tr nsfo rm Africa economi s.

A

^{fric 's grow h continued 0} incre se rising fro m 3.7 per c n in 20130 3.9 per cent in 2014.

The perform nce un rpinn d by improved m ero conomic man gem en , diversifi ed tr de nd inves men ties it h eme rging cono mies rnon othe r f ctors. Africa's soci l evel ment indic tor s r ve I the we kness of the 0 served economic perform nce: hi h unemp loym ent and poverty co istin wit h rob ust rowt h. This is a p rad

r I In

II II

Industri "zingTh ro u g h Tr d

n ur 1 h

u hn ct Iscan s r rrunc Afn luch m can In n 's n rro

nd d by 10 lu

u h r nd rim ry co rnrn

v ry hrc h r d co ts, t nff nd non-t ri

a in r -A ric n r d nd Afnca's ee

In rnctio n I m r s . This R port d Iv S tnt r d phon h r I ronsh: b w n r d nd indus ry in Africa, and p eifie Ily h rol f

trede 111 suppor rnq Afrie '5 Indus ri liz tion

Th th m of his R port is justified on rn n grounds nd wo a th m r highli h d h r First, Afrie IS m rginalised in th world tr.d .Th cantin nt's share in th glob I e ports incr·.. -·...r

m rgin lIy from .9 9 in 1970 05. 9 m 19 0 n h 5can inu d th downw rd tr nd sinc th n.It w 3.3 0 in 2010 nd 3.3 a in 2013.Th r of Af rc n rn nu etur 5 in tot I rn reh ndi or w

18.5 In 2013. B 5 d on Afne 's bund nt physic I, n ur I nd hum n r so u re 5, th can In n heS

pot n I Is a siq m c n Iy incr sits sh r In h I b I ports.

,

et for Afrie to into glob I v lue conormc

t rrn,I t rn son w r

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II

h pro by t ppin

eu rr n s us of na ion I nd de oho In Afrie nd wh t re

I n for h on merit ' industri I

t m I r In lu

II In

h ir im Ir I n Wh

Wh n nd ho w tr d policiesb nefit or harm indust n liz i n?

Wh

indu rI liz eh In 7

im

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Thl

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I lie In th

n Jr S

n th:

Id in Ju ry, hi

All n

If nd

rnrru ^I nf rA n

H nc , or ffec ive trade-induced industrialization in Africa, s ructural transformation of industrial produc ion nd tr d is a basic pre-requi site.

Thr critical issues are: (1) production and trad in int rmedi tes; ( ) establishing, joining and upgr ding along n tional/regionallglobal value ch ins;and (3) increasing role of services in (1) and (2) and in tr d in gen ral. Afric must imbibe th ch nge from trade in products to trade in tasks

nd activities and promote the increasing role of services in the process.

bl 0 r lic th

p 5 m or imi l r

10 r d nd ro uc ion .How v r, i is Iso impo rt n h A ric is c p bl of surp s ing h n mir cl by c r fully d si ning r d nd indus ri I ph th t t 5in o consid r ion I ssons from p ri nce as w II s th current nd futur d velopm ntsin theglobal environm n .

Fin Ily,and perhaps mor important, trade policy is critical for effective trade-induced industrialization.

ational trade policy architecture and th flurry of activiti s in bilat ral, regional and multilateral r d nego iations across the length and breadth of the contin nt must consistently give priority to industrializ tion.

Global value chains are a

impor an fea ure in today's global economy and African coun ries see ing 0 develop

por and gro heir

co omies need 0 a e

hem i 0 accoun

Industrializing Through Tr d

Tr -m uc d Indus n Ii tion is no u om rc:

i r qurr S conc r d or s i s 0 I I . Firs .In d n co he r n r d n mdu n I pol ici . dil i n Iy cr ft d nd im p l m n d.

c r ully nd r ul rly moni or d nd V lu d is pr -r quisit . Such polici s mus be 1I0r

ow rds h ov rail go Is nd obj c iv s of coun ry's n ion I cl velopm n s r g nd pi n whil r cog nizin nd incorpor in ch II ng s nd oppor uni ies o ere by h e rn I nvironmen . Second, v rious s k holder s mus be on bo rd. An ff civ me hod is co nsul ions wi h v riou s k hold r groups 0 n ur th mos h ir conc rns are ddressed .Th vicl nc from th co un ry c se s udi s sugge sts he n d

o s p-up co h r nc betwe n tr d poli c nd th n ional d v lopm nt st r t gy nd b w n r de policy ncl other policies espe ci lIy industri I policy.

n

DI NGS

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oods .

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KEY FI

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n oun ry c s s udi s. Th uging h r

p CI Ily in r I Ion 0

In u

A r oltcy 0 r

II b hi hly s c iv .

I froIII wo

Ir , ind u tn hz Ion

InV r con . it r

B h h ry nd I in mpirical vid nc u th t rcd ,und rc r incondi tio ns,c nb V n bi o i ⁰ prorn o incl u ri I d v ¹⁰ rn n nd truc ur I r n form Ion in A ric .Tr depolicy,

n n h n , hro u h prom o ion of com p i ion, Inn nd CI n u iliza tio n of r sourc

c n h dyn n ic ci ncy of m tur cI

fum fos r inclu ri liz tion. On th oth r h n hey whic h po s s inf n indu ri

I I nc n I d to d -ind ustri liz ion . A c or for tr d pol icy to promot In I n is th I propri ate b I ncing

n r motio n r I IV Iy mur d s c o rs irnul n Oll r c i n nclsuppo r 0 rcgil

No doub t, this i no an sy sk bu n h h b n ucc ssfully p rform d yI In ^U II II c untn s

Glo balvalue chains (GVCs) are an import n f tur in t d y's 10 al economy and Afric n coun n S

seekin to develop e ports and grow h I

conomi s need to tak them i 0 ccoun. At h s me tim e, the g owing impor ance of info rm Ion and comm unicaions t chnol og ies (I( T) n I Afric n countries to en t r sev r I v lu ch

ms

with ut h vin to d velop h who l prod uc ion proc ss. P rtici tion in GVCs and com

is lin ked to h vin access to pric d int rm d:

imports, with bord r costs, impor riff nd customsproc dur sbing im po r nt f ^ctors.

y par s a m nuf c urin in rm d: s In

ar icul r ligh m nu c uri ng in u s - concurs i h h vi enc of p rsis ntl lim i I h of in r -ind us ry rad in h r ion, nd om S

a h low I I 0 i rian in 0 in rn Ion I roduction n t or

s.

^{b h y r gion I or lob I}

Af ic n co u n tri s show high p rticip ion r in GV s, ho ug h t v ry low I v l oth ch In

While bac ward int ion has b n iner sing many Afric n countri

s.

^{the larg r}

sh

^r 0 Afric 's GVCs rticip tion is still du 0 for rd inte ratio n driven by por s0 r w ma rials.TI I

illustrat sthe act th t A ric n firms ope r t h lowest ru 9 of he la er in GVCs. In th s m v In,

rticip tion in GVCs per se do es not ur n structural t ansform tio n: Africa ne ds 0 ocu on im pro in c rd in gr tion . Int ra-r glon I tr dein pro cesse oodsisthe firs op po r unity or Afric n firms to move u he chain. So r, on l firms re driving the ro w t h of Africa's b c w rd integration. GVCs link 9 s need to b e p nd d to other firms nd reas of the econom y.

5ervic s l y n impor n ro l in Afnc 's con rru

r

ns orm ion. Th y r y In U S 0

m

ot he r busin ss

s .

^{m dir c} con ri u I n GOP nd job cr t r c mv s m n I 0

lac I bu in ss s nd r m n or FDI. A fO

Afric n count ri s. gro h in

s

rVIC v lu d is 5 ron Iy lin d 0 row h In m nu

v Iu dd d. Th s ron row h 0

sorn

u -5 C ors in A ric h s no Iw y r n I d in 0 r s rVI C 5 or loc I

rrns.

In m ny A

nc

n cou n i

s,

b n

s

h v po I Io n th ms Iv

s

I nd 0 I r minIn roj 0 for rqn InV s or wh rl loc I 5 Es r m in er di -cons r III Th s r ic s c or c n b i s If n v nu or conomlC rnrm ^I n rA rr

Um

Consi n i h lob I r nds, In rm

pro uc s ccou n d or h bul of A ric ' m rch nd: r d , ccou nti ng for bou 60 r c n of Afric 's 0 Im rch n is irn or s nd ove r

80 rc n of i or s. In dditi on,in s r r s n h mo s dyn mic com po n n 's m rch ndi tr d , inc r sin fouol over he I 5 d c d; y t Africa only ccou nt s fo -3 ^{p r} c nt of h glob I 1 ure.Importsof manufac turing in rmedi t s h v e n d ed rema k Iy, y t this h s I rgely failed to eve rse Afric

's

^{prema ture de-}

industri liz tion ,and s ur theem r enc of via Ie r gional s ppl ch i s.

AI ho u h m nuf c ur bul 0 rrn or

nc

o unpor CISIV

A nc · indu h A^riC,

n

o GV(s,bu m mly u II

o h r 10 - nd ro uc s.Th LJ u d rol

fica's ports of intermediate good s re domin te by minin roducts an r source-b se

nu ac ures such as asic metals orche ical and fuel s; this is consist nt wi h a orw rd int gr tion int lo b I value cha ins, but merely as e porter of r w rn erials and othe r intermedi tes mbodying limite d value ad ition. Despite its limited size, intra-Africanrade in intermediat s is sig nificantly ma r diversifie than the c rresponding trade wit h he rest of the wo Id. Th scope for incip ient merg nce of re ional value ch ins, part icu larly in he manufactu ring sector, is ho ev r still larg Iy untapp du to an array of struc t ur I and policy cons raints. The shallow ness of re ion I supp ly ch ins c n egauge y he fact that Africasou rces

88 p r cent of i simported in utsfr m outside the r gion. Eff c ive participation in GVCs re uires in s ments in s c or-specific skills and humar cap i al, as well as in rastructure, fin cial services

nd a cond uci v policy fram ark. Base on the I ^v I^{of d v lop me n t of hese ar meters in most} Afric n coun t ri s, intra-Afric n d nd regional v lue ch ms (RVCs) re ident ifi d s a pia form for I arning nd n ling econom ies of scale, th r y

f ^{cili In Afric 's ind us ri liza ion nd v n ual}

n ry in a GVCs. This is simil r 0 inf n ind ustry r um n .

nc 015 Industrializing Through Tr d or 0

h ch coun r or r Ion h c 5 m

should rr d rrmn ^I b s rou S ruc urzI r nsorm Ion, I Indus Ii Ii no n IS

d n orous n lySIS; h s con

rrrun Ion of h rol nd pi c o r d ndr d policy. In his v in, individu I coun II

should dopt r eI policy s r gy h b its ini i I conditions. HoN v r, th div

synergi s h r y t 0 b t pp d

r liz bl wi hin n ion I r III or .

Gr dual ppro ch 0 industri liz ion n upgr din g : L ssons rom e p ri nc 0 'lnd u n liz d

nd m rging count ri s nd rom Afric n countri pr vious mp ind us rializ ion,sugg s h t grad ual pproach 0 upg r ding nd indus rializ non is praci c ble and hig hl y r com m nded. Th fl ing gees mod el of ca ching-up pro s 0

ind ust ri liz ion, sugg sts th Afric n economi s sho uld st rt rom I bour-int nsiv s c

ors

nd upgr d 0 med ium- nd high-t chnology s c ors.

Since, A rican count ries are a diff ren I v Is 0

ind ust ri I d v lopm nt, som will have to start wi h labour-in nsiv s c ors whil ot h rs should b upgrad in g.

U I ,

III U

, h

I n II h rr

m

II U II II I n.

cono rm

Th

r ns orm ion, p r icul rly or sm II coun ri 5 n

151 nd 5 . 0 II A

nc

^{n coun n 5} c n d v lop thr u h m nu c urin . Th r IC 5 C or pi 5 n mer Sin Iy irnpor n rol In in rnion I rd . 5 rVI Scontnbu SOp rC n 0 A ric '5 0 I r d In v lu dd d.Th rm "5 rvi IZ ion"iscorn d 0

mph SI h Import n lin b tw n5 rVIC 5 nd p r ICI non in v lu ch ins.

hem S h v n r Ily b n h Ip ul m sup A ric 's rad wi h pre r nc - IVIn coun ri 5 but h Y h ve f il d 0 ro dly nh n Afric 's indus ri liz tio n so f r. Alt ho ug h II y r m In qUI u ful nd impor nt f r Afric I 0 11"'1 or rd, unil r I tr d pr r nc Ion c n h relly n bl th conditions requ ir dor the

I v I pm nt 0 r gional v lu ch ins.

h impl ment ion proc 55of Afric '5

mt r) ion, nel sp cific Ily st blishin g n Afric n C ntrn n I Fr e Tr d Ar (CFTA), could go I n We y in upporting Afr ica's ind us.ri liz tion. A CFTA would h Ip incr s both in tra-Africa n tr d

n Indus ri I ont n; th dop ion 0 tr d iht I n m sur 5 ono f eFTA r form would ni l r bly nhanc Furth r h po si iv e p c d .TI I v lof mbition for Afric '5 r ion I In hould b I v t d with p rticu larl y t ntron IV n to h d v lo p m nt of I n I v lu ch in I rc Iy un pp d wi hin h

DA IONS

A hig hly selective trade pol icy th t is b sed on rigorous empirical analysis, c refully design d to promote efficiency of m tured firms nd prot ect budd ing industry, void neg ive poli y externalities and put indus rial d v lop m n over and bove other obj ctives is an impor n ste p in the trad -induced industrializati on. Th implement tion nd management of such a po hcy is as im porta nt as its design .The im plemen a ion must be time-bound, prog ress ow rds h objec tivesand benchmarksare regul arly mon itored

nd evalu ted and the process car fully man g d to avoid politic I hijack.

picture of ch Ilenges and oppo r uni ies. nd h f ctorin of h se soci Iph nom n in str uc ur I transformat ion agend is impor nt. Afric n s to str tegically t ke advan t g of risin w s In

Chin and other p r s of Asi and th irnrnin n reloc tion of I bou int nsive indust ries. Thi c lis for educat ion,training nd hum n developm ntof both the skill d and unskilled I bour.

African countries need to rethink tr d policy a me ns to promote ind ustrial developm n In

order to achieve st ructural r nsfor m tion h will promote inclusive, stable nd sust In bl growth;redu cepoverty and gener te employm n . This message calls for d lib r t cuons th

must erm ate all levels of tr d nd inv s rn n negotiations as evidence clearly shows ch success ive bil r I, region I nd multil

negoti tionsh v r due d nd constr in h u of tr dit ion I trad poli cy instrum nt th t w r one us d by d veloped countri s to prom ind ustrializ ion . Afric n coun ri should ^I n ^I

nd d ploy possibl I rn iv ins urn n s ^I hill h world r i ng yst rn h c n be invo

ost r ind ustri liz tion (i, ., copin s r poin is h h world will no w i

coun ri soc ch u i h indus n liz ron. r A ric n coun ri sn d 0 b srn r , rn t rrog ss m nd d ploy r d poli c II1S rum n s will os r h irindustri liz ion sprratrons. Ind d.

his is h pa h ow d by I e comers in lndustn I Th mo r phic d n mics n urb ruz Ion

proc ss scurr n Iy inforc in Anc mi d Hum n capit I is centr I to inno vatio n. Technic I

nd t chnologic I progress and ntrepr eneurship lin 0 know l dg cre tion and he ed uc ion I sys m i h k rn I of social dev loprn ent s ra gy lign d 0 structur I transfor m tion n .Asocial dev lopm n str t gy isn cess ry, nchor d wi hin Ion rm pi nnin process s, str n h ning h produ c ive c p ci ies 0 h I bou fore hrou h hi h qu Ii y, qui y-b s d

duc Ion nd h I h pohci

s.

com I m nt d by inv stm n In r s rch nd d v lopm n focus d on rivm In us ri Ii ion, mod rn s rvic s nd struc ur Ir ion .

POL CY RECOMME

Urut Ion Economic Cornrmssron f rAfnc

A

^{fricainto susn edsin ble0 ransl end} incl usive d^{th current gr}evelopm en^owtht.

In ddi ion 0 sust ining and improving business nvironment, good poli ical and econo mic ov rn nc and man gem ent, soci I developm ent s r gi s th t re consistent with the needs of the industri I nd mod ern sectors are required.

Conducive socio-ec onomic conditio ns, peace nd s curityaswellaspoliticalwill areeq ually im portant to ensure Africa structur I tr nsformatio n c n ffectively take pi ceo African countries need to leverag e on the progressth t has been mad and continue to buil robust institutions that m intain nd improve the business environmen t, econom ic govern nee and macroecono mic managem ent.

This will in turn boost investors' nd consumers' confi nee and further strengthen the conti nent's future growth prospects. There is the need to ensu e th t growth is sustainable nd inclusive, and the sources of growth re diversified to reduce vulnerability of African economies to inte rnal and ternal shocks such as droug hts, global consum tion shocks, and financial, economic and debt crises. In this regard , appropriate policies

h t promote inclusive growth, prod uctivity and struc ur I transformation throu h industrialization, v lue ddit ion, e port diversific tion,and re ion I in egra ion r main p ramount.

orm r.

th n

lu

15 Industrializing Through Tr d

Tr d policy equire compl menta y p licie and variou ins I u ional

ruc ures 0 deliver n indus rial developmen

hispurpos nd 0 r son bl n

b n r d nd n Ion

r p c d ⁰

addi ion, h e p cd s qu nc polrcy form ul ion 0 pr c d h

for m ul tio n nd h i t r o rrn rom In

Loo ki ng a intr -Afric n rad , the w igh f manuf eturing in term di tes is f r gre t r th n in the coninen 's por so h rest 0 th world, sugg sing a consid r bl scop for r gion I sup ply chains to sup po rt Afrie 's indus ri liz ion . Non e h less, regional v lue chains are st ill poorly e ploited, nd only 12 per e n of Afric 's irnpor in rrn di s i sourc d rorn th r ion. A 5 rong produe ion n tw o r on th na ion I as w II on

h r ionallevel will provid pi form for I and r lizing conomi s of sc I .T/1 I din

contro l n s t produc st nd rds in h ^II V lu ch ins h cons r ins h possibili y 0 loc I rrn o s p in 0 high r s 0 lob I v lu ch Ins A r ion I producion nwor sho uld h r r c IV r n Ion.

th goals nd objec ti v s artie uled in ·h How ever, wh r his sequ ne is noe sibl main s re min g e ereisemay b r quir d.

Econorruc R 0 on

t

d v 10 m nt sp CI Ily the n wi indus ri lized coun

nes (

^1(5). Afric n coun ri 5 should s op n ling r m nts sIf industri liz ion do s no m r.Afric n coun ri s should s m th r nd Inp ^II y-sp c rosion sp ci lIy wh n n go iing ny form of tr d nd inv s m n gr m n s by

111 I Ir1 on h n d 0 us such policy ins rum n s pr m Indus n liz ion 0 h ir economi s.

In rrns of s quencing of tr d policy r for ms, oeeoer nd bold r r gion I in gr tio n hould b follow d by r du I op ning-up of A ric n . on mi s with h r st of h word s African ( un n s would th n b in bett r po si ion to m In rn tio n lIy. Thus, th us of grad ual

run

nd m rt pro t c ion ism to prom o e the nc of r gion Iv lue ch ins s a launching I for d v lopm nt of industry/hig h v lue

a c

IVltl ri ht st p in the righ t direc ion.

Grv n h t Afric n eoun tri s d pend on

111 rn

non

^I

rn

rk ts for bo h inp u s nd ou pu

s.

h pur os of promoting indust rializatio n r I IICy

m s

rum n smust b carefull y sel eted

III rd r to void "n 9 tiv policy e tern Ii is". A

I U h hinkin -t hroug h the proces is r quir d in lv rt nt ff ets. Such policy must dyn mie ei ncy of m tur d firm s

im promote ffici ncy of in n mpor ry shi Id from h m tl ion. In h c s of

I IV riff pro cion

dir e d

III h indu ry

m nt d ⁰

The current situation where African coun t n s re more open and ccessibl e 0 the rest of the orld than to themselv s isinimical to regi on I rad nd creat io n and eff ctiveness of re ion Iv lue ch ins.

It i th refo reimp r tive 0 rem o erem ainin g riff and non-t riff barriers not only by consolid ting exist ing REC , but mor bro dly cross the who le cont inent, thereby su port in h m rg nc 0

vi ble regional sup Iy networks.This actio nwill Iso help to fullye ploit and m imize h ad v nt g in thediversiti es f the ca n in nt.

Re ion Itrade reem ents(RTAs)h v he pot t s r e s uildi lock 0 th mul il t r I r syst m. hile the can complement mul il tr in systems, h c nno subs i u i .How v r, from n em iric I po in 0 vi w, h r is pow r ul evi d nce to suppor th f ct h t u non of r de pol icy r forms matt rs consid r bly. To

h t n , region lism c n b truly b n CI I com po n nt of Afric n n rons'tr d policy r f rm . eve th less, not II for ms0 r ion lism h v h s m i p c on Afric 's r d nd 111 us n hz ion.

gr men s h y h ve si n . Ther is no dOLb th t i s ar th ^csi st d pol icy ins rum n

implem ent nd in d i ion,h y I o n r v nu or th v rnm n .How v , ot h

olic instrum nts inclu ing p ra- riff m su s (t riff r u t S, (TRQs), subsi i 5 (for e por nd f r r se rch n v lopm n ), con ing n tr e rotect i e ur S ( n i-dumpin g,counte rv ihn , nd s f gu r me sures) r ri ble ra policy inst rum nts.Ofcours , h im plem n tion ofth 5

ot he r tr d po licy i strum nts is mor dem n In

than that of the t riff m sures. Techn ic I c p city need s to b bui lt and a pro ri t instiution s n to b est blish d and rule nd regu l tio ns n d to be na ted in order 0 invo ke hem . For r d , to eff ctively promot ind us rializ ion, Afnc n co unt ri sne d to m v cway rom riff m sur s only and d velo c paci y to f lIy eng g in modern tradepolicy.

The r I ively hi h r r om in ohcy option

v il bl nd p c d rom Sou h-Sou h

n m n s h n from or h-Sou h p rtnership , su s s th t A ric n countn s would ain mar by r ino ci19 r d i s ^WI h v lop in p r n rs.

How v r, op run - p A ic '5 m r shou ld b Ion s cono rm om rms Ion f r n

Asnot d r1i r som tr de olic y instrumen tsth w r onc us d byd velo p d count iesto d v lop

h i ind us ri I sec ors r no Ion r p rmissibl e nd new on s h v b n cr d. A sm rt mov

siring 0 promo ind us ri I

m n s

h . d. wi h vi wo kin dv nta of eooeo

f1

ibiliti s. This proc ss m y n II

r n h r m n 5 or s for

n v , n ndurinc y

v lop c ci Y (to

n i hobh Ions nd

o h v nousir A ic n coun i s houl r visit \I h v rious

ul s 0 ori in (RoO) wi h vi w to r l ing h consr ints h im os d on referenc uilis tion

nd ro uc ive c p ci y evelo pme n Ind d.

pr n i Ischemes( . 0'AGOA) c nsurelysup ort fric 'st cde; inclu i in m nufacturin secto rs if h usu Ilys ring rul s of origin re el ed to b

d qu n in li e wih of en lim it produ tive c p ity of Afric n eco no mies. A more int gr ted f ic m rket c nen bl th necessary conditions to gr pro uctiv c p ityrequir dtofost ring the evelopment f solid regi onalvalu chains,and facilit te iversific ti n.The h rmonization of rules of ori in wit hi n the continent and possibly beyond willal b essent ialin making sure thoseobstacles to trade s w ell sto moving up the v lue chains wit hin the continent are further reduced, thereby stro ng lysupporting Africa'sindustrializat ion.

Op ning-u Af ric 's market through reciprocal a reements can also deliver positiv benefits to many African countries. Nevertheless, their impact on Afric 's ind ustrializat ion highly depends on initi I prot ect ion cond it ions. Africa should, how ev r, eize the opport unit y of the econo mi c partn ership agre m nts (EPAs) between som e reg io ns nd the European Union to str tegically determine i s xt rnal protection struct ures (e.g., f cilit tin imports of intermediat sto be used in the pr duct io n of industri I product s) wit h bot h fric n an non-Afric n partners. This is critic I in rend rin m re syste m ticind u trializ ti n ben fits fro il er I ^c reem ents an u nteeing that r gion I integrati on d ind ustrializ tio n fforts re not dilu

Industrializing Through Tr d

o

ENDNOTES

by ric n rms^IS n irn ort n und r In In h proc s of m Ing r d nd r d pohc romo in s ri liz ion Polic s h s c or I

I v I h impro nd lin S

nong firmsin h lu ch in (e.q., 0 al pro) c oz bi u ) c n iner s Afric 's b c

p ticip ion in GVCs. The poor conn c ion b w en success ul sec ors nd 0 her r

economy is huge constr intor Afric ⁰

.h IIpoenti I ro GVCs.Henc ,polk: s n 0

ocu s on est bli shin g producion n or's i hm h A ic neconomi s.

stablis hi n speci I economic zon 5 (SEZs), tr d ones n e po t processing zon s including a n tionaI pro uctio n ne wor or in ustri I clusters to inclu mor S Es/S Is nd promo e inereas d link s to other reas of h econo my is n import nt st in echnolo ic I rans r , which could b fur h r p n edo n i h ouring cou n ries. While many African cou1 i sh v establishe S Zs, their oper tions, speci lIy he lin iththerest of he econo mies, reI ss e trve

o promote the required illover eecs 0 res of the onomies.

Nat io nal polici s h v 0 b compl ment d y strong reg ion I policies includi n r gion I infr struc ure, ICTs, log is ics and conv rg nc in re ul tory licies. tionaI olici s h v 0

focu s on I our-intensive sec ors nd should giv a hi h r weig ht to h gricul ur s c or in ord r to brin g social upgr ing r h r h n only n econom ic upgr din .

Econ o rruc

r ion I eross h rogressive nd id Ily in nsified onc

In egra ion has consid r bly en d can in nt.

Inde d.r gion lin egrio nse ms 0 show he most convincin ou comes 0 sup or ing i oro usly mdus ri liz ion of rican co nom ies. Bo os ing In r -Afric n r d c n b chie v r i Iy - hou gh h for m ion of n Af ic n m g -r gion I rad

m n, n melyh e CFTA- y removin IItari b rri rs on goo s still remainin wi hin Africa nd

c ling hose rei d os rvices swe ll.

Addre sing Afric 's in dequ t physic I nd vir u I infr- structur I revision (ro

d s.

r ilw ys,por s,ICT ) an boos its ener

y

prod uct ion nd dis ribu ion neworks, 0 clo the com pe itiven s f c d How ver, i should b em ph sized th t tr depolicy Ion c nnot liver on indust ri I d v lopmen t.

Complem nr ry olic ies nd v rious institutiona l ruct ures r r uir d for r de pol icy to op im Ily foster in ustrializ tion an structur I ransform tion . Afric n ount ries sh uld m k

ffor storn ins ream r d policyinto dev lop ment str gies nd ensu r cohe rence among II the national olicies speci lIy b tw n trade nd indus ri I olicies.

Tr d policy

1 0

is not a p nace for Afric 's indu tri I velo me t notwit hst n in its rrnpo r ant pi ce n ro l in th industri Iizat ion proc ss. There re im po rtant rol s for campi m n ry olici s th t ar c h r nt with r d industri I olici s. The sc pe fo campi m nt ry polici es ppears lim itless as any

01icy nd or ctio n that romotesin ustrizlizat ion

In ddi ion to tra olicy is u lifi d. Perhap s, h r is need for stron consiste ncy etwee n m era conomic olicy espe ci lIy ch nge ra pol icy nd r policy.

In Iigh of Afric 's dis ropor ion Iy high trad e- r I d costs, tr de f cilia i n issues warran t sp cific entio n to r duce he burden of tim e- consumi ng nd costl y lministr tiv nd cus om proc dures. These cups of r tap s cq ui re an v n hi her rei v nce in he con 0 GVCs, since goods .r likel , 0 be e port d n im po r ed

S veral imes long he v lue ch ins.