Kalamogo Coulibaly, Ph.D, The World Bank, 1818 H Street NW #200, Washington DC, DC 20007 and Brian W. Sloboda, Ph.D., U.S. Postal Service, 475 L'Enfant Plaza, Washington, DC 20260.
Studies have shown that trade liberalization and openness to trade correlated positively with increased economic performance.
India,
China,
Vietnam and
Mexico are the most cited examples of countries that have liberalized trade policies and have seen a substantial increase in economic growth and poverty reduction. Along with the increase in GDP, these countries saw respective declines in poverty. Conversely, Sub-Saharan Africa (SSA) countries have liberalized trade for the last decade and seen different results. The average tariff rate in SSA declined by 20 percent from 1983 to 2003 as the average applied tariff decreased from 22.1 percent to 17.7 percent. Likewise the share of exports plus imports of SSA in the world rose from 49 percent in 1983 to 63 percent in 2003. However, average growth rate of per capita GDP in SSA countries fell by -0.3 percent between 1983 and 2003. Poverty also increased in SSA countries during this time according to the UN Human Development Index - an index which measures human development on a scale from 0 to 1, with 0 being the lowest and 1 whereas the value for the developing countries as a whole was 0.655. Likewise, though trade liberalization of the late 1980’s brought about some clear signs of economic recovery during the 1990’s in several Latin American countries, it was accompanied by an increase in the overall income inequality and poverty. This paper attempts to provide an answer of why trade liberalization and openness to trade did not succeed in reducing poverty in SSA countries as it did in other areas of the world like
India,
China,
Vietnam and
Mexico.