News Release

December 6, 2005

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African Trade Liberalization Should Begin at Home
African nations must stop blaming others for their poverty

WASHINGTON -- As trade liberalization talks get under way in Hong Kong, many of the world's media outlets continue to focus on protectionism in rich countries and its negative effect on poor countries, especially those in Africa. But, a new Cato Institute study cautions that trade liberalization in rich countries as a cure for African poverty is overemphasized.

In "Trade Liberalization and Poverty Reduction in Sub-Saharan Africa," Marian Tupy, assistant director of the Cato Institute's Project on Global Economic Freedom, argues that trade liberalization and domestic reforms within Africa are more important than trade liberalization in rich countries.

The study finds that even if rich countries open their markets to African goods, Africa's welfare gains would be limited because the main causes of African impoverishment are internal -- namely, political instability, high trade tariffs, and a general lack of economic freedom. According to Tupy, "it is hypocritical for African leaders to call for greater access to global markets since Africa continues to be one of the most protectionist regions in the world."

Average African tariffs are four and half times higher than those of rich countries. Moreover, African tariffs on African exports are much higher than rich countries' tariffs on African exports. According to the study, trade liberalization within Africa could increase intra-African trade by 54 percent and account for over 36 percent of all the welfare gains that Africa stands to receive as a result of global trade liberalization.

As examples for Africa to follow, Tupy points to India, China, Hong Kong, Chile, and many other developing countries that are reaping the benefits of unilateral trade liberalization. But, Tupy warns, without far-reaching economic and political changes, domestic and foreign investors will continue to avoid Africa and the benefits of trade liberalization will be severely restricted.

Policy Analysis no. 557