A Dashboard for Trade Policy Diagnostics

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This paper organises trade policy measures into those that address the ‘negative’ (e.g. tariffs) and the ‘positive’ (e.g. institutions like fair-trade). These measures are collected in a dashboard with links to online sources. The paper shows how trade outcomes can be linked to the measures in the dashboard after selecting a comparator group for the country of interest.

 

The set of measures that affect international trade in goods and services defines trade policy. Trade policies affect trade costs. ‘Good’ trade policy seeks to minimise trade costs. Traditionally trade policy was restricted to measures imposed at the border (tariffs, import quotas, export taxes, subsidies). It is now recognised that trade costs extend beyond border measures to include ‘behind-the-border’ measures (logistics, regulations). Trade costs also depend on the quality of the institutional environment (completeness of contracts and enforcement). This primer proposes elements of a ‘good trade policy’ for an African country where the context is country-specific but where common geographical characteristics, common policies, and common market failures often prevail.

Based on the strong evidence that countries with more open trade policies have superior performance along several economic dimensions, it is assumed the central objective of trade policy in Africa should be to reduce trade costs. For expository purposes, measures are classified into those aimed at dismantling cost-raising policies–i.e. letting market work– and those aiming at making markets work, i.e. those addressing ‘market failures’. The former policies (completing the negative agenda) release resources while the latter (the positive agenda) require expenditures and the allocation of scarce funds. Measures to be addressed at the level of the Regional Economic Communities (RECs) are listed separately.

A dashboard of indicators describing trade outcomes serves to identify policy measures. Elements for inclusion in trade policy packages will be country-specific, but likely to include:

Negative agenda:

  • Raise the profitability of agricultural activities by reducing (and eventually removing) the bias against agriculture.
  • Widen the tax base by implementing an accompanying fiscal reform.
  • For renewable resources with ill-defined property rights, export controls can help conservation until improvements in the property-right regime.
  • To support emerging activities (i.e. infant-industry protection) design results-based measures (meeting market share targets in X years to benefit from support).

Positive Agenda:

  • In the short-run, improving customs management as agreed by all WTO members in the TFA.
  • Over the longer-run, improve the quality of domestic contracting institutions including the activities and efficiency of TPOs
  • Evaluate, in view of developing, private trade institutions (fair-trade, voluntary standards, trading platforms)

Deepening integration along the RECs:

  • Ensure access to intermediate inputs at world prices by reducing external tariffs to 1-2-band tariff schedules, a sine qua non to participate in GVCs.
  • Emphasise deep integration by including services and other regulations in the negotiating agenda.
  • Carry out diagnostics at the REC level, an opportunity to monitor the application of decisions decided at the REC level.

Four annexes and annotated references complete the paper.