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Economic Report on Africa 2004

Unlocking Africa’s Trade Potential

image of Economic Report on Africa 2004

The Economic Report on Africa is an annual series that reviews the continent’s economic performance and near-term prospects. This year’s report’s main conclusion is that trade liberalization alone will not boost growth and poverty reduction in Africa. In 2003, Africa was the second fastest growing developing region, yet, only 5 countries achieved the 7% or higher growth rate required to reach the Millennium Development Goal of halving poverty by 2015. FDIs inflows continued to increase but still remain largely concentrated in the natural resources sector. Although the regional outlook for 2004 is positive, with growth projected to accelerate, there are still several downside risks to be faced.

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Trade liberalization—Panacea or mirage?

In the search for broad-based human development in Africa, is trade liberalization likely to bring real long-term benefits? Considering how meagre the benefits from Africa’s trade reforms have been up to now, what is the correct trade policy for African countries? These are the questions at the heart of this chapter, which looks at three areas of central concern to African policy makers: (a) the reasons for Africa’s continuing marginalization in world trade, by contrast with the success of some Asian economies; (b) the potential impact of multilateral trade liberalization on Africa’s agricultural sector; and (c) the effects of trade reform on the reduction of poverty and income inequalities in Africa. The chapter concludes that liberalization in itself is not a miracle cure and that trade must be liberalized cautiously. Trade has rescued millions from deprivation and poverty, but successful development requires more than the pursuit of free trade alone.

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