Africa Today 48.4 (2001) 142-144
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Richard Mshomba provides an invaluable source of information for anyone wishing to understand trade and underdevelopment in Sub-Saharan Africa. The first two chapters clearly develop his central argument that trade policies in both developed and developing countries are detrimental to African trade and economic development. Mshomba is correct when he states that negative interest rates, overvalued exchange rates, and discriminating agricultural policies against farmers in Africa as well as the price-distorting policies used by developed countries to support their producers have contorted market forces and set the price levels. A historical analysis of the generalized system of preferences, GATT-WTO, and international commodity agreements in Chapters three, four, and five is intended to support this hypothesis. In the last two chapters, Mshomba advocates free trade, economic integration, and an increase in political accountability (p. 204) as the new directions African states should take to realize fully the benefits associated with trade.
The book is powerfully argued and tightly organized but has a few problems. Chief among these is that the author does not attempt to advance any kind of overarching model of policy-making process, even though he embeds his analysis in the existing economic literature. One might, for example, expect a discussion of the dynamics of the trade policy-making process at both the domestic and the international level. The thrill of policy making lies in the inherent freedom it allows to select preferred policy goals among alternative choices, but these choices and the constraints placed upon African policymakers are hardly discussed.
At the theoretical level, the author maintains that the determinants of private investment in less developed countries are political stability, macroeconomic stability, public sector investment, exchange rates, the terms of trade, the magnitude of the debt burden, interest rates, and credit availability (p. 16). Except for the concept of interest rates, he does not adequately develop any of these. This is a major shortcoming of the book, because savings and investments tend to be correlated even in the presence of negative interest rates.
Also, the book completely ignores the growing literature on primary sectors and economic growth. For example, the most comprehensive study [End Page 142] to date paints a gloomier picture. In their regression analysis of ninety seven countries between 1971 and 1989, Sachs and Warner (1995) show that states with a high ratio of natural resource exports to gross domestic product had an abnormally slow growth rate even after controlling for a wide range of growth-related variables such as initial per capita income, trade policy, investment rates, region, bureaucratic efficiency, terms of trade volatility, and income distribution. The exclusion of developing but rich oil exporters did not change their conclusion.
Is the wealth of natural resources in Africa a curse? Mshomba hardly discusses this question despite the overwhelming evidence of a high ratio of a few primary export commodities to total export revenue illustrated by Table 5.1 (p. 140). Nonetheless, the wealth of natural resources per se is probably not the issue; what matters is the lack of African governments' corrective responses to diversify the economy, to improve productivity, to foster competitiveness, and to manage resources efficiently. Any analysis of trade policies and international regimes must thoroughly examine how policies are made and how both states and groups interact to produce such policies and then ignore implementing them.
The author neither discusses policy-making processes nor analyzes the formation and collapse of international regimes. For example, the Multi-Fiber Arrangement (MFA) for the textile and clothing sector was signed in the early 1970s during a period when liberalization of trade in manufactured goods was generally expanding and increasing in scope. How can it be explained that states which had expended great efforts to secure international cooperation on the MFA subsequently led the way to dismantle it during trade negotiations in the Uruguay Round?
If the lack of political commitment and accountability in Africa is the issue, as Mshomba rightly...