How Facilitating Trade would benefit Trade in Sub-Saharan Africa

Despite a significant trade expansion that has been above the world average in the recent period, Sub-Saharan Africa still remains relatively marginalized in the world trading system. This paper sets out to analyze the extent to which various elements of the trade cost landscape in the sub-continent may have contributed to shape trade patterns both within the region and with the outside world. Various trade facilitation measures such as border efficiency, physical infrastructure and regulatory environment are related to bilateral trade flows in a gravity framework. The results based on the Poisson pseudomaximum likelihood indicate that a one-standard-deviation increase in trade facilitation measures could yield up to 33% increase in exports, and raising the sub-continent to the level of the world average would amount to reducing bilateral distance by 1.8% to 4.5%, or reducing ad valorem tariff by 1.8 to 12.8 percentage points. The extent of the gains varies greatly across the trade facilitation measures, commodity sectors, export destinations, and depends on which trading partner undertakes the corresponding reforms. Policies aimed at boosting trade could focus more on improving border efficiency that appears to be more cost-effective especially in the context of budget-constrained governments across the sub-continent.