Trade Liberalization and Manufacturing Sector Performance: Evidence from the Economic Community of West African States
- Uche A. Osakede and Olayinka O. Adenikinju
- ( paper pages. 119 - 146 )
Abstract
The relationship
between trade liberalization and industrial sector performance is ambiguous
from both the theoretical and empirical points of view. More so, studies have
linked trade liberalization with economic growth and sectoral performance; yet,
efforts to situate findings on industrial activity within trade blocs
especially in Africa are scarce in the literature. This is particularly
important, as the African Union has taken a major step to boost regional trade
and economic integration by establishing the African Continental Free Trade Area
(AfCFTA). In this paper, the effect of trade liberalization on manufacturing
value added for countries in the ECOWAS using data from the World Development
Indicators (2019) and the CEPII data base was examined. Findings are shown for
the period of the ECOWAS treaty, 1975 to 2019 and the non ECOWAS and ECOWAS
period 1960 to 2019. Estimates were provided using the fixed (controlling for
country and time effects) and random effects models. Findings showed that trade
liberalization measured by openness and export taxes led to improvement in
manufacturing value added. Interestingly, increase in import tariff rate as a
measure of trade liberalization had unexpected positive effect on manufacturing
value added. Additional findings noted were associated improvements in
manufacturing sector performance with population increase and fall in the real
exchange rate. No significant differences were found in the result for both
periods considered in the study. Empirical findings of the study support
theoretical propositions that trade liberalization can lead to improved
industrial sector performance with specific reference to the African region.
The evidence lends support to the potential of AfCFTA in promoting industrial
sector performance and sustainable development in Africa.
Citation
Uche A. Osakede and Olayinka O. Adenikinju.
2022.
"Trade Liberalization and Manufacturing Sector Performance: Evidence from the Economic Community of West African States"
The Nigerian Journal of Economic and Social Studies,
64 (1): 119 - 146.
JEL Classification
F14. F15, F41
