Trade Policies and Development of Technology in Africa

Introduction

Trade between nations is very crucial in the process of economic and technological growth. The growth link between international trade and economic development could be traced to the classical trade theory of Adam Smith, and David Ricardo and the modern neoclassical trade model of Heckscher-Ohlin (H-O) model. The basic tenet of the trade theory is that welfare is generally enhanced through improvement in productivity and sectoral allocation of factors of production. Some of the benefits associated with trade include foreign exchange earnings needed in the importation of intermediate goods required in the industrial sector, increased competition, product specialization, and a broader avenue for technology transfer (World Bank, 1991). Studies by Bhagwati, (1978, Bhagwati and Srinivasan, 2002); Balassa (1982, 1985); Krueger (1978,1990,1997); and Edwards,(1993) confirm the positive relationship between exports and economic growth. In the African continent, however, the trade policy of many countries was based on the doctrine of import-substitution industrialization. That policy gained wide acceptance as a viable policy package that would help many of these countries achieve structural transformation and subsequently lessen their dependence on primary products (UNCTAD, 2008). According to UNCTAD 2006 Report, African countries have not diversified their exports towards more dynamic primary commodities and manufacturing goods which are less prone to the vagaries of international markets and that Asia dominates trade between developing countries, accounting for more than half of all South-South commodities exports (UNCTAD, 2006). The impact of this weak export situation is more noticeable in the class the majority of African countries fall into according to World Bank categories of nations.

The World Bank has classified economies based on gross national income (GNI) per capita as low income, middle income, or high income World Bank (1993). The middle income group is further subdivided into lower middle and upper middle income. The low income economies are characterized by GNI per capita of $935 or less; lower middle income from $936 to $3,705; upper middle income, $3,706 to $11,455; and high income, $11,456 and above (World Bank, 2009). According to 2007 GNI per capita calculations, out of 47 Sub-Saharan African countries, only eight were classified as lower-middle-income, and three as upper-middle-income economies. In effect, only three countries South of Sahara, namely Gabon, Seychelles and South Africa meet the criterion of GNI per capita of $3,706 to $11,455 range. The situation should not surprise many people if technological innovation and application in most African countries is low.