62 Africa in the New Trade Environment
essential for policy makers to identify priorities. Reform that focuses on a few priorities would have a greater impact. We show that many countries in SubSaharan Africa have taken advantage of the opportunities provided by the AGOA, but the results vary across countries and over time within countries. Countries with better ICT infrastructure; a relatively better functioning and effective judiciary, and hence better contract enforcement institutions; and a better macroeconomic environment (including stable exchange rates) have registered the most significant AGOA-related export gains. Increasing exports and improving trade—and hence promoting growth— in Sub-Saharan Africa require improvements in a set of institutions for property rights protection and legal structures. Although improvements in other institutional areas, such as reduction of corruption, are also important for trade and exports, policy priorities focused on the rule of law, the quality of the judiciary, and contract enforcement seem to generate greater returns. Sub-Saharan African countries also need to adopt a set of sound macroeconomic policies to keep inflation low and exchange rates stable and competitive. Finally, building on the quality and quantity of physical infrastructure, ICT, and other infrastructure presents opportunities for expanding exports for international trade. These represent the critical mass of reforms needed to boost the AGOA’s transformation impact on beneficiary Sub-Saharan African countries.
Conclusion This chapter has examined the AGOA’s aggregate impact using SCM, a quasi-experimental approach. The novelty in the empirical approach is that it addresses the fundamental problems of estimation that are prevalent in nonexperimental methods such as the gravity model. The main finding is that most of the eligible countries registered gains in exports due to the AGOA. However, the results were varied and the export gains largely unsteady. Much of the gains were attributable to petroleum exports, although a few countries expanded into exports of manufactured and other industrial goods. When the gains were derived from exports of fuel, they were largely unsteady. When they were based on nonfuel exports, the gains increased consistently over the years of AGOA eligibility. The erosion of preferences, particularly the expiration of the MFA, has lessened successes in the latter group. In the long term, the AGOA’s impact on exports could support the transformation of economies as long as there is diversification of exports into nonfuel sectors such as manufacturing and agroprocessing. The variation in the trade impacts is largely explained by infrastructure, institutions of legal frameworks, ease of labor market regulations, and a sound macroeconomic environment including stable exchange rates and low inflation. The results suggest that preferential market access granted to Sub-Saharan African countries has the potential to foster their economic transformation,
