More local trade is a great idea

Varied African states – essentially all that are still states other than Nigeria and South Africa – has joined up into a trade bloc. Of course, it’ll matter how the details turn out but there’s great good sense in their trying to create something like a common market among themselves. For what is all too often underappreciated is that trade between places at roughly the same level of technology is just as good at increasing economic wealth as any other form of it:

The two biggest economies in Africa, Nigeria and South Africa, were wednesday conspicuously absent as 44 leaders of African countries signed a deal to create one of the world’s largest free trade blocs.

The billion odd people of China are richer because there is free trade between those billion. The billion odd people of Africa would be equally richer for the same reason – free trade between a billion people.

Note that it’s not necessary that trade be on the sort of terms Africa has had these recent decades. Being an exporter of raw materials and commodities and importing manufactures. Sure, that’s nice, people get manufactures and so on. But to get growth motoring it’s necessary for there to be domestic production of something that adds value. Which means producing something higher up the value chain than simply raw commodities.

The problem in near all African countries being that the domestic market is simply too small to support someone doing anything at world levels of productivity. Which poses something of a problem really, doesn’t it? Not up to world standards production and yet not a large enough market to get there either. The answer being to start dividing and specialising the various production tasks among those nations which all share that same problem. Free trade between African countries therefore.

This trade stuff really isn’t difficult. Trade makes people richer, the more trade there is the richer the people get. Thus anything, any arrangement, which increases trade by reducing the barriers to it is a good idea.

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5 COMMENTS

  1. South Africa, were wednesday conspicuously absent as 44 leaders

    “were wednesday conspicuously”

    WTF does that even mean? A typo or a lift from a piece written by a semi-literate septic from over the Pond?

    It’s English Jim, but not as we know it.

  2. South Africa was Wednesday conspicuously absent perhaps because its emphasis is not on increasing productivity but on seizing farms without compensation based on the skin color of the owner. It can replicate the economic miracle of Zimbabwe all by itself. It might be wise to exclude this basket-case-in-the-making from the free trade zone.

  3. “Being an exporter….Sure, that’s nice….But…it’s necessary for there to be domestic production of something that adds value.” Mining adds value, versus keeping the ore in the ground. Yes, it would be nice if Africa had a well-developed manufacturing sector, and webpage-design and space-launch sectors as well. But enabling open trading, versus dictating what is traded, is at least unrelated and at worst at cross purposes.

    • One of Africa’s biggest industries, albeit “undocumented” is taxis. Our taxis look nothing like a New York yellow cab or even an Uber. They are minibuses with a (nominal) seating capacity of between 14 and 25. Every weekend, and especially over extended public holidays like Easter and Xmas, some number of millions of passengers are moving from Pretoria to Lilongwe or from Abuja to Yaounde. On such international journeys the taxis normally tow trailers carrying plenty of consumer goods from clothing to satellite dishes, some for personal use and some for trade.

      I attended a talk from a member of International Students for Liberty who complained that in West Africa the real border tariff posts are not between countries but between the territories of various local potentates. They have on their own re-discovered the Laffer Curve. Make the tolls too high and traffic drops dramatically, reducing revenue collections. These potentates also push the state to keeping their roads in good order, to encourage using that route. Ah, good old economics.