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Deep regional trade agreement as a driver for global value chains in Africa: the case of ECOWAS region

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Abstract

Deep regional trade agreement (RTA) is likely to enhance global value chains (GVCs) by increasing coordination of trade policies. Economic Community of West African States (ECOWAS), established on 28 May 1975, aims to promote integration of members into regional and global trade, especially trade in GVCs. Thus, a trade liberalization programme called ECOWAS Trade Liberalization Scheme (ETLS) is instituted in 1979. The ETLS covers protocols and conventions which go beyond tariff reduction and must be signed and then ratified. The paper investigates the effects of deep RTA on GVCs for 11 countries from the ECOWAS region during 1996‒2018 by applying the fractional logit regression technique. GVCs are calculated as shares of foreign value-added (FVA), domestic value-added (DVA), and DVA exports (DVX) in gross exports. Unlike previous works that often use the binary variable, RTA is measured by a new continuous indicator relating the ETLS protocols and conventions ratified. Second, the paper analyses control of corruption as a channel through which RTA influences GVCs. The findings reveal that deepening RTA significantly increases FVA, while it reduces DVA, but only at the 10% level. Furthermore, our findings indicate the existence of a complementarity relationship between deep RTA and control of corruption in DVX model. ECOWAS governments should pursue the ratification of the ETLS protocols and conventions in order to increase their chances of integration into GVCs (FVA). Furthermore, governments should remember that RTA should not be seen in isolation, and control of corruption is needed to enhance its effect on DVX.

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Fig. 1

(Source: Authors, based on the databases of Mamba and Balaki (2022) and Worldwide Governance Indicators (WGI))

Fig. 2

(Source: Authors, based on the data from UN Global Survey on Digital and Sustainable Trade Facilitation)

Fig. 3

(Source: Authors’ calculations based on the Eora database (UNCTAD))

Fig. 4

(Source: Authors’ calculations based on Eora database (UNCTAD) and ECOWAS reports)

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Notes

  1. See also Handley and Limao (2017) and Martínez-Zarzoso and Márquez-Ramos (2019).

  2. Obasaju et al. (2021) obtain similar findings as Obasaju et al. (2019) for ECOWAS and East African Community (EAC) regions.

  3. In comparison with ECOWAS, de Melo et al. (2020) assert that the East African Community (EAC) stands with a more transparent trade policy. Rauschendorfer and Twum (2021) indicate that the EAC, the “only fully operational customs union in Africa”, has long been considered a rare example for an African REC that has completely liberalized trade among its member states. However, Rauschendorfer and Twum (2021) mentioned that ECOWAS, as well as EAC, deviated from the CET with exceptions.

  4. Information available at https://wacomp.projects.ecowas.int/value-chains/.

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Acknowledgements

We wish to express our deep appreciation to the African Economic Research Consortium (AERC) for the financial support to carry out this research. We are also grateful to the resource persons (Jaime De Melo and Marcelo Olarreaga) and members of AERC’s Group for various comments and suggestions that have helped the evolution of this study from its very beginning to this stage. The findings made and opinions expressed in this paper are exclusively those of the authors. They do not necessarily represent the views of AERC, the AERC resource persons. This research is published by the AERC as a Working Paper. URL: http://publication.aercafricalibrary.org/handle/123456789/3413.

Funding

This work was supported by the African Economic Research Consortium [Grant Numbers RC21554, 2021].

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  1. Department of Economics, University of Kara, Kara, Togo

    Essotanam Mamba & Afi Balaki

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Appendix

Appendix

See Tables 8, 9, 10, 11, 12 and 13

Table 8 Correlation and multicollinearity (variance inflation factors test), tests
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Table 9 Stationarity test
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Table 10 Robustness checks: IPCR as a driver for GVC participation (FVAI, DVAI, DVXI), model 1
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Table 11 Robustness checks: IPCR as a driver for backward GVC participation (FVAI)
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Table 12 Robustness checks: IPCR as a driver for total domestic value-added (DVAI)
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Table 13 Robustness checks: IPCR as a driver for domestic value-added export, DVXI (forward GVC participation)
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Mamba, E., Balaki, A. Deep regional trade agreement as a driver for global value chains in Africa: the case of ECOWAS region. Econ Change Restruct 56, 2037–2068 (2023). https://doi.org/10.1007/s10644-023-09503-x

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