Ending Africa's Poverty Trap (Part 2‪)‬

The Role of Trade Reform Most of this paper has focused on the quantity and direction of ODA needed for African countries to make the public investments necessary to break out of a poverty trap. The implied aid flows are large, equivalent to 20 to 30 percent of recipient countries' GDP over the course of a decade or more. An important related issue is how these costs compare with the benefits of increased international trade. Could improved trade conditions substitute for the required aid? Have the advocates of "trade, not aid" discovered a less expensive solution? These questions are particularly relevant in the context of the current Doha round of negotiations under the auspices of the World Trade Organization, which are meant to focus in large part on developing country needs, although the talks have produced few results as yet. The long-term ambition for African economies with respect to trade needs to be to diversify away from dependence on commodity exports and the related long-term decline in terms of trade, but several other trade policy issues are of immediate importance. (85) Market access remains crucial for African exporters, as is an intellectual property regime that permits reliable access to key pharmaceutical products and a trade regime that allows enough flexibility for countries to implement industrial promotion policies. Yet even though trade reform is welcome and important, it is certainly not sufficient to achieve the MDGs. Trade will not directly provide the targeted public investment strategies outlined above, and the gains from trade are simply insufficient to finance the necessary investments. Even the much-heralded Africa Growth and Opportunity Act of the United States has had only marginal effects on most African countries' exports. (86)