Abstract
Trade is one of the key channels through which Chinese economic growth affects the world economy and especially developing countries. African manufacturing sector is confined to few traditional sectors. Even if at times, and in some sectors, African exports have been favored by preferential treatments, Africa has proven to be particularly vulnerable to the competitive threat posed by China in third markets, including other African countries. With the intensification of economic relations, in fact, China has started flooding African markets with its low-cost manufactures, often at the expense of local producers. Furthermore, in Africa's main trade partners, namely United States and European Union, most Chinese goods are likely to crowd-out cheap African manufactures. We measure the indirect impact of China on African exports. Using disaggregated data for the period 1995–2005, we present significant evidence on the existence of a displacement effect at different levels: sector, product, region and market.C'est à travers la croissance économique chinoise que se manifeste l'un des plus grands impacts de la chine sur l’économie mondiale et plus particulièrement sur celle des pays en développement. Le secteur manufacturier africain se limite à quelques productions traditionnelles. Même si, à certaines périodes et dans certains secteurs, les exportations africaines ont bénéficié de traitements préférentiels, l’Afrique s’est avérée particulièrement vulnérable à la menace compétitive exercée par la Chine sur les marchés tiers, y compris sur d’autres marchés africains. En effet, avec l’intensification des relations économiques, la Chine a commencé à inonder les marchés africains avec des produits manufacturés à bas coûts, souvent au détriment des producteurs locaux. De surcroît, aux Etats Unis et en Europe, principaux partenaires des pays africains, les produits chinois sont aussi susceptibles d’évincer des produits manufacturés africains bon marché. Nous mesurons l’impact indirect de la concurrence chinoise sur les exportations africaines. En utilisant des données désagrégées sur la période 1995–2005, nous mettons en évidence l’effet de déplacement au niveau des secteurs, des produits, des régions et des marchés.
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Notes
The EU has signed with Mediterranean countries the Euromed Association Agreements, which consist of duty-free access for the associated countries to the EU market for manufactured goods.
AGOA provisions make a distinction between apparel and non-apparel products. A regional quota of 1.5 per cent of US imports remains for apparel products (Frazer and Van Biesebroeck, 2007).
Also some North African countries (especially Tunisia and Morocco) and – to a lesser extent – some SSA countries (Swaziland, Cote d’Ivoire, Mauritius among the others), have recorded significant exports in these sectors.
For a general discussion on the main effects of the Asian Drivers (that is China and India) on developing countries, refer to the introduction of the special issue of World Development, Vol. 36(2), 2008 (Kaplinsky and Messner, 2008).
Kaplinsky and Messner (2008) report a less intuitive, but very significant example of indirect effects arising from China's growth. They quote the case of Lesotho, whose manufacturing exports suffered from the Rand appreciation (to which Lesotho's currency is tied), which, in turn, has been an indirect consequence of China's growing demand for South Africa's commodities. In general, however, the episode of the appreciation of the Rand has not been followed by other currencies. The IMF (2008) has recently highlighted that the ongoing boom in the prices of main commodities exported by African countries has not been followed by a strong appreciation of the real exchange rate, reducing any concern of Dutch disease.
In order to compare unit values of Chinese exports with Africa, we computed a weighted average, for each product at the 6-digit level of the HS classification, the weight being the value of export flows. The data set BACI makes data on unit values at the product level available up to 2004 (Gaulier et al, 2008).
The fallacy of composition hypothesis is based on the view that, as many developing countries try to enter international markets, they might face insufficient demand for their goods and begin a ‘race to the bottom’, driving prices of exports down, (cf. Razmi, 2007; Razmi and Blecker, 2008).
Morris (2006) compares the current situation to a previous period of export-led growth, when the newly industrialized countries entry in international markets displaced domestic producers in the industrialized countries. These economies were not in direct competition, but rather they were involved in a positive-sum game among themselves.
Currently, Algeria, Egypt, Morocco and Tunisia have signed such agreements, which have entered into force at different times.
Owing to lack of individual country statistics before 2000, the five countries belonging to the Southern African Custom Unit: South Africa, Botswana, Namibia, Lesotho and Swaziland are considered as a unique reporter.
The Pagan-Hall test has been performed on different sub-samples casually drawn from the data set. The results have been always similar.
Clustering allow to the GMM estimator to produce efficient results in the presence of intra-cluster correlation. In the case of equation (1), the cluster corresponds to the panel identifier, that is the combination of the countries couple (importer-exporter) with the product being traded.
Previous works (Greenaway et al, 2006) adopt China's GDP as an additional instrument. In this case, however, its correlation to China's exports is high but it might not be exogenous (Eichengreen et al, 2004). Hence, we run an overidentification test based on the Hansen J. statistics (Baltagi, 2005). Not surprisingly, the test (whose statistic is 102.811, with a P-value of 0.000) shows that identification problems may arise when China's GDP is included in the set of instruments together with bilateral distance.
In presence of heteroskedastic errors, the Kleibergen-Paap rk statistics (Kleibergen and Schaffer, 2007) perform a LM test and reject the null of under-identification. In the latter case, the Wald F. version of Kleibergen-Paap rk statistics (Baum et al, 2007b) similarly refuse the null of weak identification.
Note that all the regressions below include time-fixed effects that are not reported for reasons of space.
The SITC classification of manufacturing exports excludes processed food items and tobacco products (which are included in SITC 0 and 1). In contrast, the ISIC (that is industry-based) classification of manufacturing includes all such commodities in ISIC 311 (food products), 313 (beverages) and 314 (tobacco products). Furthermore, the ISIC classification of manufacturing also includes non-ferrous metals (ISIC 372), which are usually excluded from the SITC.
The coefficient for SITC-721 is −0.19, whereas for SITC-724 is −0.35 (they are both significant at 5 per cent level). The other sub-group showing a significant (and also negative) sign is the residual of this group, SITC-728, which included all the machineries for industries not included elsewhere (the coefficient reports −0.26 and significance level is 5 per cent).
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Acknowledgements
An earlier draft version of this paper has been presented at the Second Summer School on the Chinese Economy at CERDI, University of Auvergne. We would thank Margherita Velucchi, Stefano Rosignoli and Aruneema Mahabir, and two anonymous referees for their helpful comments.
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Giovannetti, G., Sanfilippo, M. Do Chinese Exports Crowd-out African Goods? An Econometric Analysis by Country and Sector. Eur J Dev Res 21, 506–530 (2009). https://doi.org/10.1057/ejdr.2009.20
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DOI: https://doi.org/10.1057/ejdr.2009.20