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Effect of multilateral trade liberalization on export performance in developing countries: Does aid for trade matter?

Sena Kimm Gnangnon (Department of Development, Organisation Mondiale du Commerce, Geneve, Switzerland)

Review of International Business and Strategy

ISSN: 2059-6014

Article publication date: 5 June 2019

Issue publication date: 5 June 2019

369

Abstract

Purpose

The purpose of this study is to examine empirically whether the impact of multilateral trade liberalization on export performance and export performance convergence in developing countries depends on the amount of Aid for Trade (AfT) flows that accrue to these countries. Export performance is measured by export of goods and services to gross domestic product ratio, whereas export performance convergence refers to the process whereby a developing country’s export performance catches up with the world’s average export performance.

Design/methodology/approach

The analysis has used an unbalanced panel data set covering a sample of 97 developing countries, over the period 2002 to 2015. The two-step system generalized methods of moments has been used to address the question empirically.

Findings

Empirical results show that multilateral trade liberalization generates higher export performance and convergence in export performance in developing countries only when it is accompanied by higher AfT flows to developing countries, with a view of helping these countries enhance their trade capacity and reap the opportunities offered by multilateral trade liberalization in the international trade market.

Research limitations/implications

These findings indicate that greater access to the international trade market is not sufficient to promote developing countries’ export performance and convergence in export performance. Such a promotion could materialize if multilateral trade liberalization is accompanied by higher AfT flows (to enhance these countries’ capacity to trade). The findings therefore indicate that the current context of escalation of trade tensions would likely result in lower degree of multilateral trade liberalization, and eventually lower AfT flows to recipient-countries, and ultimately hamper developing countries’ export performance and convergence in export performance.

Practical implications

The findings therefore indicate that the current context of escalation of trade tensions would likely result in lower degree of multilateral trade liberalization, and eventually lower AfT flows to recipient-countries, and ultimately hamper developing countries’ export performance and convergence in export performance. An avenue for future research could be to perform the same analysis when data would be available over a longer time period. Future studies on the matter could also investigate whether the findings obtained apply to components of export performance, including for example manufactured exports and non-manufactured exports.

Originality/value

Many papers related to the AfT effectiveness have looked at the effect of AfT inflows on recipient-countries’ export performance. However, little attention has been paid to the effect of multilateral trade liberalization on developing countries’ export performance and export performance convergence and particularly to whether this effect would depend on the amounts of AfT that would accrue to developing countries to help them develop their trade capacity. To the best of our knowledge, no previous paper has addressed this issue.

Keywords

Acknowledgements

The author would like to express his gratitude to the anonymous reviewers for their useful comments on this article. The latter represents the personal opinions of individual staff members of the WTO and is not meant to represent the position or opinions of the WTO or its members, nor the official position of any staff members. Any errors or omissions are the fault of the author.

Citation

Gnangnon, S.K. (2019), "Effect of multilateral trade liberalization on export performance in developing countries: Does aid for trade matter?", Review of International Business and Strategy, Vol. 29 No. 2, pp. 117-138. https://doi.org/10.1108/RIBS-09-2018-0079

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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