Trade Policy and African Participation in Global Value Chains: Does Trade Facilitation Matter?

Abstract

This study offers an empirical appraisal of the contribution of trade facilitation for Sub-Saharan Africa (SSA) countries participation in global value chains. We used new value-added data on a panel of 25 countries over the period 2004-2017. The results using pooled ordinary least squares (OLS) regression and instrumental variable-two-stage least squares (IV-2SLS) estimators reveal that trade facilitation indicators such as physical infrastructure, information and communication technology, and border and transport efficiency support SSA countries' participation in global value chains. More interestingly, these results are robust at the sectoral level, particularly in agriculture, manufacturing, and textiles & clothing sectors for physical infrastructure and ICT, while the business environment is conducive to upstream integration of GVCs in the agriculture and textiles & clothing sectors. These results underscore the increased importance of trade facilitation in the era of global value chains and call for well-targeted sectoral policies to reap the benefits of GVCs.