Can a deep preferential trade agreement boost global value chain participation in Sub-Saharan Africa?

Abstract

The increasing relevance of the global value chains (GVCs), and the deepening preferential trade agreements (PTAs), have recently increased the strength of globalisation. Hence, many developing counties are increasing their PTAs to reap the benefits of GVC. However, given the lack of the necessary financial means, and the low level of industrialisation, developing countries could remain providers of low-value primary materials, and miss out on the real gain of GVC. The present study examined if Sub-Saharan Africa's (SSA) preferential trade agreement increases their level of participation in GVC. A panel study approach was employed using data of some countries in SSA for the period 2000-2020 in static and dynamic models. The analysis showed that deep PTAs have a significantly positive impact on the level of GVC in SSA. It was found that the participation of SSA in GVC can be enhanced by the level of development and attraction of FDI. The previous levels of GVC were also found to have an increasing and significant impact on the current level of GVC participation in SSA. Increasing the depth and amount of PTAs, the level of development, and the ability to attract FDI are recommended to increase the level of SSA’s participation in GVC. Also, an increase in access to tertiary education and the volume of export has the potential of increasing SSA’s participation rate in the GVCs.