Services trade policy and industry performance in African economies

Abstract

This paper assesses the potential impacts of services trade liberalization for a sample of African countries. The focus is on the relationship between labour productivity of manufacturing sectors and two types of services trade-related policies – restrictions on foreign direct investment (FDI) in services and restrictions on international payments for invisibles. The analysis takes in account differences across manufacturing sectors in the intensity of use of different services as inputs into production as well as difference in the quality of economic governance across countries. We find that services trade liberalization may have substantial positive impacts on the performance of manufacturing sectors, and increase with services input intensity and the quality of governance.