Econometric Analysis of China-ECOWAS agricultural products trade

Abstract

Agriculture trade remains the economic fulcrum of most African countries as the continent continues to host the largest percent of arable land. This research analyzed the Economic Community of West African States (ECOWAS) and China’s agricultural products trade determinants based on 19 years (2000-2018) panel dataset of West African countries aggregate agricultural products exports ($) and macroeconomic variables; GDP, population, arable land, language investment, and trade association(WTO)) as predictors. The PPML estimation method was employed due to its prediction accuracy, the size of the data, and potential hetroskadacity issues. With a 78.5% prediction power, the model explained the variation in ECOWAS-China agricultural trade (Exports). GDPj, lnPOPj, lnPOPi, and lnARLj, LndLj, ConfInsj, and WTOij were positive and statistically significant determinants of trade as hypothesized by existing trade literature. In addition, the China’s population (lnPOPj) had a value of 0.5877, which is significant at the 5% level, indicating that a 1% increase in the Chinese population significantly increases trade in agricultural products with ECOWAS states. The coefficient of distance (Dij) is -4.4573 statistically significant at the 1% level, indicating that distance between partners impedes trade flow. There are unidentified barriers that delay the progress of trade in agricultural products between ECOWAS and China. Based on the above findings, Investments in ECOWAS arable lands demand urgent attention if significant progress in exports is expected, additionally, governments of both partners should assist Agricultural research and development to identify and rectify stifling trade barriers. Furthermore, as trade between ECOWAS and China has not yet reached its full peak, studies on export determinants of individual Agro-commodities and potentials are needed to enrich literature.