The Role of Competition Reforms in Unlocking International Trade: Evidence from Africa’s Proposed Tripartite Free Trade Area

Abstract

This study applies an econometric approach to estimate the impact of competition reform adoption and tightening on international trade, using Africa’s envisaged Tripartite Free Trade Area (TFTA) as a case study. An index measuring the extent to which competition regimes have been tightened and enforced between 2001 and 2016 in the TFTA countries is constructed. A gravity model of international trade, based on generalized method of moments, is then estimated to establish how exports are influenced by this competition index measure after controlling for other traditional gravity model variables. The results show that increasing competition reforms by 1% is associated with an increase in bilateral exports into the TFTA by 0.16%. However, if competition reforms in the importing country increase by 1%, then an approximate decline in bilateral exports of 0.46% would result. This underlines the role of competition enforcement in enhancing national competitiveness.