Why have exports from poorer countries failed to increase more rapidly following trade liberalisation? What can be done to improve performance? Research on the response of firms in the private sector to economic reform can underpin new approaches to export promotion for poorer developing countries. For a long time, protective trade policies, poorly performing state-owned industries and state controls over the private sector were blamed for poor export performance in Africa and South Asia. Now that some of these problems have been remedied, other obstacles have come to light.

The effect of economic liberalisation and adjustment on the performance of poor countries has been cause for concern. Trade liberalisation should increase incentives to export and facilitate business enterprise by encouraging private ownership through privatisation and by attracting foreign investment. Macroeconomic stability ought to boost business confidence and performance. All these factors should promote exports, offsetting job and income losses caused by the closure or reorganisation of inefficient enterprises and industries. Yet, although many poorer countries have achieved some degree of reform and stability it is without the export growth that was expected.

Trade reform and macroeconomic stability may be necessary conditions for improved export performance but by themselves are insufficient. The obstacles to improving export performance are numerous and there is no easy policy answer. The research programme examined export performance at three levels:

• regional: how trade strategies should vary with skills and natural resource endowments
• national: factors influencing the export performance of manufacturing
• sectoral: the performance of particular sectors of the economy

The East Asian economies have shown that developing countries can compete successfully in global markets. For many, they provide a blueprint for economic growth applicable to many poor countries. Adrian Wood’s earlier research on trade performance has shown convincingly that the concentration of East Asia’s exports on manufactured products is the result of its particular combination of land scarcity and a relatively educated labour force. New research shows the consequences of differing land and labour endowments for the trade strategies of Africa and South Asia.

South Asia’s comparative advantage lies in its abundant unskilled labour, while Africa’s lies in its abundant natural resources, argues Wood in this issue. Different export-promotion strategies are essential. South Asia’s best prospects are in labour-intensive manufacturing: the region’s low level of exports would soar over the next decade if current obstacles to trade were reduced. Africa’s exports could also increase, but its biggest potential is in primary products that need little educated labour and abundant natural resources.

Some African countries could also be substantial exporters of manufactures, but their actual manufactured exports in most cases now fall far short of Wood’s predictions. Morrissey and Teal examine some of the causes of this poor performance. Why do African manufacturing firms export so little? Teal examines Ghana, where reforms have increased exports as a whole but have failed to lift manufacturing exports. Comparing Ghana to Mauritius - one of Africa’s most successful exporters of manufactured goods - differences in firm-level efficiency are apparent. Mauritian firms have more capital per worker and use it more efficiently. Reducing trade barriers is not sufficient. Wages in Ghana would have to be substantially lower to offset low labour productivity. Alternatively, labour productivity will have to be drastically improved if Ghanaian firms are to compete successfully in export markets with wages at current levels.

Morrissey highlights another problem for African firms trying to enter export markets. Even when companies use capital and labour efficiently, poor infrastructure is a frequent stumbling block that increases the cost of sending products to export markets - an acute problem in landlocked countries and equally acute for manufactures as research on Uganda clearly shows. What hurts manufacturing exporters is being hit by the high cost of transporting their output to foreign markets and of transporting the materials they need from abroad. The cost penalties resulting from geography and poor infrastructure are far greater in Uganda than from high tariffs and other import restrictions.

Southern firms can still break into export markets, however. Developing-country firms do export to markets with exacting standards for product quality, reliability of delivery, and consumer safety. Two crucial aspects of trade promotion for developing countries, however, are often overlooked:

• Non-manufacturing sectors, such as tourism and horticulture, generate significant employment and offer opportunities for supplying increasingly sophisticated products. Although manufacturing is considered more attractive, certain areas of tourism and horticulture can be equally appealing.
• New export opportunities are created as southern producers establish closer links with foreign customers. Producers of labour-intensive products such as garments, horticulture and footwear frequently depend on large retailers and specialist international traders for designs, information about demand and technical support.