Abstract

This study examined the effect of the export and import of agricultural products on the economic growth of Cameroon. The specific objectives were to assess the effect of cocoa export on the economic growth of Cameroon, to determine the effect of coffee export and on the economic growth of Cameroon and to evaluate the impact of rubber export on the economic growth of Cameroon.

This study was backed by Joseph Alois Schumpeter’s Theory of Economic Growth and Harrod-Domar Model of Growth. The model specifies economic growth measured by gross domestic product as dependent on export and import of agricultural products proxy by cocoa export, coffee export and rubber export. Annual time series data from World Bank 1980-2017 was sourced using secondary data.

A multiple regression model was specified using ordinary least squared estimation technique. Results show that export and import of agricultural products has a significant positive impact on economic growth. Both cocoa export, coffee export and rubber export have a significant effect on the economic growth of the country.

The study demonstrates that increasing export and import of agricultural products reaps the static and dynamic benefits, stimulating rapid national economic growth. The study therefore recommends that the government of Cameroon should encourage the development of the agricultural sector through infrastructural development which will hence increase agricultural export.

The study further recommends that the government of Cameroon should support farmers to improve the productivity of the current production tools through technology transfer, and help them to increase the output of plantations by training them on good agronomic practices and also providing them with farm inputs at a subsidized rate.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The trade of import and export is considered as the first and most important step towards the economic growth and an increment in exert tends to enhance the income of factor of production, which boost the demand for further growth in the production sector and industrial areas. End result of expansion in production also stimulates the new technologies, innovations and investment opportunities in the country.

The significance of export in economic growth is more evident in classical research writings. A nation economics progress belongs to international trade (Marshall, 1980). International trade is an engine of growth. It has been observed that an efficient use of available natural resources is the gateway towards international trade and economic development (Huff, 2012).

High and speedy growing economies are linked to export with geometric rate. it is not necessary that a country with the plentiful endowment of natural resources are the suitable for economic growth else with the relatively with the scare resources country can expand its export with the optimum use of available resources like Singapure. Its mean a country is not dependent fully on its endowment of natural resources, import of raw material and furnished it with the semi and final goods is the modern technique to enhance the export, most amenably used by Asian tigers countries (Torvik 2009).

With the world having evolved into a global village, it is a precept for a nation to be in alliance with other nation(s). One of the coherent ways to create such an alliance between or among nation is via international trade. International trade allows for the exchange of goods and services cum foster healthy relations among countries irrespective of their level of economic development.

A country involved in international trade (export and import) need not have fear of hegemony or loss of its sovereignty because it is a mutual agreement to engage in trade across their border. A nation not participating in international trade is at risk of a slow pace of economic development due to the cogent fact that a country cannot be fully endowed with all the resources essential to be utilized for sustainable economic development. (Ado-Ekiti, 2014)

International trade can be interchangeably referred to as ‘foreign trade’ or ‘global trade’. It encompasses the inflow (import) and outflow (export) of goods and services in a country. A Country’s imports and exports represent a significant share of her gross domestic product (G.D.P); thus, international trade is correlated to economic growth.

In an open economy, development of foreign trade greatly impacts GDP growth (Li, Chen & San, 2010). Countries would be limited to goods and services produced within their territories without international trade. International trade is directly related to globalization because increase in trade activities across border is paramount to the globalization process. (Ado-Ekiti, 2014)

Export is a function of international trade whereby goods produced in one country are shipped to another country for future sales or trade. Agricultural exports can therefore be said to be the sales of agricultural products across international boundaries.

According to Prof. John Ndebbio, economic growth is an increase in a country’s output of goods and services over a period of time. That is a continuous increase in a country’s Gross Domestic Product (GDP) overtime.

Agriculture is a main source of livelihood for Cameroonians and agricultural exports are a major source of foreign exchange earnings for most African countries, Asian and South American countries and even for the major European and American economic powers. It should be noted that in the world today, the United State of America is the principal exporter of agricultural products, followed by the Netherlands, France, Germany, Brazil, Belgium and Italy. This therefore emphasizes the fact that, the exportation of agricultural products is very vital to every economy whether big or small (FAO, 2017).

A panoramic view of supply and demand shows that the global cocoa supply is highly dependent on African, South American and now Asian countries. The supply is abundant, often leading to a supply-demand imbalance (confers a law of supply and demand of J.B. Say), causing a structural weakening of prices prejudicial to most producers.

Indeed, world cocoa production since the 20th century has been growing at a rate of around 2% to 2.5% and reached 1.5 million tonnes in 1964. Today, it exceeds 2 million tonnes, of which Africa alone accounts for nearly 66% (Mossu, 1990). The major producing countries are: Côte d’Ivoire, Ghana, Indonesia, Cameroon and Nigeria (FAO et al., 2007).

There is an increasing interest in the relationship between export and economic growth. Theoretically it has been argued that a change in export rates could change output. Export growth, therefore, is often considered to be a main determinant of the production and employment growth of an economy which is shown in Gross Domestic Product (GDP) growth (Ramos, 2001)

International trade theories can be divided into three periods namely classical, neoclassical and modern trade theories. Classical theories recommend that countries can win economically if they all implement free trade. The most known classic theories are the absolute advantage theory developed by Adam Smith and the comparative advantage theory of David Ricardo.

Neoclassical theories suggest that countries can gain through free trade by producing goods in which they specialize but with efficient use of resources. The most know Neo-classical theory is the Hecksher-Ohlin Trade Theory (Usman, 2011).

Modern theories support the comparative advantage theory by identifying economies of scale as an important source of economic growth (Berkum & Beijl, 1998; Usman, 2011). Before Adam Smith, there was a mercantilism theory developed in the sixteenth century. According to this theory, the country’s wealth is determined by promoting exports and discouraging imports. This theory did not favour free trade and the world wealth was fixed because countries could not simultaneously benefit from trade (Berkum & Beijl, 1998).

It has been theoretically indicated that both export and import may play a crucial role in economic development. The theoretical and empirical studies mainly concentrate on either the relationship between export and growth or between import and growth or the association between export, import and economic growth.

Exports and import of goods and services are seen as an engine of economic and social development for several reasons, including exports that require companies to innovate and improve to maintain market share (Saaed & Hussain, 2015).

Exports ensure increased sales and profits. Alternatively, they reduce dependency on local markets since, in the event of expansion in foreign markets, the market base increases, leading to a reduction in local customers only. Otherwise, exports have the ability to minimize the impact of market volatility, by working in global markets, companies become more captive to economic changes, changing customer demands and seasonal fluctuations in the local economy (Bakari & Mabrouki, 2017).

The globalized nature of an economy enhances its direct participation in the world market consequently leading to market expansion. According to Adam Smith, expansion of a country’s market encourages productivity which inevitably leads to economic growth. It can be said that the positive effects of International Trade (IT) on Economic Growth (EG) were first pointed out by Smith (1776).

This idea prevailed until World War II (WWII), although with relative hibernation during the ‘marginality revolution’. After WWII, the introverted and protectionist EG experiments had some significance, especially in Latin America. From the 60’s on, owing to the failure of those experiments and to the association of quick EG with the opening of IT and the consequent international specialization in several countries, as well as to the results of many studies based on the neoclassical theories of EG and IT, a new decisive role was given to IT as EG’s driving force. (Afonso,2001)

However, although the dominant theoretical position tended, from the beginning (with the Classics), to indicate a positive relation between IT and EG, many studies linked the gains of IT only with static effects. But Baldwin (1984), for example, concluded, in a survey of empirical studies, that the static effects were of little significance.

The debate has widened in the last decades, precisely in the direction of pointing out and stressing dynamic effects of international trade. The theoretical development afforded by the models of endogenous Economic growth (especially after the works of Romer (1986) and Lucas (1988)), which stimulated the creation of empirical studies, moved toward an integrated analysis of the Economic Growth and International Trade theories.

As such, the classical tradition, apparently interrupted by the neoclassical separation of those two areas of the theory, seems to have been recovered, assigning, as a result, a decisive role to International Trade on the countries’ rate of Economic Growth.

The recognition of this importance has even led to the ceaseless appearance of proposals from international organizations, such as the World Bank (WB) and the United Nations. International trade is seen to have started in the 15th century with the emergence of nation states like Britain (1485-1509), Spain (1464), Germany and Italy (1870) and France (1453).

Due to the emergence of these nations they were forced with the problem of consolidating their authorities as such, they had to carry out trade which could generate income for them to run their economy. The volume of international has increased as all nations in the world are trading international. They are either exporting to other nations or gaining foreign exchange importing from other nations and spending their currency.

For 1990, the volume of trade amongst countries in goods and services measure in dollars has surpassed four trillion dollars. In the year 2000, the growth rate of the world trade merchandise was around 10% and double the rate recorded in 1999 and this was due the resumption of economic activities in Western Europe (WTO, 2007).

Trade liberalization is an important component of Structural Adjustment Programmed (SAP) which aimed at opening up economics to increased international trade  (because it a policy that encourage the production of locally made goods and services that will further enhance international trade) by either producing or eliminating protection for domestic industries ( Australia, 2006).

In support of this, Ajayi (2003) reports that the removal of  barriers to trade has increased the flow of trade by 16 per  cent fold in the last 50 years,  with the world exports of goods and services almost tripled in real terms between 1970 and year 2000.

Ruoen (1995) and Woo (1998) argue that the official GDP deflators are biased and tend to understate inflation. Using an alternative price deflator series and adjusting alternative labor market participation data, Young (2003) finds that China’s growth rate over the reform period 1978-98 is reduced significantly from Official figures.

Most of the African countries adopted structural adjustment programs during the Bretton Woods era which were made up of rapid and extensive liberalization, deregulation, and privatization of economic activity in search of a solution to the stagnation and decline (UNCTAD, 2001). Trade in Africa as a share of GDP increased from 38% to 43% between 1988 to 1989 and 1999 to 2000, respectively.

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