The Impact of FOCAC on African countries Trade Flows

One of the fundamental questions in international trade literature is whether “with whom countries conduct their trade with” matters for their respective trade flows. This paper examined the impact of trading with China on African countries’ trade flows. We proxy Africa-China partnership using membership in Forum for China – Africa Cooperation (FOCAC) framework. We also examined whether one country membership in FOCAC has trade creating advantages on its trade flows and whether two countries’ membership in FOCAC has trade creating advantages as well. Our study period is from 1990 to 2018 using a sample of 150 countries. We estimated our framework using panel data fixed effects methodology. We found that FOCAC has positive and significant impacts on both exports and imports in African countries. We found trade diversion effects of either one or both countries membership in FOCAC for our imports equation. For our export equation, we found that one country membership in FOCAC has trade creation impacts while two countries being members of FOCAC has trade diversion impacts. We conducted our robust estimation using Pseudo Poisson maximum likelihood estimation and found comparable results for our study. These findings may enable authorities in Africa, China and beyond to strategize on how their countries should position themselves in terms of industry structure to maximize their benefits as well as sensitizing both their producers and consumers on how they can take advantage of trade preferences offered.