COVID-19 working paper: single commodity export dependence and the impacts of COVID-19 in sub-Saharan Africa

ABSTRACT

As recent trade disputes have led the United States to broaden export markets, the macroeconomic and developmental characteristics of sub-Saharan Africa (SSA) ostensibly indicate the region will likely be a destination for U.S. agricultural exports in upcoming years. However, many of these character-istics are symptomatic of the economic development struggles prevalent in the region, which present significant challenges to sustained development. Trade in high-value commodities, for example, may offer economic growth, but the benefits are not necessarily diffused throughout the broader economy. Serving as the primary source for economic growth, foreign exchange, and export revenue, exports of high-value commodities can create terms-of-trade shocks during periods of significant fluctuations in international prices. This can limit a country's ability to trade effectively and alter trade flows due to the resultant depreciating exchange rate. The current Coronavirus (COVID-19) crisis has created such a period of intense price volatility, offering a unique opportunity for modeling potential effects of a global shock on trade with these nations. This working paper illuminates the impact that this volatility can have on U.S. agricultural product export values to SSA. By simulating the effects of declining oil prices in 2020 and subsequent years through a shock to gross domestic product (GDP) in oil-depen-dent nations-i.e., Angola and Nigeria-we can evaluate the impacts of COVID-19 on agricultural trade for key U.S. export commodities to SSA.