Import and Export Practices of Mali and Ivory Coast - Case Study Example

Introduction

The economic stability and transformation of many nations depend on trade. Trade contributes significantly to the GDP of several economies. Today, countries are seeking trade opportunities as a consequence of boosting their economic well-being. Mali and Ivory Coast are some of the nations in Africa that trade in different products and materials with an aim of stabilizing their economies. Livestock, cotton, and gold are some of the products that Mali exports to various destinations in the World. It is imperative to underscore that Mali has witnessed the growth of Cotton production, and the increase in prices have ensured more foreign exchange. Ivory Coast depends primarily on agriculture. Ivory Coast is the largest producer of cocoa beans, palm oil, and coffee. These products form the bulk of exports from Ivory Coast. Even though Ivory Coast enjoys a positive balance of trade through its exports and imports, Mali continues to struggle with the balance of trade deficit.

Ivory Coast's Imports and exports

The economy of Ivory Coast is on the ascendancy and experiencing tremendous growth after months of political instability. The economy of Ivory Coast depends on to a greater extent on agriculture. It is estimated that close to 70% of the population engage in agriculture (International Business Publications, 2011). In the 1960's, the GDP of Ivory Coast grew by 82% and by 1970 the economy witnessed a growth of about 360% (International Business Publications, 2011). However, the GDP fell to 22% because of certain factors that had negative impacts on the economy. For instance, population growth resulted in poor living standards. In 1994, the economy of Ivory Coast began to surge after the devaluation of their currency. The main exports from Ivory Coast at the time were Coffee and cocoa. The increased prices of these products in the global markets provided an avenue for increased foreign income. The trade of rubber and pineapples, which are non-traditional exports increased in the 90s. Cash production remains the primary focus of Ivory Coast because of the critical importance the products play in attracting foreign income. While cocoa, palm oil, tropical woods, and coffee are the exports from Ivory Coast, it imports agricultural chemicals, gas equipment, wheat, rice, telecommunications and plastic materials (International Business Publications, 2011).

The World Trade Organizations reports that between 2006 and 2008 90% of GDP represented trade (World Trade Organization, 2015). The balance of trade was one of the most influential components in Ivory Coast's exports and imports. For instance, in 2008, the exports amounted to about $10 billion dollars while the imports were $7billion (OEC, 2016). The commercial services exported from Ivory Coast in 2008 totaled to $845 million. In 2008, Ivory Coast witnessed a positive increase in trade, and that contributed to the stability of its economy despite economic challenges in the global markets. Ivory Coast's major trading partners include Germany, United States, and Netherlands. The imports to Ivory Coast come from Nigeria, China, and France.

Ivory Coast continues to experience a balanced trade because it exports more that it imports. In 2014, Ivory Coast exported merchandise worth $14 billion, while the imports amounted to $11 billion (OEC, 2016). The positive trade balance in 2014 was $2 billion (OEC, 2016). The immense trade benefits drawn from the exports in 2014 resulted in a positive contribution to the GDP because the gross domestic product was $34 billion (OEC, 2016). Today, Ivory Coast exports the following products to various destinations and they include cocoa beans, refined petroleum, rubber, coconut, and cashews. The imports include crude oil, rice, frozen fish and special purpose ships. Ivory Coast exports its merchandise to the US, Netherlands, Germany, South Africa, Nigeria, France, China, and India. In 2015, Ivory Coast continued to experience an expansion of its export materials to other destinations. Dairy products, cars, and textiles were imported from the UK.

The balance of trade deficit is one of the most critical challenges affecting most of the African nations in the modern dispensation. However, Ivory Coast has managed to overcome the challenges of import and exports and experience a positive balance of trade (World Trade Organization, 2015). Due to the positive establishment of trade, the GDP has increased. Moreover, the exports have contributed to the economic stability of Ivory Coast. After the political crisis in Ivory Coast, there has been immense growth and development due to increased earnings from export revenues. Even though there has been a tremendous growth in trade, there is a need for caution because there is no diversity in the products Ivory Coast takes to other nations. Over-reliance on agriculture can be detrimental to the economic stability of the nation.

Ivory Coast depends on agriculture both for domestic consumption and export to other jurisdictions.

The West African Nation produces and exports cocoa, palm oil, and coffee amongst other materials. While Ivory Coast has managed to exploit the exportation of the agricultural products, there is a higher risk because any fluctuation in the market can have negative impacts on the economy. The government and stakeholders should ensure that there is diversity as a measure of shifting the focus from agriculture to other materials. For example, if the prices in the international market go down, there is a possibility that the country will not draw maximum benefits and as a result, the economic stability might be affected. Moreover, agriculture is dependent on the weather to realize productivity. However, climate change has caused the weather to be unpredictable. Ivory Coast cannot continue to rely on the agricultural sector for its exports.

Ivory Coast will continue to experience a positive balance in trade because most of its sectors are vibrant and experiencing vast growth. For example, cocoa and coffee production has increased, and the prices in the market have also gone up and as a result the foreign income has surged. Consequently, most of the sectors continue to witness increased productivity. The imports continue to go down because it has started the production of some of the materials. Rice production has commenced in Ivory Coast, and even though it is on a small scale, it will play an essential role in solving the deficit concerns that cause the nation to import from other countries. Exportation of agricultural materials to other countries is likely to increase, and that will enhance the positive balance of trade.

Mali's import and export

Mali has put trade as one of the most influential components in the improvement of its economic growth. Gold, livestock and cotton are some of the leading exports from Mali. The increased prices of cotton in the international markets have boosted the production and trade in cotton to a greater extent. The foreign income from cotton has increased because Mali capitalizes on the increased prices. In 1994, the CFA franc was devalued, and that improved the exports of livestock, cotton and major exports from Mali. However, the devaluation had negative effects on the imports because the nation was forced to spend before importing essential products.

Even though Mali relies on trade to improve its economic status, it remains one of the poorest nations. In 1999, Mali's GDP was $820 million (World Trade Organization, 1998). Agriculture is one of the areas through which Mali has tried to capitalize on with an aim of meeting its export demands to other jurisdictions. Agriculture is widely practiced in Mali with a larger population in the rural setups majoring on subsistence farming. Mali's potential does not lie on agriculture, but mining. The areas along the river banks are the most productive because water from the rivers is used to irrigate the farms.

Trade represented about 65% of Mali GDP between the year 2007-2008 (World Trade Organization, 1998). World Trade Organization reports that 80% of the export products comes from livestock, gold, and agriculture. Mali has suffered in the past because it is a landlocked nation and depends on a country such as Ivory Coast to export or imports its product. In 2008, the Ivory Coast went through a political turmoil and that affected the ability of Mali to trade with some of its partners because it could not take goods through the Ivory Coast. However, Senegal has played a critical role in providing a trade route to other destinations. For instance, Senegal has a railway that that Mali can use to export and import goods. Today, Mali has commenced an ambitious program of constructing road networks that will connect it to other countries. The establishment of the infrastructure program is designed to provide alternative routes to reduce dependence on the coastline of Ivory Coast. Mali's major export partners include China, Denmark, and Thailand. On the other hand, Mali's primary import partners include Ivory Coast, Senegal, and France (Development, O. E. C., 2004).

In 2014 Mali's export value stood at $867 million, while its imports amounted to $3 billion. The balance of trade deficit in the financial year 2014 and 2015 was about $2billion. The GDP per capita in that similar period was $1.6 million. The dynamics of trade have shifted in the last few years. Cotton remains the biggest export followed by mineral, chemical fertilizers and Iron ore. Mali's biggest challenge is the fact that it exports less and imports more (Development, O. E. C., 2004). This economic condition is detrimental to the economic stability of the Western African nation.

An analysis of Mali's trade balance signifies a consistent imbalance in the export and import of goods. Mali has not witnessed a positive trade balance and this implies that the country is running on a borrowed time. Ideally, the country is in debt because the foreign exchange it gets from the exports is less than what it spends on the imports. The long-term effect of this economic condition is that the investors may slack spending on domestic products and that may have far-reaching implications for the stock markets. The trend may lower the demands on the domestic stock market and that can result in a decline in growth (Boyes & Melvin, 2013). Mali should work on a program that will ensure it bridges the trade deficit gap. The approach adopted should be geared towards exporting more materials with an aim of attracting additional foreign revenues. However, if the trade imbalances continue, Mali will be in perpetual debts and slow economic growth.

Conclusion

Trade contributes immensely to the economy of Mali and Ivory Coast. The exports and imports from these two countries have in one way or the other become economic catalysts for development. The GDP of these two nations relies on trade. Mali exports Gold, livestock and cotton and imports crude oil, vehicles, machinery among others. Mali experiences a balance of trade deficit and that has negative effects on its economy. On the other hand, Ivory Coast exports cocoa beans, refined petroleum, rubber, coconut and cashews and imports agricultural chemicals, gas equipment, wheat, rice, telecommunications and plastic materials. Ivory Coast enjoys a positive balance of trade and that contributes tremendously to the GDP. However, Ivory Coast should diversify on its exports to avoid over-reliance on agriculture.