Deep preferential trade agreements and export efficiency in Ghana: Do institutions matter?

Abstract

Preferential trade agreements with environmental provisions (Deep PTAs) have introduced a new layer of costs to bilateral trade. For a country that is seeking to grow its export to generate sufficient foreign exchange for economic transformation, it is essential to investigate the effects of the expanded preferential trade area on its export efficiency. This paper, therefore, employs the stochastic frontier gravity model to investigate the efficiency of bilateral exports of Ghana using a panel of 44 of her export destination countries for the period 2007 to 2019. The paper finds that Ghana’s bilateral export trade is inefficient, implying huge potential exists. It further reveals that PTAs with environmental provisions reduce Ghana’s export efficiency. The reduction in export efficiency lessens with improvement in institutional quality. The paper recommends that Ghana strengthens the regulatory role of the Ghana Standards Authority and the Environmental Protection Agency to ensure that exporters meet export market regulations to continue to benefit from the bilateral PTAs it has signed. Also, Bank of Ghana should enhance its macroeconomic stability, in order to grow its exports.

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