International Trade and Capital Flight

The chapter examines the double-edged role of governance in capital flight. Focusing on international trade and trade-related financial transactions, the chapter demonstrates that the sword of governance has been wielded to cut predominantly one way—to facilitate capital flight—in key African countries. It highlights how poor governance enables capital flight and undermines the fight against it, while capital flight in turn erodes the quality of governance and weakens the regulatory system. The chapter describes the complexities governing import and export transactions, with a view to understanding how political, social, and economic arrangements facilitate corruption in general and capital flight in particular. It argues that “getting governance right” will require reforms in the management and oversight of international trade data to enhance quality, consistency, and transparency in data reporting and the exchange of information.