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What the world thinks about trade after Brexit
If the U.K. is to make a success of Brexit as Prime Minister Theresa May vows, it’s going to have to strike a string of trade deals with partners around the globe.
Whether it can was thrown into question last week by Ivan Rogers, who resigned as the U.K.’s ambassador to the European Union with a warning that “contrary to the beliefs of some, free trade does not just happen.”
The U.K.’s commercial trade links with the other 27 nations of the EU will be the subject of heated debate once May triggers formal divorce talks sometime before April. May says she wants the “best possible deal,” but negotiations may be hindered by her ambitions on immigration, laws and the budget.
As for arrangements with nations outside the EU, the U.K. government’s ability to seal deals with them is for the moment limited by Britain’s membership in Europe’s customs union. That’s because the EU currently lines up accords on behalf of members, all of which agree to impose the same tariff regime.
Still, following June’s referendum, May’s government has already established working groups with some counterparts to get the ball rolling. Some countries are warning though that doing deals with the EU will remain their priority over engaging with the U.K.
Bloomberg reporters conducted interviews and reviewed public comments for a sense of where other major trade partners now stand on their future trading ties with Britain.
UNITED STATES
Outgoing President Barack Obama said the U.K. would be at the “back of the queue” for a trade pact if it voted for Brexit, but President-elect Donald Trump may look more favorably upon Britain. Trump said before he won November’s U.S. election that the U.K. “would certainly not be at the back of the queue” and declared Britons were right to seize back control. Since then, his nominee for Treasury secretary, Steven Mnuchin, has said the Trump administration will favor bilateral trade deals.
Larry Kudlow, a potential chairman of Trump’s Council of Economic Advisers, said in December: “One of the things that’s gonna happen, I think very early, is the president-elect will wish to negotiate a free-trade agreement with Britain. He will move Britain from the back of the queue to the front of the queue and it will be a solid free-trade agreement.”
Trump advisers and congressional leaders reiterated that message when they met with U.K. Foreign Secretary Boris Johnson this week in the U.S., with Senator Bob Corker of the Foreign Relations Committee telling the BBC: “There’s no way that the United Kingdom will take a back seat – they will take a front seat.”
CHINA
The U.K. and China said in November they would establish a working group to enhance trade discussions “including options for the future trading relationship.”
China is studying a proposal for a trade agreement, Ministry of Commerce spokesman Shen Danyang said, adding that there is no concrete plan yet.
Geng Shuang, spokesman for the Foreign Ministry in Beijing, said: "Our position on negotiating and signing free-trade agreements or arrangements with foreign countries is clear. The Chinese side is ready to do that with interested countries on the basis of the WTO rules and in the spirit of mutual respect, mutual benefit, openness and inclusiveness, in a bid to promote trade and economic growth in the two countries, the region and beyond."
SWITZERLAND
The Swiss government has created an advisory group that “will put forward suggestions” as to how to structure relations between Switzerland and the U.K. in future given they “will have to be redefined.”
JAPAN
Japan’s priority is to find a basic agreement on an economic partnership with the EU by the close of 2017 rather than focus on the U.K., Chief Cabinet Secretary Yoshihide Suga said in November.
“We will pay close attention to how the negotiations about Brexit proceed between the EU and the U.K., and deal with the issue appropriately,” Suga said. “At this point, we are not thinking of an agreement with the U.K."
Prime Minister Shinzo Abe said in May that broader trade agreements were more important to Japan than bilateral deals with individual countries.
NORWAY
Norway, the biggest exporter of natural gas to the U.K., will wait for clarity on the British government’s future relationship with the EU before cementing its own future relationship on trade with Britain, Norwegian Foreign Minister Boerge Brende said.
“I hope to see great cooperation between Britain and Norway and trade arrangements that are as good as possible,” Brende said in a Bloomberg interview in December. “It’s premature to discuss this in a formal way. It has to be informal dialogues before the formalities between the U.K. and the EU are decided on.”
The two nations agreed at a meeting in November to build on trade links and to establish a dialogue.
CANADA
Canadian Finance Minister Bill Morneau said any pact with Britain would be based on the one signed recently with the EU, the Comprehensive Economic and Trade Agreement. “We have a long cultural and historical relationship with the U.K. and any eventual trading relationship I think will be positive and it will be founded on the basis of CETA,” he said.
Still, in an interview with the Financial Times, Morneau indicated a deal wasn’t a priority at a time when the U.S.’s Trump is criticizing the North American Free Trade Agreement, saying: “We’re not talking as much about Brexit as you are in the U.K.”
POLAND
Poland, the biggest exporter of workers to the U.K., wants a future EU-U.K. trade deal to be “positive,” according to Deputy Foreign Minister Konrad Szymanski. The country’s surplus in trade with Britain rose five-fold over the past decade to 7.3 billion euros in 2015.
TURKEY
Turkish Economy Minister Nihat Zeybekci said in November that the U.K. and Turkey had agreed to “implement a wide-ranging trade agreement” post-Brexit. Britain’s Johnson said in September that he hoped for a “jumbo” pact with Turkey.
INDIA
After Britain’s May visited in November, Indian Trade Minister Nirmala Sitharaman said her government was “happy to engage” with the U.K. about a free-trade agreement at some point. The Commerce Ministry said India would identify those sectors where it enjoys a competitive advantage. The two countries have established a working group on how to remove barriers to trade.
SOUTH KOREA
Britain and South Korea said in December that their officials would meet up to four times a year to discuss removing barriers to commerce and prospects for “future, ambitious trade opportunities” after Brexit. The U.K. government said South Korea is an especially promising market for luxury brands such as Burberry Group Plc, which has about 70 stores in the country, and high-end automakers like Jaguar Land Rover and Bentley. Other sectors with strong potential include renewable energy and nuclear decommissioning.
“We definitely want a bilateral trade agreement with the U.K.,” Kim Hak-do, deputy minister for trade negotiations at the Ministry of Trade, Industry and Energy, said in an interview in November. “Having a deal with the U.K. is important for us to have better access to the overall European market,” he said. “If it were a completely new deal, it would require a lot of resources until the final signing,” but it could be “relatively easy” if it mirrors South Korea’s current terms with the EU.
GULF COOPERATION COUNCIL
The U.K.’s May agreed to establish a working group to seek a trade deal when she attended a December summit of the council, which is composed of Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.
RUSSIA
Given the U.K. can’t negotiate deals, “there has been no initiative” from the British to start discussions, the economy ministry said by e-mail.
Two officials who spoke on condition of anonymity said Russia might eventually be interested in a free-trade agreement, but noted the relationship would need to be via the Eurasian Economic Union.
SOUTH AFRICA
U.K. Chancellor of the Exchequer Philip Hammond visited South Africa in December and declared he would like to increase trade with the country. He assured his hosts of the U.K.’s “intentions and determination not to disrupt trade” during the Brexit process.
AUSTRALIA
Australian Trade Minister Steven Ciobo and U.K. International Trade Minister Mark Price attended an inaugural meeting of a trade working group between the two countries. They discussed parameters of a future trade agreement. “At a time when the outlook for global growth is uncertain, it makes sense for us to seize this opportunity to put our future economic relationship on the strongest possible future footing,” Ciobo said.
BRAZIL
A Brazilian official said the country is interested in a deal but cannot begin formal negotiations. As a member of Mercosur, Brazil would need to negotiate as part of that bloc, which has been in talks with the EU since 1999.
"We still need to await the entire process of the U.K. leaving the trade bloc,” said Marcos Jorge de Lima, executive secretary at Brazil’s Trade and Industry Ministry.
INDONESIA
Thomas Lembong, an economic adviser to Indonesian President Joko Widodo, said the government intends to negotiate a trade deal with Britain after Brexit. It would be modeled on the agreement that the country is trying to complete with the EU, he said.
ARGENTINA
Argentina would be interested in negotiating a bilateral free-trade agreement with the U.K., potentially turning around often-testy relations between the two countries. Argentina already has been working bilaterally with the U.K. on a number of matters but, before launching trade negotiations, pending issues related to a long-standing dispute over the Falklands Islands need to be solved, Argentinian Foreign Minister Susana Malcorra said in Buenos Aires in December.
“You know very well that our relation with the U.K. has its special characteristics, and we need to resolve some things before advancing with a bilateral negotiation,” Malcorra said.
A deal with the U.K. would bypass the Mercosur trade bloc, which also comprises Brazil, Uruguay, Paraguay and the currently suspended Venezuela. Other members of Mercosur have also sought to make the bloc’s rules more flexible to sign their own bilateral trade agreements with other countries.
MEXICO
Luis Videgaray, then Mexico’s finance minister, said in June that the government had already drawn up a rough trade agreement with the U.K. when preparing for Brexit.
ICELAND
Iceland Foreign Minister Lilja Alfredsdottir said in October that she would make it a “priority” for the U.K. to join the four-nation trading bloc known as European Free Trade Association. The country is also studying areas of cooperation. President Olafur Ragnar Grimsson also has suggested joining his country, Greenland, Norway and the Faroe Islands in a group.
NEW ZEALAND
Britain and New Zealand have established regular talks on trade policy. “The U.K. is a major trading partner for New Zealand and we have signaled our interest in a free-trade agreement with them when they are in a position to negotiate one independently of the European Union,” Trade Minister Todd McClay said in October. “In the meantime, we hope this dialogue will allow us to develop a better understanding of one another’s trade interests.”
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On the structural transformation of rural Africa
From 2000 to 2014, per capita gross domestic product in Sub-Saharan Africa increased by almost 35 percent in real terms, doubling in some countries. Such progress happened while agricultural productivity growth remained low in the aggregate, despite some bright spots, and poverty reduction was steady but discouragingly slow.
This paper argues that ending extreme poverty will require structural change in agriculture, and in rural African economies more broadly. Drawing on a range of recent research, the paper outlines broad priority areas for policy actions to accelerate productivity and initiate structural change in the agriculture sector and the rural nonfarm economy.
Introduction
Virtually every one of today’s high income economies enjoyed sustained agricultural productivity growth coupled with transformation of the rural non-farm economy that jointly sparked rapid industrialization and inclusive economic growth. Indeed, the Nobel Laureate W. Arthur Lewis famously wrote: “industrial and agrarian revolutions always go together, and… economies in which agriculture is stagnant do not show industrial development” (Lewis 1954, p. 433). Until most recently, the economies of Sub-Saharan Africa (SSA) have also been enjoying robust economic growth (4.5 percent growth in gross domestic product (GDP) per capita per year during 1995-2013), according to World Bank data,1 and the region shows early signs of agricultural productivity growth and structural transformation.
But much remains to be done. Despite notable progress – the share of people in SSA living on less than $1.90 a day (in 2011 international purchasing power parity PPP) declined from 54 percent in 1990 to 41 percent in 2013) – the number of extreme poor still increased, by more than 100 million (from 276 million to 389 million). Extreme poverty remains high, with the $1.90 a day headcount poverty rates in SSA today twice as high as in South Asia, and more than ten times higher than in East Asia.3 By 2030, most of the world’s extreme poor (four out of five) are predicted to be concentrated in Africa.
This is partly driven by continuing high population growth (2.7 percent per year during 1990-2013). But the challenge of persistent extreme poverty that has plagued Africa for a generation is also closely bound up with continuing low agricultural productivity and the nature of the region’s structural transformation. Most of the region’s poor still find themselves in rural areas – an estimated 82 percent – earning the bulk of their income in agriculture – an estimated 69 percent among rural households in a sample of nine African countries, and even more among the rural poor. The sheer size of these numbers makes what happens in agriculture particularly important for poverty reduction. At one level, real agricultural value added (constant 2010 US$) has been growing annually at 4.1 percent during 1990-2013, but only at 1.4 percent in per capita terms. The areas cultivated with cereals expanded annually by 1.3 percent; cereal yields by 1.6 percent. Not only is this productivity growth less than what has been observed, for example, in Asia during the Green Revolution, it started from a very low base and remains low. Cereal yields in SSA (about 1.5 ton/ha) are today still only about half those in South Asia (3.1 ton/ha in 2014), and about a quarter those in China (6.0 ton/ha).
There has also been structural transformation. Agriculture’s share in GDP declined from 23 percent in 1995 to 17 percent in 2013. The share of agricultural employment likewise fell during the 2000s, by an estimated 10 percentage points.4 Yet Africa’s structural transformation has been towards (non-tradable) services, not tradable manufacturing. This partly links with Africa’s commodity boom during the 2000s, which fueled economic growth in many countries as well as urbanization, in particular the emergence of consumption cities, characterized by higher shares of imports (including of food) and employment in non-tradable services, as opposed to tradable manufacturing or services. While inconsequential regarding the level of urbanization (and also growth and aggregate income in the short run), such resource driven structural transformation, urbanization and growth have historically also been associated with greater slum formation, higher urban poverty, larger rural-urban income gaps, and more inequality than transformations towards tradable manufacturing and services. With much of the growth literature suggesting that convergence is faster in industry than in (non-tradable) services, and commodity prices collapsing since 2012 following the end of the commodity supercycle, this does not bode well for sustaining growth and poverty reduction. After slowing to 3 percent in 2015, Africa’s growth is projected to fall to 1.6 percent in 2016, the lowest level in two decades.
Different schools of thought have emphasized different drivers of successful structural transformation, urbanization, growth and poverty reduction. Rural push theories highlight the critical role of raising labor productivity in agriculture to productively release labor for off-farm activities. Urban pull theories underscore the critical role of industrial technology in urban areas to put the large amounts of underemployed rural labor to productive use. What comes first (rural push or urban pull) remains difficult to disentangle. Development and poverty reduction have often proceeded fastest when agricultural and industrial revolutions go together. Although some SSA countries have recently shown signs of such coupled growth (e.g. Ethiopia, Rwanda), this has not (yet) happened at the scale or across the number of countries needed to make a major dent in Africa’s poverty.
This paper describes the key undercurrents necessary for structural transformation to occur, with a focus on the role of agriculture, the current state of agricultural labor productivity growth in rural SSA, and the structural impediments currently slowing the rate of progress. The aim is to update contemporary African policy makers as they attempt to stimulate agricultural and rural transformation to foster sustained and inclusive economic growth that will accelerate poverty reduction in the region. Section 2 provides stylized facts on the path of structural transformation in agriculture with a brief review of the current state in SSA. Deep-seated factors impeding structural change in Africa’s agriculture and food systems are discussed in section 3, after which section 4 turns to nascent positive developments that merit monitoring. Section 5 outlines key policy priority areas, while the last section concludes.
This paper is a product of the Jobs Cross Cutting Solution Area of the World Bank jointly with Cornell University, African Development Bank and Precision Agriculture for Development. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world.
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tralac’s Daily News Selection
Looking ahead: The 2018 Economic Report on Africa – scope of contents (UNECA)
The 2018 ERA will be structured in two parts. Part I will discuss both recent developments in the world economy and their implications for Africa, and examine recent trends and policy challenges in economic and social development. This part also provides forecasts on Africa’s medium-term economic outlook with the associated downside risk analysis. It also examines the social trends of relevance for growth and structural transformation in the continent. Part II of the report will address number of thematic issues and is currently conceptualised to comprise of six chapters. The chapters will cover the following:
Razia Khan: ‘Growth, Trump, and debt in Africa: key economic trends to watch in 2017’ (African Arguments)
In 2016, real GDP growth in sub-Saharan Africa is estimated to have been the weakest since the 2008-09 global financial crisis. This was largely because of the poor performance in its two largest economies, South Africa and Nigeria, which together make up about half of sub-Saharan Africa’s GDP. Although oil and mining economies were hurt by the commodity slowdown, much of East Africa as well as oil-importing Francophone economies such as Côte d’Ivoire and Senegal managed robust rates of growth of above 6%. The slowdown in Africa was not uniform. But what are the prospects for African economies in 2017?
Todd Moss: ‘What does the Trump Administration mean for Power Africa?’ (Forbes)
If the new White House team looks at the details of Power Africa, however, there are plenty of reasons it should appeal to Republicans focused on getting results and cutting waste. Here are five I see as crucial: [Otavio Veras: Trump effect on African oil]
India-East Africa trade and investment updates: India to host presidents of Rwanda, Kenya this week (Livemint)
Rwanda’s Kagame in India for business summit (New Times)
President Paul Kagame is today afternoon scheduled to speak at the opening ceremony of the Eighth Vibrant Gujarat Summit, a global business forum in India. The President will also hold bilateral talks with Prime Minister Modi as well as meet with the Minister for Gujarat State, Vijay Rupani. Over the 5 year period between 2011-2015, bilateral trade has been valued at $526 million. According to the Rwanda Development Board, between 2011 and 2016, Rwanda registered 66 investment projects from India valued at $317.5 million which have translated too over 3800 jobs in various fields including telecommunication, hospitality and education. “The State of Gujarati, due its proximity, has been the India’s most prominent source of business and investments into Africa, and especially into Eastern Africa,” RDB chief executive Francis Gatare said. [PM Modi to inaugurate 8th Vibrant Gujarat Summit]
What lies ahead for bilateral ties after Kenyan President’s visit to India (The Wire)
With the Kenyan economy expected to be among the star performers in Africa this year, India is looking at the East African economic powerhouse as a safe haven for investments and a hospitable market, but regaining the top spot for trade from China will be a hard climb. When Prime Minister Narendra Modi and Kenyatta meet later this week, it will be their third meeting in in as many years. An underlying theme of Kenyatta’s current visit to India is the implementation of the assurances made during Modi’s African sojourn. Officials said agreements to operationalise two lines of credit amounting to $45m extended during Modi’s 2016 visit for upgrading manufacturing capacity, including to refurbish a textile factory, could be signed on Wednesday. This is partly to improve Kenyan manufacturing capacity, which could go some way in balancing the yawning trade gap – a major concern for Nairobi. As per Indian government figures, out of around $4.3 billion bilateral trade, Indian exports to Kenya alone account for approximately $4bn. The major Indian export items are textile yarn, pharmaceuticals, steel products, vehicles and power transmission equipment. [India, Kenya MoU on agri gets Cabinet nod]
China to bail out TAZARA (Times of Zambia)
“The leaders of China, Zambia and Tanzania have already reached important consensus and the over-arching goal of revitalising TAZARA. China will once again show its due responsibility and play an important role in making a unique contribution for TAZARA,” China’s Foreign Affairs Minister Wang Yi said. Components of the revitalisation process will include a comprehensive reform the railway company’s management system, creating better cohesion between the railroad and relevant ports as well as building industrial and economic zones. Mr Wang said China wanted to see its intervention enable TAZARA to become a source for cooperation and development for Zambia and Tanzania and help to boost industrialisation and agricultural modernisation between the two countries and others in the region.
Tanzania: Modern industrial parks will attract more investments – TPSF (The Exchange)
The Executive Director of the Tanzania Private Sector Foundation, Mr Godfrey Simbeye, made the call in Dar es Salaam ahead of a one-day working visit by China’s Foreign Affairs Minister, Wang Yilanded in the country on Monday. “The current model of Special Economic Zones in Tanzania is not suitable for attracting massive investments in terms of industries from China which has proved to boast of immense capital to invest in other countries,” Mr Simbeye noted. Mr Simbeye urged the government to form a team of facilitators from the Ministry of Industry and Trade and the Ministry of Finance and Planning to formulate business models of successful industrial parks from China. “Through this facilitation, we will be able to do away with unpredictable fiscal policies and overlapping of functions among regulatory bodies,” Mr Simbeye explained.
Related: TPSF makes push to China in pursuit of Belt group, Chinese Foreign Minister’s arrival reinforces China-Tanzania ties, China pledges to back TZ’s industrialisation, Ambassador DR Lu Youquing: ‘China can do, Tanzania also can do’, Chinese FM meets Madagascar’s president on cooperation under Belt-Road Initiative
Tanzania Export Handbook (TMEA)
The Tanzania Export HandBook is a single source of comprehensive information available to existing and prospective exporters. The handbook will focus on the export of non-agricultural products, food products, animal and animal products, manufactured goods, and minerals. [Note: access the handbook via the latest TradeMark East Africa weekly digest]
COMESA countries lift China shoe trade (Mediamax)
COMESA countries more than doubled their shoes imports from China in five years while intra-regional trade in footwear is on the decline. Chinese footwear exports to COMESA increased by 218.2%, from $241m in 2009 to $767m in 2014. A one-week forum in Hawasa, Ethiopia, organised by the Comesa Leather and Leather Products Institute (LLPI) noted that China’s relative importance in the regional market grew from contributing 61% to 72% of the footwear import bill in the same period. Comesa LLPI director general Mwinyikione Mwinyihija said the Asian nation’s exports into the region are much higher compared to intra-trade in footwear which has retreated to 2.2% from 6.8%.
Kenya: Exports to Uganda dip by 20% as trade volume contracts (The Standard)
Kenya’s exports to Uganda declined by 20% in the first 10 months of 2016 in a worrying trend that has seen the country lose out in other key markets. Latest data from the Kenya National Bureau of Statistics, besides drop in exports to Rwanda and the United Kingdom, showed exports to Uganda dipped from Sh52.2 billion last year to Sh41.8 billion in the 10 months to October. The KNBS data shows that exports to the United Kingdom recorded the second biggest decline, contracting by 7.8% to Sh30 billion in the period under review. This saw the UK, which was disrupted by the Brexit vote, slide from the second biggest export market last year to number four. The third biggest drop is Rwanda, with exports shrinking by 7.5% in the same period. [Note: For the Jan-Oct 2016 data, see Tables 10-14 in the KNBS report: Leading Economic Indicator November 2016 (pdf)]
Uganda: Finance Minister scraps incentive on rice imports (Daily Monitor)
The minister of finance, planning and economic development has instructed the minister of East African community affairs, Mr Kirunda Kivejinja to terminate the rice incentives given to importers. The directive which took effect of January 1, 2017 caught the importers unaware forcing some of them to rethink their operations. The importers argue that the directive is unfair and unjust as they were not given due notice to make adjustments in time.
With a little help: shocks, agricultural income, and welfare in Uganda (World Bank)
This study analyzes a nationally representative panel of 2,356 households visited four times between 2006 to 2012, in combination with data on conflict events, weather, and prices. The study describes the type of income growth households experienced and assesses the importance of these external events in determining progress. The study finds substantial growth in agricultural incomes, particularly among poorer households. Many of the gains in agricultural income growth came about because of good weather, peace, and prices, and not technological change or profound changes in agricultural production.
Trade between China and Portuguese-speaking countries falls 8.44%, Jan-Nov (MacauHub)
Angola’s with China in the same period totalled $14.23bn (-22.10%), with Angola purchasing goods from China worth $1.58bn (-53 84%) and selling goods worth $12.64bn (-14.77%). Mozambique’s two-way trade with China in the period reached $1.69bn (-22.91%), with China selling goods worth $1.26bn (-29.36%) and buying products worth $433m (+5.03%). Trade between China and the other Portuguese-speaking countries – Cabo Verde (Cape Verde), Guinea-Bissau, Timor-Leste (East Timor) and Sao Tome and Principe – amounted in the first 11 months of the year to $224m.
TCdata360: Filling gaps in open trade and competitiveness data (World Bank)
The World Bank Group offers a variety of open data sources for public use. The newest platform, TCdata360, focuses on trade and competitiveness and aggregates thousands of data points from dozens of vetted sources. This type of high quality data helps us get an unbiased, objective, and comprehensive view of how the world economy works and demonstrates how all the pieces of the global economy are integrated. Without it, there would be no evidence base on areas that we know to be critical for development, such as global value chains, foreign direct investment, or even starting new businesses. TCdata360 has three distinct advantages over other data websites:
Transfer pricing and developing economies: a handbook for policy makers and practitioners (World Bank)
In practice, developing economies often have basic legal provisions around transfer pricing principles. But only a small number operate effective transfer pricing regimes that incorporate a thorough legal framework and credible enforcement capabilities. Drawing on our experience with tax authorities around the world, the handbook (pdf) summarizes approaches that have been successful and unsuccessful. Our aim is to present lessons learned and to provide a range of examples in building and implementing more effective transfer pricing regimes. We also discuss strategies to encourage taxpayer compliance and help to prevent and resolve disputes. To be clear, the handbook is a technical read. It gets into the details, and provides nuance for tax policy makers. We are trying to reach those who can make the day-to-day changes in the governments that need it most.
‘Significant discrepancies remain in commodity trading data’ (UNCTAD)
An early version of the UNCTAD report Trade Misinvoicing in Primary Commodities in Developing Countries: The cases of Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia generated substantial interest and contributed to the debate on the broader issues of transparency in international trade statistics and fairness in the distribution of gains from globalization. The reactions to the report also revealed some areas of confusion in the interpretation of the results and inadequate understanding of the key concepts used in the analysis. The revised report provides a more detailed exposition of the methodology and the concepts used while further stressing the main messages from the analysis. In the revised report, the concept of trade misinvoicing is explained in greater detail, including its origin in the literature and the estimation methodology.
Maya Forstater: ‘Gaps in trade data ≠ criminal money laundering’ (CGD)
On December 23, UNCTAD published an updated version of the report. The new report and accompanying note do acknowledge that there are alternative explanations for the discrepancies (such as higher than expected transport costs), but it quickly dismisses them as being implausible. While the language of some of the claims is moderated and a couple of the calculations adjusted, the main conclusions remain unchanged. Why does UNCTAD remain so convinced?
Reconnecting with the Commonwealth: the UK’s free trade opportunities (Free Enterprise Group)
Phase Three & Four: The UK will need a number of African, Caribbean, and Pacific (ACP) deals to mirror or better the existing EU options which it will undoubtedly lose post-Brexit unless it can secure grandfathering rights. Failure to do so will damage the UK’s standing with developing markets especially when the UK represents a major European export destination. The UK should offer deals that are tariff free with no quota access with a view to more favourable asymmetric liberalisation on the ACP side. Special attention and priority should be given to South Africa given its strategic trading importance to the UK. [Teddy Y. Soobramanien, Mohammad Razzaque: Staging Brexit at the WTO (Commonwealth Trade)]
Today’s Quick Links:
Zimbabwe: National Trade Facilitation Committee workshop this week (UNCTAD)
South Africa: Buoyant exports save SA vehicle makers from a very rough road in 2016 (TimesLive)
Tanzania in talks with lenders for $1.4b in budget support
Uganda’s 2016 remittance estimates increase, says BoU
Zambia sets indaba for $6bn Batoka Gorge HEP scheme (Zambia Reports)
Samuel Oloruntoba, Chris Changwe Nshimbi: ‘If Africa is serious about a free trade area it needs to act quickly, and differently’ (The Conversation)
Jeffrey Kucik, Krzysztof J. Pelc: ‘Secret negotiations at the World Trade Organization create a big problem’ (Washington Post)
US-China Joint Fact Sheet on the 27th US-China Joint Commission on Commerce and Trade
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World Bank Group launches free, interactive, and easy-to-use trade & competitiveness data platform
The World Bank Group yesterday launched TCdata360, a free, open, and easy-to-use online platform that collects, analyzes and visualizes trade and competitiveness data. The website is designed to help policy makers, development practitioners, academics and citizens better understand critical issues, and create more informed policies in the areas of trade, investment, innovation and the general economy.
“Accessible, easy-to-use open data can have significant economic and societal benefits,” said Anabel Gonzalez, Senior Director of the World Bank Group’s Trade & Competitiveness Global Practice. “TCdata360 provides a platform for transforming data into millions of stories on critical trade and competitiveness issues that provide the public and governments with better information to debate and determine policies.”
TCdata360 aggregates and visualizes publicly available data from over 20 sources including the World Bank Group, the International Monetary Fund (IMF), the World Trade Organization (WTO), the World Economic Forum (WEF), and the Organization for Economic Co-operation and Development (OECD).
Developed by the Bank Group’s Trade & Competitiveness Global Practice, the new platform represents a storehouse of statistics where users can browse and filter data across 1,800 indicators, create visualizations to enhance their understanding of how countries and regions perform, and make more informed policy decisions.
“There are thousands of datasets on trade and competitiveness for public use spread across dozens of sources,” said Klaus Tilmes, Director of the World Bank Group’s Trade & Competitiveness Global Practice. “TCdata360 aggregates this data into one easy-to-use platform that is constantly updated and makes it simple for users to visualize and mash-up.”
TCdata360 allows users to customize their own visualizations to convey important trends at a glance across countries, regions and income groups. For example, asking “How long does it take to start a business in Kenya?” quickly produces the answers in a format that visualizes the data. Users can share the visualizations via social media, or download the raw data. Advanced users can connect dynamically all the data in the website through an API (application programming interface).
» TCdata360 makes country-specific data trends easy to visualize
Why Data is Important for Trade and Competitiveness
Effective data in trade and competitiveness helps governments pinpoint how they can improve, how they compare to their peers, and what successes they can build upon. Trade and competitiveness data supports many policy objectives including encouraging investment, optimizing logistics, and understanding how economies and industries are linked.
TCdata360 aggregates actionable data from a variety of vetted sources, including internal sources like the World Bank Group’s Doing Business Report and Logistics Performance Index and external sources like the OECD’s Innovation Index and the World Economic Forum’s Global Competitiveness Index to demonstrate to policymakers how their economies are doing across many variables and what they can do to compete with their peers.
TCdata360: A big addition to the world of open trade and competitiveness data
The inequalities that make some countries poorer than others include inequalities of information. To make sound decisions on economic development, policymakers need reliable and – just as important – readily accessible data. That is the concept underlying a new World Bank Group platform called TCdata360, an open platform for trade and competitiveness data from inside and outside the World Bank Group.
TCdata360 combines vetted datasets from more than 20 organizations – including the Bank Group, United Nations, World Trade Organization, World Economic Forum, and Organization for Economic Cooperation and Development – in an interactive, easy-to-use platform. Busy policymakers, development practitioners, academics, and industry specialists can use the site to access, compare, and download timely data on some 2,000 indicators related to a wide variety of trade and competitiveness topics such as trade logistics, global value chains, investment climate, entrepreneurship, and the cost of business operations.
» TCdata360 provides snapshots of countries’ economic performance on key indicators
In addition to its comprehensive content, the platform sets itself apart through the visual presentation of information supported by tools that allow users to create customized graphics. TCdata360 allows users to create customized visualizations, compare countries and regions, and easily share charts, graphs, and maps through social media. Further, it adds depth to the numbers with curated country reports, data stories, and toolkits that put data in context.
Thomas Verbeet, an analyst with the WTO’s Economic Research and Statistics Division, called TCdata360 “a remarkable new data initiative… (that) allows sourcing new insights from multiple data sources providing timely and valuable facts for trade policymakers. I particularly liked the data mining visualization tool, creating new understandings by connecting billions of data points.”
TCdata360 is now part of World Bank Group’s engagement in the open data movement. Timely, high-quality data is essential to enabling policymakers to identify economic growth opportunities, formulate appropriate policies, and design development interventions. It is equally critical to determining whether growth-oriented strategies are working.
Big data is poised to transform the way countries, institutions, and businesses tackle development challenges by offering new and more user-friendly sources of information. Advances in data science are transforming the range of evidence that can be drawn from big data in support of evidence-based decision-making for trade and competitiveness.
“The use of big data to benefit developing countries has been hampered by too many sources of data, too many versions, difficulties in accessing and using information, and a lack of narrative stories to add perspective to the numbers,” said Klaus Tilmes, director of the Bank Group’s Trade & Competitiveness Global Practice. “TCdata360 addresses these issues by bringing together all the relevant data in one platform, ensuring it is kept up to date, and providing tools that make the information easy to use.”
» TCdata360 enables country comparisons on thousands of trade and competitiveness indicators
TCdata360 supplements a wealth of data already available on the Bank Group’s main data website, Data.Worldbank.org, and is part of a broader effort to leverage the power of data to help low- and middle-income countries spur economic growth by developing strategies that boost trade integration, enhance investment climates, improve sector competitiveness, and foster innovation and entrepreneurship. Related initiatives include the World Integrated Trade System (WITS), a tool for analyzing country participation in global value chains (GVCs) in three key sectors: apparel and footwear; electronics; and automotive goods.
“Making more data from more sources easier to reuse is one of the goals of the Bank Group’s open data initiative, and the TCdata360 website is another step in that direction,” said Haishan Fu, Director of the World Bank Development Data Group, whose team launched the World Bank open data website. “TCdata360 expands our suite of thematic websites designed to serve audiences looking for a wider range of data on a specific topic.”
TCdata360 is conceived not just as a source of information but as an interactive forum for engagement on trade and competitiveness challenges.
“We really want to build a community around this,” said Prasanna Lal Das, a lead knowledge management officer with T&C and one of the designers of TCdata360s. “We don’t see it as a product; we see it as a platform. We don’t see it as a closed web site; we see it as a growing ecosystem.”
TCData360 is available here: http://tcdata360.worldbank.org/
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Transfer pricing and developing economies: A handbook for policy makers and practitioners
In today’s globalized world, a corporation might have a retail store in one country, a factory in another, and financial services provider in yet a third. Corporate interconnectedness has brought investment and growth, to be sure, but it has also added complexity to the work of tax authorities.
Increasingly, developing-economy governments come face-to-face with corporations that employ sophisticated strategies with the aim of paying fewer taxes. With our recently published handbook, “Transfer Pricing and Developing Economies: A Handbook for Policy Makers and Practitioners,” we hope to support efforts to protect countries’ corporate tax bases.
This will not be easy. To capture revenues from multinational corporations, tax authorities must master rule-making, enforcement, and auditing around a technical accounting practice called “transfer pricing.” This practice is important because it is how corporations that work in multiple countries determine where their profits are made.
Essentially, a corporation sets the prices for transactions between its subsidiaries – say the price for a tee-shirt made in a factory in Honduras and sold to a retail store in Germany. This, in turn, determines the corporation’s tax liability in those countries – if the tee-shirt is more expensive, the factory makes more profit; if it’s cheaper, the retail store does.Transfer pricing is necessary to determine profits, losses, and taxes.
Problems arise when a corporation intentionally manipulates transfer prices to its advantage, depriving countries and their citizens of millions of dollars. Abusive transfer mispricing is among the most urgent problems in international tax planning confronting tax officials around the world. Take the ongoing dispute – with several billion dollars at stake – over the appropriate valuation of Facebook’s intellectual property, which was transferred to Ireland in 2010. Valuation challenges are equally relevant in developing economies, which tend to rely more on revenue from corporate tax.
At the same time, if governments are too aggressive or careless, they can subject corporations to double taxation, which risks undermining investor confidence. Multinational corporations frequently cite transfer pricing as one of their most important tax concerns, and one that may affect investment decisions. Tax authorities need to balance revenue goals with the desire to maintain a fair and predictable investment climate.
In practice, developing economies often have basic legal provisions around transfer pricing principles. But only a small number operate effective transfer pricing regimes that incorporate a thorough legal framework and credible enforcement capabilities. Drawing on our experience with tax authorities around the world, the handbook summarizes approaches that have been successful and unsuccessful. Our aim is to present lessons learned and to provide a range of examples in building and implementing more effective transfer pricing regimes. We also discuss strategies to encourage taxpayer compliance and help to prevent and resolve disputes.
To be clear, the handbook is a technical read. It gets into the details, and provides nuance for tax policy makers. We are trying to reach those who can make the day-to-day changes in the governments that need it most.We also recognize that transfer pricing is only one of many priorities confronting tax administrators. So we emphasize the need to identify the transfer mispricing risks that are specific to individual countries – is there a certain sector that is more vulnerable? Does that sector have the potential to provide much more public revenue? And we recommend that any government properly assess the costs and benefits of investing in transfer pricing capacity. Tailoring is critical – the approach taken by a country with few large multinationals in a small number of priority sectors will differ from the approach of a country with a large number of active foreign affiliates.
In our experience, strengthening measures against corporate base erosion, such as building robust transfer pricing regimes, tends to yield good returns on investment. In initial pilot programs delivered by the World Bank, OECD and EU, additional revenue collection from transfer pricing adjustments in Colombia, Kenya, Vietnam and Zambia have been encouraging. Similarly, aggregate analysis using firm-level information, and very recent work done at the OECD suggest that requiring firms to provide more robust documentation of their transfer pricing practices and introducing related anti-avoidance rules may reduce profit-shifting by multinationals.
We hope that this handbook will help inform policy makers in evaluating different policy options and in implementing effective transfer pricing regimes. We hope it will help make the rules a little bit clearer for everyone, from government to taxpayer.
Jan Loeprick works for the World Bank as a senior economist and covers a range of tax policy and administration issues, including the implementation of transfer pricing regimes.
» Download: Transfer Pricing and Developing Economies: A Handbook for Policy Makers and Practitioners (PDF, 6.18 MB)
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Kagame in India for business summit
President Paul Kagame is this afternoon scheduled to speak at the opening ceremony of the Eighth Vibrant Gujarat Summit, a global business forum in India.
The President will also hold bilateral talks with Prime Minister Modi as well as meet with the Minister for Gujarat State, Pradipsinh Jadeja.
The bi-annual Vibrant Gujarat Summit which opens today is an investment promotion platform aiming towards inclusive and sustainable development.
At the forum, Rwanda is taking part at the trade show with a seminar scheduled for tomorrow afternoon according to the summit’s agenda.
The bi-annual meeting which started in 2003 has over the years become reputable in the showcase of investment opportunities, knowledge sharing, creating networks and sealing cooperation agreements.
By convening policy makers and business leaders from across the world, the forum also creates a platform to address current national and global challenges facing corporations and economies.
The 2017 edition is under the theme; “Sustainable Economic and Social Development,” and is bringing together Heads of State and Governments, policy makers, heads of multinational companies, academicians and experts, as well as major Indian companies.
Among other objectives, the summit aims to position the host state Gujarat as the most socially and economically developed state in the Asian nation and increase India’s competitiveness.
Over 2,500 delegates from about 100 countries are expected at the summit with over two million people expected to visit the concurrent trade show at exhibition grounds where over 2,000 companies from 25 sectors will showcase their products.
Rwanda-India ties
Rwanda and India have enjoyed warm bilateral and business relations over the years.
Over the 5 year period between 2011-2015, bilateral trade has been valued at $526 million
According to the Rwanda Development Board (RDB), between 2011 and 2016, Rwanda registered 66 investment projects from India valued at $317.5 million which have translated too over 3800 jobs in various fields including telecommunication, hospitality and education.
“The State of Gujarati, due its proximity, has been the India's most prominent source of business and investments into Africa, and especially into Eastern Africa,” RDB chief executive Francis Gatare said.
“Rwanda is coming here to reinforce its position as an entry point for Indian businesses into East Africa and leverage an enhanced strategic cooperation between the two countries that will strengthen the realisation of this objective.
“As Rwanda pushes further into the strategy to increase Made in Rwanda, the focus here is going to be manufacturing. Business people from Rwanda have come to Gujarat to create partnerships in the field of manufacturing for many of the products Rwanda is currently importing.”
Other heads of government expected at the summit include, President Uhuru Kenyatta of Kenya, Antonio Costa, the Prime Minister of Portugal, Aleksandar Vucic Prime Minister of Serbia as well as Deputy Prime Ministers of Russia and Poland.
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Modern industrial parks will attract more investments – Tanzania
Private sector players in the country have appealed to the government to amend the Special Economic Zone Act and the Tanzania Investment Act to enable the country set up modern industrial parks to attract more investments, particularly from China.
The Executive Director of the Tanzania Private Sector Foundation (TPSF), Mr Godfrey Simbeye, made the call in Dar es Salaam ahead of one-day working visit by China’s Foreign Affairs Minister, Wang Yilanded in the country on Monday.
“The current model of Special Economic Zones in Tanzania is not suitable for attracting massive investments in terms of industries from China which has proved to boast of immense capital to invest in other countries,” Mr Simbeye noted.
Mr Simbeye as well urged the government to form a team of facilitators from the Ministry of Industry and Trade and the Ministry of Finance and Planning to formulate business models of successful industrial parks from China.
“Through this facilitation, we will be able to do away with unpredictable fiscal policies and overlapping of functions among regulatory bodies,” Mr Simbeye explained.
The TPSF top executive noted further that the visit by the Chinese minister is a window of opportunity for Tanzania to access the 60 billion US dollars pledged by China for industrialisation and improvement of infrastructure in four selected countries in Africa.
During the Sixth Forum on China-Africa Cooperation (FOCAC) meeting in South Africa in 2015, Chinese President Xi Jinping pledged the said amount to four African countries namely Tanzania, South Africa, Kenya, and Ethiopia.
“If we put in place favourable investment climate to boost competitiveness, then we will be able to attract more than the 200 factories which are expected from China and this will enable Tanzania to attain middle-income economy by the year 2025,” he remarked.
Mr Simbeye as well urged the government to embark on ‘entrepreneurship diplomacy’ with China to enable Tanzania to acquire skills and technology to develop industries. At the same occasion, the TPSF’s Head of Investment and Enterprise Development, Mr Edward Furaha, cited Ethiopia as among African countries that have emulated China’s industrial parks to boost industrialisation. “These parks, which consist linked factories, facilitate and make it easy for regulatory regimes and investors,” Mr Furaha stated.
Meanwhile, Mr Simbeye revealed that the government of China had offered the private sector in Tanzania a whole floor in a building located in the sprawling port city of Guangzhou to enable smooth linkage of Tanzania and China’s business communities.
Maalim Hussein further predicted that despite the looming famine, the country will in the next three months experience a bumper harvest. “The first day in 2017 was Sunday and according to precognition study, the day falls under the Leo sign, whose origin is fire.
It also means kingdom, administration, political and religious leadership. If the day starts on Sunday, it also shows that the year will be a bit slow. For you to succeed, you need to do things in strides and use your time wisely. Those who will do things in a rush will least succeed this year,” he cautioned.
Furthermore, more religious and political scandals would dominate the year as well as causing the fall of many politicians. “We will also witness accidents that would cause deaths of recognised politicians and religious leaders. They need to be very careful this year,” he warned.
Expounding further, he said there would be controversial statements that will be delivered by national leaders that would cause them to be assassinated or fall out of the political sphere. On the side of social incidents, Maalim Hussein forecasted more fires and floods regardless of the current drought facing various regions in the country, adding that the world might face a number of conflicts that will harm society members.
“Various countries will enter into diplomatic and political misunderstandings that might result into wars. Political leaders need to wisely decide on their actions,” he noted with concern.
The precognition also has it that one big ship will sink while an airplane from a giant country will crash and cause a number of deaths. He further said the economy of the world and Tanzania in general will improve this year compared to last year.
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Reconnecting with the Commonwealth: the UK’s free trade opportunities
Brexit offers the UK an opportunity to pursue an independent, worldwide trade liberalisation and tariff elimination agenda – ushering in a return to its free trading principles.
A new paper from Conservative MP James Cleverly and Tim Hewish, with a foreword from former Prime Minister of Australia Tony Abbott, makes the case for prioritising free trade agreements with key Commonwealth nations.
The report marries up a commitment to free trade and support for the Commonwealth in British foreign policy that has been neglected in trading terms for decades. A new five-phase approach offers the most practical way to ensure that the UK utilises the Commonwealth for mutual benefit through free trading principles.
Foreword by The Hon Tony Abbott MP, 28th Prime Minister of Australia
Brexit means that Britain is back. The country that gave the world the English language, common law and the Mother of Parliaments is once more to seize its destiny as a global leader. This is an exciting time for Britain and an exhilarating one for the countless millions elsewhere who appreciate Britain’s unique contribution to western civilisation.
It’s good that Britain will no longer be constrained by the statism and bureaucracy of Brussels. It’s also good that the remaining members of the European Union will now have to rethink how much of their sovereignty they wish to surrender.
Brexit was not a vote against free trade because the EU has acted as a protectionist bloc against trade with outsiders. Brexit gives Britain the chance to do its own trade deals where consumers benefit from global goods and services and workers benefit from being able to compete more fairly in the markets of the wider world.
In the long run, free trade is in everyone’s interests. In the shorter run, of course, freer trade might mean that rich people in poor countries benefit more than poor people in rich ones. The best way to ensure that free trade has few losers, even in the short term, is to begin with much freer trade between likeminded countries with comparable standards of living. Free trade agreements with economically advanced Commonwealth countries are the obvious place for Britain to start.
Of course, no two countries are more like-minded than Britain and Australia. We have a language, a set of values and a large slab of history in common. Britons don’t feel like strangers in Australia and vice versa. If Britain is determined to make the most of Brexit – and everything about Prime Minister May shows this steely determination – why not strive for a one page FTA with Australia?
The movement of goods between our two countries should be absolutely free of tariffs or quotas. And each country’s product and service standards should be recognised in the other. If a car is fit to be sold in Britain, it’s fit to be sold in Australia. If a doctor is fit to practice in Australia, he or she is fit to practice in the UK. We don’t need a uniform market; we need a common one. We need what the European Economic Community of the 70s promised but failed to deliver. Provided people are coming to work rather than to take advantage of social security or health services, Australians should also be free to live in the UK and vice versa.
In a world where too many people are frightened of the future, Brexit has shown that a great country and a great people are prepared to “have a go”, as we Australians say. Britons can be sure that today’s Australians will rally to our friends with the enthusiasm for which our forebears were rightly famous.
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tralac’s Daily News Selection
Featured tweet, @AUTradeIndustry: CFTA Planning retreat from 2-7 January 2017, in Nairobi, Kenya
African integration: facing up to emerging challenges (ICTSD)
This paper examines the key elements bearing upon regional integration in Africa. It argues that regional integration should not be an end in itself but rather a means to respond to the sustainable development aspirations of societies across the continent starting with concerns around poverty alleviation, food security and access to essential services. The paper presents the key motivations for deepened integration in Africa, provides a comprehensive overview of experiences to date at the continental level and proposes forward looking options. The paper has been designed as the first of an ICTSD research series dedicated to regional integration and trade relationships in Africa. The series aims to look at how carefully crafted regional integration processes can act as a vectors for inclusive and sustainable development. [The analyst: Vinaye Ancharaz]
Alan Hirsch: ‘Africa is poised for sustainable growth and development. But there are risks.’ (The Conversation)
To counteract the growing pessimism about the fate of Africa’s recent growth accelerations there are also significant positive trends. These could underpin a long term growth and development trajectory. Agricultural productivity is rising, not rapidly, but significantly and consistently. Small businesses are proliferating and thriving in many parts of Africa. Several African countries are committed to industrial or sectoral strategies. Some are being encouraged by development agencies. If well managed, the recent surge of investment in infrastructure, from rural roads to airports, offers advantages for producers and traders. East Africa is in many ways showing the way.
Launching today, in Brussels: Challenges Paper 2017 (ECDPM)
The year 2017 opens up new opportunities for EU-Africa relations, whose ‘strategic importance’ has been recently reiterated by HR/VP Federica Mogherini. In 2016, ongoing challenges such as financial difficulties, migration and terrorism have marked a shift in the way the two continents relate to one another. The 2017 edition or our Challenges Paper – to be launched on 9 January – explores some of the political challenges for the year 2017, adopting issues of financing for development and EU-Africa cooperation as a guideline, and exploring ways to match means to emerging priorities.
Launching on Thursday, in Washington: Foresight Africa - top priorities for Africa in 2017 (Brookings)
To explore these critical trends, the Africa Growth Initiative at Brookings has compiled thoughts and recommendations from leading experts on these important issues in its annual Foresight Africa report. On 12 January, AGI will host its annual Foresight Africa event featuring a panel of leading Africa experts. The panel will offer their insights on these vital regional trends and provide recommendations to national governments, regional organizations, multilateral institutions, and civil society on how to contend with these priorities in the year ahead. After the program, the panelists will take audience questions. This event will be webcast live.
Development Effectiveness Review on Agriculture (AfDB)
The Review details the progress and the pitfalls to date in transforming Africa’s agriculture sector, and lays out what steps must be taken to catapult Africa into becoming a global agricultural powerhouse in the next decade. In recent years, agriculture has zoomed to the top of Africa’s policy agenda, with African countries pledging to eradicate hunger and halve post-harvest losses in under a decade. The sum total of these efforts showed the AfDB has made good progress on several fronts: 97% of the Bank’s agriculture projects were rated satisfactory. In the meantime, project approval times shrank to six months from nine months. Largely as a result of the Bank’s Integrated Safeguards on social and environmental impact and its enhanced focus on gender equality, 89% of projects had a climate-informed design, and 87% factored in gender differences, major improvements on both aspects. The number of projects managed by field offices grew to 70%, a leap from 40%, to meet the demand of member countries to working more closely with the Bank.
AU/UNECA policy process: an update on the Draft Africa Policy Framework, Applications Platform and Guidelines for the Development and Promotion of Regional Agricultural Value Chains
A suite of country trade and development reports:
Sudan National Trade Facilitation Roadmap 2017-2021 (UNCTAD): Seeking ways to boost its economy, Sudan aims to remove unnecessary costs and reduce the time to trade across its borders by 40%, boosting exports by at least 25% by the end of 2021, according to a new plan launched by the Sudan Working Group on Trade Facilitation in December 2016. The plan, which comes as Sudan became the first country to complete UNCTAD’s Empowerment Programme for National Trade Facilitation Committees, aims to both boost GDP and improve the county’s standing in international logistics rankings: Sudan placed 184 out of 189 countries in the World Bank’s Trading Across Borders index in 2016. The plan includes making it easier for Sudan to trade 10 key products representing almost half of Sudan’s exports. The value of these exports was worth more than $1.5bn in 2015. The 31 actions included in the National Trade Facilitation Roadmap 2017-2021 were drafted with the assistance of UNCTAD.
Mozambique: Accelerating poverty reduction - challenges and opportunities (World Bank): Official data shows that poverty fell from 69.7% in 1996 to 46.1% in 2015 but for each percentage point of economic growth between 1996 and 2009, poverty only reduced by 0.26 percentage points. This is nearly half as fast as what Sub-Saharan Africa has achieved relative to the same level of growth (0.5 percentage points). The report notes that while poverty reductions have been modest, not everyone is benefitting equally. Inequality remains high and has reduced the potential for economic growth to generate significant gains in reducing poverty. More than two million Mozambicans could have been lifted out of poverty had the economic growth created between 1997 and 2009 been more equally shared. Additional findings of the report:
Botswana: Country programme document for Botswana, 2017-2021 (pdf, UNDP): In view of the above, and in response to the expressed needs of the Government, UNDP will implement a programme that reinforces the value triangle of policy design, policy implementation and data as Botswana moves towards ‘Vision 2036’. The programme will address the following national priorities (eleventh national development plan): eradicating extreme poverty and reducing inequality; strengthening human development outcomes; generating diversified export-led economic growth and employment creation, and deepening democracy, as well as managing the trade-off between income generation and environmental sustainability.
Senegal: Staff report for the Article IV Consultation (pdf, IMF): To further strengthen export performance, Senegal needs to address structural factors limiting investment in export-focused sectors, including by improving the business environment and reducing regulatory costs for exporters. For instance, the Global Competitiveness Index compiled by the World Economic Forum ranks Senegal at 110 out of 140 economies, with significant gaps in infrastructure, market size, and in the macroeconomic environment. Senegal ranks 147th (out of 190 economies) in the 2017 ease of doing business index compiled by the World Bank, with a score that is close to the SSA average and lower than all fast growing SSA countries (Mauritius and Rwanda are ranked, respectively, 49th and 56th). In particular, Senegal scores poorly on the ease of paying taxes and getting electricity, and on the quality of trade and transport infrastructure. In terms of policy actions, the two priorities should be: 1) the improvement of the quality of the product mix; and 2) the strengthening of the business environment to attract investors, making Senegal a regional hub. [Note: The Selected Issues Paper Export diversification and competitiveness in Senegal (pdf) provides a detailed description of the methodology to estimate the effects of the contribution of mix of products exported, sectoral specialization, distribution of trading partners and competitiveness]
A suite of news postings, resources on Rwandan trade and development issues:
Is the Made-in-Rwanda campaign already paying off?: Rwanda’s trade deficit reduced by 5.1% for the better part of last year, largely due to the ongoing Made-in-Rwanda campaign, an initiative that promotes consumption of locally-produced goods and services. According to the statistics, released by the central bank last week (pdf), Rwanda’s trade deficit reduced from $1,602.21 million to $1,519.97 million in the first 11 months of 2016. The central bank’s Monetary Policy Committee said the drop was due to an increase in formal exports by 6.1% as well as a decrease of formal imports by 2.4% in value. The Government has for the past two years embarked on a drive to promote Made-in-Rwanda products by encouraging more production and consumption of locally-manufactured goods.
Economy grows by 5.2% in third quarter of 2016: Rwanda’s economy grew by 5.2% during the third quarter of 2016, a report by the National Institute of Statistics of Rwanda released over the weekend indicates. The services and agriculture sectors were the biggest drivers of growth over the reporting period, according to the report. The services sector contributed 48% of GDP, while the agriculture sector added 33% and the industrial sector was responsible for 13% of the GDP over the reporting period. About 5% was attributed to adjustment for taxes and subsidies on products, NISR shows. This performance pushed Rwanda’s GDP at current market prices to Rwf1,662 billion, an increase from Rwf1,506 billion in the same period of 2015. [NISR: Formal External Trade in Goods Statistics report (Q3, 2016)]
New online platform to support Rwanda’s grain farmers: Grain and cereal farmers in Rwanda will now be able to access regional market information, particularly prices and markets, thanks to an online platform unveiled by the Eastern Africa Grain Council. The Regional Agricultural Trade Intelligence Network (RATIN) will help address the problem of poor access to market information among grain and cereal value chain actors in the country, Seth Kwizera, the EAGC country programme manager, said. Twenty-three grains and cereals produced in the East African region are registered and traded on the platform. The facility also records volumes at border posts. For Rwanda, it is currently operational at Rusumo, Gatuna, Kagitumba, Cyanika borders, and monitors markets in Kigali and Huye, according to Kwizera. EAGC operates in 10 countries, including Rwanda, Kenya, Uganda, Tanzania, Burundi, Ethiopia, South Sudan, Malawi, Zambia and the DRC.
Flower exports gain momentum as NAEB mulls strategies to increase production: Finally, after over three years of planned rose exports from Rwanda’s Gishari Flower Park in Rwamagana District, ‘encouraging’ flower shipments have made it to key European market. Since production started in July, the project under Bella Flowers has shipped over 1.7 million stems of roses over the past months, Business Times has learnt. Only six hectares of the park are currently in production, officials have said. The Rwf5.3 billion 35-hectare flower farm is expected to produce at least 44 million stems per year, according to Aurore Umubyeyi, the chief operating officer Bella Flowers.
Two updates on South Africa’s poultry sector:
Poultry sector calls for more protection (Business Day): Trade and Industry Minister Rob Davies, who in December increased tariffs on imported chicken portions, says the government is aware of the crisis facing the poultry industry and is tackling it on various fronts. The minister has just approved a provisional 13.9% safeguard duty on European bone-in chicken imported in December in terms of SA’s economic partnership agreement with the EU. The latest duty comes amid another comprehensive probe by the International Trade Administration Commission. Davies said in an interview on Sunday that his department was aware of the influx of bone-in portion chicken portions, particularly from the EU and Brazil, and was considering designating chicken as one of the products that government departments and state entities would be required to procure locally. The department has a dedicated unit focused on the poultry industry.
Rainbow Chicken on a knife edge (IOL): One of South Africa’s biggest chicken producers is selling 15 of its 25 farms in Hammarsdale to stay afloat after fighting years of dumping by importers. Because of the cutbacks Rainbow Chicken, renamed RCL Foods, is retrenching 1350 workers from the end of the month.
South Africa: Merchandise Trade Statistics, November 2016 (SARS)
Exports jumped to ZAR 99.6 billion, boosted by higher sales of vegetable products (+20%), precious metals and stones (+20%), base metals (+11%), vehicles and transport equipment (+7%) and chemical products (+12%). Major destinations for exports were China (11.6% of total exports), the US (8.6%), Germany (7.8%), Namibia (5.7%) and Botswana (5.5%). Imports rose to ZAR 100.7 billion, as purchases went up for vehicles and transport equipment (+57%), mineral products (+20%), machinery and electronics (+7%) and prepared foodstuffs (+23%). Meanwhile imports fell for equipment components (-25%t). The main sources of imports to the country were China (19.5% of total imports), Germany (11.7%), the US (7.2%), France (6%) and Saudi Arabia (4.9%).
Zambia/DRC: Copperbelt Minister, Katanga Governor resolve Kasumbalesa stand-off, trucks begin crossing (Lusaka Times)
Copperbelt Minister Bowman Lusambo held a meeting with officials from the neighbouring Katanga Province in the DRC to resolve a stand-off at Kasumbalesa border post which saw drivers from the SADC region pack their trucks. More than 500 trucks from the SADC region had been marooned at Kasumbalesa border following harassment by Congolese nationals. The drivers from SADC countries such as Tanzania, Botswana and South Africa had stopped crossing into the DRC citing security concerns.
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African integration: Facing up to emerging challenges
Least developed countries (LDCs) and low-income countries, particularly in Africa, have been enjoying a sustained period of economic growth and macroeconomic stability. Nevertheless, most LDCs continue to suffer from a set of structural handicaps which affect their ability to achieve sustained economic growth, diversify their economies, create jobs and reduce poverty on a significant scale. A carefully crafted integration agenda could help foster inclusive and sustainable development in Africa.
The issue of regional integration is particularly prominent in Africa, where it has been estimated that the continent’s current trade intensity barely stands above 12 percent. Africa’s own agenda aims to boost intra-regional trade from the current level to 25 percent or more by 2022. This is an ambition that must be embraced by Africa’s traditional and emerging trading partners considering the potential development benefits that could be derived from such a scenario.
But the integration agenda in Africa is rendered extremely complex due to the multiplication of processes. The African Growth Opportunity Act (AGOA) with the US, the Economic Partnership Agreements (EPAs) with the EU, the regional Tripartite Free Trade Area (TFTA) and the drive for a grand Continental Free Trade Area (CFTA) all have an impact on how each Regional Economic Community (REC) handles its integration agenda and priorities.
However, the TFTA marks a key milestone in the long and arduous economic integration process in Africa and this opportunity can be leveraged. It demonstrates a will to tackle several of the long-standing issues that have marred deeper integration efforts until now, including overlapping memberships, poor implementation of liberalisation commitments and a generally fragmented approach to integration.
This paper examines the key elements bearing upon regional integration in Africa. It argues that regional integration should not be an end in itself but rather a means to respond to the sustainable development aspirations of societies across the continent starting with concerns around poverty alleviation, food security and access to essential services. The paper presents the key motivations for deepened integration in Africa, provides a comprehensive overview of experiences to date at the continental level and proposes forward looking options.
The paper has been designed as the first of an ICTSD research series dedicated to regional integration and trade relationships in Africa. The series aims to look at how carefully crafted regional integration processes can act as a vectors for inclusive and sustainable development. We hope that it will provide a useful contribution to researchers, policymakers and trade experts.
Executive Summary
Continental integration has been on the agenda ever since African countries gained political independence. The notion of pan-African integration even predates independence movements and the creation of nation states on the continent. Trade has traditionally been the motor of economic, social and political integration. The launch in June 2015 of the Tripartite Free Trade Agreement, followed by the official start of negotiations with a view to establishing a Continental Free Trade Area (CFTA) by 2017, marks a key milestone in this process.
Pursuing regional integration has, however, been challenging on the continent with many initiatives motivated more by political cooperation than by economic interest and trade, let alone sustainable development concerns. Besides concerns around the adverse impacts of tariff cuts on government revenue and local industries, the process has been affected by high implementation costs, institutional weaknesses and overlapping memberships. The private sector has been mainly absent, and, except for members of the East African Community (EAC), there is no specialised agency within government in a number of African countries to monitor regional integration.
In spite of these challenges, the economic gains from further trade integration are potentially large if integration contributes to economic transformation and inclusive development. Poverty is still a heavy burden in Sub-Saharan Africa, with 35.2 percent of the population living on less than US$1.90 a day in 2015. Undernourishment affects close to 220 million people at a time when Africa is far from exploiting its agricultural potential fully. Most Africans have limited access to essential services, including education and health. The adult literacy rate is hovering around barely 60 percent, with deep ramifications in terms of inequality and economic competitiveness in the long term. Finally, it is estimated that Africa is experiencing a 2 percent loss in total Gross Domestic Product (GDP) each year because of insufficient and poor infrastructure. In all these areas, regional integration can generate significant improvements, either by creating employment opportunities through economic diversification, by creating regional infrastructure including roads and electricity or by boosting agricultural productivity and improving access to essential services.
The lack of trade complementarity among African countries, with most exports focusing on extractive industry or agricultural commodities, means that the natural markets for Africa are often external to the continent. But it also means that intra-regional trade tends to exhibit more diversified trade patterns and a higher concentration in manufactures and processed products. In 2015, more than 40 percent of intra-African exports consisted of consumer or capital goods. In other export destinations such goods generally account for less than 30 percent of total exports. This is not only true for goods but also investment flows and services. A first implication is that enhanced intra-regional trade as a result of regional integration may boost trade in more diversified and processed products. This in turn can be a significant driver of structural transformation of the continent’s economies. Regional markets can also serve to help firms prepare and gain competitiveness before engaging internationally and competing with world-class businesses.
To achieve this, regional integration should focus on the emergence and development of regional value chains. The international fragmentation of production is creating new opportunities for African countries by eliminating the need to gain competency in all aspects of a particular good. Integration in international value chains is also frequently associated with enhanced foreign direct investment (FDI) and knowledge spillovers to the local economy. But taking advantage of those opportunities is not automatic. For countries willing to use the “global value chain (GVC) technology” as an engine of development, an open and predictable import regime for intermediate goods becomes more important, as competitiveness is increasingly defined by both country imports and exports. Minimising trade frictions such as delays in border clearance or low quality distribution facilities is critical. Another key factor is connectivity, including transport, logistics services, and information and communications technology (ICT) networks.
Global value chains are essentially driven by investment decisions of multinational corporations (MNCs), through their outsourcing and offshoring activities. Yet, for African countries seeking to maximise benefits from their value chain participation, a major concern has been to capture a higher share of value added domestically to promote productivity gains, the deployment of new technologies, better employment opportunities or economic diversification. In practice, however, it is the lead firm who decides where to locate plants, where to invest and who to source from, based on its strategy to maximise profits. This may or may not offer participatory or upgrading opportunities for particular countries. In the absence of backward linkages with the rest of the economy, critics point to the footloose nature of efficiency-seeking investments or caution against the risk for resource exporting countries of being caught in the “resource trap” when FDI focuses on extractive industries. Others suggest that in the absence of active policies, African countries often lack sufficient absorptive capacity to benefit effectively from technology upgrading as a result of GVC integration.
African integration offers significant opportunities to address these concerns. Regional agreements formed among neighbouring countries seem to play an important role in the development of such regional value chains. Estevadeordal et al. (2013) estimate for example that, on average, countries will source 15 percent more of their foreign value added from members of the same regional trade agreement (RTA) than from non-members. Secondly, as firms unbundle their production processes, logistics costs and efficient border operations become crucial. Regional projects, such as one-stop border posts along the North-South Corridor, often offer the only viable approach to address these bottlenecks and reduce the cost of trade.
Regional integration, however, is not happening in a vacuum. With intra-regional trade still accounting for a relatively small share of Africa’s exports, the continent cannot ignore its traditional and new trading partners in the South. Moving towards deep continental integration would also ultimately require harmonising the different trade commitments made by African countries at the multilateral, regional and bilateral level. China is now Africa’s second most important export destination behind the EU, and India has surpassed the US to become Africa’s third largest export destination. The potential for the emerging economies to boost regional integration in Africa is significant. Empirical evidence suggests that Africa’s imports from the emerging economies, notably China and India, have been mainly in manufactured goods, including motor vehicles, machinery and equipment. To the extent that these products can be sourced at lower cost from the South, African countries can afford to import more of them, leading to greater productive capacity and, ultimately, increased trade. The links between emerging economies’ investment activity in Africa and intra-African trade are also critical in building the continent’s productive capacity – both directly, including through infrastructure projects, and through knowledge spillovers. Moreover, where such investment catalyses regional FDI, there will be a further boost to region al integration.
On the regulatory front, the rise of mega-regional agreements is posing new challenges. These deep integration arrangements tend to go beyond tariff liberalisation to focus on services, non-tariff barriers, regulatory cooperation and investment, with the risk for African countries that such agreements may raise the bar too high for non-members to access their markets, resulting in further marginalisation of the continent. Estimating the impacts of the mega-regionals on third parties remains a guessing game since only the Trans-Pacific Partnership (TPP) has been concluded – and at the time of writing ratification is facing growing uncertainties. The trade diversion effects are likely to be small since tariffs are already low. However, the exceptional treatment of agriculture, fisheries or textiles and clothing where high tariffs remain could be a cause for concern over preference erosion for competitive African exporters. On the other hand, the harmonisation of standards, for example between the US and the EU, could benefit excluded parties as they only need to meet the standards in one market to qualify for export to the other. The mega-regionals may also have a “domino effect”, leading excluded parties to form their own bloc or strengthen existing mega-regionals, and, in the case of Africa, ultimately creating new momentum for the CFTA.
Such an effect may also result ultimately from the conclusion of the Economic Partnership Agreements (EPAs). While these agreements promised to strengthen regional integration in Africa, they arguably had the opposite effect, at least at the very outset, by pushing several countries to split away from their Regional Economic Community (REC) and go for an EPA alone or as part of a smaller configuration. However, an unintended by-product of the EPAs may be the realisation among African RECs that, unless they step up efforts to boost regional integration, they might end up offering more generous market access terms to the Europeans than to their regional partners. The EPAs may also provide for technical and institutional support towards regional integration, including in areas such as infrastructure projects and trade facilitation measures. Regional cumulation can also foster the development of regional value chains, which, in turn, can boost intra-regional trade. There is some evidence, for example, that flexible rules of origin for textiles under the US-led Africa Growth Opportunity Act (AGOA), has spurred the development of regional value chains in Africa with remarkable impact on jobs.
In short, regional integration offers significant potential; particularly if it goes beyond cooperation on trade and promotes economic transformation by expanding regional coordination to other areas, including investment, trade facilitation and infrastructure. Essential drivers for such an approach would include the use of intra-African markets as an engine of economic transformation through diversification, industrialisation and the promotion of regional value chains combining goods, services, investment, trade facilitation and infrastructure development.
This paper was produced under ICTSD’s Programme on Inclusive Economic Transformation as part of a project dedicated to regional integration and trade relationships in Africa. ICTSD would like to thank Vinaye Ancharaz (previously ICTSD Senior Development Economist) who acted as lead author and researcher for this paper as well as Christophe Bellmann (ICTSD Senior Resident Research Associate) who provided substantive inputs. ICTSD also wishes to thank David Luke (UNECA) for comments on earlier drafts of this paper. The views expressed in this publication do not necessarily reflect the views of the funding institutions.
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Trade with Sudan made cheaper and quicker as ‘trade roadmap’ is adopted
Seeking ways to boost its economy, the East African nation of Sudan aims to remove unnecessary costs and reduce the time to trade across its borders by 40%, boosting exports by at least 25% by the end of 2021, according to a new plan launched by the Sudan Working Group on Trade Facilitation in December 2016.
The plan, which comes as Sudan became the first country to complete UNCTAD’s Empowerment Programme for National Trade Facilitation Committees, aims to both boost GDP and improve the county’s standing in international logistics rankings: Sudan placed 184 out of 189 countries in the World Bank’s Trading Across Borders index in 2016.
The plan includes making it easier for Sudan to trade 10 key products representing almost half of Sudan’s exports. The value of these exports was worth more than $1.5 billion in 2015.
Top 10 key products of Sudanese exports
- Cotton
- Gum Arabic
- Sesame
- Groundnuts
- Hibiscus Flower
- Senna Pods
- Livestock
- Meat
- Vegetables and Fruits
- Hides and Skins
The 31 actions included in the National Trade Facilitation Roadmap 2017-2021 were drafted with the assistance of UNCTAD.
Although not a member of the World Trade Organization (WTO), Sudan intends to use the roadmap as a way of implementing at least 70% of the measures included in the WTO’s Trade Facilitation Agreement which aims to streamline cross-border trade around the world.
“I have this image of 2011,” the chairman of the Sudan Working Group on Trade Facilitation, Brigadier Ali Giddo Adam, said.
“As a group, we could not even understand all the implications of the different measures being negotiated within the WTO… but now, much has changed, and thanks to the Empowerment Programme, we have even a set of national experts that can support mainstreaming trade facilitation into Sudan’s policies,” he said.
UNCTAD support for Sudan takes place in cooperation with the World Customs Organization (WCO) and is financed by Her Majesty’s Revenue and Customs (HMRC) of the United Kingdom as part of the HMRC-WCO-UNCTAD Capacity Building programme.
UNCTAD’s Empowerment Programme for National Trade Facilitation Committees is being implemented in more than 10 African countries.
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The East African Community: Another diplomatic headache for Kenya?
The East African Community has been on top in Africa as a fast rising trading bloc in the past one and half decade, after its resurrection in 1999 by its original members, Kenya, Uganda and Tanzania. This was after years of political rhetoric emphasizing regional cultural ties and integration as a means to economic development.
This move was absolutely pragmatic and implausibly timely to this end, evident from the tremendous progress the bloc has made in terms of economic integration and diplomatic partnerships. In 2014, EAC was termed as having made the most progress on integration and as the most ambitious amongst all the Regional Economic Communities (RECs) in Africa, according to the African Development Bank.
One of the most fascinating goals that the bloc came up with less than two years ago is having a monetary union with a common currency, the East African Shilling in the next one decade. Ambitious as this could be, it is an indication of how cohesive, harmonized and prosperous the community is determined to be.
However, the latest developments in the bloc whose members, according to the United Nations Economic Commission for Africa (UNECA) traded more with Africa, compared with countries belonging to other trading blocs between 2000 and 2012, have raised eyebrows on the essence of having the bloc anyway.
Kenya, which is the strongest economy among all the members of the EAC, has stood in the receiving end in the open derision of the bloc on deals running raw. The bloc seems to be losing grip on the very fundamental areas that led to its establishment by the forefathers decades ago; of enhancing trade and development in the region through common trade pacts that will see it grow economically in years to come. Self-interests seem to have taken precedence on some member states.
The refusal by Tanzania to sign the Economic Partnership Agreement (EPA) between the EU and the East African Community which was initiated in October 2014 and authorized by the European Council on 20th June 2016 stands to be the biggest blow. Kenya is imminent to receive should the deal flop.
The economic partnership agreements which are intended to enhance regional integration and economic development in the African, Caribbean and Pacific (ACP) countries are based on the principle of asymmetrical market opening, meaning that they are into giving the ACP partners a better access to the EU market. Indubitably, they offer unprecedented market opportunities for agricultural and fisheries products.
This is not going to be the first time that Tanzania is throwing the region into a diplomatic dilemma over the EPA. A similar action by the country in 2014 saw Kenyan exports to the EU attract duty up to 22 per cent for three months under the Generalized System of Preferences (GSP).
The fact that the members of the EAC are at different levels of development has stood out to be the stumbling block in the enhancement of the objectives of the bloc. Tanzania for example, together with Uganda, Rwanda and Burundi, are listed among the Least Developed countries in the world. Kenya is a developing country.
The listing of the countries as least developed countries in the world enables them to access the EU market duty free under Everything but Arms (EBA) initiative. There seems to be a deliberate motive by Tanzania to be oblivious of the economic impact the failure to sign the agreement will have on Kenya. Regardless of whether Tanzania signs the agreement or not it is going to enjoy the benefits of its being a least developed nation to access the EU market.
The Brexit vote is chief among the reasons that have been given by Tanzanians in their decision of not signing the economic partnership agreement. As noted from the former president of Tanzania, Benjamin Mkapa, the Brexit leaves the country with a lot of uncertainty since they feel if Britain is going to be outside the deal, they stand to lose immensely.
“I don’t understand how such a powerful trade bloc can have a free trade agreement with the developing economies of Africa. There is no way that our small economies can have free trade agreement with Europe”, this was the emphasized by Mkapa in July concerning the signing of the EPA. The sentiments that were pretty supported by the intellectuals from Tanzania are yet to find the basis of the arguments which demean the capability of EAC to trade as bloc with EU.
It is intriguing to note the market competitiveness the Kenya stands to lose in the EU should the deal not go through. In the global exports from Kenya, the EU accounts for 31%, whereas, amongst the total exports to EU from EAC which amounted to $2.9 billion in 2015, half of them were from Kenya (50.87%). Kenya’s imports from the region were 54.56%. Tanzania which exported 26.01% of the total exports from EAC to EU last year stands to lose nothing should it fail to sign the EPA before the deadline which is on 1st October 2016.
The fact that we are not moving together as a bloc literally stands to kill the spirit with which the EAC is founded on. The jeopardy insinuated by Tanzania’s decision to put aside the EPA is just one among a series of other actions taken by the current government to kill the foundation of the EAC. The argument that the deal is not good for local industry in Tanzania is hollow especially now that they focus to progress industrially, since the entire region is going to enjoy better export terms.
In addition to this diplomatic hurdle that Kenya has had to face with the recent visits to Tanzania by the Deputy President and the Foreign Affairs Minister Amina Mohammed to negotiate for the signing of the deal, Kenya has had enough share of loses in trade and other agreements in the region to reconsider its terms in being part of the bloc if at all it has to stand to be a partaker of the benefits that comes with being a member. Early 2015, tourists operators from both Tanzania and Kenya found themselves in wars of supremacy when Kenya denied Tanzania tour operators to access Kenyan towns, after a similar scenario had happened before on the Tanzanian borders where, while Tanzania had enjoyed unfettered access to Kenyan towns, Tanzania had refused Kenyans past their borders. Also, Tanzania failed to agree to join the single East African visa that allows tourists to the region to visit all sites of their choice without unnecessary paperwork in each country.
Perhaps one of the biggest betrayal that Kenya has faced in the region is the oil pipeline deal where Uganda overlooked the more viable route through Kenya for Tanzania. It is imperative that Kenya reconsiders and ponders objectively on the future it has as a member of the EAC, whether stooping to the requirements of now budding economies of the region will bear fruits in the long term.
The effects from leaving the bloc are imminent such as struggle by the Kenyan businesses with branches in the region among other repercussions. Nonetheless, should we remain in a bloc where our very interests that define the economic future are jeopardized? If Kenya has to remain to be part of the EAC, much needs to be done to harmonize the customs procedures and surmount the barriers that emanate from varying levels of economic development of member states, political barriers that to harmonizing trade policies and the numerous overlapping preferential trade agreements.
The writer is a Monitoring & Evaluation Specialist.
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“Three new changes” lead China-Africa win-win cooperation, says Chinese foreign minister
The cooperation between China and African countries has been gradually transformed and upgraded, Chinese Foreign Minister Wang Yi said on Monday.
Under the new ideas put forward at the Forum on China-Africa Cooperation’s summit in Johannesburg, the China-Africa win-win cooperation has shown “three new changes,” Wang said during a meeting with his Zambian counterpart Harry Kalaba.
Wang explained that the first change is a transformation from government-led cooperation to the market oriented one, and the second is an upgrade from general commodity trade to capacity cooperation and processing trade.
He added that the last one is a shift from ordinary project contracting to the expansion of investment, construction and operation.
Despite a gloomy world economy and sluggish growth of global trade, the China-Africa capacity cooperation and the alignment of their industrial policies are growing robust, Wang said.
The cooperation has witnessed a fast growth, with many Chinese enterprises coming to Africa to invest and establish plants, noted Wang.
He said that from the Dec. 2015 Johannesburg summit to July, 2016, the agreements signed in various fields between China and Africa have been valued at over 50 billion U.S. dollars.
The “three new changes” indicate that the China-Africa cooperation has reached a new level, which features transformation, upgrade and new opportunities of mutual benefit, the minister said.
Zambia is one of the main players and beneficiary of the “three new changes,” said Wang.
2017 marks a key year to implement the outcome of the Johannesburg summit, he stressed.
Despite an unpredictable international situation and world economy, China will keep its words and comprehensively implement the summit’s outcome so as to bring more benefits to the two peoples of Africa and China at an early date, Wang said.
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tralac’s Daily News Selection
Ahead of the AU Summit later this month: commentaries by two candidates for the position of African Union Commission Chairperson
Senegal’s Abdoulaye Bathily: ‘Africa has no future without unity’ (Premium Times)
Q: How would you do this? Bathily: Apart from the former colonial masters, we have new partners today. But, this syndrome is still there. Whether it is China or India or Japan, they are shipping raw materials back home to produce goods they will bring back to sell at higher cost to Africans. I think it is important to go for full-scale industrialization of Africa. We cannot continue to have an economy that is externally driven. Industrialization means to create the social basis for survival. We cannot industrialise on the basis of only foreign investments, which will only focus on areas of concern to them and their interests. For us to create the conditions for sustainable development, we must have an industrialization and modernization of agriculture driven by African investors themselves. It is important to create a class of real African entrepreneurs, who invest their money in productive sectors of the African economy and create the basis for sustainable industrial, agricultural and service development, not renters. We must reproduce the productive forces and social basis from within Africa, not outside. Many people think the talk about regional integration is just about creating infrastructure. Yes, we need roads, dams and energy. But, this is not enough. We have to create African engineers through our education system relevant to this. [Prof Bathily: ‘AU’s reliance on EU unfortunate’]
Kenya’s Ambassador Amina Mohamed: ‘Accelerating industrialization and regional integration for development’ (Huffington Post)
Open borders will open up markets and increase productivity. Free movement will boost our economies and help to transfer skills, knowledge, technology and best practice. While there has been commendable progress such as the launch of the African Passport and the African Openness Report, countries need to harmonise their policies to address the concerns hindering open borders across the continent ̶ such as security and immigration management practices. It is advisable that open border policies are firmed up at the Regional Economic Communities and then scaled up through grand regional Agreements. However, political goodwill and coordination are critical elements for successful integration.
While there are several facilities available to assist investors with the costs of identifying and preparing projects, awareness of these is low and facility design is often ill fitted to investor needs. There is a need to better match facilities with investors through initiatives like the Infrastructure Consortium for Africa’s and Project Preparation Facilities Network, which aim to increase reach, collaboration and learning among support providers on the continent. New financial instruments can also help alleviate risk aversion in private investors. For example, the Asian Development Bank (ADB), in partnership with the India Infrastructure Finance Company Ltd. (IIFCL), has created a $128 million “project bond guarantee facility” that raises the credit rating of infrastructure bonds by absorbing a portion of risk.
EAC summit delayed as EU trade deal standoff continues (IPPMedia)
The EAC Heads of State Summit, earlier scheduled for this week, has been pushed to next month after ministers failed to agree on the issues to be ratified by the highest organ of the bloc. Kenya’s East African Affairs Principal Secretary Betty Maina yesterday said the summit will take place in February because the council was yet to finish its business. “The business of the council must be concluded before the summit is held. By the beginning of the year, the meetings leading to the summit had not fully taken place,” Maina said on the phone.
Peter Kiguta (outgoing EAC director-general in charge of trade and customs): ‘Zeal to work together as EAC has waned over the past two years’ (The East African)
Q: The UNECA ranks the regional economic bloc as the best performing in Africa. ‘What would you attribute this rating to? The Customs Union stands out. It has shown some level of cohesiveness particularly while negotiating trade deals between the East African Community and third parties — such as the Economic Partnership Agreements with the European Union, the Trade and Investment Partnership with the US, and the Tripartite Free Trade Area with the Common Market for Eastern and Southern Africa and the Southern African Development Community. In the course of implementing the Customs Union, we have tried as much as possible to avoid unilateral actions by partner states such as varying Common External Tariff and imposing non-tariff barriers. The failure to sign the EPAs with the EU, however, has posed a challenge. Countries appear to be more cautious about committing to anything during trade meetings, and are taking hardline positions. Suspicions are also resurfacing.’
Q: What needs to be done to raise the momentum of regional integration? ‘That will require political commitment at the highest levels. There is a need to give the EAC more powers. I hope the anticipated restructuring of the EAC shall yield the expected results. It is my hope that during the next Summit the Heads of State will deliberate integration issues more frankly.’ [How has EAC positioned itself for 2017 and beyond? (New Times)]
New postings from the EABC’s ‘Enhancing the role of the private sector as driver of the EAC integration process’ discussions: East African Business Leaders’ Summit final report (pdf), Launch of the EABC-led Code of Conduct for businesses in the EAC (pdf), Keynote address by Ambassador Ombeni Yohana Sefue (pdf)
ACP secretary general has dire warning for member states in 2017 (Jamaica Observer)
Secretary General of the African Caribbean and Pacific Group of countries, Dr Patrick I Gomes, is urging member states to move towards ratifying the WTO 2013 Trade Facilitation Agreement. The Guyanese-born diplomat said that there must be “more concerted actions by ACP member states” to ratify the accord for which the ACP Group, as a critical global force, had exerted its influence in the G90 to secure a treaty that reduces cross-border customs regulations and transaction costs. Gomes said that sound progress had been made last year with the contentious ACP-EU economic Partnership Agreements. He said that while the accord enables implementation measures for these WTO-compatible, preferential trade and investment accords to start reaping some, if even limited, “those ACP countries with full or interim agreements, that have not been ratified should do so as soon as possible and ensure their tariff schedules are prepared to take effect in 2017”.
UN partners with Africa’s Development Agenda 2017-2027 (IDN)
With that programme due to expire end of 2-16, the General Assembly has adopted on 23 December a new joint UN-AU proposal for a successor programme enshrined in the draft resolution titled Framework for a Renewed United Nations‑African Union Partnership on Africa’s Integration and Development Agenda 2017-2027. The representative of Burkina Faso, on behalf of the African Group, introduced the draft, saying the adoption of the framework in June 2015 in South Africa had been an important stage regarding Agenda 2063 – "a global strategy to optimize use of Africa’s resources for the benefit of all Africans".
G20 policies and least developed countries’ export performance (UNCTAD)
This report is structured in two parts. The first part presents an overview of the effects of G20 policies on LDCs exports. The second part discusses trends in selected trade policy instruments including illustrative statistics. The second part is divided in five chapters: tariffs, trade agreements, non-tariff measures, trade defence measures, exchange rates and trade costs. Trade trends and statistics are provided at various levels of aggregation illustrating the use of the trade policy measures across economic sectors and geographic regions.
Germany’s G20 presidency: T20 Africa Conference (1-3 February, Johannesburg)
Africa and the G20: Building alliances for sustainable development. The T20 Africa Conference will bring together opinion leaders from think tanks and universities in Africa and the G20 countries as well as high-level policy-makers from Germany, South Africa, international and African regional organisations. The key objective of the conference is to discuss options about what future cooperation between the G20 and Africa could and should look like. Participants will draw lessons from previous global initiatives to support sustainable development in Africa (e.g. as part of G7/G8 partnerships or BRICS countries’ cooperation with Africa) and analyse advantages and challenges to building alliances between African actors and the G20. In addition, conference participants will analyse a select range of topics to explore how Africa and the G20 could cooperate, including: [T20 Germany www, Profiled T20 Blog: Global trade and investments at the receiving end]
Paul Collier: ‘Let’s stop preaching to Africa’ (DW)
Paul Collier, a leading development economist, has spoken with DW about a new G20 agenda for Africa, which should focus on improving private investment, learning from China, and not repeating the mistakes of the past. [Germany’s focus on Africa for 2017 (DW)]
Aubrey Hruby: ‘Don’t dismiss the Donald Trump administration on Africa policy’ (Newsweek)
Trump administration policymakers should keep three principles in mind when thinking about how to approach an agenda for Africa. First, millions of Africans, just like millions of Americans, are working hard every day to pull themselves up by their own bootstraps, so policy must ensure that those bootstraps are within reach. Second, the new administration should ensure that its policies advance American competitiveness in African markets. And third, U.S. policies should be oriented towards enabling business and investment as tools for mutually beneficial economic development. As a Democrat who has worked with administrations of both parties over the past 12 years, I recommend the following policy proposals that build on business ties and advance U.S. interests in Africa for consideration: [David Levin: ‘Trump administration will not have sweet medicine for Africa’ (Business Day)]
China assumed the BRICS Presidency on 1 January: four priorities
Our work will focus on four main areas. The first is to promote economic cooperation as the main thread while coordinating practical cooperation in various fields, and strive to make new progress to the end that BRICS countries will have a high level of trade and investment integration, monetary and financial facilitation, infrastructure connectivity and people-to-people and cultural exchanges. The second is to coordinate actions on major international and regional issues, contribute to improving global governance, and jointly respond to global challenges. The third is to explore new projects for people-to-people and cultural exchanges so that BRICS cooperation will win over more popular support and truly benefit the people. The fourth is to enhance the BRICS cooperation mechanism, build a more expansive partnership, and enlarge BRICS’ circle of friends.
Paris invites Cairo to attend Africa-France Summit in January (Ahram)
Stewart M. Patrick: ‘Ten Summits to watch in 2017’ (CFR)
US trade expert warns Trump tariffs could ‘choke’ WTO remedies process (NBR)
Understanding Malta’s EU Council presidency
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Kiguta: Zeal to work together as EAC has waned over the past two years
The outgoing director-general in charge of trade and customs at the East African Community, Peter Kiguta, spoke to Christabel Ligami about the state of integration and the flow of trade in the region.
The United Nations Economic Commission for Africa ranks the regional economic bloc as the best performing in Africa. What would you attribute this rating to?
The Customs Union stands out. It has shown some level of cohesiveness particularly while negotiating trade deals between the East African Community and third parties – such as the Economic Partnership Agreements (EPAs) with the European Union, the Trade and Investment Partnership with the US, and the Tripartite Free Trade Area with the Common Market for Eastern and Southern Africa and the Southern African Development Community.
In the course of implementing the Customs Union, we have tried as much as possible to avoid unilateral actions by partner states such as varying Common External Tariff and imposing non-tariff barriers.
The failure to sign the EPAs with the EU, however, has posed a challenge. Countries appear to be more cautious about committing to anything during trade meetings, and are taking hardline positions. Suspicions are also resurfacing.
What needs to be done to raise the momentum of regional integration?
That will require political commitment at the highest levels.
There is a need to give the EAC more powers. I hope the anticipated restructuring of the EAC shall yield the expected results. It is my hope that during the next Summit the Heads of State will deliberate integration issues more frankly.
What effect has Brexit and the election of Donald Trump as the US president had on EAC trade?
We have the chance to attract European and American firms that had relocated to Asian countries to benefit from cheap labour.
These firms are looking for new locations as labour costs continue to rise in Asia. EAC countries could attract such firms to produce goods for export to Europe and America under the EPA and the African Growth and Opportunity Act (Agoa) preferential market access.
However, though Agoa was extended for 10 years from June 2015, it’s not certain what decisions Trump will take as president, going by his decrees on trade with other countries.
On the Brexit issue, the UK will stop being a member of EU and EPA will cease to apply, depending on the trade arrangements Britain will negotiate with the EU. This could affect Kenya’s exports as Britain is a major market for flowers and vegetables.
How is the EAC handling the cut in donor support and delays in remittances by member states?
While partner states have not been making their contributions promptly, four of them have no arrears. However, the delays have affected the EAC’s schedules, forcing us to introduce cost-cutting measures. For example, procurement rules and regulations have been streamlined, resulting in annual savings of $3 million.
EAC is also rationalising its budget to address donor dependency which has come down to around 50 per cent from over 80 per cent. Partner states are also exploring a funding mechanism to address the budget shortfalls.
Do you see full integration becoming a reality any time soon?
Although the EAC has been cited as the best performing economic bloc in Africa, challenges persist in the implementation of collective policies and programmes. EAC has performed well in the implementation of the Customs Union, but the same cannot be said of the Common Market.
There is a lack of commitment by some partner states. The dilly dallying in the signing of the trade agreement also threatens to undo some of the progress made under the Customs Union implementation.
The enthusiasm earlier exhibited by countries to move the region towards higher levels of integration seems to have waned over the past two years.
After 12 years as trade director-general, what are your key achievements?
I set up a Customs and Trade Directorate which has successfully overseen the implementation of the Customs Union. Consequently, intra-regional trade grew to more than $7 billion in 2015, from around $1 billion in 2004.
The share of intra-regional trade to total volume of trade has grown to around 17 per cent, from 5 per cent in 2004. I am also happy that we managed to bring down the cost of doing business by reducing the time it takes to move containers from the ports of Mombasa and Dar es Salaam to inland countries.
We are also implementing a regional mechanism for monitoring non-tariff barriers to trade with a view of eliminating them.
In terms of supporting cross-border trade for small and micro enterprises, I started the Jua Kali/Nguvu Kazi regional exhibition that rotates annually across the partner states where exhibitors can sell their goods tax-free. I also successfully steered partner states during negotiations for EPAs and Collaboration Agreement with the US on trade facilitation and Technical barriers to Trade which was signed in 2015.
What were your biggest challenges?
Changing mindsets of both the public and private sectors from national to regional orientation, which has sometimes impacted on programmes.
In some cases, technical advice has been interpreted as favouring a particular country. Other challenges relate to inadequate resources both human and financial.
However, the biggest personal challenge was failure to have the EPA signed by all the five partner states. I had hoped to kick-start the implementation of the agreement before exiting the office.
The office you are exiting from has been advertised twice. Similarly, the EAC has been searching for a qualified person to fill the position of a registrar of the regional competition authority, six months after a budget was approved to operationalise the office. Are people not interested in working for the regional body?
Yes, the position has been advertised twice. But I do not see this as a reflection of lack of interest to work with the EAC. Rather it’s a show that maybe the qualifications required are too high and those eligible are few and already comfortable where they are working. I recall when I was appointed, the position had to be advertised twice.
In future the Council may have to relook at the qualifications and adjust them accordingly.
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G20 policies and least developed countries’ export performance
Key Indicators and Trends in Trade Policy 2016 – G20 policies and LDCs’ export performance
During the last decade international trade has been characterized by a progressive shift in the use of trade policy instruments. Tariffs have remained substantially stable during the last few years with tariff protection remaining a critical factor only in certain sectors in limited number of markets. On the other hand, the use of regulatory measures and other non-tariff measures such as antidumping has become more widespread.
The recent years have also been characterized by movements in the exchange rates. Overall, tariffs have remained substantially stable during the last years. As of 2015, developed countries import restrictiveness is at an average of about 1.2 percent. However, import restrictiveness remained higher in many developing countries, especially in South Asia and Sub-Saharan African Countries. Although low on average, tariffs remain relatively high in some sectors. Moreover, tariff peaks are present in important sectors, including some of key interest to low income countries such as agriculture, apparel, textiles and leather products. Tariffs also remain substantial for most South-South trade.
As of 2015, international trade is increasingly subject to and influenced by a wide array of policies and instruments reaching beyond tariffs. Technical measures and requirements regulate about two-thirds of world trade, while various forms of sanitary and phytosanitary measures (SPS) are applied to almost the totality of agricultural trade. The past few years have also seen a general increase in the use of trade defence measures within the WTO framework.
In spite of the effects of the economic crisis, the process of deeper economic integration has remained strong at a regional and bilateral level, with an increasing number of preferential trade agreements (PTAs) being negotiated and implemented. PTAs increasingly address not only goods but also services and increasingly deal with rules beyond reciprocal tariff concessions to cover a wide range of behind the border issues. As of 2015, about half of world trade has occurred under some form of PTAs.
The economic turbulence of recent years has been reflected in exchange rate markets, both for developing and developed countries’ currencies. Exchange rate movements are playing an important role in shaping international trade in the last few years as they have influenced countries’ external competitiveness. In particular, 2015 saw the value of the US dollar appreciate against most major currencies.
This report is structured in two parts. The first part presents an overview of the effects of G20 policies on LDCs exports. The second part discusses trends in selected trade policy instruments including illustrative statistics. The second part is divided in five chapters: tariffs, trade agreements, non-tariff measures, trade defence measures, exchange rates and trade costs. Trade trends and statistics are provided at various levels of aggregation illustrating the use of the trade policy measures across economic sectors and geographic regions.
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G20 policies and export performance of least developed countries
The Sustainable Development Goal (SDG) on strengthening the means of implementation and revitalizing the global partnership for sustainable development has reiterated the commitment to significantly increase the exports of Least Developed Countries (LDCs).
LDC exports potential depends on several factors, one of which is access to major markets.
This study provides an overview and analysis of G20 trade policies, in particular tariffs and non-tariff measures, and provides suggestions on how they could be improved to increase the export competitiveness of LDCs.
It finds that G20 tariffs remain restrictive in several sectors of importance for LDCs. More importantly, the results indicate that the G20 countries’ regulatory frameworks and the corresponding non-tariff measures (NTMs) alter relative competitiveness to the advantage of exporters that are capable of efficient compliance with NTMs, therefore penalizing exports originating in LDCs.
In terms of achieving SDG, the findings of this study indicate that tariff preferences should be seen as part of the approach to increase LDCs exports. However, tariff preferences alone are not sufficient, as they would produce meaningful effects only for a limited number of LDCs. Better market access through the facilitation of compliance with G20 regulatory frameworks would be essential to increase exports from LDCs.
The impact of providing LDCs with truly tariff-free market access to the G20 is quantified in an increase of exports of almost 10 billion US$, while eliminating the distortionary trade effects of NTMs would increase LDC exports to G20 countries by about 23 billion US$. Taken together LDC total exports would increase by almost 15 per cent.
While extending preferential schemes to cover 100 per cent of products and all G20 members would be straightforward, reducing the distortionary trade effects of NTMs requires a much more complex approach.
In this regard, further progress in Aid for Trade initiatives and increases in technical assistance programmes, both on bilateral and multilateral levels, to help minimize LDCs’ costs of compliance with NTMs would be essential to facilitate the integration of LDCs in the global economy.
Introduction
The Sustainable Development Goal (SDG) on strengthening the means of implementation and revitalizing the global partnership for sustainable development has reiterated the commitment to significantly increase the exports of Least Developed Countries (LDCs). Target 17.11 aims to double LDCs’ global export share by 2020 (Target 17.11). Cooperation in the area of trade for economic development dates back to the creation of UNCTAD in 1964 and was a major point of the WTO Doha Development Round in 2001. The Doha Round Declaration stated that a central goal of the negotiations was “to improve the trading prospects and to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development”. More recently, the commitment to help LDCs with regard to market access was formally reinstated at the end of 2015 in the Tenth WTO Ministerial Conference Declaration, which stated that WTO members strongly commit to addressing the marginalization of LDCs in international trade and will contribute to improve their effective participation in the multilateral trading system. The argument behind helping LDCs to increase their exports is that a stronger integration of their economies with international markets would benefit LDCs by providing resources for facilitating the implementation of the other Sustainable Development Goals.
SDG Target 17.11 identifies a persistent problem of many of the weaker economies: the generally low level of integration with international markets. Although LDCs represent around 12 per cent of the world’s population, their exports only amount to about one per cent of global exports. Moreover, LDCs’ international integration as measured by trade over GDP is about 22 per cent, significantly below the average for developing countries of about 35 per cent. The causes behind the limited participation of LDCs in world trade are complex and related to productive capacity, trade costs, and market access. With regard to productive capacity and trade costs, LDCs’ weaker economies, domestic constraints, geographic isolation and unfavourable endowments make it relatively more difficult for them to access and effectively compete in international markets. With regard to market access, the issues are complex as well. On one hand, the international community has developed a number of initiatives facilitating market access for LDCs, so as to better integrate them in the international trading system. On the other hand, market access is increasingly determined by regulatory and technical requirements including those stemming from non-trade objectives related to health and environmental protection (Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT)) which may impose an additional burden on LDCs.
In terms of achieving SDG Target 17.11, the findings of this study indicate that LDCs would make further gains if preferential schemes were extended to truly cover 100 per cent of products and all G20 members. However, preferential schemes alone would produce meaningful effects only for a limited number of LDCs. Better market access from the facilitation of compliance with G20 regulatory frameworks would be essential to increase exports from LDCs. The analysis of this study quantifies that the exports from LDCs to the G20 would increase by about 10 billion US$ if preferential tariff schemes were extended to cover 100 per cent of exports from LDCs. With regard to the regulatory framework, LDC exports to G20 countries would increase by about 23 billion US$, equivalent to about a 10 per cent increase if LDC exporters were able to comply with NTMs as well as non-LDC exporters. Taken together, if G20 countries were to fully liberalize market access for LDCs and if the distortionary effect of NTMs was eliminated, LDC total exports would increase by almost 15 per cent.
LDCs’ trade performance
The goal of doubling LDCs’ share of global exports by 2020 is ambitious. Although LDC exports have substantially increased from about 83 billion in 2005 to about 220 billion in 2015, their share in global exports increased only from about 0.8 per cent to about 1.2 per cent during the same period.
Doubling this number in less than 5 years would require a strong commitment both with regard to addressing productive capacity constraints and facilitating market access for LDC exports. Abstracting from productive capacity, the importance of market access is emphasized by the statistics showing LDCs’ relatively low level of export over GDP ratio. In contrast with other developing countries, LDCs generally trade much less than the size of their economy would suggest. Therefore, the doubling of the LDCs’ share in world trade has to result not only from increasing productive capacity but also from exporting a higher share of their production. Increasing LDCs’ export performance on a permanent basis has proven very difficult because of their fragile economies and their over-reliance on commodities. During the past 10 years LDCs’ export over GDP ratios have been oscillating between 22 and 33 per cent. Since 2011 the ratio has declined and as 2015 it is about 22 per cent.
The pattern of weak international integration in terms of exports is widespread across LDCs, although with some differences. Although some LDCs present an export over GDP ratio larger than that of developing countries as a group, the majority of LDCs have an export over GDP ratio which is less than 20 per cent. Moreover, for a substantial number of LDCs, their export over GDP ratio has actually declined since 2011.
Improving the economic integration of LDCs with the rest of the world depends on enhancing and benefiting from market access opportunities, especially in relation to the major economies. Better market access improves countries’ competitiveness and leads to export diversification both in new markets and new products. In this regard, policies regulating market access in G20 countries are of fundamental importance as these markets account for about 85 per cent of world GDP and represent more than 80 per cent of LDC exports Among the G20 markets, China, the European Union and the United States are of major importance as they alone represent about 65 per cent of LDC exports. An increase in LDC exports both to these three major economies and to other G20 countries could make an important contribution to the target of doubling the share of LDCs in world exports by 2020.
Sustainably improving LDCs’ weak export performance requires going beyond export values and addressing export diversification. Although there is some heterogeneity, many LDC exports remain concentrated in a few sectors, largely commodities related to natural resources.
The remaining exports to G20 are largely concentrated in agriculture (about 15 billion US$) and textile and apparel (for about 40 billion US$). Moreover, LDCs tend to be specialized in their exports. This is evident when comparing the export composition of LDCs in different country groups. 75 per cent of exports of the group comprising African LDCs and Haiti are related to natural resources, with oil contributing to about 70 per cent. On the other hand Asian LDC exports are relatively more diversified but still very concentrated in textiles and apparel (about 54 per cent).
G20 trade policy and LDCs
Most of the G20 economies joined the long trend of progressive liberalization of international trade. Such liberalization has greatly improved market access to many of the G20 countries, especially in relation to tariffs. Moreover, the proliferation of trade agreements, many of which involve G20 countries, further liberalized market access, although in a more selective manner. Still, while G20 markets are now more open in the traditional sense, market access has become increasingly regulated by other types of more subtle regulatory measures. These trends had positive and negative implications of LDCs. While tariffs cuts further liberalized market access, they also resulted in preference erosion in markets which were already providing LDCs with forms of preferential access. The implications related to the wider use of regulatory measures are more complex, as these measures can a produce substantial distortionary trade bias against LDCs.
The international community generally recognizes LDCs’ trade constraints and therefore provides LDC exporters with mechanisms which facilitate trade, or at least do not impose additional burdens. Trade arrangements differentiating LDCs from the rest of developing countries exist both at the multilateral level, as well as at the bilateral level. With regard to the G20 countries, their policies try to facilitate LDCs market access both by providing tariff preferences and by facilitating LDCs trade with regard to forms of NTMs (e.g. quotas). The mechanisms through which more advanced economies aim to provide LDCs with a policy driven competitive advantage take the form duty-free quota-free access, broader lists of eligible products, softer rules of origins, Aid for Trade, and technical facilitation programs to reduce trade costs and boost productive capacity so as to ultimately increase LDCs’ overall competitiveness.
The purpose of studies under the Research Study Series is to analyse policy issues and to stimulate discussions in the area of international trade and development. This paper represents the personal views of the authors only and not the views of the UNCTAD secretariat or its member States.
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UN partners with Africa’s development agenda 2017-2027
The then United Nations Secretary-General Kofi Annan and Alpha Konare, Chairperson of the African Union Commission at that time, signed the Ten-Year Capacity Building Programme (TYCBP) for the African Union in 2006 as recommended by the UN General Assembly the previous year.
With that programme due to expire end of the year, the General Assembly has adopted on December 23 a new joint United Nations-African Union (UN-AU) proposal for a successor programme enshrined in the draft resolution titled Framework for a Renewed United Nations‑African Union Partnership on Africa’s Integration and Development Agenda 2017-2027.
The representative of Burkina Faso, on behalf of the African Group, introduced the draft, saying the adoption of the framework in June 2015 in South Africa had been an important stage regarding Agenda 2063 – “a global strategy to optimize use of Africa’s resources for the benefit of all Africans”.
According to the African Union, Agenda 2063 is both a Vision and an Action Plan. It is a call for action to all segments of African society to work together to build a prosperous and united Africa based on shared values and a common destiny.
In their 50th Anniversary Solemn Declaration, the Heads of State and Government of the African Union (AU), while acknowledging past successes and challenges, rededicated themselves to the continent’s accelerated development and technological progress.
They laid down vision and eight ideals to serve as pillars for the continent in the foreseeable future, which Agenda 2063 will translate into concrete objectives, milestones, goals, targets and actions/measures. Agenda 2063 strives to enable Africa remain focused and committed to the ideals envisaged in the context of a rapidly changing world.
The framework for Partnership on Africa’s Integration and Development Agenda (PAIDA) 2017-2027 intends to promote a closer partnership between the United Nations, the African Union and sub-regional organizations in the face of violence, migration and other issues.
PAIDA is anchored on and aligned to the aspirations and goals of the African Union’s Agenda 2063 and integrates the objectives and goals of other major continental socio-economic development frameworks such as New Partnership for Africa’s Development (NEPAD). It is also closely aligned to the 2030 Agenda for Sustainable Development.
NEPAD is a socio-economic development flagship programme of the African Union (AU), adopted by African leaders at the 37th Summit of the Organization of African Unity (OAU) held in Lusaka, Zambia, in July 2001. It is thus a vision and framework that facilitates and coordinates the development of continent-wide programmes and projects, mobilizes resources, engages the global community, Regional Economic Communities (RECs) and AU Member States in the implementation of these programmes and projects.
NEPAD’s overall mission is to address the critical challenges of poverty, development and Africa’s marginalization internationally. Its four primary objectives are to eradicate poverty, promote sustainable growth and development, foster integration of Africa in the world economy, and accelerate the empowerment of women.
Like the TYCBP-AU, PAIDA has a ten-year timeframe, 2017-2027, and its implementation will be closely aligned to the flagship projects contained in Agenda 2063’s First 10-Year Plan.
PAIDA outlines seven main principles that should guide the UN-AU cooperation, namely: ownership and leadership by the African Union (AU), respect for Africa’s policy space, faithfulness to commitments made, consultation and coordination, accountability, strategic partnership (including with the Regional Economic Communities (RECs) and NEPAD Planning and Coordinating Agency [NEPAD Agency]), and proactive engagement.
The priority areas of PAIDA cover 13 thematic issues. These are: infrastructure and trade, economic transformation, regional integration, gender equality and women’s empowerment, agriculture, private sector development, health, education and training, natural resource governance, climate change, democracy and governance, human rights and the rule of law, and peace and security.
PAIDA also highlights a number of cross cutting implementation issues, which the UN is called upon to support; namely: advocacy, programmatic and institutional support, resource support, and reporting.
PAIDA was jointly developed by the UN-AU Technical Working Group that was established in November 2014, on the recommendations of the 15th Session of the Regional Coordination Mechanism for Africa that took place in Abuja, Nigeria in March 2014.
PAIDA outcome document from the Technical Working Group was adopted by the 25th African Union Summit in decision (Assembly/AU/Dec.587(XXV) and transmitted to the African Group at the UN in New York, for onward submission to the United Nations General Assembly.
The Office of the Special Adviser on Africa (OSAA) was a member of the Technical Working Group that developed PAIDA document. In addition, PAIDA document in its paragraph 113 specifically states that OSAA will continue its global advocacy and policy advisory activities on behalf of the African Union, NEPAD Agency and the RECs, within the context of implementation of PAIDA.
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South Africa Merchandise Trade Statistics for November 2016
South Africa’s trade deficit narrows in November
South Africa posted a trade deficit of ZAR 1.1 billion in November 2016 compared to a downwardly revised ZAR 3.91 billion deficit in October, while missing market expectations of a ZAR -0.75 billion gap. Exports rose 12.8 percent, boosted by higher sales of mineral products and precious metals and stones and imports increased by 9.2 percent, as purchases rose mainly for vehicles and transport equipment and mineral products.
Exports jumped to ZAR 99.6 billion, boosted by higher sales of vegetable products (+20 percent), precious metals and stones (+20 percent), base metals (+11 percent), vehicles and transport equipment (+7 percent) and chemical products (+12 percent). Major destinations for exports were China (11.6 percent of total exports), the US (8.6 percent), Germany (7.8 percent), Namibia (5.7 percent) and Botswana (5.5 percent).
Imports rose to ZAR 100.7 billion, as purchases went up for vehicles and transport equipment (+57 percent), mineral products (+20 percent), machinery and electronics (+7 percent) and prepared foodstuffs (+23 percent). Meanwhile imports fell for equipment components (-25 percent). The main sources of imports to the country were China (19.5 percent of total imports), Germany (11.7 percent), the US (7.2 percent), France (6 percent) and Saudi Arabia (4.9 percent).
Considering the first eleven months of 2016, the trade deficit shrank to ZAR 14.61 billion compared to ZAR 59.28 billion the same period a year earlier, as exports went up 5.8 percent and imports grew at a much slower 1 percent.
Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country posted a trade gap of ZAR 10.71 billion in November.
The South African Revenue Service (SARS) has released trade statistics for November 2016 recording a trade balance deficit of R1.09 billion. The year-to-date deficit (01 January to 30 November 2016) of R14.61 billion is an improvement on the deficit for the comparable period in 2015 of R59.28 billion. These statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R1.09 billion trade balance deficit for November 2016 is attributable to exports of R99.64 billion and imports of R100.73 billion. Exports for the year-to-date (01 January to 30 November 2016) grew by 5.8% from R948.37 billion in 2015 to R1 003.51 billion in 2016. Imports for the year-to-date of R1 018.13 billion are 1.0% more than the imports recorded in January to November 2015 of R1 007.66 billion.
On a year-on-year basis, November 2016’s R1.09 billion trade balance deficit is a deterioration from the surplus recorded in November 2015 of R0.24 billion. Exports of R99.64 billion are 7.0% more than the exports recorded in November 2015 of R93.14 billion. Imports of R100.73 billion are 8.4% more than the imports recorded in November 2015 of R92.89 billion.
October 2016’s trade balance deficit was revised downwards by R0.50 billion from the previous month’s preliminary deficit of R4.41 billion to a revised deficit of R3.91 billion as a result of ongoing Vouchers of Correction (VOC’s). Exports increased from October 2016 to November 2016 by R11.31 billion (12.8%) and imports increased from October 2016 to November 2016 by R8.49 billion (9.2%).
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Including BLNS: | |
Mineral Products | + R 3 917 | + 20% |
Precious Metals & Stones | + R 2 702 | + 20% |
Base Metals | + R 1 198 | + 11% |
Vehicles & Transport Equipment | + R 849 | + 7% |
Chemical Products | + R 668 | + 12% |
The main month-on-month import movements (R’ million)
Section: | Including BLNS: | |
Vehicles & Transport Equipment | + R 4 238 | + 57% |
Mineral Products | + R 2 411 | + 20% |
Machinery & Electronics | + R 1 609 | + 7% |
Prepared Foodstuffs | + R 770 | + 23% |
Equipment Components | - R 1 985 | - 25% |
Trade highlights by world zone
The world zone results from October 2016 (Revised) to November 2016 are given below.
Africa:
Trade Balance surplus: R18 961 million – this is a 5.4% decrease in comparison to the R20 034 million surplus recorded in October 2016.
America:
Trade Balance deficit: R2 390 million – this is a 14.3% increase in comparison to the R2 092 million deficit recorded in October 2016.
Asia:
Trade Balance deficit: R11 943 million – this is a 27.5% decrease in comparison to the R16 463 million deficit recorded in October 2016.
Europe:
Trade Balance deficit: R12 233 million – this is a 28.0% increase in comparison to the R9 558 million deficit recorded in October 2016.
Oceania:
Trade Balance surplus: R222 million – this is an improvement in comparison to the R152 million deficit recorded in October 2016.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for November 2016 recorded a trade balance deficit of R10.71 billion. This was a result of exports of R86.47 billion and imports of R97.18 billion.
Exports increased from October 2016 to November 2016 by R10.61 billion (14.0%) and imports increased from October 2016 to November 2016 by R7.92 billion (8.9%).
The cumulative deficit for 2016 is R112.95 billion compared to R156.77 billion in 2015.
Trade highlights by category
The main month-on-month export movements (R’ million)
Section: | Excluding BLNS: | |
Mineral Products | + R 3 887 | + 22% |
Precious Metals & Stones | + R 2 836 | + 22% |
Base Metals | + R 1 113 | + 11% |
Vehicles & Transport Equipment | + R 837 | + 7% |
Chemical Products | + R 613 | + 14% |
The main month-on-month import movements (R’ million)
Section: | Excluding BLNS: | |
Vehicles & Transport Equipment | + R 4 232 | + 57% |
Mineral Products | + R 2 428 | + 20% |
Machinery & Electronics | + R 1 612 | + 7% |
Prepared Foodstuff | + R 743 | + 27% |
Equipment Components | - R 1 985 | - 25% |
Trade highlights by world zone
The world zone results for Africa excluding BLNS from October 2016 (Revised) to November 2016 are given below.
Africa:
Trade Balance surplus: R9 345 million – this is a 11.4% decrease in comparison to the R10 546 million surplus recorded in October 2016.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for November 2016 recorded a trade balance surplus of R9.62 billion. This was a result of exports of R13.16 billion and imports of R3.54 billion.
Exports increased from October 2016 to November 2016 by R0.70 billion (5.6%) and imports increased from October 2016 to November 2016 by R0.57 billion (19.1%).
The cumulative surplus for 2016 is R98.34 billion compared to R97.49 billion in 2015.
Trade Highlights by Category
The main month-on-month export movements (R’ million)
Section: | BLNS: | |
Prepared Foodstuffs | + R 192 | + 14% |
Machinery & Electronics | + R 124 | + 7% |
Textiles | + R 92 | + 16% |
Base Metals | + R 86 | + 10% |
Misc. Manufactured Articles | + R 81 | + 23% |
Wood Pulp & Paper | + R 58 | + 22% |
Chemical Products | + R 56 | + 5% |
Plastics & Rubber | + R 48 | + 9% |
Precious Metals & Stones | - R 134 | - 17% |
The main month-on-month import movements (R’ million)
Section: | BLNS: | |
Precious Metals & Stones | + R 246 | + 792% |
Chemical Products | + R 176 | + 22% |
Textiles | + R 130 | + 23% |
Wood Pulp & Paper | + R 29 | + 84% |
Vegetable Products | - R 29 | - 40% |
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The WTO’s role in fisheries subsidies and its implications for Africa
What should we expect from the current discussions on fisheries subsidies at the WTO? And what are the potential implications for African economies?
Fisheries subsidies have been long identified as a critical issue for trade and sustainable development and, more recently, a matter of significant international concern in efforts to manage global fisheries. Subsidies to the fisheries sector, through resulting production and trade distortions, lead to unsustainable fishing practices and overexploitation of fish stocks. Such overcapacity and overfishing can have a debilitating impact on fragile marine ecosystems, the sustainability of both coastal and offshore fisheries and the livelihoods in fisheries-dependent economies. In light of these threats, members of the international community, in various configurations, have recognised the urgency of curtailing subsidies that contribute to overcapacity, overfishing, as well as illegal, unreported, and unregulated (IUU) fishing. This understanding was reflected in paragraph 173 of the outcome document of the United Nations Conference on Sustainable Development (Rio+20) in 2012 – “The Future We Want”.
The call to prevent the harmful impacts of fisheries subsidies received the unanimous endorsement of the international community in Sustainable Development Goal 14.6 of the 2030 Agenda for Sustainable Development, which sets the unambiguous target of 2020 for the elimination of certain forms of fisheries subsidies which contribute to overcapacity and overfishing. This commitment is reflected in the following undertakings: (1) the elimination of all forms of subsidies contributing to IUU fishing; (2) the prohibition of harmful subsidies that promote overcapacity and overfishing, and (3) a commitment by UN members not to introduce any new “such” subsidies. These targets are accompanied by a recognition that appropriate and effective special and differential treatment (S&DT) provisions for developing and least developed countries should be an integral part of the WTO negotiations on the topic.
While the collective resolve of the international community is reflected in the SDGs, international best practice and norms on fisheries subsidies are increasingly being fashioned by commitments undertaken in the context of bilateral, regional, and multilateral processes engaged in by countries of varying sizes, and at different levels of development. In this context, many African states have participated in, or agreed to the expansion of a raft of international measures on harmful fisheries subsidies.
Samoa Pathway
Given the existential ecological risks posed by certain forms of capacity-enhancing subsidies, the outcome document of the Third International Conference on Small Island Developing States (SIDS) addresses the issue of subsidies in the fisheries sector, and urges the prohibition of certain forms of subsidies that contribute to over-capacity and overfishing, in accordance with the Doha and Hong Kong WTO ministerial declarations, respectively adopted in 2001 and 2005.
Bilateral and plurilateral commitments
The expansion of commitments on fisheries subsides includes proposed new disciplines through the Trans-Pacific Partnership (TPP) – although significant uncertainty surrounds the future of the deal – wherein contracting parties “recognise that the implementation of a fisheries management system that is designed to prevent overfishing and overcapacity and to promote the recovery of overfished stocks must include the control, reduction and eventual elimination of all subsidies that contribute to overfishing and overcapacity.” To that end, contracting parties have agreed to provisions that explicitly prohibit subsidies negatively affecting fish stocks in an overfished condition and those for IUU fishing. Similar provisions can be found in the recently signed EU-Canada Comprehensive Economic and Trade Agreement (CETA) wherein parties committed to working jointly towards developing a multilateral resolution on fisheries subsidies. While this commitment falls short of those found in the TPP, the EU and Canada have assumed a binding commitment to advance efforts on fisheries subsides would materialise at the multilateral level.
A further deepening of the international consensus on harmful fisheries subsidies can be found in the joint UNCTAD-FAO-UNEP statement that emerged from the Fourteenth Session of the United Nations Conference on Trade and Sustainable Development (UNCTAD XIV) that, inter alia, reaffirmed SDG 14. In a nuance of SDG 14.6, signatories noted that “regulating fisheries subsidies cannot be seen as a stand-alone issue.” Moreover, the statement highlights the vital importance of adopting a “holistic approach for the sector’s development that also addresses market access (tariffs and non-tariff measures) and capacity constraints in implementing sustainable fisheries-related measures.” It also appears to reflect the implicit need to allow for equitable and differentiated rules for countries at different levels of development. As expressed in the statement, over 45 African countries – members of the African, Caribbean, and Pacific Group of States (ACP) – agreed to a standstill on subsidies that: (a) negatively affect overfished fish stocks; and/or (b) accrue to “vessels or operators engaged in illegal, unreported and unregulated fisheries.”
A growing convergence of international commitments and the establishment of international norms and best practice on fisheries subsidies have led to an increased interest and effort at the WTO to agree on disciplines on fisheries subsidies ahead of the Eleventh WTO Ministerial Conference, carded for Buenos Aires, Argentina, in 2017.
Fisheries subsidies disciplines, food security, and Africa
Multilateral rules that discipline fisheries subsidies can have a significant impact on food security in coastal and island African countries. Quantitative analysis of the sector reveals that fish is an important source of food for about over 400 million Africans, mostly supplied by small-scale, coastal, and inland fisheries.[1] It is projected that the continent will require an additional 1.6-2.6 million tons of fish per year by 2030 in order to satisfy anticipated consumption needs. Coastal and island African countries have extensive marine wild-capture fisheries that remain largely underexploited commercially, or as it relates to domestic consumption. This market failure is largely due to the fact that subsidised foreign fleets capture most of the fish for export via bilateral fisheries access agreements. Curtailing capacity-enhancing subsidies (which constitute approximately 60 percent of global fish subsidies) including operating subsidies, such as fuel subsidies, will impact on the ability of foreign fleets to exploit Africa’s offshore fisheries resources. At the same time, any new multilateral disciplines must allow sufficient policy flexibility for coastal and island African countries to develop their domestic fisheries sectors, and thereby reap increased benefits from their own abundant resources. Additionally, any such approach by African countries to better exploit their own fisheries should be based on adequate science-based national and regional fisheries management systems as well as appropriate levels of transparency.
Towards this end, the ACP Group issued a submission on 15 November 2016 which builds on, refines, and reaffirms previous ACP submissions related to the disciplining of fisheries subsidies, discussed in further detail in the next section.
Recent ACP proposal on principles and elements for fisheries subsidies negotiations
The ACP submission reprises the original fisheries subsidies mandate as well as a supplementary mandate agreed in 2005 that, inter alia, holds that “appropriate and effective special and differential treatment (S&DT) for developing countries and least developed countries should be an integral part of the negotiations, taking into account the importance of the sector to development priorities, poverty reduction and livelihood and food security concerns.[2]
The core principles outlined in the ACP submission include the disciplining of IUU fishing, subsidies provided to large-scale commercial or industrial fishing, and subsidies to fishing activities outside of a member’s maritime jurisdictions – subsidies that promote fishing in the high seas or in the exclusive economic zone (EEZ) of another member. As a cross-cutting S&D principle, the ACP proposes the adoption of a general carve-out according to which “nothing shall prevent” a developing country or LDC member from maintaining or granting subsidies that do not contribute to overfishing and overcapacity or do not negatively affect third countries (with examples of such subsidies cited in the text). Specifically, and with due account of jurisdictional considerations with respect of multi-species catch, the ACP has proposes the prohibition of:
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Subsidies to fishing vessels or fishing activity that negatively affect fish stocks that are in an overfished condition; and
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Subsidies provided to vessels or operators engaged in illegal, unreported and unregulated (IUU) fishing.
In terms of S&DT, the ACP proposal specifies that provisions should ensure that LDCs and SVEs are not required to assume commitments beyond these two general prohibitions and that implementation-related flexibilities, including with respect to transparency and notification requirements, should be supported by technical assistance and capacity building.
The Trade Facilitation Agreement style approach to a fisheries agreement
The November 2016 proposal by Argentina, Peru, and other co-sponsors calls for a WTO fisheries agreement that would be structurally and procedurally similar to the Trade Facilitation Agreement (TFA).[3] The co-sponsors of the proposal are correct in pointing out that since the UN adopted fisheries-related goals as part of the SDGs, members have effectively de-linked progress on fisheries subsidies from other areas of the Doha Round, tacitly agreeing to untie fisheries subsidies from the straightjacket of the so-called single undertaking. Such an approach has been challenged by other members who wish to preserve the spirit of the “single undertaking”, according to which nothing is agreed until all elements of the package are agreed, at least within the context of the rules negotiations.
The Argentina and Peru proposal seeks to establish a framework that aligns the commitments to be undertaken by members with their capacity to implement each measure, similar to the approach followed by the WTO TFA. Proposed implementation categories are as follows: (1) category A – implementation of disciplines by 2020; (2) category B – to be implemented after a transitional period following the entry into force of the agreement (available to developing and least developed countries); and (3) category C – technical cooperation is required for capacity building to implement relevant measures. It should be noted that unlike category C of the TFA, technical assistance is not an explicit condition for implementation under the proposed structure.
There are some preliminary concerns regarding this proposal, particularly with regard to how policy space (appropriate S&DT provisions) for small and vulnerable economies – including SIDS – and LDCs can be accommodated in the proposed structure. Additionally, given the general lack of information regarding current subsidies baselines, it would be difficult for members to agree on which subsidies would fall under category A, and which would be appropriate for category B. The criteria for subsidies that would fall into category A would need to be spelt out clearly if such an approach is to yield results. One size does not fit all, even within the developing country grouping. A self-designation approach as contemplated by the Argentina proposal might be used by some of the more advanced developing countries to avoid taking meaningful commitments, hence watering down the proposed disciplines and limiting the ability of any new multilateral rule to discourage the harmful effects of certain types of subsidies. In the context of fisheries, category C would also have to relate to technical cooperation directed at strengthening fisheries management plans and systems for targeted fisheries and/or fleets.
Furthermore, the proposal ends up reopening Pandora’s Box with regards to the definition of “overfishing”, “overcapacity”, and “artisanal fisheries”, which has proven to be a major sticking-point in previous discussions within the negotiating group on rules. The enhanced notification requirement provision is an interesting proposal that ought to be explored while ensuring that this obligation is not unduly burdensome for developing countries. Overall, given the complexity and unique nature of the fisheries issue, a TFA style approach may become unwieldy and unnecessarily complicated. Hopefully proponents will provide further clarification in the weeks and months ahead.
Recent EU proposal and its implications for Africa
The recent EU proposal ought to be credited for its attempt to revive text-based discussions in the WTO negotiations.[4] In particular, it rightly emphasises the need to start defining the subsidies that are harmful if members are serious about developing disciplines ahead of the upcoming 2017 ministerial conference.
The EU’s submission was preceded by a blog post by EU Trade Commissioner Cecilia Malmström, which specifically acknowledged that apart from targeting IUU fishing, the focus needs to be on disciplining capacity-increasing subsidies, based on UNCTAD’s estimate that 60 percent of global fisheries subsidies are capacity-enhancing.[5] The lack of data from reluctant governments continues to be a major problem in identifying the size and nature of national subsidy programmes. However, if the above statistic is accurate, the textual proposal presented by the EU is a step in the right direction, given that it specifically targets subsidies supporting the construction of new vessels, the enhancement of capacity through equipment/technology, and the importation and transfer of fishing vessels through joint ventures (i.e. those that increase the capacity of the vessel to fish more).
Some have expressed concerns that the EU, in its proposal, does not explicitly prohibit fuel subsidies, which are technically effort-enhancing and have been found to have significant effects on the overexploitation of fish stocks. Fuel subsidies constitute 22 percent of total subsidies and have been particularly problematic in extending the range of the distant water fishing fleets into African waters.[6] However, a strong argument can be made that operating subsidies such as fuel are a part of “subsidies that increase the marine fishing capacity of a fishing vessel” and are thus forbidden under the EU proposal. Alternatively, members can push for an explicit prohibition by drawing a distinction based on strict definitions of fishing capacity and fishing effort or cost-reducing categories of subsidies.
If the proposed prohibitions lead to a reduction in the activities of subsidised commercial foreign fleets in the EEZs of African coastal and island states, it will benefit the development of the continent’s artisanal and small-scale commercial fisheries, which has long been neglected. Recent studies that have carried out bottom-up re-estimations of catch show that EU and Chinese fishing fleets report only 28 and 6 percent of their actual catch respectively, and overall, have a poor record in terms of illegal fishing, patterns of exploitation, and contribution to the sustainability of resource use.[7] There is also evidence that foreign bottom-trawlers have significantly exploited near-shore fisheries in places like Senegal that have a long tradition of fishing.[8] Additionally, benefits from license fees obtained through bilateral fishing treaties with foreign governments do not trickle down to benefit African populations.
Cecilia Malmström’s blog post also acknowledges an important fact: that a one-size-fits-all approach cannot work with regards to these disciplines, hence the need for appropriate S&DT provisions, which is followed through in EU’s WTO submission. However, the submission falls short of providing any flexibility for the development of commercially viable small-scale fisheries, including commercial-artisanal fisheries. Proposed exemptions in the EU proposal provide only for subsistence fishing activities, which are for non-commercial purposes only. The development of small-scale fisheries has been identified by numerous fisheries agencies (such as the World Fish Centre) as an opportunity for growth, and a high priority for increasing food security. Indeed, linking commercial retailers/exporters to artisanal fish supply chains in coastal and island African countries has been identified as an innovative strategy for producing more stable incomes and improving the livelihoods of their fisheries-dependent communities.
Implications for the African region
Regardless of the approach adopted by WTO negotiators, sufficient flexibility should be granted to African countries, which lack the capacity to engage in commercially viable fisheries, to allow them to provide policy support aimed at the development of capacity, including support for the scaling-up from subsistence to commercially-viable fisheries, especially small-scale fisheries.
Substantial investments will have to be made in order to build capacity and develop the continent’s fisheries sector domestically, as it is now dominated by distant-water fishing vessels. According to the World Fish Centre, 25 percent of the fish caught and landed in Africa never makes it to the mouths of the consumer, largely due to poor infrastructure (storage, handing, and transporting) and poor domestic processing facilities.[9] In order to capture more of the value-added component of the value chain domestically, investments will have to be made to improve processing facilities and technologies. This will require sufficient flexibility for African countries to allow for the development of viable and sustainable fisheries sectors. Unfortunately, fisheries management is still a low priority for several governments, and thus will continue to be a key concern. In this regard, any exemptions to WTO provisions ought to be conditioned on the implementation of science-based fisheries management plans.
Stephen Fevrier is International Trade Consultant and advisor on small state issues. Manleen Dugal is International Trade Consultant and former WTO delegate for the Pacific Island Group.
This article is published under Bridges Africa, Volume 5 - Number 10, by the ICTSD.
[1] World Fish Center. “Fish Supply and Food Security in Africa.” July 2009.
[2] WTO Document TN/RL/GEN/182, 16 November 2016
[3] WTO Document TN/RL/GEN/183, 28 November 2016.
[4] WTO Document TN/RL/GEN/181, 18 October 2016.
[5] Cecilia Malmström. “Protecting global fisheries through the WTO,” Blog post, 17 October 2016.
[6] Sumaila, Ussif R., et al. Note titled “Global Fisheries Subsidies”, prepared for the European Parliament’s Committee on Fisheries. 2003.
[7] Belhabib, Dyhia, et al. “Euros vs. Yuan: Comparing European and Chinese Fishing Access in West Africa.” PLoS ONE 10(3). 2015.
[8] Pala, Christopher. “African Fisheries Plundered by Foreign Fleets.” IPS News. 23 June 2016.
[9] World Fish Center. “Fish Supply and Food Security in Africa.”
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Is Made-in-Rwanda campaign already paying off?
Rwanda’s trade deficit reduced by 5.1 per cent for the better part of last year, largely due to the ongoing Made-in-Rwanda campaign, an initiative that promotes consumption of locally-produced goods and services.
Trade deficit is amount by which the cost of a country’s imports exceeds the value of its exports.
According to the statistics, released by the central bank last week, Rwanda’s trade deficit reduced from $1,602.21 million to $1,519.97 million in the first 11 months of 2016.
The central bank’s Monetary Policy Committee said the drop was due to an increase in formal exports by 6.1 per cent as well as a decrease of formal imports by 2.4 per cent in value.
The Government has for the past two years embarked on a drive to promote Made-in-Rwanda products by encouraging more production and consumption of locally-manufactured goods.
Through the Ministry of Trade, Industry and EAC Affairs, the Government has put up strategies to improve export volume and value in the coming years to tilt the current level of trade imbalance.
On Tuesday, Francois Kanimba, the minister for trade, industry and EAC affairs, told The New Times that the impact of the initiative in reducing the trade deficit had come faster than expected.
“we expected a decrease in trade deficit but to be honest we had not quantified this on annual basis particularly on the first year,” he said.
A study conducted by the ministry estimates that the initiative will have an impact of about $450 million in the medium term.
“We are doing more analysis to understand what products had the biggest roles and which ones were most affected. In itself it’s a good outcome. In our study conducted three years back, we estimated an impact of $450m in the medium term. It takes time but it is coming,” he said.
Cimerwa sets the pace
Among the local firms that contributed to the reduced trade deficit was cement producer Cimerwa, which, Kanimba said, can still perform better as it is currently operating at 56 per cent capacity.
In August 2015, Cimerwa launched a $170 million (about Rwf126 billion) plant in Rusizi District, increasing its production capacity to 600,000 tonnes a year from 100,000 previously.
This can meet the growing local demand that currently stands at about 450,000 tonnes of cement, driven by the increasing demand for cement by the local construction and real estate sectors.
The surplus output is targeted for the export market in the region, especially Burundi and DR Congo.
During the course of 2016, Cimerwa stepped up production capacity compared to previous years. This, coupled with market penetration strategies, saw higher consumption of locally-produced cement, undoing years of high imports in the construction sector.
Kanimba said recent statements from various industries in the country show increased turnover, especially among firms producing consumer goods.
Central bank governor John Rwangombwa said while the development is positive in terms of trade deficit, it can be explained by two factors; Cimerwa starting to produce more than they have done in the past couple of years and reduction in importation of intermediate goods.
Trade deficit reduction can happen as a result of several scenarios; increased consumption of local products or reduced imports due to economic hardships.
In an ideal situation, the reduction of the trade deficit should be characterised by increased exports and consumption of locally-produced goods.
Donatien Mungwarareba, the Private Sector Federation (PSF) director for advocacy, communication and labour relations, said the impact was a result of partnerships and joint efforts between local producers and other industry stakeholders, including the Government.
“We were expecting an impact like that when we started this campaign. We need to continue reducing the trade imbalance. When we met the President last year, PSF outlined plans to reduce trade deficit by between 30 and 50 per cent in the next five years,” Mungwarareba said.
He said they had also collected feedback from clients of the various sectors with most of them happy about the quality of products. However, most clients took issue with shortfall on marketing.
“We will be focusing on marketing and outreach of locally produced products in and out of the country,” he said.