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tralac’s Daily News selection: 7 October 2015
The selection: Wednesday, 7 October
The TPP deal gets done: what does it mean for developing countries? (CGD)
From information available so far, it looks like there were improvements in some areas of interest for developing countries. But I still have concerns in the three areas I wrote about in July. I’ll need to see the details before I can assess the outcomes there. And my biggest concern about the TPP, TTIP, and other regional agreements remains how they affect the World Trade Organization. Most developing countries are outside these big trade deals and will have no way to protect themselves in trade if the multilateral system fades into irrelevance.
Finally, how will the deal impact the multilateral system? Will a successful TPP negotiation spur countries on the outside to increase their efforts to bring things back to the WTO? Or will it encourage US negotiators to turn away from the WTO and focus on the Transatlantic Trade and Investment Partnership? We should get an indication of that when WTO ministers meet in Nairobi in December and, unfortunately, I’m not optimistic. [The author: Kimberly Elliott]
Sean Doherty: 'Has the TPP deal finally brought trade up to date?'
G20-OECD Global Forum on International Investment: summary report
G20 urges reforms for global trade growth
The great global trade slowdown (LiveMint)
The latest trade statistics from around the world do not make for happy reading. Economists at the World Trade Organization have recently cut their forecast of global trade in 2015 by 50 basis points, to 2.8%. Trade volumes are falling in many countries such as China. The Indian trade numbers too have been weak. The immediate news on the trade front should not be a surprise for most people who follow economic trends. But there could be more structural damage as well that is not captured in the headlines. [The author, Niranjan Rajadhyaksha, is executive editor of Mint]
US trade deficit widens as exports sag, imports from China surge (Reuters)
The data released on Tuesday by the Commerce Department illustrates the U.S. economy's vulnerabilities to a strong dollar and weak demand in foreign markets, which could impose further caution on the Federal Reserve's plans to hike interest rates. The trade deficit swelled by 15.6% to $48.3bn in August, according to data that is adjusted for seasonal factors.
The world economy is awash with liquidity and the cost of debt has never been so low – still many developing countries struggle to obtain sources of international finance for long-term productive investment. UNCTAD’s Trade and Development Report, 20151 argues that dedicated government action is needed to correct this shortfall if ambitious development goals are to be achieved. This task cannot be entrusted entirely to financial markets. Instead, specialized public institutions and mechanisms designed specifically for this purpose will be crucial. [Downloads, data]
Global action plan launched against MNCs avoiding tax (OECD)
Inclusive Global Value Chains: policy options in trade and complementary areas for GVC integration by small and medium enterprises and low-income developing countries (OECD/WB)
Jobs, wages and the Latin American slowdown (World Bank)
In the report, Jobs, Wages and the Latin American Slowdown, the World Bank´s Office of the Chief Economist for Latin America and the Caribbean points out that the expectation is that the region will see 0% growth for 2015 with a slight improvement to 1% in 2016, although uncertainty around that projection is high. That would be the fifth year in a row the region has underperformed initial expectations, a sign that new factors, mainly internal, are prolonging the effects of worsening external conditions, particularly the sharp deceleration in China and fall of commodity prices.
From Cape to Cairo? The potential of the Tripartite Free Trade Area (SAIIA)
The three main countries involved in this project – Egypt, Kenya and South Africa – have a considerable regional trade complementarity. The de facto regional trade of these three countries is also high but concentrated in sub-regions of the TFTA. The regional trade complementarity of Ethiopia, another potentially major player, is much lower, as is its regional trade intensity. The authors moreover analyse similarity in regional exports to shed light on the competition that markets face and resulting disincentives for the TFTA. [The authors: Sören Scholvin, Jöran Wrana]
South African trade policy: key cabinet decisions (GCIS)
Cabinet approved the Guidelines of Good Business Practice for South African Companies Operating in Africa. These guidelines are a voluntary set of principles consistent with laws and internationally recognized standards that promote responsible business conduct on the African continent. They provide a guiding framework for South African companies to promote sustainable economic development in Africa. They also encourage South African companies to align their involvement and practices with government’s integration and development objectives in Africa and to build mutual confidence, trust and benefit for the companies and the societies in which they operate.
Cabinet approved the ratification of the Annex on the Institutionalization of the Southern African Customs Union Summit. The summit, which comprises Heads of State or Government of each member state, will provide political and strategic direction to SACU. All SACU member states need to sign the agreement so that the summit can become the highest decision making institution of the SACU. [Background: tralac's SACU Roundtable]
Resolve disputes - Mwanakatwe tells SA (ZNBC)
Commerce Minister Margaret Mwanakatwe is optimistic that Zambia and South Africa will resolve disputes regarding the export of organic products into South Africa. Mrs Mwanakatwe says this will mitigate trade imbalances between the two countries. Mrs Mwanakatwe says the move will allow the Zambian honey to easily penetrate the South African market.The Minister was speaking when she opened the 2015 Zambia-South Africa Trade and Investment Forum in Lusaka.
Security bill spat: SA-US relations at risk (IOL)
South Africa is in danger of being sidelined for project funding by the International Monetary Fund and the World Bank as the US lobbies to scrap the controversial Private Security Industry Regulation Amendment Bill. Yesterday, the US trade mission threatened to withdraw its support for South Africa’s funding applications for infrastructure development projects if certain clauses in the bill were not reviewed, and once more placed the Africa Growth and Opportunity Act on the back foot. Heidi Ramsay, the deputy spokeswoman for the US embassy in Pretoria, said the US’s concerns were that the requirement would force US security firms to sell off their ownership at what would likely end up being fire-sale prices, which could effectively result in an uncompensated expropriation. [Security law to cost SA R133bn (Business Report)]
Botswana moves to eliminate trade barriers (Mmegi)
Local exporters and importers now have a ‘one-stop shop’ where they can receive crucial information on laws, regulations and quality standard requirements for conducting cross-border trade. Through a National Enquiry Point, which was launched in Gaborone this week, the Botswana Bureau of Standards will offer the services. The NEP is a requirement of the WTO under the Technical Barriers to Trade agreement.
Services sector anchors Botswana's 2nd quarter economic growth (Mmegi)
Uganda: Substandard imports decrease by 30% - government (Daily Monitor)
Substandard and counterfeit imports have reduced by 30% over the last two years, the minister of Trade has disclosed. According to Ms Amelia Kyambadde, the reduction is as a result of the enforcement of a government policy subjecting sensitive imports to quality test before being shipped here. Speaking last week at the 6th annual Ministry of Trade Sector Review Conference, Ms Kyambadde said the reduction that the sector has seen since 2013, also tells a story of what a stronger resolve can yield. In the sector review meeting, the executive director of Uganda National Bureau of Standards, Mr Ben Manyindo, said by close of the year, substandard and counterfeit imports would have reduced by 50%. And by end of 2016 it would have gone down by 65%.
Kenya: Current account deficit hits Sh151bn on imports surge (Business Daily)
The gap between Kenya’s imports and exports widened by 62% in the second quarter of the year, contributing to the pressure on the local currency. The country’s exports value slumped to Sh133.5 billion between April and June from Sh141 billion for the same period last year while imports grew to Sh379.9 billion from Sh371.5 billion, KNBS data shows. The expanded import bill and reduced exports pushed Kenya’s balance of trade to a deficit of Sh246.3 billion compared to a Sh230.5 billion deficit reported in the second quarter last year. However, the current account deficit was kept low because of the positive balance on the services account and remittances.
Dar-Kenya trade scales EA high (Daily News)
Trade between Kenya and Tanzania has continued to grow, accounting for 80 to 90 per cent of trade in the East African Community, President Jakaya Kikwete has said. Addressing the Kenya’s National Assembly in the capital, Nairobi, President Kikwete said the growth in trade between the two countries demonstrated how much the two countries’ contribution is critical to the greater EAC integration agenda.
Kenya-Tanzania Business Forum: Uhuru Kenyatta's speech (Business Daily)
France’s milk firm eyes East Africa (Daily Nation)
Improve ease of doing business in Tanzania (The Citizen)
EALA plenary commences in Nairobi, Pan-African Parliament: opening of the 1st Ordinary Session
Women traders in Africa’s Great Lakes (World Bank Blogs)
The Great Lakes Trade Facilitation Project (GLTFP) is groundbreaking in many ways: it is the first large-scale World Bank operation focusing on small-scale trade in a conflict area; it moves beyond a traditional focus on trade in goods, also targeting cross-border trade in services; and it is a collaborative effort across WBG’s Global Practices, including the Trade & Competitiveness and the Governance GP, designed with critical support from the Fragility, Conflict and Violence Group. [The authors: Cecile Fruman, Carmine Soprano]
Serial offenders - industries prone to endemic collusion: contributions from South Africa, Brazil (OECD)
State-business relations as drivers of economic performance (UNU-WIDER)
The empirical study of state-business relations in developing countries has emerged only recently, with notable contributions starting in the mid-1990s, developing further in the 2000s and gaining more general acceptance in the 2010s. The evidence suggests that effective SBRs can matter for economic performance. The case studies suggest that SBRs can be effective (Mauritius) but also ineffective (Malawi). [The authors: Alberto Lemma, Dirk Willem te Velde]
International agencies and experts meet to update classification of non-tariff measures (UNCTAD)
Leading organizations and experts in trade and non-tariff measures (NTMs) met in Geneva on 28-29 September, to plan an update to the International Classification of NTMs - policy measures other than ordinary customs tariffs that nevertheless restrict free trade. The following objectives were achieved:
Towards a new partnership between the EU and the ACP countries after 2020: public consultation
It is important to take stock of the current Partnership Agreement, to explore the extent to which it remains valid for the future and offers a platform to advance joint interests. A thorough review is needed of the assumptions, on which the partnership is based, of its scope, instruments and ways of working. The outcomes will form a major component of the analysis and as such contribute to set out policy proposals for the future relationship. Reference documents:
Zambia constitutes team to tackle job losses in mining industry (Coastweek)
South Africa: State of Renewable Energy report (GCIS)
WTO agrees membership terms for Liberia
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As volatile financial markets create rumblings in developing countries, UNCTAD report calls for fresh policy thinking
For most developing economies, integration into global financial markets has up to now had only weak linkages to their long-term development goals, the UNCTAD Trade and Development Report, 2015 says. Coupled with increasingly large and volatile capital flows that have expanded vulnerabilities to external shocks, the effectiveness of the policy tools designed to manage growth and development is also being limited.
Since the early 2000s, private capital inflows to developing and transition economies have accelerated substantially. External inflows to these countries, as a proportion of gross national income, increased from 2.8 per cent in 2002 to 5 per cent in 2013, after reaching two historical records of 6.6 per cent in 2007 and 6.2 per cent in 2010. Worries of a sudden or substantial exit of inflows began with the economic slowdown and have become more pronounced with the increased volatility of recent months. The close ties between capital flows and key economic prices also increase the danger of a downward deflationary spiral (see figure).
Particularly after the crisis of 2008, those capital flows owed as much to policy decisions in advanced economies as to improved fundamentals in recipient countries. Prior to the crisis, borrowing and asset appreciation drove consumption booms and private investment bubbles in some major economies, and net exports in others. After the inevitable collapse that followed, developed country policies of quantitative easing, together with fiscal austerity, have largely continued this pattern of generating excess liquidity in the private sector.
In mid-2015, global financial markets were spooked by recessions in Brazil, the Russian Federation and South Africa and by signs of economic weakening in China. Global investors, already anticipating a hike in interest rates in the United States of America and a continuing fall in commodity prices, moved briskly to exit emerging economy equity and bond markets.
“Managing the persistent volatility of financial short-term flows requires an internationally coordinated policy response,” UNCTAD Secretary-General Mukhisa Kituyi said, not merely a financial correction with few serious consequences for the real economy. “With developing countries contributing over 60 per cent of global growth since 2011, the knock-on effects of recent emerging market difficulties could be widely felt.”
Overall, developing country growth is forecast to decline to around 4 per cent in 2015, continuing a slowdown that began in 2011 after what initially seemed to be a robust recovery from the crisis in 2008/09, when annual growth reached 7.8 per cent in 2010. That forecast, though, hangs on robust growth in the Asia region; downside risks could push the figures sharply lower in the final quarter of 2015.
For much of the last decade, many developing countries experienced strong growth and improving current accounts, accumulating considerable external reserve assets as a group. The promise of higher returns for investments in developing countries presented an attractive alternative to the low interest rates on offer in advanced economies for international investors.
These capital inflows, however, generated pressures for exchange rate appreciation. More open capital accounts also meant Governments had to conduct monetary and fiscal policy with an eye to the preferences of international finance. An estimated $2 trillion carry trade in emerging economy markets was “an accident waiting to happen”. A minor currency correction by Chinese authorities seems to have been the straw that broke the camel’s back.
Trade growth is also stalling, with the slowdown in most developing regions in 2014 expected to continue or accelerate this year. Commodity prices fell significantly during 2014 and the first half of 2015, extending their downward trend from peaks in 2011/12. The most dramatic fall was that of crude oil prices, but commodity groups whose demand is more closely linked to global economic activity experienced substantial decreases as well.
The resulting decline in the terms of trade for commodity exporters, coupled with increasing capital outflows, has severely weakened economic prospects for many developing countries, the report notes.
The associated depreciation in emerging market currencies does not, however, hold the promise of a recovery-inducing surge in exports. Instead, lower global prices are likely to result in more deflationary pressures than expanded trade given the ongoing weaknesses in global aggregate demand.
A monetary and fiscal policy mix aimed at better managing private capital flows, in particular those of an unstable or speculative nature, and their macroeconomic effects, would help developing countries to face the challenges and to enhance the gains made overall from integrating into global financial markets, the report argues. Measures at the national level, including the judicious use of capital controls and credit allocation policies, need to be supplemented by global measures that discourage the proliferation of speculative financial flows and provide more substantial mechanisms for credit support and shared reserve funds at the regional level. The recent financial turmoil has added urgency to adopting such measures.
Graph 1: Aggregate net capital flows and exchange rates
Highlights
The Trade and Development Report (TDR) 2015: Making the international financial architecture work for development reviews recent trends in the global economy and focuses on ways to reform the international financial architecture. It warns that with a tepid recovery in developed countries and headwinds in many developing and transition economies, the global crisis is not over, and the risk of a prolonged stagnation persists. The main constraint is insufficient global demand, combined with financial fragility and instability, and growing inequality.
These trends reveal the lack of a well-functioning international monetary and financial system, which should be able to properly regulate international liquidity, avoid large and lasting imbalances and allow for counter-cyclical policies; however, international liquidity and capital movements respond to economic conditions in developed countries rather than to actual needs in developing countries. Furthermore, much of the current regime is in fact driven by large international banks and financial intermediaries whose activities increased much more rapidly than the capacity of any public institution (either national or multilateral) to effectively regulate it. Recent initiatives aiming at better regulation remain too timid and narrow.
This dysfunctional regime can neither prevent boom-and-bust episodes nor recurrent debt crises; and when such crises occur, it leads to asymmetric adjustment that throws most of the burden on debtor countries and exacerbates a pro-cyclical bias. This calls for a mechanism for debt resolution, in particular for sovereign external debt, which minimizes the cost of crisis and shares it fairly among the different actors. Furthermore, inefficiencies and missing elements in the international financial architecture have had negative effects in the provision of long-term finance for development.
Against this background, TDR 2015 identifies some of the critical issues to be addressed in order to establish a more stable and inclusive international monetary and financial system which can support the development challenges over the coming years. It considers existing shortcomings, analyses emerging vulnerabilities and examines proposals and initiatives for reform.
In order to improve global growth and financial stability, and to realize the investment push required to fulfil the new development agenda, the systemic problems of the international financial architecture need to be addressed. Solutions are available, but they require dedicated action by the international community.
The main recommendations of the Report are:
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To avoid secular stagnation, developed countries need to combine monetary expansion with fiscal expansion and wage growth, and be mindful of the international spillovers that their policies can produce;
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To make the provision of official international liquidity more stable and predictable, multilateral reform remains the desirable target – in the meantime, developing countries may build on regional and interregional initiatives, set swap arrangements among Central Banks and reduce the need for reserve accumulation;
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A bolder regulatory agenda is needed. This should include strict separation of retail and investment banking, strong regulation of shadow banking as well as public oversight of credit rating agencies and their progressive substitution by more appropriate mechanisms for risk assessment;
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Developing countries should not be required to apply prudential rules which have been conceived for countries hosting internationally active banks as they result in credit rationing to sectors and agents that need support from a development perspective;
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A sovereign debt restructuring mechanism is urgently needed. This could be in the form of contractual improvements or internationally accepted principles to guide sovereign debt restructuring. However, the Report sees the best option in a statutory approach based on a multilateral treaty defining a set of rules for a debt restructuring that restores growth and debt sustainability;
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Specialized public institutions and mechanisms are crucial for the provision of long-term development finance, in particular development banks. The international community needs to meet its Official Development Assistance commitments and to tune it better to strengthening the productive economy.
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G20-OECD Global Forum on International Investment 2015: International investment policies in the evolving global economy
Report on the Global Forum on International Investment (GFII), 5 October 2015, Istanbul
Ministers and High Officials from more than ten G-20 and non-G20 countries, Heads of International Organizations, business leaders, academics and high-level representatives from labour and civil society participated in the G20-OECD Global Forum on International Investment (GFII).
The Forum took place at a critical juncture for the global economy, with the growth recovery lukewarm, trade and investment at half speed, and the social consequences of the crisis, including high income inequality, weighing down on the economic recovery. Investment – foreign direct investment in particular – still remain well below the levels prevailing before the global crisis, and the backlash of protectionism, including through new forms of ‘murky protectionism,’ is a real threat. These circumstances make it critically important to maintain open markets, and to make trade and investment work better together for the global recovery.
Against this background, the OECD Forum has provided a constructive exchange of views on evolving business realities and what they imply for policy-making, including in the G20 process. The Forum has revealed that the current regime for international investment does not allow to fully meet the challenges brought about by three realities:
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The scope for open trade and investment regimes, and the need to foster an investment climate that is conducive to development and recognizes new countries and actors in the investment landscape;
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The fragmentation of the international regime for investment, and the need to improve linkages with trade disciplines in mega-regionals and new-generation regional trade agreements (RTAs);
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The sharper inter-dependencies between trade, investment and services in global value chains (GVCs), and how these links must be better coordinated in policy-making.
Keeping markets open and fostering a favourable investment climate for development
Speakers recognized the scope for further elimination of investment barriers, particularly in services, and more broadly the need to promote a good investment climate for development. The OECD Policy Framework for Investment (PFI) was mentioned as useful in this regard. Participants also underscored the need to better identify, monitor, and assess the costs associated with murkier forms of protectionism.
A common thread in these discussions was the widespread recognition that investment needs to deliver for the well-being of people, and foster more inclusive productivity, as well as durable and sustainable forms of growth meeting high standards of responsible business conduct. The OECD Guidelines for Multinational Enterprises allow for a balanced approach meeting society expectations, and participants affirmed that their use should be encouraged, particularly in the process of shaping the post-2015 Development Agenda and achieving the Sustainable Development Goals. They also encouraged continued collaboration between OECD and other international organisations in helping developing countries implement investment reforms.
Promoting a coherent governance for the international investment regime
Despite the importance of international investment as a source of economic growth and employment, there is no overarching set of rules governing this subject matter. The discussions highlighted how the current fragmented governance of FDI contributed to the confusing landscape for governments and businesses. Bilateral and regional arrangements have continued to proliferate over the past decade to fill this void: the international investment regime consists of over 3,000 international investment agreements (IIAs), most of which are bilateral investment treaties (BITs). The growing trend in RTAs signed over the past decade to include comprehensive coverage of investment underlines the importance of developing trade and investment disciplines under a joint framework. Still, participants highlighted that there is more to do to strengthen internal coherence. The Forum welcomed the contribution of the OECD-hosted dialogue on international investment disciplines gathering all G20 members, developing countries, business, civil society and international organisations, on collecting and exchanging best practices.
Participants agreed that new disciplines in emerging in ‘mega-regionals’ and next-generation RTAs have advanced policy thinking and provided partial solutions to pertinent issues; they are improving the links between trade and investment, and a range of related regulatory disciplines. On the other hand, there were also concerns that the co-existence of different blocs may create loopholes, overlaps and contradictions across investment regimes, which can engender costs and distort efficient patterns of investment and trade. On balance, participants agreed that it is necessary to promote dialogue on WTO-plus measures that can provide inspiration on potential good practices for constructing more coherent and comprehensive global rules in the future.
Addressing inter-dependencies between trade and investment
Participants agreed that the sharper inter-dependencies between trade and investment in Global Value Chains may call for strengthened coordination in policy-making. The growing complexity in the trade-investment relationship emerges from the activities of multinational enterprises (MNEs), which account for a large share of world trade. Participants agreed that it was necessary to understand new business strategies of MNEs, including the changing trade and investment relationships between parent companies, subsidiaries and suppliers, including small and medium enterprises. When flows of not just goods (final and inputs), but also services, capital, management personnel, technology, and data cross borders, investors are subject to multiple risks that may be effectively attenuated with coordinated policy efforts. Although RTAs can continue to make strides in addressing some of these issues, the need for a more global and systematic approach was underlined.
Recognizing the importance of services competitiveness in supply chains, participants highlighted that great benefits could be reaped from various types of domestic reforms, particularly in backbone services such as telecoms, transport and logistics. Services are the cornerstone of GVCs, not only as inputs in the production process, but also in connecting different production segments. Manufacturing remains a core activity in GVCs, but is increasingly dependent on efficient services. There is also enormous potential in services value chains that remains untapped due partly to high levels of restrictions. Adequate reforms in key services markets are still not in place. Participants mentioned the OECD Services Trade Restrictiveness Index (STRI) as a key tool for prioritising and sequencing of such reforms, and strengthening the assessments of costs from remaining barriers. Participants also underscored the need to enhance participation of SMEs and LDIC in GVC to build a more inclusive and sustainable world economy. They welcome the report on this topic prepared by the OECD and the WB and encourage them to continue addressing these issues, with the view to develop a comprehensive policy analysis.
The way forward: enhance the dialogue on trade and investment in the G20
Ministers, High Officials and other participants concurred that enhanced G20 involvement in trade and investment matters is critical to address such challenges. There is an opportunity to build evidence, mutual understanding and consensus on the way forward to improve the international regime for trade and investment, the twin engines for reviving the world economy. The design and implementation of better policies and disciplines cannot happen in a vacuum. It will rather proceed from a more informed debate and systematic sharing of good practices. Finally, participants commended global efforts carried out under the outstanding chairmanship of Turkey to improve the policy environment for investment, infrastructure and long-term finance; and called on the OECD together with other international organisations to enhance its contribution on international investment and trade in 2016 under the leadership of China.
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Istanbul G20 Trade Ministers Meeting: Presentation of the OECD-WBG inclusive global value chains report
Presentation of the OECD-World Bank Group report, “Inclusive Global Value Chains: Policy options in trade and complementary areas for GVC integration by small and medium enterprises and low-income developing countries”, on 6 October 2015
Remarks by Angel Gurría, Secretary-General, OECD
Understanding global value chains is crucial to understanding trade and globalisation in today’s highly interconnected world, and to defining the policies that will help countries reap their full benefits in terms of growth and jobs.
I am honoured to be here today to present to you the findings of a new report prepared jointly by the OECD and the World Bank Group. Building on earlier reports that we have prepared under the Mexican, Russian and Australian G20 presidencies, this report goes deep into questions about how to strengthen the participation of small and medium sized enterprises and low-income developing countries in GVCs. I salute the wisdom and the commitment of Turkey in bringing these important issues into the limelight.
The foundation of our GVC analysis is our joint effort with the WTO to develop new trade statistics (TiVA) that identify the value added by each country along the value chain. We have just released a new version of the TiVA database, which extends coverage to 61 countries and 34 sectors. This new data shows that GVCs drive trade today, with 75% of global trade now comprised of intermediate inputs and capital goods and services. In addition, the data reveal that services are much more important in driving trade than we previously thought – over half of total trade is composed of value-added services in OECD countries, and 42% in China. These data reinforce earlier conclusions that imposing protectionist measures on imports is the trade policy equivalent of shooting yourself in the foot, causing costs of production to rise and damaging the competitiveness of exporting firms.
But not all countries, and not all firms, have had the same level of success integrating into GVCs:
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Although their participation has greatly expanded in the past two decades, low-income developing countries (LIDCs) are still hugely under-represented in GVCs – only about 11% of the total world gross exports in 2011 (up from 6% in 1995). In particular, SMEs in LIDCs tend to be concentrated in the agriculture sector, or remain in the informal economy, and so have particular difficulties.
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By the same token, SMEs, while representing the vast majority of firms in all countries, typically contribute less than half of exports. In fact, when SMEs do succeed in participating in GVCs, we are now learning that it is usually indirectly – that is, they supply firms that export, but do not export themselves. Our new TiVA database tells us that in 2009 for example, SMEs in the United States accounted for around one-third of direct US exports, but because they also sold to larger firms that export – and are thus engaged in indirect exporting – they actually accounted for closer to half of US value-added through exporting, supporting around 2 million jobs.
So what can the G20 do to help those firms, people, and countries to share in the benefits of GVCs in terms of growth, living standards, and jobs? As SMEs are relatively more impacted by the policy “eco-system” than larger companies - they have indeed less capacity to absorb policy deficiencies and shocks – their development requires a very coherent, and carefully crafted, enabling policy environment. As presented in the report delivered to you today, the OECD and the World Bank have put together a comprehensive action plan and defined priority policy actions that can be taken by G20 countries, either individually or collectively, covering trade and investment, along with a host of complementary capacity building efforts. Let me highlight a few areas for you now.
Open trade and investment policies should be at the centre of the policy choices: in particular, priority actions must be taken to implement and ratify the WTO Trade Facilitation Agreement, alongside investment in hard and soft infrastructure that would allow goods and services to flow more easily across borders. Let’s not forget that trade costs – such as red tape, regulatory complexity and opaque clearance processes - fall disproportionally on SMEs compared to MNEs. This is a “sine qua non” for SMEs, but also for LIDCs, to be able to break into GVCs. The latest analysis from the OECD, based on 2015 data across over 160 countries, shows that implementing measures agreed to in the TFA could reduce trade costs by between 12% and 17.5%. At the same time, if rules of origin in G20 countries were simplified, nuisance tariffs eliminated, and aid for trade initiatives directed to SMEs, we believe that big improvements would follow. Finally, there is also a lot that business can do to remove constraints and foster supplier diversity, focusing on efficiency of logistics, services delivery, and MNE-SME linkages.
We also recognise the need to work with SMEs to grow to scale and strengthen their capacity to meet the requirements of globalised supply chains. The ability of SMEs to swiftly adopt new technologies, to hire a skilled workforce and develop their human capital, to learn by doing, to innovate, and to optimize their production is constrained by their small scale, limiting their ability to engage with GVCs. To help young SMEs scale up quickly and better integrate in GVCs, it is important to lower barriers to the entry, growth, and exit of firms. Ensuring a level playing field for new SMEs is particularly important; in many countries, policies still favour incumbents over new firms, reducing the potential impact of these challengers on growth, productivity and exports.
It is also important to enhance SME access to external finance, a critical enabler of their participation in GVCs. The G20-OECD High Level Principles on SME Financing, to be delivered to leaders in November, recognise the need to strengthen and diversify sources of finance for SMEs, including trade finance, to allow SMEs to seize opportunities in global markets.
The G20 could also consider establishing an action plan for universal ICT and broadband connectivity that would empower SMEs to leverage the digital economy, which can be a low-cost way for firms to engage in trade and to become “micro-multinationals”. In Korea, for example, small firms derived almost 30% of their turnover from e-commerce in 2012. All of this may be possible through global platforms for sharing best practices and e-learning, involving both public and private sectors.
Finally, to address constraints by LIDCs in particular, we need to be better equipped to identify obstacles, take remedial actions, and evaluate the efficiency of policy measures. The TiVA database has made important strides in this respect, but coverage of LIDCs needs to be strengthened. Reinforced by complementary World Bank data resources, these tools could allow valuable and more targeted policy interventions designed to meet the specific needs of highly heterogeneous firms in countries with very different problems.
Ministers, colleagues – It has been my pleasure to present the main findings from this report. The OECD and World Bank have worked together to define a set of actions, which if taken, could vastly improve the inclusiveness of GVCs by giving LIDCs and SMEs the capacity to participate much more fully. Many of the actions proposed could be taken immediately. Some could be taken by G20 countries at their own initiative, while others require that G20 countries act together. I cannot stress enough the importance of private sector engagement; we have identified a whole series of actions that large multinational firms could undertake.
As discussed in our previous session, we are currently experiencing a slowdown in global trade. If trade – and more specifically, participation in global value chains – is to continue to create opportunities for growth and jobs, we must remove obstacles facing countries and firms that have not yet managed the process of GVC integration.
I would like to thank Turkey for the strong collaborative relationship of this past year. We look forward to continuing to work with the G20 to promote key elements of a comprehensive approach to strengthening trade and investment, which will take needed structural reforms forward, make services markets more competitive and efficient, and identify both implicit and explicit restrictions on cross-border trade and investment, with a view to removing them.
I thank you for your attention.
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ICC Banking Commission Global Survey highlights impact of trade finance gap on SMEs
The International Chamber of Commerce (ICC) Banking Commission has released the results from its 2015 Global Survey on trade finance – highlighting the impact of the trade finance gap on SMEs, the impact of regulation on correspondent banking, as well as positive trade finance trends, particularly with regards to export finance.
Small and Medium-sized Enterprises (SMEs) are among the hardest-hit by the trade finance gap, reports the Global Survey on trade finance, released on 29 September 2015 by the International Chamber of Commerce (ICC) Banking Commission. The Survey received 482 responses from 112 countries around the world and showed that SMEs account for nearly 53% of all rejected trade finance transactions. By contrast, 79% of the trade finance transactions for larger corporates are accepted.
Certainly, the trade finance gap is highlighted throughout the Survey – citing compliance as a chief barrier to trade finance. Nearly 46% of the banks surveyed terminated correspondent relationships due to the cost or complexity of compliance, while 70% of respondents reported declining transactions due to AML/KYC requirements. Furthermore, the percentage of respondents citing anti-financial crimes compliance requirements as a significant impediment to trade finance has increased from 69% last year, to 80% in this year’s Survey. This trend is expected to continue, as nearly all (93%) of respondents expect compliance requirements to increase during 2015.
“The Global Survey works as a snapshot of market trends – allowing us to compare progress from previous years and gauge global expectations,” said Vincent O’Brien, Chair of the ICC Banking Commission Market Intelligence. “This year that snapshot has highlighted the severity of the trade finance gap – which continues to be impacted by regulation, despite the low-risk nature of trade finance – and particularly its impact on SMEs. This is crucial given SMEs constitute over 95% of all firms and account for approximately 60% of employment worldwide.”
That said, the results from the Survey also show some positive trends in trade finance. Around 63% of respondents reported an increase in overall trade finance activity, with 61% of banks stating they have increased their capacity to meet trade finance. What’s more, 25% of respondents to the Global Survey on trade finance consider trade instruments supporting trade as involving more than 75% less inherent risk than conventional lending.
The results from the Global Survey also reflected positively on export finance, with 79% of respondents in the industry claiming it remains a profitable business. The industry also observed a significant decrease in pricing, and even more so, fees in 2014.
“While the trade finance industry is certainly facing challenges, and the trade finance gap is a clear issue, the results from the Global Survey on trade finance show that it is not all doom and gloom,” added O’Brien. “The financial landscape is recognizing the importance of trade and, in addition to banks stating they have increased capacity to meet trade finance, we have an array of alternative lenders – such as specialist financiers, export credit agencies, and multilateral development banks – stepping up to fill the trade finance gap.”
Daniel Schmand, Chair, ICC Banking Commission said: “New players can prove their worth by addressing the shortfall of trade finance; new or alternative financiers may support trade in areas where banks are restricted by risk appetites, regulatory burdens or stakeholder concerns.”
» Download: ICC Global Trade and Finance Survey 2015 (PDF, 10.13 MB)
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CAR: Companies must not profit from blood diamonds
The Central African Republic’s (CAR) biggest traders have purchased diamonds worth several million dollars without adequately investigating whether they financed armed groups responsible for summary executions, rape, enforced disappearances and widespread looting, Amnesty International said in a report published on 30 September 2015.
The report, Chains of Abuse: The global diamond supply chain and the case of the Central African Republic, documents several other abuses in the diamond sector, including child labour and tax abuse.
CAR’s diamond companies could soon start exporting diamonds stockpiled during the on-going conflict in which 5,000 have died. An export ban in place since May 2013 will be partially lifted once the government meets conditions set in July 2015 by the Kimberley Process, which is responsible for preventing the international trade in blood diamonds. Before the conflict, diamonds represented half the country’s exports.
“If companies have bought blood diamonds, they must not be allowed to profit from them,” said Lucy Graham, Legal Adviser in Amnesty International’s Business and Human Rights Team.
“The government should confiscate any blood diamonds, sell them and use the money for the public benefit. The people of CAR have a right to profit from their own natural resources. As the country seeks to rebuild, it needs its diamonds to be a blessing, not a curse.”
Based on interviews with miners and traders, the report details how armed groups – the Christian or animist anti-balaka and predominantly Muslim Séléka – both profit from the diamond trade by controlling mine sites and “taxing” or extorting “protection” money from miners and traders.
It also documents the inspection gaps in diamond trading centres that make it possible for blood diamonds to be traded and sold globally.
Diamond trader fails to prove due diligence
There is a high risk that the country’s biggest buyer of diamonds during the conflict, Sodiam, which has amassed a 60,000 carat diamond stockpile worth US$7 million, has purchased and is still purchasing diamonds that have financed the anti-balaka, the report said.
The UN has already black-listed second-biggest trader, Badica, and its Belgian sister company, Kardiam, for buying and smuggling diamonds from Seleka-controlled areas in the east of CAR.
In May 2015, a Sodiam representative in Carnot confirmed to Amnesty International that the company has been buying diamonds in the west of CAR despite the conflict, and keeping them until they can be exported.
The report documents the significant involvement of the anti-balaka in the diamond trade in the west of CAR. Traders who Amnesty International spoke to in that area were aware of the anti-balaka’s involvement, but none appeared to actively screen out diamonds that may have funded the armed group. One of these traders, who said it was too dangerous for security reasons to visit mine sites, showed Amnesty International receipts for sales to Sodiam. Other traders who sold to Sodiam made similar admissions to the UN.
Sodiam denies ever buying conflict diamonds. The company says that it does not buy diamonds from mines controlled by rebel groups or traders known to associate with them, but Amnesty International challenges their due diligence processes.
Amnesty International wants the CAR government to confiscate diamonds unless Sodiam and other exporting companies can prove they have not financed armed groups. Seized diamonds should be sold and the money used in the public interest.
International diamond companies must address Kimberley Process failure
The report – which looks at several countries in the diamond supply chain, from CAR to Belgium and the United Arab Emirates – also details human rights abuses, smuggling and tax dodging throughout the diamond supply chain.
With the diamond industry due to gather at the Jewellery Industry Summit in March 2016 to discuss responsible sourcing, Amnesty
International is challenging governments and international diamond companies like de Beers and Signet to support stronger regulation of the sector. Diamond companies should be investigating their supply chains for human rights abuses, conflict and other illegal or unethical practices, and disclosing the steps taken.
“International diamond companies need to look closely at the abuses along their supply chain, from child labour to tax abuse. By focusing only on conflict diamonds, the Kimberley Process camouflages all the other human rights abuses and unscrupulous practices associated with diamonds,” said Lucy Graham.
“This is a wake-up call for the diamond sector. States and companies can no longer use the Kimberley Process as a fig leaf to reassure consumers that their diamonds are ethically sourced.”
» Download: Chains of Abuse: The global diamond supply chain and the case of the Central African Republic (PDF, 7.25 MB)
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G20 urges reforms for global trade growth
G20 trade ministers on Tuesday agreed to pursue deeper and wider reforms to ensure trade growth as it grew less than the global economy for the first time in the last four decades.
“Only through a comprehensive and international trade system, this trend could be reversed and trade growth could be revived,” the ministers said in a press release issued at the conclusion of a two-day meeting in Istanbul.
Chinese Minister of Commerce Gao Hucheng stressed that China, as a country with a significant trade volume in terms of products and valuable export and import figures, is ready to contribute to the global trade growth.
“In 2016, during China’s G20 presidency, the trade growth and investment will be on top of the agenda and China is ready for cooperation to develop a comprehensive, international trade system,” Gao said at a joint press conference with Turkish Economy Minister Nihat Zeybekci.
Zeybekci also urged G20 countries to reverse the slow pace of global trade growth through implementing policies that fit the needs of the system.
“Our economies should be supported by real sector (production, growth and job creation) instead of fictional factors with inflated values, mostly based on consumption,” said Zeybekci.
Talking about the trade accord reached on Monday between 12 Pacific Rim nations, which is known as the Trans-Pacific Partnership, the Turkish and Chinese ministers spoke of cooperation through regional integrations and creation of institutional structures as means to boost the global trade.
Gao noted that when they meet in the Philippines in November, the APEC members will have a full discussion about the roadmap on a free trade area of the Asia-Pacific, a process initiated in Beijing last year.
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Security bill spat: SA-US relations at risk
South Africa is in danger of being sidelined for project funding by the International Monetary Fund (IMF) and the World Bank as the US lobbies to scrap the controversial Private Security Industry Regulation Amendment Bill.
Yesterday, the US trade mission threatened to withdraw its support for South Africa’s funding applications for infrastructure development projects if certain clauses in the bill were not reviewed, and once more placed the Africa Growth and Opportunity Act (Agoa) on the back foot.
Costa Diavastos, an executive director of the Security Industry Alliance, which is spearheading the lobbying against the cession of the 51 percent stake of foreign-owned security firms to locals, said US trade officials had given an undertaking that they would revoke their support for South Africa’s loans if the amendment came through.
“US trade officials are on record saying they would not support our IMF and World Bank applications for funding,” Diavastos said at the presentation of the SA Chamber of Commerce and Industry business confidence index for September, at which the impact of the proposed bill was discussed.
In 2010, the US support proved vital to South Africa securing a $3.75 billion (R50.775bn) loan for the Medupi coal-fired power station.
But now US officials have warned that if the clause was not removed, the US government would see it as an expropriation of US property, a move that would automatically disqualify South Africa from continued participation in Agoa.
Heidi Ramsay, the deputy spokeswoman for the US embassy in Pretoria, said the US’s concerns were that the requirement would force US security firms to sell off their ownership at what would likely end up being fire-sale prices, which could effectively result in an uncompensated expropriation.
Already, South Africa is treading on very thin ice as it pushes for the lifting of the conditional access to Agoa and the restoration of full benefits.
The country missed the end of September deadline as US authorities hardened their attitudes and demanded further concessions on the bill.
Diavastos said the private security sector had invested about R4.5bn into the economy over the past eight years through mergers and acquisitions and acquisition of firms locally. He said it was an R50bn-a-year industry, employing roughly over 500 000 people.
Gordon Institute of Business Science economist Roelf Botha said the security legislation could knock R133.4bn off South Africa’s gross domestic product, R52bn off tax revenue and cost about 850 000 formal and informal jobs. Those would be the effects of the act discouraging foreign investment, losing South Africa’s duty-free access to the lucrative US market through Agoa and likely provoking trade retaliation from US and European countries.
Botha said the American Chamber of Commerce in South Africa, which represents 250 American companies in South Africa, 60 of which are Fortune 500 firms, said reasons given by the government that foreign-owned security companies were a threat to South Africa’s national security were absurd.
“There is a law in South Africa, PSIRA Act 56 of 2001, that requires that management of foreign-owned security companies are South Africans; foreign-owned security companies are registered South African companies; the security companies employ almost 100 percent South Africans and they make up less than 10 percent of the security industry in South Africa,” he said.
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WTO agrees membership terms for Liberia, paving way for formal decision in Nairobi
WTO members negotiating Liberia’s accession agreed by consensus, ad referendum, on the terms of the country’s WTO membership on 6 October 2015, paving the way for the eighth least-developed country to join the organization since 1995. Liberia’s membership terms will be presented to the 10th Ministerial Conference in Nairobi, 15-18 December, for a formal decision by ministers.
Out of the original 48 least-developed countries (LDCs) on the United Nations list, 34 are WTO members, of which seven have negotiated their membership terms since 1995. Seven more LDCs are negotiating to join the WTO. They are Afghanistan, Bhutan, Comoros, Equatorial Guinea, Ethiopia, Sao Tomé & Principe, and Sudan.
WTO Director-General Roberto Azevêdo said:
“I warmly welcome this news which promises to bring a timely boost to Liberia’s economic development. I congratulate the Government of Liberia on this achievement and praise the leadership of President Ellen Johnson Sirleaf. I very much look forward to finalising Liberia’s membership at the WTO Ministerial Conference in Nairobi this December. Helping least-developed countries to trade is a vital part of the WTO’s work and is a priority for me as Director-General.”
Speaking at the Working Party meeting on 6 October, H.E. Mr Axel Addy, Minister for Commerce and Industry of the Republic of Liberia, said:
“We believe in the multilateral trading system and the power of trade to contribute to poverty reduction in our country. My dream is that the work we have done here will pave the way for a better Liberia for all of us and our children so they too can exercise their potential.”
Working Party Chairperson H.E. Joakim Reiter said:
“Liberia’s WTO accession is a strong, positive and clear signal of its commitment to engaging with the global economy in the framework of the rules-based trading system. The conclusion of this least-developed country accession is a critical win-win for LDCs, Africa and the WTO.”
Liberia’s Accession Package will now be put to the Nairobi Ministerial Conference on 15-18 December for formal adoption.
Find out more about Liberia’s WTO accession negotiations.
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OECD report: Global action plan launched against MNCs avoiding tax
G20 nations announce action plan to fix gaps between tax systems in various countries
In a bid to put an end to tax avoidance by multinational companies, a global action plan was announced in Paris on Monday. Developed over the last three years by the Organisation of Economic Cooperation and Development (OECD) at the behest of G20 nations, the Base Erosion and Profit Shifting (BEPS) project, has brought together 60 countries, including India.
BEPS has become a serious problem as gaps between tax systems in different countries are exploited by multinational enterprises to make profits ‘disappear’ or shift to low tax jurisdictions and tax havens. Tax planning has turned into core business for many companies and practices such as transfer pricing are catered to by an entire industry. Globalisation and digital economy exacerbate this problem and international tax rules designed to prevent double taxations have ended up facilitating double non-taxation as well. BEPS lead to annual national revenue losses from 4-10 per cent of global corporate income tax revenues, i.e., $100-240 billion annually, according to a research conducted by OECD since 2013.
These new measures intend taxing enterprises “where economic activities take place and where value is created.” Model provisions have been developed to prevent treaty abuse, including through treaty shopping for which a number of countries work like hubs. Transfer pricing rules have been reinforced, according to the OECD.
This set of 15 measures will be introduced for the renovation of international tax standards and will be presented to and are likely to be adopted by the G20 Finance Ministers on the October 8 in Lima. The instrument will be open for signature to all interested countries in 2016 for information exchange to start from 2017-18. According to OECD, there is large scale consensus for these treaties.
MNEs such as Amazon and Starbucks have announced tax policy shifts to fall in line with BEPS. It’s being hailed as “the most significant rewrite of the international tax rules in a century”. But critics say BEPS will fail to reach the stated objective of ensuring that multinational corporations pay their taxes ‘where economic activities take place and value is created’.
BEPS AT A GLANCE |
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“There will be some amount of strengthened cooperation and more information about what’s going on for tax administrations in OECD and G20 countries,” Tove Ryding of Eurodad, a network of 46 NGOs from 20 European countries, told Businesss Standard. “But this action plan doesn’t abolish patent boxes, in fact, it legitimises their use; there’s no agreement on the use of the profit-split method; transfer pricing guidelines are turning more and more complex and the outcome on country by country report is weak,” said Ryding. He feels the lack of clarity in rules is likely lead to an increase in conflicts between tax administrations and multinational corporations. India had earlier said mandatory binding arbitration to resolve tax treaties disputes will impinge on its sovereign rights.
Experts groups say the rich country group OECD is not the appropriate body to set tax cooperation rules and a new global body which offers equal representation should be formed.
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tralac’s Daily News selection: 6 October 2015
The selection: Tuesday, 6 October
World Bank/IMF 2015 Annual Meetings: A guide to webcast events, Event: State of the Africa region, AfDB delegation to strengthen alliances at 2015 Annual Meetings
Africa’s Pulse: October 2015 (World Bank)
The 2015 forecast remains below the robust 6.5% growth in GDP which the region sustained in 2003-2008, and drags below the 4.5% growth following the global financial crisis in 2009-2014. Overall, growth in the region is projected to pick up to 4.4% in 2016, and further strengthen to 4.8% in 2017. Africa’s Pulse notes that overall decline in growth in the region is nuanced and the factors hampering growth vary among countries. In the region’s commodity exporters - especially oil-producers such as Angola, Republic of Congo, Equatorial Guinea, and Nigeria, as well as producers of minerals and metals such as Botswana and Mauritania, the drop in prices is negatively affecting growth. In Ghana, South Africa, and Zambia, domestic factors such as electricity supply constraints are further stemming growth. In Burundi and South Sudan threats from political instability and social tensions are taking an economic and social toll. [Download]
Companion, regional perspectives from the World Bank: South Asia Economic Focus, East Asia Pacific Economic Update, Jobs, wages, and the Latin American slowdown
Sub-Sahara Africa gets over $7.4bn of financing from World Bank (GBN)
Ibrahim Index 2015: Banks and customs procedures indicators
The indicators that are contributing the most to declines in Public Management and Rural Sector are Ratio of External Debt Service to Exports (-3.4) and Agricultural Policy Costs (-5.7) respectively. However Business Environment has shown the most concerning trend, exhibiting the most deteriorated score of any sub-category in the IIAG since 2011 (-2.5), having shown a year-on-year deterioration for four consecutive years. This trend has been largely driven by the two most deteriorated indicators in the IIAG, at the African average level: Soundness of Banks (-11.0) and Customs Procedures (-9.0). These are both concerning. Reliable financial institutions are the foundation of any growing economy – if people are losing trust in African banks, then sustainable economic growth is more remote than ever. Efficient customs, meanwhile, is absolutely essential for trade across African borders. The African Union thinks intra-African trade is fundamental to Africa’s economic future, and it’s not a good sign that, despite the continental body’s efforts, customs procedures are getting worse instead of better. [Various downloads available]
Nairobi MC10: submission by the G-33 (WTO)
We, the G-33 members, strongly renew the long-standing calls for global trade reforms that address inequities and imbalances in the Uruguay Round Agreement on Agriculture so that all WTO Members would be governed by a multilateral trading system under the WTO which is not only open, transparent, and market-oriented but also, more importantly, development-oriented, fair and provides a level playing field.
Amid uncertain outlook for farm talks, WTO members consider the 'Nairobi Package' (WTO)
Ambassador Vitalis gave a detailed account of the status of the four inter-related elements of the agricultural negotiations. These are: 1) domestic support; 2) market access; 3) export competition; and 4) cotton. He also updated members on the separate talks regarding public stockholding for food security purposes. He reported “a very serious situation” in both the domestic support and market access pillars of the agricultural negotiations. “In fact, in my summing up of both discussions I drew the obvious conclusion: that the failure to find convergence in domestic support and market access has wider implications and these are not positive”.
Kenya's @AMB_A_Mohammed yesterday tweeted a series of comments following her meeting with G7 trade ministers: view her TL
The African Union Commission and its technical office, IBAR, have supported the training to improve the quality and effectiveness of participation of African member States in the activities of the WTO SPS Committee. The specific training objectives were to:
Trans-Pacific Partnership - selected updates: Technical summary of the agreement (DFAIT Canada), Obama finally gets the TPP, a massive trade deal covering 40 percent of the world’s economy (Foreign Policy), In Pacific trade deal, Australia gets bigger US sugar allocation (Reuters), DG Azevêdo congratulates TPP ministers (WTO), China expresses hesitant support for the Trans-Pacific Partnership (TIME)
African Grain Trade Summit concludes with clear commitments towards structured grain trade (EAC)
The summit ended with recommendations from the delegates who fronted for a private sector-led Action Group that would champion the identification of key issues and to drive policy engagement with governments to ensure the grain sector thrives. Regional harmonization of trade policies among countries and among regional economic blocs, was supported unanimously by the delegates. The Eastern Africa Grain Council was tasked to drive the regional trade harmonization agenda, including policies on Warehouse Receipting Systems, Post-harvest Management, storage systems and technologies that support regional trade. The summit also brought together, for the very first time, the Eastern Africa Grain Council, the Southern Africa Grain Network and the West Africa Grain network, where it was agreed on the need of collaboration on Marketing Information and Capacity Building. The delegates further agreed to the formation of the African Grain Council (AGC).
Policy, not technical challenges, is the real hurdle for smallholder farmers, says civil society (UNCTAD)
The SADC Renewable Energy and Energy Efficiency Status Report (REN21)
The Southern African Development Community is one of the oldest regional economic communities on the African continent. The region is now becoming a key player in the international trend towards development of renewable energy resources and energy efficiency. However regional challenges persist particularly around energy access, health and environment, energy security, infrastructure and financing. The SADC Renewable Energy and Energy Efficiency Status Report provides an comprehensive overview of where the opportunities and challenges lie for meeting the region’s need for accessible, clean and sustainable energy. As with other REN21 reports, it is for policymakers, industry, investors and civil society to make informed decisions with regards to the diffusion of renewable energy. By design, it does not provide analysis or forecast.
Synergising and optimising mineral infrastructure in regional development strategies (E15 Initiative)
The purpose of this paper is to explore the potential of mineral infrastructures as “anchors” for economic development and cross-border cooperation. It proposes some policy recommendations to make better use of existing frameworks to foster the utilisation of mineral infrastructures. It also points out that in some cases, rules may not be the most appropriate way to stimulate broader economic development out of resource infrastructures. Sometimes incentives and strategic partnerships are more efficient and effective ways to realise certain objectives. [The author: Isabelle Ramdoo]
EAC seeks 'common borders' for education (New Times)
The East African Community is looking into the adoption of a common education protocol to ease movement of learners and teachers within the region. Regional experts behind the plan say the creation of a common EAC Higher Education Area (EACHEA) implies that qualifications will be appropriately recognised in all partner states both for continuation of studies as well as in the labour market. When the EAC is declared as an EACHEA in November, according to Prof. Mayunga Nkunya, the executive secretary of the Inter-University Council for East Africa, the most important development will be the elimination of the disparity in the national education systems. “And I must say that we are the first region in Africa to have devised this kind of system. Once operational, all these challenges which we are seeing in movement of students from one partner state to another will end.”
Zimbabwe: Exports to SA down 37% (The Herald)
According to the latest trade data from ZimStat, Zimbabwe exports to its neighbour were down 37,3% to $86,3m in August from $137,6m, while imports from South Africa climbed 5,4% from $189,3m to $199,6m. The weakening rand has made imports from South Africa land much cheaper in Zimbabwe. This is despite the policy measures, meant to curb imports, introduced by Government at the Mid Term Fiscal Policy Review. Zimbabwe’s trade deficit for August stood at $316,2 million from $291,4m recorded in July this year. This represents an increase of 8,5% from the July figures. Overall Zimbabwe’s trade deficit for the year to August 2015 now stands at $2,02bn reflecting the over dependency on imports and the decline in exports as the local economy continues to be hamstrung by capacity constraints and lack of competitiveness. [Zimtrade to tackle trade facilitation issues (The Herald)]
Swaziland: IMF completes 2015 Article IV Mission (IMF)
The mission encourages the authorities to step up efforts to raise the country’s potential for inclusive growth in order to address social and economic challenges. To this end, the mission recognized that the loss of AGOA eligibility raises the importance of enhancing economic diversification and competitiveness. To this end, the mission highlights the importance of fast-tracking policy efforts in multiple areas to promote export diversification (through private sector development), enhance access to financing, and improve the business climate.
Uganda: IMF staff completes review mission (IMF)
Rwanda: Ministry of Trade and Industry improves export base (New Times)
Côte d’Ivoire: Support to industrial competitiveness enhancement project (AfDB)
Regional Oversight Mechanism for DRC and the Great Lake Region: update (SADC)
HPCL seeks Mozambique gas for Gujarat LNG terminal (LiveMint)
Global Forum on Competition: Does competition kill or create jobs? Contribution from CUTS
Given the above, the international competition fraternity and indeed national policymakers need to explore ways in which fair markets influence jobs – especially in the developing world. As an advocate of competition reforms across the developing regions of the world, CUTS presents its views on the linkage between competition and employment, under the following three heads especially relevant for developing countries like India:
Competition policy within the context of Free Trade Agreements (E15 Initiative)
OECD/G20 BEPS Project for discussion at G20 Finance Ministers meeting (OECD)
The OECD presented the final package of measures for a comprehensive, coherent and co-ordinated reform of the international tax rules to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru. The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to ‘disappear’ or be artificially shifted to low/no tax environments, where little or no economic activity takes place. Revenue losses from BEPS are conservatively estimated at USD 100-240bn annually, or anywhere from 4-10% of global corporate income tax revenues. Given developing countries’ greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant.
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Reaffirming development: MC10 Nairobi and Post MC10 Nairobi – Submission by the G-33
We, the G-33 members, strongly renew the long-standing calls for global trade reforms that address inequities and imbalances in the Uruguay Round Agreement on Agriculture (AOA) so that all WTO Members would be governed by a multilateral trading system (MTS) under the WTO which is not only open, transparent, and market-oriented but also, more importantly, development-oriented, fair and provides a level playing field.
Developed Members have expansive flexibilities in the AOA which make their farmers and exporters artificially competitive. These flexibilities include, amongst others, huge and high ceilings in trade-distorting subsidies in both production and exports; non-transparent and complex TRQ and tariff systems including tariff peaks and escalations; as well as the highest entitlements to the special safeguard provisions (SSG). Considering these flexibilities, developing Members’ tariffs have not been able to match these wide-ranging flexibilities enjoyed by developed Members and increase their levels of competitiveness and the capacity needed to compete in a market of fair competition.
In order to continue the fundamental reform in agriculture and to address the inequities and imbalances, our Ministers in the Uruguay Round inscribed the “built-in” agenda under Article 20 of the AOA. The agenda has been carried through and further reinforced by the Doha Development Agenda (DDA) in 2001 (WT/MIN(01)/DEC/1) which puts “development” and special and differential treatment (S&DT) for developing Members at its core.
The objectives enshrined in the DDA can only be achieved once all the elements of the agriculture negotiations have a comprehensive and development-oriented outcome. Until the same is achieved we firmly believe that the negotiations must continue towards and after the 10th Ministerial Conference (MC10) Nairobi, building on the various Ministerial decisions/declarations and the development framework we have agreed to date since 2001.
The Group is willing to engage constructively and contribute to a credible and balanced outcome, which withstands the test of development at MC10 Nairobi and beyond.
As part of the balancing and S&DT instruments, the G-33 has long been calling for meaningful Special Products (SP) and an accessible and effective Special Safeguard Mechanism (SSM). These tools are needed for sustaining investments in agriculture for food security, livelihood security and rural development, as well as addressing the destabilizing and crippling effects of import surges and downward price swings in the increasingly volatile global agricultural markets largely due to huge subsidies in productions and exports by the developed Members.
Also the Group firmly believes that there should be a permanent solution on public stockholding for food security purposes as mandated.
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Ibrahim Index 2015: ‘Governance progress in Africa is stalling’
How well is your country governed? This is the question the Ibrahim Index of African Governance seeks to answer. This year’s results are bad news for the continent as a whole, and South Africa specifically. But what’s going right in Zimbabwe?
Sudanese billionaire Mo Ibrahim believes most of Africa’s problems are rooted in poor governance, and there are few who would disagree with him. He also believes that governance can and should be measured, accurately and objectively, and that critiques and policy should be based on numbers rather than conjecture. To this end, he created the Ibrahim Index of African Governance (IIAG), which is now in its ninth iteration.
The 2015 edition – which includes South Sudan for the first time, as there is now enough data for Africa’s newest country – reveals a continent in governance limbo, with no overall improvement or decline. This headline statistic masks plenty of activity at country and category level, however – some of it surprising. We’ve trawled through the data to find the most interesting trends.
African governance is stagnating
This is the major takeaway from this year’s results. “The results of the 2015 IIAG reveal that overall governance progress in Africa is stalling. Improvements in (index categories) Participation & Human Rights and in Human Development are outweighed by deteriorations in Safety & Rule of Law and Sustainable Economic Opportunity,” said Ibrahim.
Should we be concerned? Absolutely. The Mo Ibrahim Foundation is desperate not to reinforce negative stereotypes of Africa, which makes this a particularly painful admission – there are few stereotypes more prevalent than that of poor African leadership, and this data will prove many an Afro-pessimist’s point.
Which is why Ibrahim is at pains to stress that this overall trend does not tell the whole story. “Africa is not a country. The scores and trends seen in the 54 individual countries on the continent are diverse, each showing specific patterns in their own right, along a wide range of results, with more than a 70-point gap between the top-ranking country, Mauritius, and the bottom-ranking country, Somalia,” he said.
The star performers
Over the last four years, only six countries improved across all four Ibrahim Index categories. These star performers are: Cote D’Ivoire, Morocco, Rwanda, Senegal, Somalia and Zimbabwe. An interesting mix which includes democracies, dictatorships, a monarchy and a conflict zone – in other words, no matter what the ideologues may tell you, there are several different formulas for better governance in Africa.
Côte d'Ivoire deserves a special mention, showing by far the greatest overall improvement. Credit for this must go to President Alassane Ouattara’s government, who have done a decent job of imposing stability following the 2010-2011 political crisis.
What’s going right in Zimbabwe?
It’s hard to ignore Zimbabwe’s presence in the top six improvers. In fact, it has shown the second largest overall governance improvement since 2011 – an uncomfortable statistic for President Robert Mugabe’s many critics, and one which will no doubt be trumpeted on the front page of The Herald come Tuesday morning.
Drill down a little further, and the data is even more puzzling. Zimbabwe’s biggest category-level improvement came in Participation & Human Rights, with strong showings in the sub-categories of Rights and Gender. The country also did well in National Security, Personal Safety, Public Management and Infrastructure, Welfare and Health (it helps, of course, that the country is coming from such a low base).
For the Mo Ibrahim Foundation, results like these are potentially embarrassing, but also demonstrate the utility of the Ibrahim Index: like it or not, some things have improved in Zimbabwe over the last few years, probably as a result of increased political stability, and here are the numbers to prove it.
South Africa papers over the cracks
South Africa is the fourth-best-governed country in Africa, behind only Mauritius, Cape Verde and Botswana. The good news is that we’ve maintained that position for years, and are even showing small signs of overall improvement (up 0.9 points since 2011, although this is well within the margin of error).
But the devil is in the details. Our high ranking conceals some concerning trends at sub-category level, in particular our exceptionally poor performance in Personal Safety and National Security. For its citizens, South Africa is still an unacceptably dangerous country.
More surprising is the deterioration in the Participation & Human Rights category, driven by declines in the Gender and Rights sub-categories. Specific indicators showing significant declines include Freedom of Association & Assembly, Freedom of Expression, and Legislation on Violence Against Women.
While these have yet to affect South Africa’s overall governance performance, it’s clear that these declines are the canaries in the coal mine – and should provide further evidence, if any was needed, that all is not well in the Rainbow Nation.
Banks and customs
Across the Ibrahim Index’s 93 indicators, the two showing the biggest decline over the last four years are Soundness of Banks (-11 points) and Customs Procedures (-9 points). These are both concerning.
Reliable financial institutions are the foundation of any growing economy – if people are losing trust in African banks, then sustainable economic growth is more remote than ever. Efficient customs, meanwhile, is absolutely essential for trade across African borders. The African Union thinks intra-African trade is fundamental to Africa’s economic future, and it’s not a good sign that, despite the continental body’s efforts, customs procedures are getting worse instead of better.
The biggest losers
No surprises that the biggest declines in governance in the last few years come from war zones. South Sudan, the Central African Republic and Mali fare particularly poorly. The lesson here is crushingly obvious, but is worth repeating anyway: conflict remains the biggest impediment to good governance in Africa.
Foreword
The 2015 Ibrahim Index of African Governance (IIAG) is the 9th iteration since we launched in 2007. The IIAG has been refined and strengthened each year since then under the guidance of the Board of the Foundation, the IIAG Advisory Council, and our friends and partners, to all of whom I wish to extend our thanks and gratitude.
The results of the 2015 IIAG reveal that overall governance progress in Africa is stalling. Improvements in Participation & Human Rights and in Human Development are outweighed by deteriorations in Safety & Rule of Law and Sustainable Economic Opportunity. Over the last four years, only six countries out of 54 were able to achieve progress in all four components of the Index. If we drill down a little further, to sub-category level, gains achieved in Participation, Infrastructure or Health are of course heartening, but the drops registered by National Security, Rural Sector, and, most of all, Business Environment, are cause for concern.
However, Africa is not a country. The scores and trends seen in the 54 individual countries on the continent are diverse, each showing specific patterns in their own right, along a wide range of results, with more than a 70 point gap between the top ranking country, Mauritius, and the bottom ranking country, Somalia. The 2015 IIAG results also point to a shifting landscape. Over the last four years, half of the top ten performing countries have registered a decline of their governance performance. Meanwhile, half of the ten largest improvers over this period include countries which already rank in the upper rungs of the Index, and may well be potential powerhouses.
2015 is a milestone year for Africa. The future African landscape will be defined by the new Sustainable Development Goals, which are meant to guide us for the next 15 years, and the decisions that will come out of COP21. What is crucial is that the complexity of Africa is appreciated within these discussions, that the decisions made are based on data and sound information and that their implementation will be closely monitored according to results.
In that context, my hope is that this Index can be a useful tool.
Key findings of the IIAG 2015 include:
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The African average score for overall governance in 2014 is 50.1, a slight improvement since 2011 (+0.2). Over the last four years, only half of the top ten governance performers managed to improve their overall governance score, and 21 of the 54 countries have deteriorated.
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The Sustainable Economic Opportunity category exhibits both the lowest continental average score (43.2) and the largest performance drop since 2011 (-0.7). Sustainable Economic Opportunity includes the most deteriorated sub-category in the IIAG since 2011, Business Environment (-2.5). This sub-category includes the most deteriorated indicator in the IIAG over this time period, Soundness of Banks (-11.0).
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Among the generally negative trend of the Sustainable Economic Opportunity category, four countries, Morocco (+11.2), Togo (+9.5), Kenya (+5.9) and Democratic Republic of Congo (+5.4), exhibit impressive gains of more than +5.0 points.
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The overall governance score range between the best regional performer, Southern Africa, and the poorest regional performer, Central Africa, is more than 18.1 points in 2014. This has widened by +1.7 points since 2011.
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With a 79.9 score for overall governance in 2014, Mauritius stands over 70 points higher than the continent’s weakest governance performer, Somalia, which achieved a score of 8.5.
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The top three countries, Mauritius, Cabo Verde and Botswana, all exhibit a decline in overall governance and in at least two of the four components over the last four years, calling into question whether these countries will continue to dominate the top of the rankings in future.
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The bottom three countries in overall governance are Central African Republic (24.9), South Sudan (19.9) and Somalia (8.5). Two of these, South Sudan (-9.6) and Central African Republic (-8.4), have also registered the most extreme deteriorations, along with Mali (-8.1).
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The top ten improvers in overall governance over the last four years represent almost a quarter of the continent’s population. Five of these countries, Senegal (9th), Kenya (14th), Morocco (16th) Rwanda (11th) and Tunisia (8th), already rank in the top 20 of the IIAG, leading to the question of whether they might become the continent’s next powerhouses.
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Amid uncertain outlook for farm talks, WTO members consider the “Nairobi Package”
The Chair of the agriculture negotiations, Ambassador Vangelis Vitalis of New Zealand, updated WTO members on the current state of the negotiations on 2 October at a meeting open to all members. “Unfortunately, the areas of divergence remain and our challenge is to see what is still possible to narrow the gaps and precisely where,” he told members.
Ambassador Vitalis gave a detailed account of the status of the four inter-related elements of the agricultural negotiations. These are: 1) domestic support; 2) market access; 3) export competition; and 4) cotton. He also updated members on the separate talks regarding public stockholding for food security purposes.
He reported “a very serious situation” in both the domestic support and market access pillars of the agricultural negotiations. “In fact, in my summing up of both discussions I drew the obvious conclusion: that the failure to find convergence in domestic support and market access has wider implications and these are not positive”.
On export competition – an area of the farm talks that many see as a possible key element in any Nairobi package – the Chair said that despite the perception of less divergence in this pillar, “there is not a consensus on the overall contours of such a package, let alone its precise content nor indeed how this might relate to what happens after Nairobi.”
The Chair highlighted cotton as a priority issue for Nairobi, citing the need to engage in a more focused negotiation on what could constitute a possible outcome in relation to export competition, market access and domestic support. The Bali ministerial decision on cotton stresses the need to level the playing field for cotton producers in developing countries, especially in impoverished African regions.
Finally, on public stockholding for food security purpose, Ambassador Vitalis said he would continue to consult widely on this matter and intended to hold a separate process on public stockholding in the coming weeks.
The Chair invited members to express views on the possible outcomes at the Nairobi conference.
Noting the limited time before Nairobi, many members underlined the need to focus on a smaller package. There is a shared sense that export competition is more mature and stabilized than other areas. Positive trends were noted in members’ export-related policies as reflected in an earlier Secretariat report (G/AG/W/125/Rev.3). This is in particular the case with export subsidies, which have fallen to zero, with the exception of a few members.
Other issues mentioned as possible outcomes for the Nairobi conference include the Special Safeguard Mechanism (SSM) – a mechanism for developing countries to temporarily raise import tariffs in response to import surges or price falls. Many developing members maintain that the SSM would help to protect farmers suffering from subsidies by big players, citing that the mechanism was agreed in principle in the Hong Kong Ministerial Declaration. Opponents of the proposal, however, noted that distortions in agricultural trade should not be fought with more distortions.
Some members also listed elements in all three pillars of the agriculture talks, referring to ‘Rev 4’ (the 4th revision of agricultural modalities in July 2008), as important issues to be considered. Many reiterated that the work on removing domestic support and reducing trade barriers in the agricultural sector should not stop after Nairobi. The least developed countries (LDC) group informed members they are working on a proposal of specific issues of interest to LDCs – likely to be submitted by the end of the month – to be considered for the Nairobi conference.
In conclusion, the Chair said that members understood the centrality of agriculture and development to the wider negotiations and that there was agreement on the need to secure an agriculture outcome for Nairobi, even if there was no consensus yet on precisely what this might look like. He said there was a shared sense of urgency about the process given the limited time remaining before the WTO’s Tenth Ministerial Conference in Kenya.
The Chair further observed with regret, however, that he had not heard much that was particularly new on most of the issues considered by members in the informal session of the agriculture negotiations. Notwithstanding this, Ambassador Vitalis did observe that the exchanges on 2 October had confirmed a shared sense that the issue of export competition was both the most stable and mature of the issues under negotiation at this point. This was encouraging, he said.
Taken together, the Chair indicated that he intended to proceed by intensifying consultations with all members, recalling that the WTO could not be a “Melian Dialogue” – it had to be a fully inclusive and transparent process. In this regard, the Chair expected work to proceed with members across the entire suite of agriculture-related issues ahead of Nairobi, including in particular on export competition. In terms of the latter element, Ambassador Vitalis commented that the forward process would be shaped and informed by members’ views on the key issues through a “define by doing” approach. More broadly, the Chair underlined and welcomed the commitment of members to redouble and intensify their efforts over the coming weeks ahead of the Nairobi conference.
Earlier, in a briefing on 17 September, Director-General Roberto Azevêdo called for more clarity from members “by mid to end of October” in order to prepare the ground for a successful ministerial conference. “Given the very limited time left before the Ministerial and the sombre account the DG provided of the current state of negotiations”, the Chair told the members, “I share the DG’s view that there is an urgent need for more clarity on what can be done – or cannot be done – before Nairobi. We need to reach an understanding of what is realistic in the time we have and we clearly have no time to waste.”
Chair’s assessment of the current negotiations
Domestic support
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During the meeting on domestic support on 23 September, one member introduced ideas that had already been shared with some members in early September and subsequently outlined during a meeting on 17 September.
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That proposal combined some non-binding commitments with limited binding commitments on certain types of trade distorting domestic support, such as market price support and input subsidies.
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It’s fair to say that these ideas provoked diverse reactions from members. Some of you welcomed them with interest. Others made it clear that these ideas were not a basis for forward movement.
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If I may summarise, there appeared to me to be five specific issues identified in our discussions. These included a perception that the ideas presented: 1) may constrain developing countries’ flexibilities and notably the use of their de minimis; 2) failed to distinguish between commercial and subsistence farmers; 3) targeted two programmes some developing countries are using the most; and 4) have an impact on the public stockholding debates; 5) imply that two specific programmes were considered more trade distorting than others.
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Several members, while showing a readiness to discuss new ideas, indicated their preference for limiting trade distorting support in general, and/or for the OTDS (overall trade distorting domestic support) concept in particular.
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Some members said they were ready to work with the AMS (Aggregate Measurement of Support) concept.
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Other members focused on Rev.4 in particular, stating that this was “the most promising/viable starting point”.
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Some of you expressed an interest in transparency-related issues, with at least one member suggesting an exploration of the monitoring and transparency provisions (as per Annex M of Rev.4) as a potential deliverable for Nairobi.
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And, finally, in light of a possible nil outcome in domestic support, the question of the post-Nairobi scenario has become an increasingly important matter for many of you – indeed some of you suggested this is an urgent issue to clarify.
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In short, my conclusion was that points of disagreement – and some of these were sharp-edged – far outweighed the points of agreement.
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On the positive side, I heard an agreement about the importance of the domestic support pillar, and that the WTO remains the only place where it can be dealt with. There was a sense too that agriculture and development are closely related. There was widespread agreement too that Nairobi should include an outcome on agriculture. There was also a shared understanding that even after the Nairobi Ministerial we would need to work on this.
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Unfortunately, members disagreed on pretty much everything else. There was, for instance, no agreement on new ideas, nor was there agreement on what I called the “not so new ideas”, nor indeed on the way forward. Nor was there agreement on how to move forward on domestic support.
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As to the post-Nairobi agenda, notwithstanding the sense that domestic support would need to be focused on after Nairobi, there was certainly no agreement on how precisely this would be done and what the architecture of this would look like.
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Put simply, we are far from agreeing on the content or the contours of an outcome in domestic support. Unless I hear something new or different today – and I do hope I do (I am an optimistic person from the New World after all), we are certainly going to need to confront directly an existential question in the area of domestic support.
Market access
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Turning to market access, in my consultations on Monday (28 September) I invited members to share any new thoughts or contributions that could make a difference and help us to move forward on this pillar of the negotiations.
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I regret to report back to you that it’s clear from these consultations that we are still faced with largely the same questions that have bedevilled our process for some time now.
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Let me start with the points of agreement. There was agreement that agricultural market access mattered. There was also agreement that we have a limited amount of time to deliver an outcome for Nairobi in this area. There was also agreement that the failure to secure an outcome on market access for agriculture would have wider implications for the negotiations – and a sense that those implications were negative. Those were the points of agreement.
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Unfortunately the points of disagreement were considerable.
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There were serious question about our shared level of ambition, with on the one hand calls for what some members called “realism” while on the other hand, there was an insistence on bearing in mind the development aspects of this pillar and therefore calling for high ambition in tariff reductions.
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There were a wide range of views of how and even whether to address other market access elements already discussed in these negotiations.
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On this list of issues you raised, there were references to minimum cuts, tariff escalation and tariff capping provisions, safeguards, including the SSM, tropical products, tariff rate quotas, special and sensitive products, and specific provisions for special and differential treatment.
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It is clear to me that many, if not necessarily all of these, remain firmly on the agenda for some countries, while equally some, if not necessarily all of these, were equally firmly rejected – or set within the context of the overall process of the negotiations, noting in particular the lower ambition.
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More specifically, I heard a range of views about tariff reduction approaches, but again there was certainly no convergence apparent on any one approach.
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Some members suggested particular elements that could be addressed regardless of what level of ambition was chosen, but others were not prepared to consider these in the absence of possible, let alone meaningful, tariff reductions.
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As in domestic support, therefore, both the content of a possible market access outcome and the contours of such an outcome are very unclear.
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With respect to discussions relating to what would be possible for Nairobi and post-Nairobi, it’s safe to say by the end of the consultations that we are no closer to reaching a common understanding on this.
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My question of how to strike the optimal balance between ambition and political viability, in the context of a low ambition outcome in this pillar, remains unanswered.
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And again, as with domestic support, members – I believe – face an existential moment on market access for agricultural products.
Export competition
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On export competition, I have started consulting with a number of delegations and these contacts are continuing. I will progressively broaden the scope of my consultations.
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I know that some of you consider this pillar as a possible key element in any Nairobi package.
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That may well be the case, but I must be very clear that there is not a consensus on the overall contours of such a package, let alone its precise content nor indeed how this might relate to what happens after Nairobi.
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I am very conscious of these inter-related elements. Indeed, be assured that I have heard these diverging views. These have helped me frame, shape and inform the way I have conducted and will conduct my consultations on this pillar.
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Let us be honest, however, this divergence does not make our task easier. Let us also be frank with one another that there are also issues within the pillar itself that we will need to grapple with.
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Some of you have raised questions about the internal balance of any outcome. And then there is the question of the “external balance” across the wider negotiation.
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And that is notwithstanding the fact that this element has been considered as more mature than the two others and that at least on this pillar we have a well-developed text to work from.
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These divergences exist – but at the same time, I sense a willingness to see what may yet be possible – a kind of “define by doing” approach at least as we take this forward.
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In my continuing consultations therefore my objective will be to identify with you the precise scope of the remaining issues and work towards agreed formulations for dealing with these.
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I will be looking for opportunities to engage in broader consultations in a variable geometry format, including formats like this one as we head towards Nairobi.
Cotton
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Let me be both clear and up front on this issue. Cotton remains a priority issue for Nairobi.
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As noted by my predecessor in July, we need to engage in a much more focused negotiation on what could constitute a possible outcome on cotton in relation to export competition, market access and domestic support. I have made it clear that I share John’s assessment and am proceeding on that basis.
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During my first round of consultations, I therefore asked very directly some of the key interested members and, in particular of course the Cotton-4 members, to detail as specifically as possible their views on what could constitute such an outcome on cotton, taking into account the overall negotiation context.
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My intention is to intensify my consultations on cotton in the coming weeks.
Public stockholding
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I continue to consult widely on this matter and I understand the importance some members attach to this, noting also the divergent views on the process going forward.
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As I noted earlier I do intend a separate process on public stockholding and I expect to hold a meeting on this in the coming fortnight or so.
Conclusion
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Taken together, I have given you a sense of where matters stand in the consultations on the agriculture components. I have explained 1) the process, 2) the context and 3) the substance of the consultations thus far, including in some detail on all of the areas we are working on collectively.
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Unfortunately, the areas of divergence remain and our challenge is to see what is still possible to narrow the gaps and precisely where.
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As I noted at the outset, these kinds of open-ended consultations matter – this negotiation is, as I have already said no Melian Dialogue. Today is another opportunity for all members – all members – large and small, developed, developing and LDCs to consult, discuss and engage with one another and to help inform and guide my process as Chair going forward.
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I look forward to hearing from you today on your assessment of where we are at, including in particular on the possible outcomes for Nairobi.
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Drop in global commodity prices, electricity bottlenecks, and security risks slow Africa’s economic growth
As difficult global conditions combined with domestic challenges buffet many African countries, Sub-Saharan Africa’s economic growth will continue to slow in 2015 to 3.7 percent from 4.6 percent in 2014, according to new World Bank projections.
The end of the commodity price super cycle − with a substantial drop in the price of oil, copper and iron ore − a slowdown of the Chinese economy, and tightening global financial conditions underpin the deceleration in growth, according to the World Bank’s latest Africa’s Pulse, the twice-yearly analysis of economic trends and the latest data on the continent.
The anticipated 2015 growth in GDP marks the lowest growth rate in Sub-Saharan Africa since 2009, and falls below the robust annual 6.5 percent growth in GDP that the region sustained in 2003-2008, the report notes. “The good news is that domestic demand generated by consumption, investment, and government spending will nudge economic growth upwards to 4.4 percent in 2016, and to 4.8 percent in 2017,” said Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa Region and Author of Africa’s Pulse.
Countries Buck the Trend
The analysis points out that some countries in the region are bucking the weakening regional trend and continuing to post robust growth. For example, Cote d’Ivoire, Ethiopia, Mozambique, Rwanda and Tanzania are expected to sustain growth at around 7 percent or more per year in 2015-17 due to investment in large-scale projects in energy and transport, consumer spending, and investment in the resource sector.
More broadly, economic activity will pick up in 2016-2017 as commodity prices make a slow recovery, fiscal consolidation eases, and governments take steps to alleviate power supply bottlenecks.
In a special analysis, Africa’s Pulse examined the region’s policy response to the global downturn in 2008-09, with an eye to discovering whether countries have the adequate macroeconomic policy space to withstand new, rising external headwinds that affect their economic growth.
When the global financial crisis hit the region, some countries were able to use government investment in infrastructure and other built-in buffers to finance policy responses to enable growth. Overall, the analysis shows that before the current bout of global difficulties these policy buffers were already showing signs of vulnerability from overvalued currencies and growing fiscal deficits. Today, these policy buffers are lower than before the global financial crisis, according to the report, and will make it more difficult for countries to grow in the current situation.
Gains in Poverty Reduction
Africa’s Pulse found that progress in reducing income poverty in Sub-Saharan Africa has been occurring faster than previously thought. According to World Bank estimates poverty in Africa declined from 56 percent in 1990 to 43 percent in 2012. At the same time, Africa’s population saw progress in all dimensions of well-being, particularly in health (maternal mortality, under-5 mortality) and primary school enrollment, where the gender gap shrank.
Yet African countries continue to face a stubbornly high birth rate, which has limited the impact of the past two decades of sustained economic growth on reducing the overall number of poor. Countries still lag behind those in other regions in making progress on the Millennium Development Goals (MDG). For example, Africa will not meet the MDG of halving the share of population living in poverty between 1990 and 2015.
Weaker Commodity Prices
Sub-Saharan Africa’s rich natural resources have made it a net exporter of fuel, minerals and metals, and agricultural commodities. These commodities account for nearly three-fourths of the region’s goods exports. Robust supplies and lower global demand have accounted for the decline of commodity prices across the board. For instance, the drop in the prices of natural gas, iron ore, and coffee exceeded 25 percent since June 2014, according to the report.
Africa’s Pulse notes that overall decline in growth in the region is nuanced and the factors hampering growth vary among countries. In the region’s commodity exporters − especially oil-producers such as Angola, Republic of Congo, Equatorial Guinea, and Nigeria, as well as producers of minerals and metals such as Botswana and Mauritania, the drop in prices is negatively affecting growth. In Ghana, South Africa, and Zambia, domestic factors such as electricity supply constraints are further stemming growth. In Burundi and South Sudan threats from political instability and social tensions are taking an economic and social toll.
Fiscal deficits across the region are now larger than they were at the onset of the global financial crisis, the report finds. Rising wage bills and lower revenues, especially among oil-producers, led to a widening of fiscal deficits. In some countries, the deficit was driven by large infrastructure expenditures. Reflecting the widening fiscal deficits in the region, government debt continued to rise in many countries. While debt-to-GDP ratios appear to be manageable in most countries, a few countries are seeing a worrisome jump in this ratio.
“The dramatic, ongoing drop in commodity prices has put pressure on rising fiscal deficits, adding to the challenge in countries with depleted policy buffers,” says Chuhan-Pole. “To withstand new shocks, governments in the region should improve the efficiency of public expenditures, such as prioritizing key investments, and strengthen tax administration to create fiscal space in their budgets.”
Looking Forward
The report recommends governments begin structural reforms to address domestic bottlenecks and support renewed economic growth. Investments in energy capacity and attention to drought and its effects on hydropower will help build resiliency in the power sector. Governments can boost revenues through tax reform and improved tax compliance. In addition, governments can improve the efficiency of public expenditures to create fiscal space in their country’s budget in order to respond to external and internal shocks.
Africa’s Pulse describes the combination of external headwinds and domestic difficulties that are impacting economic activity in Sub-Saharan Africa. The report’s main messages are:
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External headwinds and domestic difficulties are weighing on growth in Sub-Saharan Africa, although some countries in the region are continuing to post strong growth.
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The region is entering a period of tightening borrowing conditions amid growing domestic and external vulnerabilities.
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Fiscal deficits across the region are now larger than they were at the onset of the global financial crisis, and government debt has continued to rise in many countries.
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Current account deficits, combined with the strong appreciation of the U.S. dollar, kept currencies across the region under pressure throughout the year.
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On the domestic front, political uncertainty associated with elections in a number of countries, civil conflict, and fiscal vulnerabilities are the major risks.
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A protracted Chinese slowdown, lower oil prices, and a sharper and faster normalization of unconventional monetary policies in the United States remain key external risks.
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Governments should embark on structural reforms, such as building resiliency in the power sector and tax reform to boost revenue that can support economic growth and reduce poverty.
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Renewable energy rising in Southern Africa
SADC becoming a key player in the international trend towards development of renewable energy resources and energy efficiency. Renewables now account for 23.5% of generation
An understanding of the SADC region’s emerging renewable energy industry, market development and growth is critical to realising the region’s potential and to scaling-up investment opportunities. In order to do so, REN21 and UNIDO have teamed up to produce the SADC Renewable Energy and Energy Efficiency Report which was launched on 5 October 2015 at SAIREC, the South African International Renewable Energy Conference.
The SADC report provides a comprehensive overview of the status of renewable energy and energy efficiency markets, industry, policy and regulatory frameworks, and investment activities in the region. The report draws on information from national and regional sources to present the most up-to-date summary of sustainable energy in the region.
There is huge untapped renewable energy potential in the region. In four rounds, South Africa’s REIPPPP solar PV has accounted for 1899 MW and CSP 400 MW (not all of this capacity has been commissioned). Botswana, Malawi, Namibia and Tanzania are developing large-scale solar PV projects, and Swaziland and Zimbabwe are joining this trend.
Wind power is also taking up speed in the SADC region. As with solar, South Africa has led the way in sector development through its tender process with wind projects being implemented in Tanzania and Mauritius.
Current potential hydro resources in the region amount to just under 41,000 MW. Installed hydro capacity is just under 12,000MW, representing about 21.5% of total electricity capacity. Of this 97.6% is large-scale is hydro. With 2,431 MW, South Africa has the largest operational capacity with the DRC having the largest potential (39 GW).
Biomass – for electricity generation and industrial heating – is growing. The potential for biomass-generated electricity in the region is estimated at 9,500MW, based on agricultural waste alone.
SADC countries aim to increase renewable energy contribution to electricity supply to 27% in 2020 and 29% in 2030. SADC energy ministers recently gave approval to the formation of a SADC Centre for Renewable Energy and Energy Efficiency (SACREEE), selecting Namibia as the host country.
Attracting investment is becoming easier as interest in Africa and in renewable energy increases. Six SADC member states – Botswana, Mozambique, South Africa, Tanzania, Zambia and Zimbabwe are ranked as being attractive to investors. Mauritius, South Africa and Tanzania accounted for USD 5.8 billion in 2014, with South Africa alone accounting for USD 5.5 billion.
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WTO Committee on Sanitary and Phytosanitary Measures: Communication from the African Union Commission
AUC SPS Related-Activities
The African Union Commission (AUC) organized the Inaugural Conference of the Specialized Technical Committee (STC) on Agriculture, Rural Development, Water and Environment from 5-9 October, 2015. The STC reviewed the relevant strategic goals, facilitate mutual accountability and identify synergies, linkages and complementarities in on-going agriculture, rural development, water and environment related initiatives, and their implications on the achievement of the overarching goals of Africa Accelerated Agricultural Growth and Transformation (3AGT) agenda for attaining food and nutrition security, reduce poverty, boost intra-African trade, and enhance resilience of production systems and livelihoods to climate change and related shocks. The Subcommittee on Agriculture, Rural Development, Livestock and Fisheries considered a total of 32 documents for endorsement and implementation and 12 of these were directly aimed at facilitating trade.
The African Union Commission (AUC) and UNCTAD organized a training workshop on Trade in Services for CFTA negotiators (English) from 24-28 August 2015 in Nairobi, Kenya. The aimed at enhancing the capacity of the African CFTA negotiator to have a common understanding of critical terminologies and operating principles governing trade in services in preparation of the CFTA negotiation starting in April 2016.
The African Union Commission (AUC) facilitated the development of the Continental Agribusiness Strategy. The strategy outlines mechanisms of mobilizing different partners including the AU, RECs, member States, farmer organizations, private sector, development partners and other actors around a set of high priority strategies designed to support the growth of a robust and inclusive private sector-led African agribusiness. When implemented, the strategy will provide significant impetus in contributing to the goals outlined in the Malabo Declaration, including boosting intra-African trade. Whereas the strategic thrusts identified by the continental agribusiness strategy will be the foundation for vibrant agribusiness and agritrade promotion in Africa, the strategy builds on existing initiatives at continental, regional and national levels. Further, the continental agribusiness strategy seeks to improve coordination, mobilization, advocacy, and communication among various actors in the agribusiness landscape in Africa by proposing key institutional developments.
The African Union Commission through the Partnership for Aflatoxin Control in Africa (PACA), a consortium coordinating aflatoxin mitigation and management across health, agriculture and trade sectors in Africa continued to provide consistent coordination and coherent leadership to the continental efforts on aflatoxin control. The AUC through the PACA Secretariat directly supports governments to achieve large scale change in aflatoxin control in Africa. It also forges strong partnerships and works jointly with RECs, private sector and other key stakeholders to improve governments’ effectiveness. Amongst other activities implemented in this period, PACA convened the regional workshop on “Revamping the Groundnut Value Chain in West Africa through aflatoxin Mitigation” 1-2 September 2015, Dakar Senegal.
The European Commission, in partnership with African Union Commission, the ACP Secretariat, the European Investment Bank and the Technical Centre for Agricultural and Rural Cooperation (CTA) organized a conference on Agri-Business Investments in partnership with farmer organisations in ACP countries, 14-15 October 2015. The aim of the conference is to engage stakeholders and partners to work on a common blue print for smart agri-business investments in ACP Countries in partnership with farmers’ organisations. The event will build on examples of agri-business investments, and development in Africa; success stories and lessons learnt on gaining access to regional and international markets for farmer organisations in ACP countries among others. The results of the conference will guide European Union and AUC future activities in this area.
AU-IAPSC SPS Related Activities
The AU-IAPSC (African Union Interafrican Phytosanitary Council) provided technical backstopping in prioritizing the capacity building areas under the Australia – Africa Plant Biosecurity Programme. 16 African experts will be trained in Australia in different areas of plant biosecurity.
AU-IBAR (African Union Interbureau for Animal Resources)
African Union Commission and its technical office IBAR have supported the training to improve the quality and effectiveness of participation of African member States in the activities of the WTO SPS Committee. The specific training objectives were to:
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Improve communication and circulation of information between relevant national stakeholders within African countries prior to the regular meetings of the WTO SPS Committee;
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Improve communication and circulation of information between African countries before the regular meetings of the WTO SPS Committee;
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Identify potential Specific Trade Concerns that could be raised by African countries or against African countries (by third countries), and prepare coordinated action by/support to the African countries involved; and
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Harmonize/coordinate the submission of information to the SPS Committee made by countries, RECs and the AU.
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Obama finally gets his Pacific trade deal
In what could become the most significant foreign-policy legacy of President Barack Obama’s administration, negotiators from 12 nations inked the Trans-Pacific Partnership (TPP), one of the largest free trade agreements in history.
The deal will boost trade among a dozen nations comprising 800 million people and making up 40 percent of the global economy. But it was in doubt as late as Sunday, as negotiators in Atlanta wrangled over the smallest details of how the deal would shape trade in the Asia-Pacific region. On Monday, U.S. Trade Representative Michael Froman announced what he called a “historic agreement” that came after more than five years of seemingly endless negotiations.
TPP “helps define the rules of the road for the Asian-Pacific region,” Froman said.
As talks in Atlanta creeped into the weekend, it was unclear whether concerns about dairy-market access and biologic medicines could be resolved.
The president must wait 90 days after the TPP agreement is done before he signs it. Then it goes to Congress for a vote. The text of the deal must be public for at least 60 of those days.
The trade deal, the centerpiece of Obama’s rebalancing to Asia, has sparked opposition from both the left and the right, angering environmentalists, trade unions, and lawmakers representing Rust Belt states who fear the pact will accelerate the exodus of U.S. manufacturing jobs. Some presidential candidates, including the front-runners, Republican Donald Trump and Democrat Hillary Clinton, are also opposed to the deal. Bernie Sanders, the independent senator from Vermont who is running as a Democrat, is also opposed to TPP.
Obama does have one advantage: fast-track trade authority, won in June, to quickly review trade bills and get an up-or-down vote from Congress. Administration officials insist the deal is necessary to keep the United States competitive in the 21st century.
“It will strengthen the hand of American workers and ensure that our businesses can compete on a level playing field in some of the world’s most significant markets,” U.S. Commerce Secretary Penny Pritzker said in a statement Monday.
The deal touches on nearly every aspect of trade between the United States and 11 other countries in the Asia-Pacific. It calls for the gradual reduction or elimination of tariffs on hundreds of goods and services, from cars and trucks to rice and cheese. It also clarifies intellectual property rights for movies and pharmaceutical drugs, as well as the Internet, and is meant to create new standards for environmental protection and labor rights in participating countries. The deal also creates a novel dispute-resolution mechanism.
The economics of the deal, including potential trade gains and job losses for different sectors, loom largest for leaders and legislative branches. The deal has proved unpopular among Canadian farmers, who fear their protected dairy industry could come under assault by international rivals, and among car-parts makers in Mexico, who fear outside competition.
But the geopolitics of the deal are a major selling point for the White House as well. In a statement on Monday, Obama underscored his view that a deal “strengthens our strategic relationships with our partners and allies in a region that will be vital to the 21st century.”
Inside the administration, the deal is frequently called the economic backbone of Obama’s “pivot to Asia,” or Asia rebalance – a broad policy meant to reassure allies of America’s staying power in the region amid China’s explosive military and economic growth. One part of the pivot involves shifting of military assets to the Asia-Pacific region in order to reassure allies and partners, especially in light of China’s recent aggressive moves. The trade pact is meant to be complementary by more fully integrating the United States with countries that have deepened their economic and trade relations with China over the past decade or more.
Notably, China is not a member of the TPP, though both Washington and Beijing have signaled an openness to China joining the club at a later date.
“The TPP’s significance is not just economic; it’s strategic – as a means of embedding the United States in the region, creating habits of cooperation with key partners, and forming a foundation for collaboration on a wide range of broader issues,” Froman said in a speech at the Center for Strategic and International Studies (CSIS) last month.
Without the TPP, experts say there is no clear alternative to expanding the U.S. footprint in the region given that the multilateral World Trade Organization process has been stalled for years. “TPP shows some competence and commitment to Asia,” Michael Green, a senior vice president for Asia at CSIS, told FP. “Without it, there would be a lot more uncertainty.”
Others have pointed out that the deal puts the United States in the driver’s seat as a leader in defining how trade will be conducted in this economically vibrant region. “It reinforces U.S. standing as a leader in establishing regimes that set rules for global best practices,” Scott Snyder, a senior fellow at the Council on Foreign Relations, told FP.
Obama reiterated that argument Monday. “When more than 95 percent of our potential customers live outside our borders, we can’t let countries like China write the rules of the global economy,” he said.
The agreement drew immediate praise from the U.S. business community, which has long backed the TPP.
“Increased trade with the TPP partners will expand economic opportunities and strengthen our security ties in the Asia-Pacific region,” defense contracting giant Lockheed Martin said in a statement Monday.
But opponents are already calling on Congress to find a way to kill it.
“The only way for this to end well for the American people, and our economy, is for Congress to reject this awful agreement, lock it in a metal safe, and dump it at the bottom of the Pacific Ocean,” Charles Chamberlain, executive director of former presidential candidate Howard Dean’s grassroots group, Democracy for America, said Monday.
» Trans-Pacific Partnership (TPP): Technical Summary of the Agreement
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tralac’s Daily News selection: 5 October 2015
The selection: Monday, 5 October
The 2015 Ibrahim Index of African Governance launches today
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G20 meet: India to oppose premature conclusion of Doha Round (The Hindu)
India will speak out at the G20 trade ministers’ meet this week against attempts by some developed countries to conclude the ongoing Doha Round of World Trade Organisation by delivering on just a handful of issues “cherry-picked” by them while ignoring the rest.
G20 energy ministerial: communiqué
We adopt the G20 Energy Access Action Plan: Voluntary Collaboration on Energy Access, the first phase of which focuses on enhancing electricity access in Sub-Saharan Africa where this problem is most acute. We welcome the discussions held with African Energy Ministers at the Conference on Energy Access in Sub-Saharan Africa on 1 October. We recognize the importance of a conducive enabling environment for increased investments and sustainable growth of the power sector, taking into account national circumstances, including available indigenous energy sources, needs and priorities. We are committed to strengthening G20 coordination and activities on energy access through the Plan, which establishes a long term voluntary cooperation framework.
Africa heads to India, demanding 100% access (The East African), UAE, Singapore special invitees at Africa meet (Times of India)
Towards inclusive and sustainable development in Africa through decent work (ILO)
The 13th African Regional Meeting convenes [30 Nov-3 Dec] at a critical moment. A new era has opened up, making the achievement of sustainable growth with decent work a realistic prospect. Africa can indeed reap the benefits of a demographic dividend and draw on the energy of its young women and men, who are better trained and have easier access to new technology and knowledge networks than ever before. The continent taken as a whole enjoys high economic growth and relatively stable macroeconomic conditions. There is evidence of strong entrepreneurial spirit along with recognition of the transformative role of social protection. Africa also possesses natural resources that are in chronic shortage globally. Though much potential is going untapped, precluding more inclusive and sustainable growth, a better future is possible provided that policies move in the right direction. There is growing awareness of the benefits of such a policy shift. Employment and decent work loom large in Africa’s vision of the future. [Report of the ILO Director-General]
Mauritius: supporting the new National Employment Policy (ILO)
World Bank forecasts global poverty to fall below 10% for first time
The number of people living in extreme poverty around the world is likely to fall to under 10% of the global population in 2015, according to new World Bank projections, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030. The Bank uses an updated international poverty line of US $1.90 a day, which incorporates new information on differences in the cost of living across countries (the PPP exchange rates). The new line preserves the real purchasing power of the previous line (of $1.25 a day in 2005 prices) in the world’s poorest countries. Using this new line (as well as new country-level data on living standards), the World Bank projects that global poverty will have fallen from 902 million people or 12.8 per cent of the global population in 2012 to 702 million people, or 9.6 per cent of the global population, this year. [Various downloads available]
Talks on South Sudan joining COMESA
COMESA Secretary General, Mr Sindiso Ngwenya led a delegation to the Republic of South Sudan from 29th September to 1st October, 2015 to consult with the government on the long awaited integration of the new State into the REC. “The talks focused on the benefits that would accrue to South Sudan upon membership to the regional bloc and in particular from COMESA’s financial institutions that include the PTA Bank, the African Trade Insurance Agency, PTA RE Insurance Agency (ZEP RE), the COMESA Clearing House and the COMESA Infrastructure Fund,” Mr Ngwenya said. The Secretary General recalled that at the COMESA Summit that was held in Uganda in 2012 arrangements had provided for the Republic of South Sudan to sign the instrument of accession.
EAC turns to IMF for tax harmonisation advice (The East African)
“We are asking for input from the IMF, which has experience and is able to give us advice on how best we can achieve tax harmonisation,” said Peter Njoroge, director of economics at Kenya’s Ministry of EAC Affairs. “It is a complex issue, because even the European Union has never fully harmonised its taxes.”
Rules on cargo bad for growth of Uganda’s vibrant transit business (The East African)
However, Uganda Customs is currently only giving 30 days and at times just 7 days to warehouse and re-export the cargo. This time is not sufficient due to the regular political problems in the neighbouring countries. No prior notice was given to importers that the Uganda Revenue Authority was planning to amend the period of warehousing. These new policies will affect the economy in four ways: First, trade with the neighbouring countries will automatically go down.
Arusha-Mwatate road to improve trade 'by 50%' (The Star)
The volume of cross-border trade between Kenya and Tanzania will increase by 50% once the Arusha-Mwatate road is complete, outgoing Tanzania President Jakaya Kikwete has said. The 90km road is being constructed by China City Construction Group. It is co-funded by the African Development Bank and the Kenya and Tanzania governments. Kikwete launched the Sh8.4 million road at Taveta town yesterday at the start of his three-day state visit to Kenya.
China targets Kenya’s ports in trade (Daily Nation)
China is targeting Kenya’s ports of Mombasa and Lamu in expanding its global influence through trade and connectivity. The Chinese government lists the two ports as important to its One Belt One Road (OBOR) Initiative, an ambitious programme meant to create “a community of common destiny” from among 63 countries around the world with about 4.5 billion people.
Graduating from AGOA (The Whitaker Group)
USTR has announced that the Seychelles will cease to be an AGOA beneficiary as of January 2017. Reason: the Indian Ocean nation and its 92,000 inhabitants have, with a per capita GNI of $13,990 in 2014, joined the ranks of high income countries as defined by the World Bank and so have become too wealthy to qualify for GSP.
Nigerian exporters paying heavy price for compromising standards (Business Day)
The sad tale story of Johnsie Company Limited reflects the daily experiences of Nigerian exporters whose products are rejected at the borders of advanced economies, notably the European Union, the Americas and Asia, on the basis of compromise to or ignorance of globally accepted standards.
Advancing inclusive insurance in Africa: innovation in industry, policy and development (Chatham House)
The expanding microinsurance market in Africa, and integration of micro products into existing insurance strategies, is both a commercial and developmental opportunity. Technological innovations and new products and distribution channels are helping to overcome barriers of low profit margins, low levels of consumer knowledge and uncertainty surrounding regulation. Access to microinsurance gives households and small businesses peace of mind to invest for the future, and lessens the impacts of losses on the most vulnerable. This conference [30 Sept] will evaluate innovation and progress in microinsurance initiatives across Africa, and discuss barriers to inclusion and challenges to further developments.
Experts meeting on trade in sustainable fisheries: recommendations (UNCTAD)
Participants recognized five main interrelated pillars for a 2030 agenda on sustainable fisheries and agreed on several next steps. They also recommended that countries prioritize a) market access constraints while recognizing special and differential treatment and, b) transparency, notification and monitoring issues regarding certain forms of subsidies that promote overfishing in the upcoming Tenth Ministerial Conference of the World Trade Organization.
World prices for agricultural goods will “remain flat or decline in the next ten years” (WTO)
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Egypt: Cotton loses its glory (Ahram)
In a bid to save the country’s cotton industry former prime minister Ibrahim Mehleb issued a decree to form a higher committee on cotton headed by the prime minister and including the ministers of agriculture, industry, planning, finance, and investment, along with the chairman of the Federation of Egyptian Industries and representatives from the Syndicate of Spinning and Weaving. The aim of the committee is to investigate how Egyptian cotton can regain its competitiveness in local as well as international markets. The committee should submit a report next month including concrete procedures to restructure cotton cultivation and the cotton trade in Egypt.
The 2015 Africa Agriculture Status Report: Youth in agriculture in Sub-Saharan Africa
AGRF 2015 communiqué: Walking the talk on women and youth
These trends request increased and better management of labour migration statistics and data. It is crucial that the National Statistic Offices take the natural lead. However, there is need to work with the other stakeholders, in particular the ministry of labour and its relevant administrations. To this effect, it is my plea that Member States set up national LMIS coordination Unit, involving the social partners, as requested by the LMIS-Framework. The Commission will provide technical support in collaboration with the ILO.
The EU-IOM seminar brought together government officials, EU Member States representatives in the Country, partner agencies and civil society to examine various aspects of Mozambique’s and Southern Africa’s changing migration dynamics.
African Union small and medium enterprise masterplan 2015-2017: validation workshop, 5-10 October
Strengthening national evaluation systems initiative in Ethiopia/Tanzania and provide support to the African Parliamentarians’ Network on Development Evaluation: EOI from the AfDB
High Level Dialogue on Conflict and Development in Africa (UNECA)
Emerging powers and global governance: whither the IMF? (IMF)
The governance structure in global bodies like the IMF continues to be disproportionally dominated by advanced economies. Sustained rapid growth in emerging and developing economies (EDEs) in the past 2-3 decades has led to their growing relative weight in the global economy, but with little increase in their voice in the IMF. The emergence of regional financial arrangements reflects the growing dissatisfaction of the EDEs with the current framework. The global economy is on the cusp of an epochal change moving the fulcrum of economic power from the North Atlantic towards Asia after more than 200 years. This must be recognized and responded to adequately. [The authors: Rakesh Mohan, Muneesh Kapur]
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World Bank forecasts global poverty to fall below 10% for first time
Major hurdles remain in goal to end poverty by 2030
The number of people living in extreme poverty around the world is likely to fall to under 10 percent of the global population in 2015, according to World Bank projections released on 4 October 2015, giving fresh evidence that a quarter-century-long sustained reduction in poverty is moving the world closer to the historic goal of ending poverty by 2030.
The Bank uses an updated international poverty line of US $1.90 a day, which incorporates new information on differences in the cost of living across countries (the PPP exchange rates). The new line preserves the real purchasing power of the previous line (of $1.25 a day in 2005 prices) in the world’s poorest countries. Using this new line (as well as new country-level data on living standards), the World Bank projects that global poverty will have fallen from 902 million people or 12.8 per cent of the global population in 2012 to 702 million people, or 9.6 per cent of the global population, this year.
Actual poverty data from low income countries come with a considerable lag but the organization, which released the information on the eve of its Annual Meetings in Lima, Peru, based its current projections on the latest available data.
Jim Yong Kim, World Bank Group President, said that the continued major reductions in poverty were due to strong growth rates in developing countries in recent years, investments in people’s education, health, and social safety nets that helped keep people from falling back into poverty. He cautioned, however, that with slowing global economic growth, and with many of the world’s remaining poor people living in fragile and conflict-affected states, and the considerable depth and breadth of remaining poverty, the goal to end extreme poverty remained a highly ambitious target.
“This is the best story in the world today – these projections show us that we are the first generation in human history that can end extreme poverty,” Kim said. “This new forecast of poverty falling into the single digits should give us new momentum and help us focus even more clearly on the most effective strategies to end extreme poverty. It will be extraordinarily hard, especially in a period of slower global growth, volatile financial markets, conflicts, high youth unemployment, and the growing impact of climate change. But it remains within our grasp, as long as our high aspirations are matched by country-led plans that help the still millions of people living in extreme poverty.”
In April 2013, nine months after Kim became president of the World Bank Group, its Board of Governors endorsed two goals: to end extreme poverty by 2030, and to boost shared prosperity by raising the incomes of the bottom 40 percent of populations.
Kim said that further reductions in poverty rates would come from evidence-based approaches, including: broad-based growth that generates sufficient income-earning opportunities; investing in people’s development prospects through improving the coverage and quality of education, health, sanitation, and protecting the poor and vulnerable against sudden risks of unemployment, hunger, illness, drought and other calamities. These measures, he said, would also greatly boost shared prosperity, improving the welfare of the least well-off in every country.
“With these strategies in place, the world stands a vastly better chance of ending extreme poverty by 2030 and raising the life prospects of low-income families,” said Kim.
Poverty remains concentrated in Sub-Saharan Africa and South Asia
For the last several decades, three regions, East Asia and Pacific, South Asia, and Sub-Saharan Africa, have accounted for some 95 percent of global poverty. Yet, the composition of poverty across these three regions has shifted dramatically. In 1990, East Asia accounted for half of the global poor, whereas some 15 percent lived in in Sub-Saharan Africa; by 2015 forecasts, this is almost exactly reversed: Sub-Saharan Africa accounts for half of the global poor, with some 12 percent living in East Asia. Poverty is declining in all regions but it is becoming deeper and more entrenched in countries that are either conflict ridden or overly dependent on commodity exports.
The growing concentration of global poverty in Sub-Saharan Africa is of great concern. While some African countries have seen significant successes in reducing poverty, the region as a whole lags the rest of the world in the pace of lessening poverty. Sub-Saharan poverty fell from an estimated 56 percent in 1990 to a projected 35 percent in 2015. Rapid population growth remains a key factor blunting progress in many countries – as this year’s Global Monitoring Report to be launched on October 8 shows.
In its regional forecasts for 2015, the Bank said that poverty in East Asia and the Pacific would fall to 4.1 per cent of its population, down from 7.2 per cent in 2012; Latin America and the Caribbean would fall to 5.6 per cent from 6.2 in 2012; South Asia would fall to 13.5 per cent in 2015, compared to 18.8 per cent in 2012; Sub-Saharan Africa declines to 35.2 per cent in 2015, compared to 42.6 per cent in 2012. Reliable current poverty data is not available for the Middle East and North Africa because of conflict and fragility in key countries in the region.
“Development has been robust over the last two decades but the protracted global slowdown since the financial crisis of 2008, is beginning to cast its shadow on emerging economies,” said World Bank Chief Economist Kaushik Basu, a former Chief Economic Adviser to the Indian Government. “There is some turbulence ahead. The economic growth outlook is less impressive for emerging economies in the near future, which will create new challenges in the fight to end poverty and attend to the needs of the vulnerable, especially those living at the bottom 40 percent of their societies.”
Measuring Poverty Globally and Nationally
The updated global poverty line and rate are based on newly-available price data from across the world- impacting not only where the global poverty line is drawn, but the cost of the basic food, clothing, and shelter needs of the poorest around the world. However, this global measure is only one of many important measures to track in order to better reach the poor and vulnerable.
“When global organizations set global goals, we have to be able to compare progress across countries using a common measure, treating the absolute poor in one country the same as in another,” said Ana Revenga, Senior Director of the World Bank’s Poverty and Equity Global Practice. “But just as important are the national poverty lines set by each country, reflecting their own standard of living. These are crucial for governments and policy makers when they are planning the programs that will improve lives, or the policies that will help bring the poorest in their country out of destitution.”
Revenga said the World Bank Group would continue to work with its country clients and partners to improve how it measures and tracks poverty, to build country statistical capacity and fill persistent data gaps, and to integrate solid data and analysis into its development work to better reach people and their families who live in entrenched poverty.
Ending Extreme Poverty and Sharing Prosperity: Progress and Policies
With 2015 marking the transition from the Millennium to the Sustainable Development Goals, the international community can celebrate many development successes since 2000. However, despite solid development gains, progress in poverty reduction and shared prosperity has been uneven and significant work remains. Three key challenges stand out: the depth of remaining poverty, the unevenness in shared prosperity, and persistent disparities in non-income dimensions of development.
To guide its work toward a “world free of poverty,” the World Bank Group in 2013 established two clear goals: end extreme poverty by 2030 and promote shared prosperity. This Policy Research Note updates the assessment of progress toward these two goals and examines the policy actions and institutional interventions needed to accelerate progress toward achieving these objectives.
The poverty goal is examined from three perspectives:
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the evolution of income poverty based on the new international poverty line that has been re-estimated at $1.90 a day;
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an assessment of person-equivalent income poverty, a new indicator that combines the incidence with the depth of poverty;
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and a review of the breadth of poverty, recognizing that income shortfalls often coexist with multiple non-income deprivations.
The shared prosperity goal is examined on the basis of the latest comparison of comparable household data on income growth of the bottom 40 percent.
Global poverty is estimated to have declined in 2012 to 902 million people, or 12.8 percent of global population, according to the most recent data. Poverty is forecast to fall in 2015 to 702.1 million, a poverty rate of 9.6 percent, the first time the share people living in extreme poverty would be in the single digits.
Download the Policy Research Note below.