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Walking the talk on youth and women: Bringing inclusive agricultural markets to life
Highlights from the Fifth African Green Revolution Forum (AGRF), 29 September-2 October 2015, Lusaka, Zambia
More than 600 men, women and youth attended the AGRF 2015. Over 200 came from the host country, Zambia. Many attended the AGRF for the first time. Over the course of 36 separate but related events, the participants have deliberated on the AGRF 2015 theme as aligned to the Malabo Commitments and as impacting on three key constituencies: youth, women and the domestic private sector. Both before and during the AGRF, the delegates and interested parties have deliberated on the next 10 year Vision of CAADP enshrined in Malabo Declaration.
New AGRF Framework
AGRF was started to bring together leaders from the public and private sector to engage in thought leadership, and make commitments for how Africa can wage a successful and distinctly African Green Revolution. From 2015 going forward, the AGRF and its stakeholders will, in response to the call by the AU and in respect to the agreed systems and structures, commit to support implementation at country level, measure, track and report progress being made against set goals.
Recommitment to Malabo Goals
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Recommitment to the principles and values of the CAADP Process
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Recommitment to enhance investment finance in agriculture
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Commitment to ending hunger by 2025
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Commitment to halving poverty, by 2025, through inclusive agricultural growth and transformation
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Commitment to boosting intra-African trade in agricultural commodities and services
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Commitment to enhancing resilience in livelihoods and production systems to climate variability and other shocks
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Commitment to mutual accountability to actions and results
To achieve these, we will work through five Thematic Working Groups on:
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Finance
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Inputs
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Agriculture Infrastructure
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Trade and Markets and the Domestic Private Sector Development
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Capacity development, Youth and Women in Agriculture
Additionally, from the AGRF 2015 conversations the following key issues emerged:
Youth Inclusivity in Agriculture
Africa’s farmers are aging; with the average age being 60 years. More than 60% of the continent’s population is under 25. Africa’s very survival depends on attracting young people to the agriculture sector – for the continent to feed itself and feed the world. Agriculture must be made attractive to young people through creative programs and initiatives that clearly define profitable opportunities. Mentoring opportunities and relationships must be made available to young entrepreneurs.
Women in Agriculture
Women are the backbone of rural agriculture and their role needs to be supported. Women smallholder farmers should be supported to form viable produce marketing organizations to seize lucrative market opportunities for their agricultural products. Financial institutions should be encouraged to create financial products tailored to women, while both public and private organizations should enhance extension services and provide appropriate technologies to women smallholder farmers to increase agricultural productivity, access markets while making their lives better.
Finance
Financiers need to support alternatives to traditional collateral such as value chain financing and warehouse receipt systems in addition to using land as collateral. Moreover farmers must be supported to see business planning for production ventures as part of collateral process. Deliberate efforts to make financial services, especially for agriculture and agribusiness, more inclusive for women should be scaled up across Africa. Risk finance products should be responsive to the agriculture sector, supported by reliable data that will empower financiers to make evidence-based decisions.
Inputs
For Africa to achieve step changes in crop yields, both government and private sector actors need to work together to ensure access technological packages including quality seed and fertilizer, including lime, to restore Africa’s depleted soils. Efforts should include creating awareness among farmers on the value of using certified seed, the best fertilizer combinations and lime application rates; promoting soil testing and mapping, as well as improving the supply and access of fertilizer and lime for smallholder farmers. The private sector should invest more in youth and women-owned distribution systems especially at local levels to ensure affordability and availability of seed and fertilizer.
Agriculture Infrastructure, Technology and Mechanization
Efficient infrastructure, technology and mechanization are key drivers to increasing agribusiness competitiveness and modern farming in Africa. Public Private Sector Partnerships are needed for greater investments in agricultural infrastructure and availability of affordable technologies and machinery along the whole value chain. Equipment leasing should be enhanced as a model of ensuring youth and women have more access to modern agricultural technologies. More investments should target the development and utilization of integrated ICT-4-Ag solutions with special focus on youth.
Trade and Markets including Domestic Private Sector Development
More advocacy and communication is needed to enhance regional trade and policy interventions that will spur growth of domestic private sector and agribusinesses. There should be adequate focus on agricultural value chains including livestock and horticulture subsectors. More investments and policies should be directed at incubating and developing local agro-processing facilities and agribusinesses run by youth and women. All stakeholders in African agriculture working with smallholder farmers must redouble efforts to help organize the agriculture sector into functional value chains. A strong continental network of the domestic private sector needs to be set up to give a collective voice to African domestic private sector actors to strongly and effectively participate as equal partners to agriculture businesses.
Capacity Development
African agriculture is dynamic and requires a diverse mix of capacity building initiatives targeted at both smallholder farmers and actors supporting them. This should include both long and short-term courses in aspects such as: agronomy, extension, as well as business development and management. This will prepare youth and women to become active members in agricultural value chains.
Public-Private Partnerships
The experience of public-private partnerships has shown positive results. This partnership has facilitated transport infrastructure, and farmers have been able to access inputs in time. We should pursue these partnerships purposefully in all sectors and ensure that all the actors have the required ability to engage in win-win relationships for the benefit of smallholder farmers, youth and women.
Policies
African governments need to review, put in place and continue implementing the policies that promote an enabling environment for business and improve the ease of doing business. Governments and actors will need to provide incentives to businesses to enhance participation of youth and women in agribusiness while at the same time adopting policies that make the agriculture sector attractive to them. Governments need to enact policies that promote land ownership by youth and women. Harmonization of regional agricultural and related trade policies should also be pursued. Youth and women call for an increased voice and vote in the agriculture and trade policymaking processes.
Demand-Driven, Market-Led Agriculture
Encouraging Africa’s smallholder farmers to farm as a business will ensure that they professionalize their farming operations and invest in making this profitable. By creating strong value chains that support smallholder farmers and agribusinesses to meet market demands in terms of volume and quality, all actors will build their capacity and motivate them. In this way, farmers will attract financiers who will have increased confidence in recouping their loans.
Looking forward
The AGRF 2015 thereby pledges to advocate for, facilitate and support youth and women with regard to the afore-mentioned 10 thematic focus areas. And we the youth, women and participants of AGRF 2015 adopt the new AGRF Results Framework as an implementation and monitoring tool to achieve the goals outlined in Malabo Declaration. The next AGRF will take place in Nairobi, Kenya in early September 2016.
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We need global policy coherence in trade and investment to boost growth
Mounting fears of another slowdown in the global economy call for bolder policy responses. Trade and investment are a case in point.
The latest WTO forecasts suggest 2015 will be the fourth year running that global trade volumes grow less than 3%, barely at – or below – the rate of GDP growth. Before the crisis, trade was growing faster than GDP. In addition, global flows of foreign direct investment (FDI) remain 40% below pre-crisis levels. If we are to achieve the ambitious Sustainable Development Goals agreed in New York in late-September, and underpin broad-based improvements in living standards, we need to reignite these twin engines of growth and we need to do it for the ultimate goal of improving people’s prospects and wellbeing.
Trade and investment have always been intertwined in business, but they have never quite come together in policymaking. In a world of Global Value Chains (GVCs), characterised by the fragmentation of production processes across countries, the interdependencies between trade and FDI are sharper. Technological improvements, reductions in transport and communications costs, and regulatory developments allow firms to combine multiple channels – imports, FDI, movement of business personnel, licenses – to optimize their international business strategies. Businesses do not think in terms of trade or investment, but in terms of maximizing expected profitability. On the contrary, policymakers have long addressed trade and investment on separate tracks. In the face of new economic realities, policymakers need to up their game.
The symbiosis between trade and investment is more complex than ever before. Multinational enterprises (MNEs) play a key role in this relationship, with their activities driving a large share of world trade. The decision of a firm to invest in a foreign country is influenced by the ease with which it can sell its products, but also by how easy it is to source inputs from its affiliates (intra-firm trade) or independent suppliers (extra-firm trade) abroad. Hence, trade barriers become indirect barriers to investment. In addition, “world factories” make emerging trade patterns more complex, as not only goods and services cross borders, but capital, people, technology, and data do too. Without a transparent framework, it is also difficult to upgrade and upscale responsible business conduct.
Services are an increasingly critical node in the relationship between trade and investment. The WTO’s General Agreement on Trade in Services (GATS) explicitly recognizes this by defining FDI in services as one of the four ways in which services can be traded (mode 3, or ‘commercial presence’). This reflects how trade and investment interact with one another. Clearly, services will be central in any further efforts to liberalize investment and to improve the business environment. The OECD FDI Regulatory Restrictiveness Index shows that investment barriers are overwhelmingly in the services economy. Reforms in backbone services, notably digital services, transport, and logistics are key to unclogging GVCs. Domestic reforms to allow for more competition in the service sectors is also a source of growth and equality. Moreover, there is untapped potential in services value chains that could be realized if services markets were opened further. The OECD Services Trade Restrictiveness Index (STRI) provides a tool for identifying these barriers and measuring their costs, in order to prioritize and sequence reforms.
There is still no global set of rules governing investment and trade, however. Apart from GATS, two other WTO agreements – TRIMS and SCM – cover aspects of FDI, but they are not comprehensive. The OECD Codes are also a reference on capital flows, but does not address the link with the trade dynamics. The void has been filled with a complex network of nearly 3,000 bilateral investment treaties (BITs) of different quality and with different coverage. Investors and States need certainty. A uniform regime would help, providing a consistent interpretation of the rules that apply to investment flows, taking into account the interest of all stakeholders. We urgently need a clear, coherent and coordinated approach at multilateral level. Multiplying the number of BITs further muddies the water and moves us further away from the multilateral ideal. A better way forward may be to start consolidating and replacing BITs on the road to a comprehensive multilateral framework. We also need to take a hard look at investment dispute settlement mechanisms, transparently addressing stakeholders’ legitimate concerns.
Replace BITs with what? Regional Trade Agreements (RTAs) are already providing some closer policy linkages. Over 330 RTAs contain comprehensive investment chapters, reflecting more advanced thinking of how trade and FDI interact in the real economy. These agreements also cover ‘deep integration’ disciplines that are essential to investments, such as movement of capital, business persons, intellectual property rights, competition, state-owned enterprises, and anti-corruption. New generation RTAs are not perfect, but they are taking us several steps forward in addressing the services-trade-investment-technology nexus. Being regional, however, they are not applied uniformly at a global level, and create their own overlaps and incoherence. It would therefore be useful to create clearer rules for co-existence among RTAs and mega-regional blocs. Above all, it is important to foster information-sharing on emerging practices from these negotiations, so that good practices can be diffused more widely and uniformly, and provide a pathway for multilateral convergence. In this way, RTAs and mega-regionals can become the building blocks of an integrated and truly multilateral trade and investment regime.
We are at a critical juncture, both economically and politically. The global economy needs a helping hand for recovery from the global financial crisis and to give people the improvements they expect in their daily lives. At the same time, we have both an opportunity and obligation to upgrade the policy framework to meet the changing reality of how trade and investment are conducted across the world, to enhance policy coordination, and to ensure that both have a positive impact on people’s well-being. Mega-regional agreements like TTIP and TPP are on track to deliver new frameworks over the coming months. These can be stepping stones towards the future of global trade and investment rules. As these mega-regional deals approach the finish line, the 10th WTO Ministerial in Nairobi in December is an opportunity to break the current impasse in the Doha Round. Finally, all of this is taking place as we enter a new “Post-2015” era with the new SDGs, where trade and investment are expected to do more of the heavy-lifting in global development.
Against this backdrop, the G20-OECD Global Forum on International Investment (GFII), being held on 5 October 2015 in Istanbul, back-to-back with the meeting of G20 Trade Ministers, will bring together the trade and investment policy communities – along with the business community – to reflect on the main axes of a pragmatic strategy to enhance the international regime for investment, including through closer links with trade. The agenda cannot be delayed: trade and investment decisions must go hand-in-hand in policy, just as they do in global business.
Gabriela Ramos is OECD Chief of Staff and Sherpa to the G20.
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2030 trade agenda for sustainable and responsible fisheries proposed by UNCTAD and the Commonwealth Secretariat
Experts meeting on trade in sustainable fisheries come up with a set of concrete recommendations to halt a looming catastrophe for the millions of people who depend on fish for food and their livelihoods.
Experts on sustainable fisheries convened in Geneva by the Commonwealth Secretariat and UNCTAD agreed to a number of concrete recommendations on 1 October, just days after Goal 14 of the sustainable development goals (SDGs), which concerns protecting fisheries and the marine environment, was adopted by United Nations member States.
In this regard, the UNCTAD and the Commonwealth urged countries and relevant organizations to take stock of the current state of affairs and draft an implementation agenda for sustainable and responsible fisheries.
Participants recognized five main interrelated pillars for a 2030 agenda on sustainable fisheries and agreed on several next steps:
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Strengthen effective governance of the fisheries sector:
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Support a triennial Conference to coordinate action on the advancement of SDG 14 and other related goals.
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Establish a monitoring mechanism on the implementation of SDG 14 and the role of trade and other implementation needs.
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Promote the participation and ratification of the United Nations Convention on the Law of the Sea and the UN Fish Stocks Agreement.
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Promote coherence among the myriad of international laws and frameworks regulating the sector and their effective implementation in a mutually supportive manner by regional fisheries management organizations and national fisheries authorities.
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Regulation of fisheries in the high seas still requires improvement.
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Harness the potential of international trade to meet an increasing demand for fish as population continues to grow:
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Map and promote convergence and harmonization of non-tariff measures (NTMs).
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Promote mutual recognition of documentation, certification, testing and evaluation needed to fulfill technical regulations and public and private standards.
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Make rules of origin relevant to Preferential Trade Agreements more flexible for developing countries to facilitate value addition.
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Address and remove harmful incentives and tackle IUU:
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Achieve full transparency and disclosure of subsidies.
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Identify and differentiate harmful and beneficial subsidies and prohibit harmful fishing subsidies in the next 5 years or by 2020.
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Quantify evidence on illegal, unreported and unregulated fishing (IUU), its market effects and the cost of inaction.
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Provide options on fisheries’ traceability.
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The Food and Agriculture Organization’s Port State Measures Agreement should be ratified and adopted to promote implementation and practical application on IUU measures.
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Focus on incentives to fulfill and address IUU and not on sanctioning schemes.
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Design complementary measures for fish stock resilience and conservation of marine ecosystems:
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Countries should green their export baskets to diversify exports. UNCTAD was requested to continue expanding its support on National Green Export Reviews to other countries, by adapting it to the marine environment.
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Promote regional cooperation and common regulatory and fish stock management systems that build climate and economic resilience.
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Meet cost and capability constraints for value addition in developing countries:
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Promote regional cooperation schemes emulating, for instance, the organic cooperation in Africa and in the Pacific.
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Recommend financial institutions to introduce schemes for green financing and for the valuation of ecosystem services and the development of marine ecosystem value chains.
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Experts at the meeting 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. Moreover, participants also encouraged member of the World Customs Organization to develop Harmonized System codes for certified seafood products.
All participants agreed that there is no time to waste. The shortage of fish is no longer an abstract phenomenon and the world stands on the brink of an economic and environmental catastrophe. Actions to reverse the damage done and ensure the future cannot be delayed anymore. Experts agreed that countries, organizations and civil society need to seize this renewed opportunity and that the time to act is now.
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World prices for agricultural goods will “remain flat or decline in the next ten years”
The current growth in agricultural production, especially in Africa, could mean that in the next ten years world prices for food will remain flat or even decline, according to a session devoted to agriculture at the Public Forum on 1 October. Food security, agricultural subsidies and the participation of farmers in global value chains were also discussed.
Two sessions organized by the Kenya Human Rights Commission, the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers’ Associations (IUF), the Centre for Equity Studies of India, and COAST of Bangladesh covered questions on how trade rules can be reformed to address the growing concern of small-scale producers about the “right to food”. It was noted that agricultural production has been growing, especially in Africa, and because of that, world prices for agricultural goods will either remain flat or decline in the next ten years.
Agriculture is a mainstay of the African economy and the sector faces many challenges. Participants explained the importance of public stockholding and the National Food Security Act in India, emphasizing that the objective of the programme is to support domestic consumers, not exports. They called for the WTO to consider such support as “non-trade distorting”, as put forward in the proposal by the G33 group of developing countries. Participants also expressed hopes that agricultural subsidies and the safeguard mechanism will be included in the forthcoming Nairobi Ministerial Conference.
Another session on agriculture, organized by the World Farmers' Organization, the United Nations Economic Commission for Europe and the UN Food and Agriculture Organization (FAO), discussed how trade policies can bridge the gap between farm and market. Farmers’ representatives stressed that farmers’ voices need to be heard when agricultural standards are set. “We should seek solutions to drive farms as businesses,” they said. “We need to discuss how to improve efficiency for farmers and how we can reach out to farmers so that they have the capacity to implement multiple standards”. The OECD-FAO Agricultural Outlook 2015-24 highlights the decline in long-term real prices, the increase in trade volumes of most products, and changes in consumer demands. To face these challenges, the emphasis needs to be on the farmer to bridge the gap between food security and farmer security, trade policy and agricultural policy, participants at the session noted.
A session organized by the Institute of Developing Economies of the Japan External Trade Organization discussed the Asian perspective on how to plug into global agricultural value chains. It was noted that agriculture is an important sector for development in Asia. Yet the agricultural sector faces many challenges when exporting products, especially concerning the rejection of some products based on misinformation in labelling, bacterial contamination or issue of excessive or dangerous additives. China, Indonesia, Thailand and Viet Nam are some of the countries facing these problems. Participants at the session noted that Asian countries should promote agri-food exports in order to foster economic development, while at the same time they need to comply with standards in order to participate in global value chains.
A workshop on “Navigating the relationship between food security policy measures and trade rules: an interactive policy tool” invited Public Forum participants to explore and give feedback on a food security policy tool developed by the Quaker United Nations Office (QUNO). The tool is an interactive, mobile app and web-based programme that analyses over 60 food security policy measures. The purpose of the tool is to make it easier for small-scale farmers, trade policy makers and negotiators to have access to information on how policy measures have an impact on food security.
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Technical workshop on labour migration statistics for the Africa region: Statement by Amb. Olawale Maiyegun
Opening remarks by Amb. Olawale Maiyegun, AU Director of Social Affairs, at the Labour Migration Statistics Validation Workshop – 29th September-1st October 2015, Addis Ababa, Ethiopia
I start by wishing you, on behalf of the Commissioner for Social Affairs, a warm welcome in Addis Ababa and at this particular gathering for a technical session on labour migration statistics. We are making breakthrough in one of the strategic deliverables of the AU-ILO-IOM-ECA Labour Migration Governance for Development and Integration in Africa, which is a comprehensive blueprint for managing labour migration with a focus on flows within the continent.
It is worth mentioning that the said programme was endorsed by the AU Assembly of Heads of States during its session in January 2015, as means to facilitate the implementation of one of the Six Key Priority Areas of the Declaration and Plan of Action on Employment, Poverty Eradication and Inclusive Development adopted the same date. Though the main goal is the creation of decent jobs at home for youth and women in particular, it is also recognized that labour migration can reduce unemployment, including through remittances and skills transfers.
The meeting is also a significant milestone on the implementation of the AU Labour Market Information System Harmonization and Coordination Framework, adopted in April 2011 by the AU Conference of Ministers of Labour, and further endorsed by the Conference of Ministers of Economy and Finance before the blessing of the Assembly of Heads of States and Governments. This Framework is crafted in line with the AU Charter on Statistics and is under the joint stewardship of the Department of Social Affairs and the Department of Economic Affairs.
Allow me to underscore the importance of your work to remove an impediment to good governance of labour mobility in Africa, by quoting the Joint Programme:
“A major constraint is absence of reliable, accurate and comprehensive data on labour migration, on migrant workers as well as on labour markets. Existing data is primarily ‘movement’ data, at best providing some indication of stocks and flows, while there is little or no data on migrants’ skills and employment profiles, labour market participation, conditions of work, or social protection coverage.”
As a global concern, migration has prompted the new Sustainable Development Goals, under its Systemic issues, to “enhance capacity-building support to developing countries... to increase significantly the availability of high-quality, timely and reliable data disaggregated by income, gender, age, race, ethnicity, migratory status, disability, geographic location and other characteristics relevant in national contexts”.
Availability of reliable, accurate statistics on labour migration will lead to a balanced understanding of the phenomenon in the continent and a well-informed debate and policy making in an area where anxiety and xenophobia shadow the benefits of labour migration. This will permit Member States to elaborate an evidenced based, statistically supported, safe and orderly national labour migration policy, according to the Joint Programme.
Increasing global and regional economic integration has a direct impact on prospects for the movement of people. At global level, the Sustainable Development Goal calls to “Facilitate orderly, safe, regular and responsible migration and mobility of people, including through the implementation of planned and well-managed migration policies”. It is easy to foresee that the new momentum of regional integration at the level of the RECs and at continental level, in particular with the Continental Free Trade Area, will be an accelerator of the labour migration in the continent, along the line with improvements in transportation and communication.
Indeed, ECOWAS policy frameworks on free movement of persons as well as on trade and their well-working administrative procedure explain why citizen of its member states migrate more within the region than out of the region. These frameworks anticipated the above call of the Sustainable Development Agenda, though there are still rooms for improvement. Other RECs will reach this level soon and this will result in significant accelerated labour migration in the whole continent. This will be to the benefits of the continent.
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.
I am pleased that we have been able to devise an innovative and credible approach to progressively develop a labour migration data and statistics system in Africa. For a first attempt, more than 40 National focal persons were nominated by National Statistics Office of Member States. Member States actively participated in the data collection process by completing the International Labour Migration Questionnaire (ILMQ), building on ILO experience in the ASEAN region.
At this juncture of my statement, I fell honored to thank the NSOs of Member States for such a laudable engagement. We also understand that this is a kind of test requiring that over the next three days, you work on the definitions, and concepts, sources, gaps, inconsistencies, etc unveiled in the process. It is essential that, further to the validation of labour migration data gathered, you define appropriate strategies and mechanisms for improving data collection of labour migration statistics in Africa. We are grateful to Member States for permitting all of us to be proud to be among the architects of the first edition of labour migration statistics in Africa report which will be published in 2015.
As we move toward the implementation of the Declaration and Plan of Action on Employment, Poverty Eradication and Inclusive Development, the Commission seeks the active collaboration of the NSOs in Member States in view of defining national baseline to support the monitoring and evaluation process of this important policy.
The Commission will seize the opportunity of your gathering to start sharing a model of baseline which also bridges with the AU Agenda 2063 related goals and targets. In the same vein, you will also have the opportunity to be informed about the AU Minimum List of Employment and TVET Indicators which I am glad to observe that Member States have already started to use to inspire their Labour Force Survey at home.
I thank the international partners engaged in the Joint Initiative. I call upon the ILO to work with the Member States and step up its technical assistance to strengthen the national collection and analysis mechanisms for better quality labour migration statistics.
I wish you successful [deliberations] and wait for the conclusions for follow-up.
Thank you for your attention.
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New book looks at challenges and achievements of the WTO over past 20 years
The WTO marked on Day 3 of the Public Forum the 20th anniversary of its founding with the launch of a new book looking back at its two decades of achievements, its setbacks, and the challenges the organization faces in adapting to a rapidly-changing global trading environment.
Director-General Roberto Azevêdo joined former WTO chief economist Patrick Low, former U.S. Trade Representative Susan Schwab, former WTO Appellate Body member David Unterhalter, and former Deputy Director-General Harsha Singh at the book launch for a discussion on what the WTO got right, what it could have done better, and how it can remain central to the rules-based trading system.
When the WTO opened its doors on 1 January 1995, it represented more than a reform of the old GATT (General Agreement on Tariffs and Trade) system. The WTO was seen as the key pillar of a new kind of global economic order – open, inclusive, cooperative – that was taking shape in the wake of the end of the Cold War. Countries that were largely closed to the world economy for almost half a century were turning to open markets and economic integration. If the GATT was the product of a divided world, the WTO offered the promise of a more unified one.
The speakers agreed that while the WTO has faced real challenges – disappointing progress in the long-running Doha Round is a lingering and high profile reminder – the organization has lived up to these expectations of its architects – and in some ways exceeded them.
“Seen through the lens of news stories about negotiating deadlocks, street protests, and trade conflicts, public perceptions of the WTO have often been less than positive – to say the least,” said DG Azevêdo. “But if we stand back and take a broader historical view of the WTO, and its growing role in the global economy, then the reality of what has been achieved looks very different.
“Thirty-three new members – a fifth of the WTO’s membership – have joined since 1995, including major economies like China, Russia and Saudi Arabia,” he noted. “Average MFN [most-favoured nation] tariffs have been cut in half since 1995... Just as importantly, the WTO has proven effective in sustaining and strengthening economic cooperation between countries – especially during times of crisis.”
Mr Unterhalter underlined the achievements of the WTO’s dispute settlement system, which has won considerable respect through its independence, its reason-based findings, and its prudence. But he acknowledged some reforms were needed to ensure continued efficiency.
Mr Singh said the WTO’s achievements include an expanded membership and an expanded agenda, but that the organization needs to keep evolving to meet challenges such as ensuring coherence with an increasing plethora of bilateral and regional trade deals.
Ms Schwab said the WTO has scored some notable recent achievements such as the Trade Facilitation Agreement in 2013 and last summer’s breakthrough on an expanded Information Technology Agreement. The biggest challenge facing the WTO, she said, is “transcending” the Doha stalemate and forging an updated set of trading rules on issues of relevance to international commerce.
DG Azevêdo agreed that the slow progress of the Doha Round is “something we have to face up to” but “in recent years, we have delivered some very important negotiated outcomes”.
“The Bali Package of 2013 was a huge breakthrough. The plan to expand the Information Technology Agreement which was agreed in July this year was also very important.
”These agreements had a systemic impact – reinforcing the WTO as a pillar of global economic governance. And they will also have a significant economic and developmental impact. So we should seek to build on them. And of course our ministerial conference in Nairobi is just two months away.
“I want us to get into the habit of delivering, making agreements, and pushing things forward,” he declared.
The DG’s full remarks at the Public Forum book launch are available here.
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With Africa facing alarming rise in youth unemployment amid major food challenges, new report finds each offers a solution to the other
Analysis turns tables on “ticking time bomb” narrative to reveal world’s largest youth population is as important to African agriculture as seeds and soil
A hard hitting report released on 30 September 2015 warns Africa will neither solve its chronic food shortages nor its urgent employment challenges without an immediate, aggressive effort to address the series of problems holding back Africa’s under-25 population from joining the agriculture sector. The report finds that a lack of land, credit, quality farm inputs, machinery and other impediments are preventing agriculture from providing jobs on and off the farm for a youth population that accounts for about 65 percent of the African population and 19 percent of the global youth population.
The 2015 Africa Agriculture Status Report (AASR), Youth in Agriculture in Sub-Saharan Africa, was developed by the Alliance for a Green Revolution in Africa (AGRA) and launched at the African Green Revolution Forum (AGRF), which is taking place this week in Lusaka, Zambia.
The AGRA-led study is the most comprehensive report to date on the topic and finds a direct connection between two of Africa’s most pressing problems:
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the low crop yields and poorly developed agriculture businesses that have caused food production to fall behind population growth; and
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the dim employment prospects for a growing population of under-25-year-olds that by mid-century will exceed the entire population of the United States.
“A continent with such vast holdings of arable land and a large and increasingly educated young workforce should be the envy of world,” said Dr. Agnes Kalibata, president of AGRA and formerly Rwanda’s minister of agriculture and animal resources. “Instead, most Africans – including, ironically, millions of our farmers – are relying on imports to feed their families. And our growing population of young people, who should be a treasured resource for economic growth, are often labeled a ‘ticking time bomb’ for fear their lack of job prospects will generate instability.”
Trillion Dollar Potential
But Kalibata said there are numerous examples in this year’s AASR that illustrate the potential for a far more promising scenario emerging on a continent where, thanks in part to a hard-earned reduction in childhood mortality, there are now 226 million people between 15- and 24-years-old and by mid-century, there could be twice that many. Meanwhile, the World Bank sees rising incomes in Africa’s rapidly expanding urban centers, generating a consumer food market that by 2030 will be worth US$1 trillion. And many experts believe those demands could be met by farms and related agriculture business located in African rural communities that are the only rural regions in the world where the youth population is rising – and will continue to do so for decades.
The AASR concludes that “with an abundant supply of youthful labor and an increasing demand for food and farm products, African countries should be able to provide the skills and knowledge” young Africans need to realize the many business opportunities in growing, processing and selling the food African consumers demand. But as it stands, much of that opportunity is currently benefiting producers outside of Africa. Africans spend more than $60 billion on food imports each year. And on the retail side, European and US food retail giants like Royal Ahold and Walmart are moving into Africa, with their high standards for the quantity and quality of the food products they carry.
A Familiar Set of Problems that Weigh Heaviest on Young People
The report warns that Africa’s agriculture sector, which employs about 65 percent of the African workforce, faces multiple challenges that could thwart efforts to capitalize on African consumers’ growing demand for food:
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The absence of a properly defined land rights tenure system;
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A lack of capital and limited access to finance and credit;
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Inadequate supply of improved farming inputs, such as high-yielding crop varieties developed for local conditions and affordable fertilizers;
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The limited availability of new and innovative technologies, such as machinery that is appropriate for the needs of African farmers and local agriculture businesses;
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Untapped entrepreneurship skills; and
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Limited public and private sector investment in infrastructure essential to agriculture, such as transportation.
The AASR finds all of these problems, while familiar to many, weigh more heavily on young people. Therefore, overcoming them will require additional, targeted interventions focused on making agriculture a viable employment option for Africa’s youth.
But at the same time, the report finds that if African countries cannot convince youth to embrace agriculture and infuse it with their “energy, creativity, and entrepreneurial” spirit, food production is likely to falter and the sector overall will not realize its potential to become an engine of economic growth for all Africans.
“Involving the youth is both an immediate and long-term priority if the agricultural sector is to play its role in reducing poverty and ending hunger in Africa,” said Dr. Lindiwe Majele Sibanda, chief executive officer and head of mission for the Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN). “Our youth is our most valuable currency and human capital and if we do not create platforms, policies and institutions that attract and retain them in agriculture, we are creating a tomorrow that is unpredictable and challenging for the continent.”
Fighting for a Generation that Views Agriculture as “Drudgery”
The AASR analysis reveals that today, agriculture can be a hard sell for young Africans, particularly educated Africans. It points to recent research that finds that in many African countries, the more education young people receive, the less likely they are to pursue a career in agriculture. In Ethiopia, for example, only nine percent of youth say they are planning to work in agriculture. (Nigeria was an outlier, with the majority of youth taking a favorable view of agriculture, which could be evidence that aggressive efforts in Nigeria to make agriculture more attractive as a business are paying off.)
“Our analysis revealed that many young Africans seem to view farming and other food production work as drudgery,” said Dr. David Sarfo Ameyaw, the managing editor of the report and AGRA’s head of strategy, monitoring, and evaluation. “They appear deeply skeptical that there are career opportunities anywhere in the agriculture sector.”
Yet the report also unearths recommendations and promising efforts underway across Africa that address some of the biggest challenges facing youth:
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The continent holds 60 percent of the world’s uncultivated arable land, yet much of it is not accessible. There is a need for policies that can grant young people access to Africa’s significant tracts of land suitable for farming.
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A program in Egypt is giving young graduates from agriculture programs priority access to land that has been reclaimed from desert areas, along with access to credit and technical assistance.
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In West Africa, an initiative is bringing farmers and landowners together to form joint ventures to produce cocoa and divide revenue from the sales.
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Governments, development organizations and NGOs must pursue novel approaches for funding young Africans with promising agriculture business plans, like crowdsourcing, challenge funds and public-private partnerships. The report finds solutions could involve new forms of credit and financing now emerging:
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Safaricom’s “M-Shwari” service, a new banking platform that enables customers to save, earn interest and access small amounts of credit instantly via their mobile phones.
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Several countries have established special funds to provide subsidized loans and financial assistance to youth-run enterprises. They include the Botswana Youth Fund, the Kenya Youth Enterprise Development Fund, the Namibia Youth Credit Scheme, the Umsobumvu Youth Fund in South Africa (now the National Youth Development Authority), and the Youth Venture Capital Fund in Uganda.
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Africa’s youth need better education and training options if they are going to meet the demand for more modern approaches to farming and food production:
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Ndola Youth Resource Centre (NYRC), an NGO in Zambia, provides training focused on farming techniques, value-added processes, business skills and bookkeeping.
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The STRYDE project that has had considerable success training young people in Kenya, Uganda and Rwanda to start or expand agribusinesses.
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“The reality is that the potential and opportunities for youth are enormous. Agriculture can provide a reliable and lucrative source of income – from producing and selling seeds and other farm supplies, to cultivating crops themselves, to providing storage, marketing and processing services or getting involved in local, regional and international food markets,” said Dr. Sarfo.
An agricultural renaissance can be achieved on this continent and Africa’s youth are essential to bringing it about – transforming agriculture into a prosperous, income-generating and job-creating sector that will improve the livelihoods of millions of people on the continent.”
The report also sees more youth gravitating toward agriculture as the array of advanced information technology services targeting Africa’s agriculture sector make it more appealing to and more efficient for a generation keenly aware of how IT is transforming other commercial sectors. These platforms include the M-Pesa mobile payment system and the new mFarms agriculture information hub recently rolled out in Ghana – and now expanding in other countries – that connects farmers with suppliers and buyers via the Internet and mobile phone.
AGRA’s Kalibata said that ultimately, regardless of the interventions involved, the end goal is to develop opportunities in agriculture that offer young people a clear path to profitability.
“If young people see agriculture as a stagnating enterprise with no future, then no program, no matter how innovative, is likely to convince them to take a chance on farming,” she said. “But if they see their peers earning a good income from agriculture, that’s really all you need to attract their interest. We need to move forward with the policies and programs laid out in this report that can make agriculture a real business for all Africans and farmers, but particularly the youth.”
Related News
tralac’s Daily News selection: 2 October 2015
The selection: Friday, 2 October
This study evaluates the economic impact of the proposed COMESA-SADC-EAC Tripartite Free Trade Area on 26 African countries. It uses the global trade analysis project computable general equilibrium model and database to measure the static effects of the establishment of the TFTA on industrial production, trade flows and consumption in the tripartite region. The results indicate a significant increase in intra-regional exports as a result of tariff elimination, boosting intra-regional trade by 29%. Particularly encouraging is the fact that the sectors benefiting most are manufacturing ones, such as light and heavy manufacturing, and processed food. Concerns have been raised that industrial production in the TFTA would concentrate in the countries with highest productivity levels - namely, Egypt and South Africa. Simulation results suggest that these fears are exaggerated, with little evidence of concentration of industries in the larger countries. [The authors: Andrew Mold, Rodgers Mukwaya]
Currency split mooted in Africa seen opening door to inflation (Bloomberg)
As Chad President Idriss Deby calls on the nations of western and central Africa to ditch their 70-year-old currency union, the voices of opposition are growing louder. The prime minister of Ivory Coast, the largest economy in the 14-member CFA franc, says the peg to the euro helps maintain stability and attracts investors. Capital Economics Ltd. and Renaissance Capital argue it keeps inflation down. Deby has his backers, too, with an Ivory Coast opposition leader saying the currency is artificially strong and hobbles competitiveness.
Economic Monetary Community of Central Africa Financial Institutions: implementation status results report (World Bank)
Future-proofing Africa’s port terminal operations (Business Report)
The International Transport Forum Transport Outlook 2015 estimates that trade between African countries will increase by 715% between now and 2050. International freight transport volumes are also expected to grow by 200% over the same period. This is not altogether surprising as volumes of trade through port terminals have to grow to sustain economic growth, jobs and food security across Africa. Effectively this means that we, as port operators, have to look beyond the terminal gates in order to ensure the future sustainability of our operations and the local economy and that we have to take cognisance of the various challenges, including the health risks, that come with the predicted necessary expansions.
First stage of modernisation of Port of Nacala, Mozambique, almost complete (MacauHub), Rwanda set to host world's first drone port (The Citizen)
COSATU International Conference on Africa: declaration
COSATU convened this important International Conference on Africa to create a platform and space for the federation, our alliance partners, sister unions from various parts of the continent and fellow international solidarity organizations and other progressive forces to focus on the state of our continent and the imperative of its fundamental transformation. This platform was meant to harness a deeper analysis and share perspectives on the situation facing Africa in order to develop viable and sustainable alternatives. The Conference deliberated on Commissions on six interrelated topics.
South Africa’s visa regime: three perspectives
Minister Malusi Gigaba: International Students Dialogue on International Migration (GCIS)
Visa rules: SA could lose R7.5bn a year (Business Report)
Security bill threat to SA-US relations (Business Day)
US officials, anxious to repair a troubled "partnership" with SA, fear a deepening breach in relations if President Jacob Zuma signs the Private Security Regulation Amendments Bill in its present form. This is because of mandates imposed by Congress requiring the US to vote against International Monetary Fund and World Bank loans to any country found to have expropriated US property without compensation or arbitration. It would also have to deny bilateral official finance and guarantees to those countries.
Swaziland: ‘SACU’s E2.4 billion drop severe’ (Swazi Observer)
As the country is faced with the Southern Africa Customs Union revenues shock, the International Monetary Fund has called for the immediate implementation of programmes to show that government’s commitment in dealing with the challenge of continued decline in receipts. IMF Head of Mission to Swaziland Jiro Honda, who was in the country for two weeks to conduct the 2015 Article IV consultation, noted that Swaziland’s economy was faced with new challenges. Honda said specifically the recent weakening of the regional economic outlook would have adverse impacts on Swaziland through trade and financial channels.
United States helps Mozambique improve business climate (MacauHub)
The United States Agency for International Development will grant Mozambique US$1.9 million to finance a programme to improve the business climate in the country, under an agreement signed Tuesday in Maputo. Under the agreement, which guarantees funding for the programme over four years, the United States will support Mozambique in improving the business climate and public-private dialogue, policy and strategy development and technical support to the Ministry of Industry and Trade, institutional training for the competition authority and technical support for the implementation of contracts and programme and audit management.
For Zim one-stop-shop a means not an end in itself (Zimbabwe Independent)
It’s the final quarter of 2015 and it appears every stakeholder in all sectors of the economy is seized with the push to finalise the one-stop-shop investment centre. The best practices, as evidenced by how Rwanda managed to turn around its economic fortunes, have made a compelling case study not only for the East African states but also the Zimbabwean government. It is only a week since a workshop was held with the focus on establishing a one-stop-shop and as industrialists we look up to the intention with unprecedented excitement. [The author, Christopher Mugaga, is chief executive of the Zimbabwe National Chamber of Commerce]
Govt protectionist policy spurs industry revival (NewsDay)
Government policies, which have been introduced in the past six months to protect local manufacturers from cheap imports, have revived many Bulawayo companies.
Mining Investment and Governance Review (World Bank)
Through the collection and analysis of a unique and comprehensive dataset, the Mining Investment and Governance Review presents an objective assessment of the mining sector of several countries. By June 2016, MInGov will have completed and published assessments of nine countries using a consistent, measurable, comparable and actionable methodology. These country assessments will include seven in Africa, one in Latin America and one in Asia. A business and an institutional structure for the long-term development of MInGov, including funding options for the continuation in 2016 and beyond are expected to be in place at that time.
Madagascar reviews its investment policy (UNCTAD)
Policies to improve the business climate and rebuild investors’ confidence in Madagascar have been outlined in an Investment Policy Review drafted by UNCTAD and discussed at a national workshop on 10 September in the Malagasy capital Antananarivo. While emphasizing the importance of improving the legal and regulatory framework for investment, the report underlines the need to better articulate sector-specific policies to fully tap into this potential. The report also deals with means of overcoming the challenges in developing infrastructure and entrepreneurship.
Investment policy framework for sustainable development (UNCTAD)
The 2015 version of the United Nation's Conference on Trade and Development Investment Policy Framework for Sustainable Development intends to bring it up to date as regards new developments and lessons learnt since its first launch in 2012. Mobilizing investment and ensuring that it contributes to sustainable development is a priority for all countries. A new generation of investment policies is emerging, pursuing a broader and more intricate development policy agenda, while building or maintaining a generally favourable investment climate.
Mainstreaming trade into national development strategies: project update (UNCTAD)
New and responsible investments in agriculture (FAO)
A two-day national technical workshop to dialogue with key stakeholders on the principles guiding new investments into agriculture was held in Accra, from 29-30 September 2015. The workshop, the third after Tanzania and Mozambique last January and April respectively, sought to build on the outcomes of previous activities of the Pilot use of Principles Guiding New Investments in Agriculture. The Inter-Agency Working Group, made up of the FAO, IFAD, UNCTAD and the World Bank launched the programme last January to provide practical recommendations on how to operationalize principles in specific investment projects and opportunities for participatory and informed discussions on what responsible investment means in practice for different stakeholders. [Access the Mozambique, Tanzania workshop reports, presentations]
Regional African Trade Insurance: country membership programme (AfDB)
The main objective of the programme is to strengthen the capacity of the RMCs with the necessary financial resources for membership subscription in African Trade Insurance Agency to allow greater underwritten insurance cover for Africa’s private sector and socio economic development. The expected outcomes are i) Increased participation of the private sector in large scale projects through ATI facilitation; (ii) increased trade flows in Africa; and (iii) ATI attracts additional members. The project is expected to strengthen the capacity of the three countries Benin, Ethiopia and Cote d’Ivoire to join the ATI.
Statistical Capacity Building Program for Managing for Development Results: second annual work plan (AfDB)
The program is needed to address the current weaknesses in national statistical systems, which are critical for informing the development, implementation and evaluation of development policies and programs in RMCs. This is necessary for meeting the data needs of the Africa 2063 and the Post-2015 Development Agenda. The program is also needed to meet the statistical needs of Bank Group operations and to achieve development effectiveness. Improved and better statistics are critical for evidence-based decision-making and for promoting good governance and accountability in RMCs, and this project is the most appropriate solution to achieving this goal.
US, India trade battle at WTO to escalate (LiveMint)
The US has signalled its intention to escalate its ongoing trade battle with India at the World Trade Organization (WTO). Participating in a meeting of trade envoys in Geneva, the US representative indicated that Washington would press ahead with the differentiation move that would deny India trade concessions accorded to developing countries under the umbrella of special and differential treatment architecture of the WTO, the global organization dealing with the rules of trade between nations.
US proposes provision on tobacco in trade pact (New York Times)
The United States proposed this week to bar tobacco companies from using special trade tribunals to sue or threaten countries that passed antismoking laws, hoping to remove one roadblock to what would be the largest regional trade agreement in history. The tobacco provision remains tentative, but its inclusion in the 12-nation Trans-Pacific Partnership being negotiated here would be a major victory for public health advocates and could set a precedent for other trade pacts.
India signals intent on reviving EU FTA talks: German ambassador (LiveMint)
Buhari orders probe of CBN, NNPC, FIRS, NCC, Customs (Premium Times)
President Muhammadu Buhari has ordered a complete audit of all revenue generating agencies in the country as a clean up measure and to make them more efficient. Top on the list of the agencies are the Nigerian National Petroleum Corporation, the Central Bank of Nigeria, the Federal Inland Revenue Service, the Nigerian Communications Commission and the Nigerian Customs Service.
Muhammadu Buhari: 'At 55, Nigeria needs greater coherence and unity of purpose'
South Africa: new ITAC commissioners appointed (GCIS)
IMF releases 2015 Financial Access Survey Data
This week in the news
Catch up on tralac’s daily news selections for the past week:
The selection: Thursday, 1 October 2015
The selection: Wednesday, 30 September 2015
The selection: Tuesday, 29 September 2015
The selection: Monday, 28 September 2015
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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to over 300 recipients across Africa and internationally, serving in the AU, RECS, national government trade departments and research and development agencies. Your feedback is most welcome. Any suggestions that our recipients might have of items for inclusion are most welcome. Richard Humphries (Email: This email address is being protected from spambots. You need JavaScript enabled to view it.; Twitter: @richardhumphri1)
Related News
U.S.-South Africa trade spat risks $1.7 billion of exports
South Africa is fighting to retain duty-free access for exports to the U.S. worth as much as $1.7 billion a year in a dispute that pits farmers in the two nations against each other.
The U.S. is reviewing South Africa’s status as a full beneficiary of a preferential trade pact known as the African Growth and Opportunity Act, which eliminates import levies on more than 7,000 products ranging from textiles to manufactured items. AGOA, as the accord is known, was renewed in June for another 10 years, benefiting 39 African nations.
At the heart of the dispute are American chicken and cattle farmers who want South Africa’s government to remove trade restrictions imposed to protect the local industry from a flood of cheaper imports. While Trade and Industry Minister Rob Davies said on Sept. 29 that South Africa had done all it can to retain access to AGOA, the U.S. government says there are still major unresolved issues.
“South Africa needs to take concrete steps towards eliminating barriers to U.S. trade and investment, a key criterion to be eligible for AGOA trade benefits,” Trevor Kincaid, a spokesman for the office of the U.S. Trade Representative in Washington, said in an e-mailed response to questions on Wednesday. “Ultimately, South Africa’s AGOA eligibility is in South Africa’s hands.”
No sooner had the two countries reached an agreement over American chicken imports to South Africa in June, a new dispute emerged relating to import restrictions following an outbreak of avian flu in the U.S. Veterinary experts from the two nations met last month to discuss health concerns around the shipment of chicken, beef and pork to South Africa.
The risk of South Africa losing its AGOA benefit is not “based so much on the realistic assessment of the value of the South Africa market, it’s more about politics in America,” Christopher Wood, a researcher in the economic diplomacy department at the South African Institute of International Affairs, said by phone from Johannesburg. “The chicken caucus within the U.S. Congress is particularly strong.”
Kevin Lovell, chief executive officer of the South African Poultry Association, said by phone on Wednesday he expects the U.S. government and farming industry to “adopt a more equitable and reasonable approach.” The U.S. embassy in Pretoria said on Sept. 16 that eliminating barriers on American poultry and beef exports will address concerns raised by the industry.
AGOA has enabled South Africa to more than double its exports to the U.S. since 2000. Shipments under AGOA accounted for more than a fifth of the nation’s exports to the U.S. last year, according to data compiled by the Tralac Trade Law Centre, based in Stellenbosch, near Cape Town.
Agriculture products and vehicles, such as the BMW 3-Series manufactured at Bayerische Motoren Werke AG’s plant at Rosslyn outside the capital, Pretoria, benefit the most from the trade accord. Transportation equipment made up 75 percent of South Africa’s $1.7 billion shipments under AGOA to the U.S. in 2014, the Tralac Trade Law Centre’s data shows.
Eliminating Barriers
To remain a beneficiary of AGOA, African countries are required to, among other things, eliminate barriers to U.S. trade and investment, operate a market-based economy, protect workers’ rights and implement economic policies to reduce poverty.
South Africa is accused of restricting U.S. businesses with plans to cap foreign ownership of private-security companies at 49 percent. If the law is passed, ADT Corp., based in Boca Raton, Florida, will be required to relinquish control of its South African unit.
African nations that no longer qualify as beneficiaries under AGOA include the Democratic Republic of Congo, Gambia and South Sudan. Swaziland lost its access in January because of an alleged lack of protection of workers’ rights, while Zimbabwe and Sudan aren’t eligible.
“South Africa is the key player under AGOA and neither side would want to see South Africa graduated out of the program – the economic and political fallout would be big,” Eckart Naumann, an independent economist and associate at the Trade Law Centre, said in an e-mailed response to questions. “There is a decent chance that South Africa may just scrape through.”
Related News
Future-proofing Africa’s port terminal operations
Economic growth prospects for Africa over the next 50 years present both opportunities and challenges for port terminal operators, writes Transnet Port Terminals chief executive Karl Socikwa.
The International Transport Forum Transport Outlook 2015 estimates that trade between African countries will increase by 715 percent between now and 2050. International freight transport volumes are also expected to grow by 200 percent over the same period. This is not altogether surprising as volumes of trade through port terminals have to grow to sustain economic growth, jobs and food security across Africa.
Effectively this means that we, as port operators, have to look beyond the terminal gates in order to ensure the future sustainability of our operations and the local economy and that we have to take cognisance of the various challenges, including the health risks, that come with the predicted necessary expansions.
Our challenge is to sustainably support growth in trade between African countries as this will have a significant impact on the environment with shipping-related emissions in ports predicted to increase by the same percentage. That is if shipping companies, port authorities, freight companies and terminal operators continue with business as usual.
It is only once terminal operators and city management start working more closely together that we will find solutions. The danger is real. Increased emissions have the potential to severely impact the lives of people around port cities.
Health dangers
In fact it is estimated that shipping-related particulate matter emissions in port cities are responsible for about 60 000 cardiopulmonary and lung cancer deaths annually around the world. Most deaths occur near the main shipping hubs in Europe, east Asia and south Asia.
It is therefore vital that any future terminal investment in Africa has to take these factors into account, especially as most of the major ports on the continent are in close proximity to city centres and residential areas. The harbours of Cape Town, Durban, Maputo, Dar es Salaam, Mombasa, Luanda and Abidjan are all good examples.
South African ports have taken this challenge to heart and in the long-term modernisation of the terminal infrastructure and operating systems will help to reduce emissions per ton of cargo moved. Not only is modern equipment more energy efficient, it is also more productive. This reduces the time that vessels spend in port – or waiting in the roadstead, which in turn reduces emissions as these vessels contribute to the emissions from the ports.
It is vital that shipping companies also do their part to continue to reduce the emissions through the introduction of new, more energy-efficient vessels or the retrofitting of older vessels. However, noise pollution remains a very real consideration too as the cumulative effect of more trade will be that the terminals have a greater impact on the air quality, noise levels and traffic congestion in the port cities in which they are situated.
If you want to see the affect of trade on a port city you need only look at the effect it has on that city’s traffic. With a few notable exceptions and for historical reasons most of the major ports in Africa have no direct road access from a highway because the cities were developed around the ports. City authorities are now left with the challenge of creating routes for trucks through city streets that were designed and built long before the container era. Add to that the huge growth in the African middle class and vehicle ownership across Africa, which has created an additional load on the road infrastructure, and traffic congestion, noise pollution and carbon emissions on Africa’s roads become a real concern.
According to figures generated by the European Commission this year, more than two-thirds of transport-related greenhouse emissions are from road transport. In contrast, rail contributes 0.6 percent and maritime operations contribute 13.9 percent of transport-related emissions. As a continent, we therefore have to focus on rail transport and short sea shipping solutions in order to support intra-African and global trade growth.
There are no easy (or low-cost) solutions. In the short term, local authorities can upgrade the access road infrastructure where this is physically possible. A more lasting solution is to place freight on rail – either from source or at a dry inland feeder port, such as the Kano dry port outside Lagos. Or a new harbour can be built.
There are already quite a few good examples on our continent: Kenya is building the port of Lamu north of Mombasa, Nigeria is building the Ibaka deep-sea port. Here in South Africa we have Ngqura and there are plans for a second port in Durban.
Increased efficiency
However, as we have seen, new ports do not automatically take all the freight from the old harbours. Without Ngqura the South African terminal system would have struggled to cope with the existing levels of trade, despite the global downturn since 2008. If the International Transport Forum is right and Africa will enjoy an average 20 percent growth in trade a year – then as a continent we will need both the new and old terminal operations to keep up with the demand.
This brings us as terminal operators back to thinking outside the terminal gates. We can only be as green and efficient as the economic and logistics systems that we support. Moving freight through the terminal gates more efficiently is one of the challenges. Another is power. According to a report the World Bank released in 2013, African manufacturers experience power outages on average 56 days a year. Terminal operators are also affected by this – which results in delays and raises the cost of doing business with Africa.
As one of the biggest power users in any port city terminal operators can, however, make a difference. Decisions on the procurement of new equipment should be guided by the energy efficiency of the machinery. An immediate benefit to the terminal operator is reduced power costs. By reducing demand on the power grid we also help keep the local economy moving, and lights burning in the homes of local South Africans. Modern ship-to-shore gantry cranes such as those installed recently by Transnet Port Terminals can also feed power back into the grid.
So, the good news is that trade through Africa’s sea terminals is going to grow, and that as an industry and society we have the solutions to reduce the environmental impact of that growth along the entire logistics value chain – which in the majority of cases starts or finishes at the port terminal. All that is required is for terminal operations to be fully integrated into the fabric of the cities and regions they serve.
Karl Socikwa is the chief executive of Transnet Port Terminals. The company has a staff complement of more than 6 000. For more information, visit www.transnetportterminals.net.
The views expressed here do not necessarily reflect those of Independent Media.
Related News
The dark side of globalization: Fighting illicit trade to safeguard integrity across economies, markets, and supply chains
Illicit Trade: fighting money laundering in international trade
Remarks by David M. Luna, Senior Director for National Security and Diplomacy Anti-Crime Programs, Bureau of International Narcotics and Law Enforcement Affairs, at a Working Session at the WTO Public Forum 2015 in Geneva
Good morning.
It is an honor to participate at this year’s Public Forum (“Trade Works”) under the auspices and leadership of the World Trade Organization (WTO). I would also like to thank the Government of Colombia for hosting our panel discussion this morning on how illicit trafficking globally harms international trade.
But first, I would like to congratulate the WTO for celebrating its 20th anniversary in 2015 and for its commitment over the years in helping to build and strengthen the rules-based global trading system. I very much agree that global trade has helped to boost growth markets, lift people out of poverty, increase access to goods and medicines, and in many ways, helped to promote “cultures of integrity” across economies, markets, and supply chains.
In that regard, I also want to congratulate the WTO and its members for the historic accomplishment of concluding the Trade Facilitation Agreement. And, like others have already done, I would urge all WTO Members to ratify the TFA as soon as possible. One of the reasons the TFA is so important is its recognition of the critical importance of risk management, of prioritizing and facilitating the flow of legitimate trade – the vast majority of trade. This has the critical effect of helping to focus scarce customs resources on detecting and stopping illicit trade. In a globalized world, where criminals are well-networked and organized, we should be too. Ensuring that we have the tools to counter such activities is more important than ever.
As Moises Naim underscored in his well-known book Illicit, “Global criminal activities are transforming the international system, upending the rules, creating new players, and reconfiguring power in international politics and economics.”
In too many places around the world, including in developing countries, criminals have built great empires on dirty money and laundered funds to infiltrate and corrupt government institutions. In this shadowy, illegal economy traffickers and narcotics kingpins act as CEOs and venture capitalists while they build their empires of destruction, jeopardizing public health, emaciating communities’ human capital, eroding our collective security, and destabilizing fragile governments.
Just to give you a snapshot of the breadth and scale of these illicit markets, various international organizations estimate the illegal economy accounts for 8 to 15 percent of world GDP, and in many developing countries, it may account for higher percentages in their economies. The WTO estimates that the value of counterfeit and pirated goods alone is equivalent to some 7% of the world’s merchandise.
This darker side of global trade is thriving with hundreds of billions of dollars in illicit commerce that includes trafficking in narcotics, persons, endangered wildlife, illegally-logged timber, counterfeit consumer goods and medications, hazardous and toxic waste, stolen antiquities and art, illicitly-traded cigarettes, and other illicitly-traded goods and commodities.
Simply put, illicit trade is an obstacle to shared prosperity, by breeding corruption and siphoning capital and human resources away from productive economic activity.
As societies grapple with insecurity and instability, illicit trafficking and corruption further decay any remaining sustainable pillars for development when governments cannot afford to provide vital public security and law enforcement because revenue streams from legitimate commerce are being siphoned away by corrupt officials, smugglers, and criminals.
Countries are also losing their human capital and economic potential when young men, women, and children are kidnapped, trafficked, exploited, or even murdered by a web of criminality and corruption.
Thus, the societal harms and impacts posed by illicit trafficking are very real.
Corruption helps to fuel this and enriches not only those bad actors and illicit networks behind today’s illegal economy but also enables corrupt police, customs, judicial, and other security officials who protect criminals and allow them to carry out their illicit trade.
I would also note that corruption contributes to slower growth, reduced foreign investment, and lower profits.
The OECD Task Force on Charting Illicit Trade, which I chair, is working on advancing international public-private partnerships and regional dialogues that help inform communities on the harms and impact of illicit trade. In joining this week’s Public Forum discussion in Geneva, I firmly believe that when the OECD, WTO, APEC, ASEAN, the United Nations, Interpol, leadings NGOs, and many other partners join forces, we can make a significant difference through collective action. Together, we can help impacted communities to combat the dark side of global trade and related corruption and money laundering.
We must continue to strengthen cross-border cooperation to tackle illicit trade and increasingly inter-connected global challenges, and help communities to fully seize the benefits of open trade to achieve great sustainable development and security. Of course, such cooperation should not impede the rules of the global trading system, but rather be consistent with them.
Pursuant to the questions posed to this panel, and in terms of pragmatic ideas and ways that we can devise strategies to confront these menaces. Coordinating international expertise in the quantification and mapping of illicit markets is a first step. This will enable a fuller understanding of the connections between different forms of trafficking. Concurrently, we need to support the experts in their analyses public policies that successfully increase economic and societal resilience to this threat. Then, we need to isolate elements of successful polices that can be disseminated to share with and emulated by other communities.
Moreover, to mitigate this global risk, public and private sector decision makers need a firmer grasp on the magnitude and nature of its impacts on economic activities, and a clearer understanding of the conditions that enable it. This can help to inform effective policy strategies and operational partnerships between the public and private sectors. The OECD TF-CIT will soon release a state-of-play report on the some of the global scale and impacts of illicit trade.
Additionally, in 2015-2016, the activity of the TF-CIT will continue to focus on:
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Mapping the economic activities of transnational criminal networks, by gathering data on volume and flow of illegal trades and agreeing to common methodological approaches;
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Examining the conditions and policies that encourage or inhibit different sectors of illegal trade, whether at the level of production, transit, or consumption;
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Developing visualization tools to help public and private sector decision makers better target prevention and mitigation efforts in strategic markets; and embarking on campaigns to educate communities not to “buy into organized crime,” taking the profits away from criminals and protecting the public’s health and safety; and
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Partner across borders through our regional dialogues including those that have taken place in Mexico, Thailand, and the Philippines, and meetings that we are keen to have in the Middle East, Europe, and Southeast Asia. We are partnering with INTERPOL, World Customs Organization (WCO), UNODC, International Chamber of Commerce (ICC), APEC, ASEAN, European Union, and many others.
Truly, the illegal economy poses an existential threat when it begins to create criminalized markets and captured states, which launches a downward, entropic spiral towards greater insecurity and instability.
The United States will continue to enhance international cooperation with key partners to combat the lethal nexus of organized crime, illicit trade, corruption, and money-laundering, and to protect communities from the violence, harm, and exploitation wrought by transnational threat networks. We will do this by enhancing our efforts to: break their corruptive power; attack their financial underpinnings; follow the money and strip them of their illicit wealth; and severe their access to the financial system.
At a time when global risks are growing and converging, the international community must come together and build our own “network of networks” to better understand the current and future turbulences of our world, and to coordinate responses and action.
Global trade, foreign investment, and economic development do create wealth and prosperity and finance economic freedoms around the world.
We must be vigilant, however, to secure these gains of globalization. Efforts to combat illicit activity should not create new barriers to legitimate trade. We must continue to shut down the illegal economy and criminalized markets, put criminal entrepreneurs and illicit networks out of business, and facilitate legitimate trade and enhance integrity across economies, markets, and supply chains.
That is why the WTO Trade Facilitation Agreement is so important. The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.
Beyond ratifying and implementing the TFA, countries should look to adopt international standards, best practices, and norms on criminalization, including those contained in the Financial Action Task Force (FATF) recommendations to combat money laundering and terrorist financing, and the UN Conventions against Transnational Organized Crime (UNTOC) and against Corruption (UNCAC) to reduce barriers to trade. As noted earlier, because criminals re-invest their illicit profits into other forms of organized crime and in the real economy, combating money laundering, and tracking and confiscating illicit funds are critical.
In closing, illicit trade harms the global trading system that the WTO and its members have worked so tirelessly to build.
If we do not work together, we will collectively destroy our chances of achieving a sustainable future for our children and grandchildren, lifting even more people out of poverty, and helping communities create a better world.
If we do, we can advance trade security as a powerful instrument to more smartly achieve these noble goals.
Thank you.
Related News
Reforms of International Investment Agreements should promote sustainable development goals
Speakers at the UNCTAD 62nd Trade and Development Board said that international investment agreements must preserve States’ abilities to adopt policies that support the SDGs. A better balance between the rights and obligations of investors and host States are needed, as are improved arbitration mechanisms.
Consensus among policymakers is that the international investment regime needs reform, asserted UNCTAD Secretary-General Mukhisa Kituyi during a roundtable discussion on 16 September 2015. The questions that remain, he explained, concern the extent of the reform and how best to implement it.
The discussion brought together representatives of governments, international organizations, academia and civil society. All agreed with Dr. Kituyi on the urgent need for reform, especially in light of the new global development agenda. Concerning the “what” and the “how” of reform, while different approaches have been adopted, the speakers concurred on the need to strike a better balance between the rights and responsibilities of foreign investors and host countries and to seek improved procedures, including alternative mechanisms to settle investment-related disputes.
Achieving the Sustainable Development Goals (SDGs) will require a surge in international investment, including private investment. This is because, according to UNCTAD estimates, an annual investment gap of US$ 2.5 trillion exists in key sectors in developing countries. But for private investment to support the SDGs, the discussion pointed out, international investment agreements (IIAs) must not limit governments’ right to regulate in areas related to the goals, such as environmental protection and public health. International Investment Agreements must go beyond simply promoting investment, they must foster sustainable development.
James Zhan, Director of UNCTAD’s Division on Investment and Enterprise, explained that in addressing the challenges as highlighted by Secretary-General Dr. Kituyi, UNCTAD has formulated the Investment Policy Framework for Sustainable Development to guide a new generation of investment policy making, and an Action Menu for reforming the existing investment treaty regime, which consists of nearly 3,300 international investment agreements (IIAs). These policy tool kits are now used by policy makers and treaty negotiators worldwide.
The extensive scope of the provisions is accompanied by an arbitration system that lacks transparency and legitimacy, according to several speakers.
Nathalie Bernasconi-Osterwalder, from the International Institute for Sustainable Development, called for the creation of an institutional mechanism at the regional or multilateral levels that would be detached from any one specific investment treaty. More importantly, she explained, it should allow for the participation of a wider array of affected or interested stakeholders and deal with issues raised by affected persons or communities.
The speakers commended UNCTAD for the 2015 World Investment Report, which, they said, offers an action menu for implementing investment reform, providing tools and options for countries to use to find their own way and approach for reform. They concluded by saying that they expect UNCTAD to continue to play a leadership role in this ongoing debate.
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20 years on, negotiators reflect on breakthrough talks on intellectual property and trade
WTO Director-General Roberto Azevêdo launched a new publication entitled “The Making of the TRIPS Agreement: Personal Insights from the Uruguay Round Negotiations” on Day 2 of the Public Forum on 1 October 2015.
He highlighted that the WTO’s TRIPS (trade-related aspects of intellectual property rights) Agreement introduced substantive and comprehensive disciplines on IP rights into the multilateral trading system and that it has impacted deeply on national IP regimes around the world – with the most significant changes experienced in developing economies.
“The Making of the TRIPS Agreement”, co-edited by Jayashree Watal and Antony Taubman, presents for the first time the diverse personal accounts of the negotiators of this unique trade agreement. Their rich contributions illustrate how different policy perspectives and trade interests were accommodated in the final text, and map the shifting alliances that transcended conventional boundaries between developed and developing countries, with a close look at issues such as copyright for software, patents on medicines and the appropriate scope of protection of geographical indications.
In launching the publication, DG Azevêdo said:
“This book is not just one for IP specialists; and it is not meant to be a book about the law of TRIPS. Instead, by describing the practical process of the making of the Agreement, and by explaining the working methods and negotiating techniques that were developed – or often improvised – it offers real insights.
“I think these insights are valid even today for those who wish to learn how such a potentially divisive subject could be negotiated to a successful conclusion. It therefore offers a rare insider’s account of the craft of international negotiations.
“The insights in this volume are not only of deep historic interest – they will also serve as an inspiration for success in future negotiations in other such complex and sensitive areas.”
His full speech is available here.
In the book, the contributors share their views on how intellectual property fitted into the overall Uruguay Round, the political and economic considerations driving TRIPS negotiations, the role of non-state actors, the sources of the substantive and procedural standards that were built into the TRIPS Agreement, and future issues in the area of intellectual property.
In probing how negotiations led to an enduring agreement that has served as a framework for policymaking in many countries, the contributions offer lessons for current and future negotiators. The contributors highlight the enabling effect of a clear negotiating agenda, and underscore the important, but distinct, roles of the Chair, of the Secretariat and above all, of the negotiators themselves.
Speaking at the launch, Antony Taubman said that “TRIPS has been proven to be an unexpectedly resilient and effective framework for balanced, good governance in the IP domain. The negotiations have shown us the benefits of taking an intellectually curious and inclusive approach to learning about technical issues under negotiation – an approach that is all the more valuable today as we seek together to learn from diverse experience working with TRIPS in over 130 jurisdictions”.
Jayashree Watal added: “The book makes no claim to present the authentic negotiating history of the TRIPS agreement, nor a guide to interpretation of its provisions. It merely presents as its title says – personal insights – from those who were involved in the negotiations.”
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TTIP and beyond: EU trade policy in the 21st century
Trade Commissioner Cecilia Malmström spoke on the future of Trade policy at New York’s Columbia University on 25 September. She called for a trade policy based on economic effectiveness and broader responsibility. Agreements like TTIP should address today’s economic issues, like services and digital trade. They also need to respect values like a high level regulatory protection and sustainable development.
I’m delighted to join you today.
Columbia Law School and the School of International and Public Affairs are both top class departments at a global level. So I’m looking forward to our discussion.
But I hope you’ll indulge me for a few moments so I can give you a sense of some of the issues we are dealing with in EU trade policy.
The title of this event is, “TTIP and Beyond: EU Trade Policy in the 21st Century.”
It gives a pretty accurate picture of my work at the moment.
Because in the public debate in the European Union today, trade policy is almost synonymous with the Transatlantic Trade and Investment Partnership.
And that’s understandable. But of course TTIP is in fact just a part – the biggest part but a part nonetheless – of our wider efforts on trade.
We are using a full range of trade policy tools to boost our economy and help us adapt to a changing world. We are working on more than 20 agreements with more than 60 countries across the Americas, Asia and Africa.
So I’d like to also give you a flavour of the “Beyond” part our trade agenda as well.
And I’d like to do that by looking at trade policy’s two biggest challenges: effectiveness and responsibility.
By effectiveness I mean that trade policy needs to work. To do that we must adapt to economic realities.
Trade is no longer just about finished products. Through global value chains, trade and investment have become part of the production process itself.
Some experts do argue that the growth of these chains has slowed in recent years. That may be cyclical or it may be permanent. It’s too soon to say.
But either way the linkages that have been forged in recent years require us to adapt. If we want to be competitive we have facilitate this value chain trade.
Trade policy also needs to take account of changes in the nature of cross-border flows. In the past, goods were far and away the most significant component. They are still vital.
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But we now also need to look at services – from transport, to finance, to technical support.
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We need to address investment.
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We need to address the rise of the digital economy, which means data flows also need to be part of the equation.
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We need to deal with the fact that people often now need to cross borders in order for trade to happen.
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And trade policy also needs to adapt in order to broaden the base of companies that take advantage of trade agreements. 30% of European exports are by small and medium sized enterprises or SMEs. But it’s still true that most SMEs don’t export. We have room for improvement.
What are we doing about these facts?
The best way to facilitate value chain trade is multilateral trade liberalisation through the World Trade Organisation. It caters for the fact that inputs may cross multiple borders multiple times:
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The EU is working hard with the US and others to deliver a result at the Nairobi Ministerial Conference at the end of the year.
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We are also making progress on a range of targeted negotiations with groups of WTO members on issues like information technology equipment, services and green goods.
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And we know we need to start thinking about what happens after the Doha Round is finished as well.
But we also need to keep multilateralism in mind when we negotiate our bilateral and regional free trade agreements.
TTIP is a particularly good example. It covers around 40% of the global economy already.
It is also important because it is ambitious.
Our aim is an advanced set of rules on issues like state-owned enterprises, localisation requirements, raw materials and energy. We are also trying to break new ground in international regulatory cooperation – in general and for 9 specific sectors including pharmaceuticals, cars and cosmetics.
The results of these efforts could serve as models for future global solutions to these issues. So through the bilateral we are preparing the ground for future multilateral work.
Moreover, an ambitious TTIP outcome on issues like services, digital trade and mobility, would help set precedents for tackling these issues in a way that fits with today’s economic realities. And TTIP will be the first agreement where the EU negotiates dedicated provisions to help SMEs benefit as much as possible.
TTIP should be our most ambitious agreement but in all the EU’s free trade agreements we seek to be as ambitious as possible – to make sure they are adapted today’s realities – and that they work. Our agreement with Korea has helped EU exports rise by more than 50% since it entered into force. Our 3 recent deals with Canada and Vietnam are also ground-breaking in different ways. That’s how we mean to go on.
We also need to think collectively about how bilateral agreements relate to each other. One example of where we’ve done this in is Latin America. We’ve had an agreement in place with Colombia and Peru for several years. And last year we reached a political deal with Ecuador that would allow it to accede to that agreement. That’s something we may wish to look at for other agreements as well, including, potentially, TTIP.
The second theme I want to talk about is responsibility.
Trade will always be fundamentally an economic policy. But it is not an island. The choices we make about trade must reflect our values.
This is not just an abstract wish. Over the last two years the public debate around trade policy has intensified – and not just in Europe. Much of the concern is essentially a call to greater responsibility.
Policy makers in democratic systems have to listen to that debate, understand it and respond to it.
Here again TTIP is at the forefront, not least because – in Europe at least – it is the most controversial.
I see this debate as an opportunity to look hard at some of our approaches and update them where needed.
One issue is about the way we negotiate. When trade deals cover issues like regulation on safety, health and the environment, people need to trust that we are not lowering standards.
If we want their trust we need to be more open. That’s why the EU now publishes our TTIP negotiating proposals on these issues. And why we are now assessing whether to apply this to other negotiations as well.
Responsibility is also about substance. For example, investment protection is one of the most intense issues in the TTIP debate in Europe.
There is considerable concern about the possibility for investors to take cases against governments.
The Commission listened to the debate in civil society and among national and European political representatives. We have – just last week – published our proposals for a new system.
We believe it keeps what is good about investment protection – it reduces risk and therefore encourages job-creating investment.
But it also makes clear that governments can make policy in the public interest.
And it turns an arbitration system that needed reform into a transparent courts system that citizens can trust.
This new approach – once agreed within the EU – will also serve as the basis for our investment deals in the future. So here again we have a result from TTIP that has wider impacts.
There is a second strand to the public debate on responsibility in trade – less linked to TTIP but no less important. And that’s the fact that consumers today are more concerned about the social and environmental footprint of the products they buy from abroad.
That is good news, as far as I’m concerned. Trade – like any other international policy – should help put our principles into practice. That goes for development of poor countries, human rights, labour rights and protecting the environment.
Trade policy makers around the world have increasingly come to this view in recent decades. The EU has also played its part:
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We offer advanced preference schemes for developing countries and free access for the products of least developed countries.
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We have also concluded a series of Economic Partnership Agreements with developing countries in Africa, the Caribbean and Pacific.
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Along with our Member States, we are the most significant provider of the Aid for Trade that helps countries take advantage of these opportunities.
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And the sustainable development rules of our free trade agreements encourage countries to respect the core conventions of the International Labour Organisation and the key international conventions.
I believe we need to do more.
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For example, we should have ambitious provisions on labour and the environment in TTIP…
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We should give more support to fair and ethical trade schemes…
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And we can do more to promote responsible supply chain management by companies.
The Commission will be talking about these and other issues in a new trade strategy document released very soon.
I hope this gives you an overview about the issues facing trade policymakers.
Resolving them will require hard work and political will from Europe and our partners around the world.
It will also need creative thinking, not only from within government but also the academic community.
So, no pressure but I hope to hear some of those from you today! Thank you.
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tralac’s Daily News selection: 1 October 2015
The selection: Thursday, 1 October
Entering uncharted waters: El Niño and the threat to food security (Oxfam)
Millions of poor people in Southern Africa, Asia and Central America face hunger and poverty this year and next because of droughts and erratic rains as global temperatures reach new records, and because of the onset of a powerful El Niño – the climate phenomenon that develops in the tropical Pacific and brings extreme weather to several regions of the world. The combination of record warmth one year followed by an El Niño the next is unique and the climatic implications are uncertain. If 2016 follows a similar pattern, we are entering uncharted waters.
Perhaps the greatest problems may occur in Southern Africa. The annual rains across Southern Africa are notoriously fickle and in addition, borderline El Niño conditions were prevalent by late last year. The rains that fell from October/November 2014 through to February 2015 were very erratic, starting a month or more late, and then from mid-December through January 2015, they were extraordinarily heavy and brought unusually extensive flooding to southern Malawi and northwest Mozambique. Zimbabwe suffered particularly poor rains. [The author: John Magrath]
Can intra-regional trade act as a global shock absorber in Africa? (Africa at LSE)
Several important issues remain for future research. First is gaining a better understanding of the relationship between regional integration and intra-regional trade and how to strengthen multilateral trade ties. Our results should not be interpreted as support for regional integration via preferential regional trade agreements at the expense of multilateral trade. Second, we have focused on the transmission of shocks from the advanced economies to Africa, leaving the impact of shocks in emerging markets on Africa to further investigation. Finally, future research could examine channels through which intra-regional trade facilitates diversification and integration of African RECs into global value chains. [The authors: Zuzana Brixiová, Qingwei Meng, Mthuli Ncube]
Informal trade flows in the EAC (Global Trade Review)
Speaking at GTR’s East Africa Trade & Commodity Finance Conference, Ecobank’s head of group research, Edward George, surmised that informal trade represents 30 to 40% of the EAC’s trade flows, affecting the competitiveness of the region’s formal traders. In this excerpt from his presentation, he questions who and what is driving this illicit activity and what hopes East Africa has for the future of trade.
Unlocking the trade potential of a continent on the move (Africa Outlook)
With a potential slowdown in China refocusing attention on SSA’s future growth and trading partners, Barclays has studied trade openness and market opportunity across SSA to provide a comparative perspective on the opportunities ahead. The research demonstrates: [The author, John Winter, is Barclays’ Corporate Banking CEO]
Business and the Sustainable Development Goals (Business Fights Poverty)
South Africa: August 2015 merchandise trade statistics (SARS)
The R9.95bn deficit for August 2015 is due to exports of R87.63bn and imports of R97.58bn. Exports decreased from July 2015 to August 2015 by R5.45bn (5.9%) and imports increased from July 2015 to August 2015 by R3.38bn (3.6%). The cumulative deficit for 2015 is R36.27bn compared to R69.94bn in 2014. Africa trade surplus: R15 330 million – this is a 6.9% decrease in comparison to the R16 464 million surplus recorded in July 2015. Trade statistics with the BLNS for August 2015 recorded a trade surplus of R9.12 billion.
US-South Africa trade dispute risks $1.7bn of exports (Bloomberg)
“South Africa needs to take concrete steps towards eliminating barriers to US trade and investment, a key criterion to be eligible for AGOA trade benefits,” Trevor Kincaid, a spokesman for the office of the U.S. Trade Representative in Washington, said in an e-mailed response to questions on Wednesday. “Ultimately, South Africa’s AGOA eligibility is in South Africa’s hands.”
Congressmen bewail SA’s trade ‘barriers’ (Business Day)
New AGOA apparel quota cap for 2015-2016 announced (AGOA.info)
DTI to lead an outward selling and investment mission to Zambia (Cape Business News)
The Department of Trade and Industry will lead a delegation of 38 business people to participate on an Outward Selling and Investment Mission to Zambia. The mission will take place from 6-8 October 2015 in Lusaka, Zambia. “Trade between South Africa and Zambia has increased from over R15bn in 2011 to more than R28bn in 2014. South Africa is Zambia’s main trading partner in the Southern African Development Community region, whilst Zambia is South Africa’s fourth trading partner,” says Davies.
Zimbabwe: Dairy producers want duty on inputs scrapped (NewsDay)
Dairy producers have called on government to scrap import duties on inputs which are not locally available to ensure that prices of final products are competitive in the region. Dendairy director Daryl Archibald told a delegation from the Office of the President and Cabinet (OPC) which toured the company’s Kwekwe plant on Tuesday that Zimbabwe’s milk products were failing to compete locally because of the heavy duty imposed by the Zimbabwe Revenue Authority on inputs such as packaging and other machinery imported by dairy companies. “If the government wants us to just produce for the local market it’s fine, but if we have to go into exports, we ask that they do not charge any duty on any product that is not available locally because even duty of 5% would make us lose the market to South Africa in the region,” he said.
Formalisation of informal economy (NewsDay)
Malawi to implement new visa regime from October 1st (StarAfrica)
Malawi through its Immigration Department will start implementing its new visa regime from 1st October whereby all foreign nationals will require to pay visas fees ranging from $50 to $100 to enter the Southern African country. Minister of Home Affairs and Internal Security, Jean Kalirani told reporters in the capital Lilongwe on Tuesday that the new regime is required from nationals of all countries except Southern African Development Community (SADC) countries except Angola, Common Market for Eastern and Southern Africa (COMESA) countries, diplomats and government officials. “Nationals from all countries that do not require Malawian nationals to pay visa fees when travelling to such nations will not pay to enter Malawi,” she added.
Falling import demand, lower commodity prices push down trade growth prospects (WTO)
WTO economists have lowered their forecast for world trade growth in 2015 to 2.8%, from the 3.3% forecast made in April, and reduced their estimate for 2016 to 3.9% from 4.0%. These revisions reflect a number of factors that weighed on the global economy in the first half of 2015, including falling import demand in China, Brazil and other emerging economies; falling prices for oil and other primary commodities; and significant exchange rate fluctuations. Trade growth remains uneven across countries and regions as illustrated by Chart 2, which shows WTO merchandise trade volume indices by geographical region.
More collaboration is needed to ensure the benefits of trade are enjoyed by all, panellists agreed at the plenary debates of the WTO’s 2015 Public Forum on 30 September. The need for multilateral cooperation among governments was highlighted in the opening plenary debate while the importance of public-private sector dialogue was underlined in the afternoon debate on making trade work for business. [The Forum www]
WTO accessions and trade multilateralism: case studies and lessons from the WTO at Twenty (WTO)
Ethiopia: IMF concludes 2015 Article IV Consultation (IMF)
Noting a softening of export activity, Directors recommended more decisive action to strengthen the business climate and enhance external competitiveness. Greater exchange rate flexibility, less burdensome regulation, and easier private sector access to credit and foreign exchange would be steps in the right direction. Opening some strategic sectors to foreign investment could also improve the provision of critical services.
Bullish Ethiopia and Djibouti agree on $1.55Bn pipeline; Kenya’s LAPSSET has reason to worry (M&G Africa)
Germany commits 37 million Euros to support regional integration in East Africa (EAC)
Delivering on the promise: Leveraging natural resources to accelerate human development in Africa (AfDB/Gates Foundation)
In the light of these challenges, this report makes three fresh contributions on how to leverage oil, gas, and mineral resources to accelerate human development progress in Africa. First, it provides a broad estimate of the possible magnitude and timing of potential new extractives revenues in Ghana, Liberia, Mozambique, Sierra Leone, Tanzania, and Uganda – six countries that have recently discovered significant oil, gas, or mineral resources. Second, it presents a practical policy framework for helping governments to better link their revenue management decisions to their human development agendas. Third, it highlights ways to leverage extractives companies’ direct spending, including procurement and employment throughout the lifecycle of extractives projects, to ensure businesses and individuals are ready to harness the benefits. [Download]
This research was inspired by a major conclusion of the 2013 African Economic Outlook on natural resources and structural transformation. The Outlook’s cross-country analysis stated that, while dependence on natural resources poses serious challenges, natural resource abundance is associated with positive outcomes such as long-term growth. By analysing the correlations among export diversification patterns of unprocessed, semi-processed and finished goods, this paper indicates that broadening the array of exported unprocessed commodities is a good predictor of higher manufacturing diversification. And, it is sometimes a first step towards industrialisation for many poor countries. This important conclusion makes a compelling case for inviting more low-income countries to join the OECD Development Centre’s ongoing Policy Dialogue on Natural Resources.
ALSF catalysing Uganda’s extractive resource sector (AfDB), Tanzania: New database launched for openness in gas, oil sector (The Citizen), Commodity exporters facing the difficult aftermath of the boom (IMF)
UN Office for Coordination of Humanitarian Affairs migration debate (UN News Centre)
As the world confronts the biggest refugee and migration crisis since the Second World War, Secretary-General Ban Ki-moon convened a high-level meeting on the issue and outlined eight guiding principles to improve preparedness.
Malaysia ramping up in Africa (Institute of Southeast Asian Studies)
Apart from South Africa, major trade partners for the export of Malaysia goods in 2014 included Kenya at $737m, Angola at $585m and Nigeria at $389m. The largest trade partners for the import of Africa goods, on the other hand, are concentrated in West Africa, with the highest ranking being Cote d’Ivoire at $355m, Ghana at $346m and Algeria at $310m
Dubai Chamber reviews investment potential of East African markets (CPI Financial)
WTO issues panel report on Argentinian financial, tax and forex measures affecting trade
Overview of INDCs submitted by 31 August 2015 (OECD)
AECF: African youths pivotal to agric business (Vanguard)
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South Africa Merchandise Trade Statistics for August 2015
The South African Revenue Service (SARS) has released trade statistics for August 2015 that recorded a trade deficit of R9.95 billion. This figure includes trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
Including trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The R9.95 billion deficit for August 2015 is due to exports of R87.63 billion and imports of R97.58 billion. Exports decreased from July 2015 to August 2015 by R5.45 billion (5.9%) and imports increased from July 2015 to August 2015 by R3.38 billion (3.6%).
The cumulative deficit for 2015 is R36.27 billion compared to R69.94 billion in 2014.
The month of July 2015 trade balance was revised downwards by R0.72 billion from the previous month’s preliminary deficit of R0.40 billion to a revised deficit of R1.11 billion.
Trade highlights by category
The month-on-month export movements:
R’ million | ||
Section: | Including BLNS: | |
Mineral Products | - R4 205 | - 20.1% |
Base Metals | - R2 464 | - 20.0% |
Precious Metals & Stones | + R1 120 | + 7.3% |
Vehicle & Transport Equipment | + R 382 | + 3.4% |
Wood and articles thereof | + R 176 | + 41.2% |
The month-on-month import movements:
R’ million | ||
Section: | Including BLNS: | |
Vehicle & Transport Equipment | + R2 027 | + 22.1% |
Mineral Products | + R1 758 | + 12.1% |
Chemical Products | + R1 248 | + 12.4% |
Equipment Components | - R 743 | - 9.4% |
Base Metals | - R 681 | - 12.8% |
Trade highlights by world zone
The world zone results from July 2015 to August 2015 are given below.
Africa:
Exports: R26 195 million – this is a decrease of R 0.28 million from July 2015
Imports: R10 865 million – this is an increase of R1 106 million from July 2015
Trade surplus: R15 330 million – This is a 6.9% decrease in comparison to the R16 464 million surplus recorded in July 2015.
America:
Exports: R8 015 million – this is a decrease of R1 099 million from July 2015
Imports: R10 947 million – this is an increase of R 941 million from July 2015
Trade deficit: R2 932 million – This is an increase in comparison to the R 892 million deficit recorded in July 2015.
Asia:
Exports: R24 773 million – this is a decrease of R3 111 million from July 2015
Imports: R43 883 million – this is an increase of R1 599 million from July 2015
Trade deficit: R19 110 million – This is a 32.7% increase in comparison to the R14 399 million deficit recorded in July 2015.
Europe:
Exports: R21 371 million – this is a decrease of R 720 million from July 2015
Imports: R30 502 million – this is a decrease of R 332 million from July 2015
Trade deficit: R9 131 million – This is a 4.4% increase in comparison to the R8 743 million deficit recorded in July 2015.
Oceania:
Exports: R1 164 million – this is a decrease of R 162 million from July 2015
Imports: R1 300 million – this is an increase of R 203 million from July 2015
Trade deficit: R 135 million – This is a deterioration compared to the R 229 million surplus recorded in July 2015.
Excluding trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS)
The trade data excluding BLNS for August 2015 recorded a trade deficit of R19.07 billion. The deficit is as a result of exports of R75.93 billion and imports of R95.00 billion. Exports decreased from July 2015 to August 2015 by R5.83 billion (7.1%) and imports increased from July 2015 to August 2015 by R3.31 billion (3.6%).
The cumulative deficit for 2015 is R105.59 billion compared to R135.91 billion in 2014.
Trade highlights by category
The month-on-month export movements:
R’ million | ||
Section: | Excluding BLNS: | |
Mineral Products | - R4 131 | - 21.8% |
Base Metals | - R2 365 | - 20.7% |
Vehicle & Transport Equipment | + R 434 | + 4.5% |
Precious Metals & Stones | + R 282 | + 1.9% |
Wood and articles thereof | + R 189 | + 71.3% |
The month-on-month import movements:
R’ million | ||
Section: | Excluding BLNS: | |
Vehicle & Transport Equipment | + R2 019 | + 22.0% |
Mineral Products | + R1 760 | + 12.2% |
Chemical Products | + R1 239 | + 12.9% |
Equipment Components | - R 743 | - 9.4% |
Base Metals | - R 677 | - 12.9% |
Trade highlights by world zone
The world zone results from July 2015 to August 2015 are given below.
Africa:
Exports: R14 495 million – this is a decrease of R 405 million from July 2015
Imports: R8 286 million – this is an increase of R1 039 million from July 2015
Trade surplus: R6 209 million – This is an 18.9% decrease in comparison to the R7 654 million surplus recorded in July 2015.
Botswana, Lesotho, Namibia and Swaziland (Only)
Trade statistics with the BLNS for August 2015 recorded a trade surplus of R9.12 billion. The surplus is as a result of exports of R11.70 billion and imports of R2.58 billion. Exports increased from July 2015 to August 2015 by R0.38 billion (3.3%) and imports increased from July 2015 to August 2015 by R0.07 billion (2.7%).
The cumulative surplus for 2015 is R69.32 billion compared to R65.98 billion in 2014.
The month-on-month export movements:
R’ million | ||
Section: | BLNS: | |
Precious Metals & Stones | + R 837 | + 4812.3% |
Base Metals | - R 99 | - 11.4% |
Chemical Products | - R 96 | - 9.1% |
Mineral Products | - R 74 | - 3.8% |
Vehicle & Transport Equipment | - R 52 | - 3.7% |
The month-on-month import movements:
R’ million | ||
Section: | BLNS: | |
Precious Metals & Stones | + R 60 | + 25.6% |
Machinery and Electronics | + R 28 | + 10.8% |
Live Animals | - R 19 | - 5.8% |
Raw Hides & Leather | - R 14 | - 37.0% |
Plastics & Rubber | - R 10 | - 25.5% |
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WTO Public Forum: Plenary debates on Day 1 highlight need for collaboration to make trade more inclusive
More collaboration is needed to ensure the benefits of trade are enjoyed by all, panellists agreed at the plenary debates of the WTO’s 2015 Public Forum on 30 September. The need for multilateral cooperation among governments was highlighted in the opening plenary debate while the importance of public-private sector dialogue was underlined in the afternoon debate on making trade work for business.
“Trade works,” Director-General Roberto Azevêdo said in his welcome address, “if it is accompanied by the right policies, if countries are supported to build the capacity they need to compete, and if we have a transparent system of rules which are agreed together and are enforced in a fair, open and cooperative way.”
“We need all of you to make sure the trading system will work for everyone,” Lilianne Ploumen, Minister for Foreign Trade and Development Cooperation of the Netherlands, said in her keynote speech. “I do hope that with our mutual commitments and with combined efforts we can help achieve equal opportunities for all.”
Opening plenary debate
Lerato Mbele, the moderator, opened the debate by noting that while trade indeed works, the benefits are not shared by all in the same way.
Panellists began the discussion by defining inclusivity. Yuejiao Zhang, Appellate Body member, said this meant getting equal access through the WTO’s most favoured nation principle and special and differential treatment for poorer countries.
Anabel Gonzàlez, Senior Director for Trade and Competitiveness Global Practice at the World Bank Group, emphasized the need to include people in rural areas, conflict zones, and the informal sector as well as women.
Susan Schwab, former United States Trade Representative, said consideration must be made for everyone from production to consumption.
Ms. Ploumen said inclusivity meant all players have access to the formal system with formal rules.
DG Azevêdo said inclusivity was important both at a geographical as well as an individual level.
Amina Mohamed, Cabinet Secretary for Foreign Affairs of Kenya, emphasized that developing countries and least-developed countries (LDCs) should be given attention.
The panellists discussed the benefits delivered by trade and the WTO; however, they also noted that benefits are not automatic to all. “This trickle down effect – forget about it. It only happens when we have policies to make sure everyone benefits,” Ms Ploumen said.
The panellists agreed that the prospects were even more worrying considering the current economic uncertainty. “We should be worried. I am concerned about the situation we are in,” Ms Schwab said, adding that trade and trade policy had the potential to be a “force multiplier” to deliver outcomes for women, youth, the environment, and other disadvantaged sectors. DG Azevêdo similarly said that, having exhausted fiscal and monetary policy, governments should explore using trade policy to turn around the slowdown and deliver gains to all.
To move forward, various policy options were discussed. Ms Gonzàlez and Ms Mohamed, for instance, emphasized the importance of domestic policy to improve an economy’s business climate, competitiveness and connectivity to regional and global trade.
On subsidies, Ms Zhang and Ms Mohamed noted the need for special and differential treatment for poorer countries while Ms Ploumen added that some developing economies have grown considerably since subsidies were first being negotiated and that talks need to reflect these changes.
On the environment, there were mixed views on whether stricter standards to address climate change were helping or hindering poorer economies.
Panellists agreed, however, that collaboration among governments on a multilateral level is necessary. “All these perceptions are valid. The good thing is the common thread,” said DG Azevêdo. “We need collaborative efforts.”
Afternoon plenary debate
The afternoon plenary debate focused on the relationship between trade and business, including small and medium enterprises (SMEs) and agribusiness.
DG Azevêdo opened the session by taking stock of what the WTO has accomplished for the business sector through efforts like the Aid for Trade initiative (which assists developing countries and LDCs export), the Trade Facilitation Agreement (which seeks to improve the ease of doing business at the border), the plan to eliminate tariffs on more information technology (IT) products through the expanded Information Technology Agreement and the plurilateral Environmental Goods Agreement in the pipeline.
“In recent years the WTO has shown that it can deliver agreements with real economic impact,” DG Azevêdo said. “Now we need the support of the business community to move ahead once again. The record shows that when we join forces – the private sector and governments in the WTO – we can achieve a great deal,” he said.
Harold McGraw III, chairman of the International Chamber of Commerce, echoed this by noting that the cooperation between governments and businesses is essential. “Government establishes policy but business is the one that executes it. They need to be on both sides of the coin,” he said. Mr McGraw further noted the importance of attracting investment to create growth and jobs as well as the significance of business organizations to help exchange information between government and the private sector.
Roland Auschel, Adidas board member in charge of global sales, discussed the importance of ironing out trade policy. “The reality today is that we’re still held by trade barriers, delays in importation and so on. We aren’t delivering on our consumer promise today,” he said. For Mr Auschel, cost and time are important factors that businesses consider as they integrate more and more into global value chains (GVCs).
Commenting on the GVCs, Gregory Doming, Trade Minister from the Philippines, noted that while integrated assembly lines are valuable for bringing in more businesses into trade, it is also important to consider alternatives for helping micro and small enterprises participate and export directly.
“The mind set has been from the perspective of large enterprises and this locks out micro and small businesses from international trade,” he said. “I’m saying GVCs are very useful but we have to add on to this. We need more pipelines for them to directly export.”
Evelyn Nguleka, President of the World Farmers’ Organization, meanwhile emphasized the importance of trade to farmers and agribusiness. Trading results in the balance of resources, she said. “There are certain areas of the world where there is more of a resource than the other. We need a scenario where it is possible and efficient and everyone can participate.” To accomplish this, however, the playing field needs to be more level in the case for instance of financing for poorer farmers.
At the close of the plenary, the moderator Ms Mbele asked each panellist whether trade works for business. Messrs McGraw, Auschel, Domingo and Ms Nguleka answered in the affirmative. When asked whether the WTO will do all it can to ensure this, DG Azevêdo replied: “Yes, if members let us.”
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Falling import demand, lower commodity prices push down trade growth prospects
WTO economists have lowered their forecast for world trade growth in 2015 to 2.8%, from the 3.3% forecast made in April, and reduced their estimate for 2016 to 3.9% from 4.0%.
These revisions reflect a number of factors that weighed on the global economy in the first half of 2015, including falling import demand in China, Brazil and other emerging economies; falling prices for oil and other primary commodities; and significant exchange rate fluctuations.
Volatility in financial markets, uncertainty over the changing stance of monetary policy in the United States and mixed recent economic data have clouded the outlook for the world economy and trade in the second half of the year and beyond.
If current projections are realised, 2015 will mark the fourth consecutive year in which annual trade growth has fallen below 3 per cent and the fourth year where trade has grown at roughly the same rate as world GDP, rather than twice as fast, as was the case in the 1990s and early 2000s.
“Trade can act as a catalyst for economic growth. At a time of great uncertainty, increased trade could help reinvigorate the global economy and lift prospects for development and poverty alleviation. WTO members can help to set trade growth on a more robust trajectory by seizing the initiative on a number of fronts, notably by negotiating concrete outcomes by our December Ministerial Conference in Nairobi,” Director-General Roberto Azevêdo said.
Global output is still expanding at a moderate pace but risks to the world economy are increasingly on the downside. These include a sharper-than-expected slowdown in emerging and developing economies, the possibility of destabilizing financial flows from an eventual interest rate rise by the US Federal Reserve, and unanticipated costs associated with the migration crisis in Europe.
At the time of our last forecast in April 2015, world trade and output appeared to be strengthening based on available data through 2014Q4. However, results for the first half of 2015 were below expectations as quarterly growth turned negative, averaging ‑0.7% in Q1 and Q2. Recent trade developments are illustrated in Chart 1, which shows seasonally-adjusted, quarterly merchandise trade indices in volume terms (i.e. adjusted to account for fluctuations in prices and exchange rates) by level of development.[1] Despite the quarterly declines in the first half of 2015, year-on-year growth in trade for the year to date remains positive at 2.3%.
Quarterly export growth of developed economies was essentially flat in the first two quarters of 2015 (-0.2% on average in Q1 and Q2), but those of developing countries were more negative (‑1.9%). The drop in exports was driven by weaker developing countries’ imports (-2.2%) and stagnation in developed countries’ imports (+0.1%).
Trade growth remains uneven across countries and regions as illustrated by Chart 2, which shows WTO merchandise trade volume indices by geographical region. After a long period of stagnation, Europe recorded the fastest year-on-year export growth of any region in Q2 at 2.7%, followed by North America (2.1%), Asia (0.6%), South and Central America (0.4%) and Other Regions (-1.0%, including Africa, the Commonwealth of Independent States and the Middle East). Disparities between regional growth rates was stronger on the import side than on the export side, with positive growth of 6.5% in North America, 3.1% in Asia and 1.6% in Europe, and declines of 2.3% in South and Central America and 3.1% in Other Regions.
Table 1 shows revised trade projections for 2015 and 2016, which depend on consensus estimates of world real GDP growth at market exchange rates. The WTO now expects world merchandise trade volume as measured by the average of exports and imports to grow 2.8% in 2015 and 3.9% in 2016. On the export side, shipments from developed economies should rise 3.0% this year and 3.9% next year. Developing economies’ exports are expected to grow more slowly at 2.4% in 2015 and 3.8% in 2016. Imports of developed economies should increase at around the same rate in 2015 (3.1%) and in 2016 (3.2%), while those of developing economies pick up from 2.5% this year to 5.2% next year.
The strongest downward revision to the previous export forecast for 2015 was applied to Asia, where our estimate was lowered to 3.1% from 5.0% in April. This is mostly due to falling intra-regional trade as China’s economy has slowed. The downward revision to Asia on the import side was even stronger, from 5.1% to 2.6%, partly due to lower Chinese imports which were down 2.2% year-on-year in Q2 (non-seasonally adjusted data). The product composition of China’s merchandise imports suggests that some of the slowdown may be related to the country’s ongoing transition from investment to consumption led growth. Large year-on-year drops in quantities of imported machinery (-9%) and metals (iron and steel -10%, copper ‑6%) were recorded in customs statistics for August, while strong increases were recorded for agricultural products including cereal grains (+130%) and oilseeds (+33%).
Another noteworthy revision relates to the import forecast for South and Central America in 2015, which was lowered to -5.6% from -0.5% in April. Much of this reduction can be attributed to adverse economic developments in Brazil, which has been simultaneously hit by a fiscal crisis, a financial scandal involving the country’s largest company, and falling export prices. Brazil’s merchandise imports in Q2 were down 13% year-on-year compared to the same period in 2014. A rebound in imports of South and Central America is expected in 2016 as Brazil’s GDP growth stabilizes and its imports start to recover. Other countries in the region should also see imports accelerate as their economies pick up next year. The size of the rebound in 2016 is also partly explained by the fact that future growth will be proceeding from a lower base following the steep decline in 2015.
If the slowdown in emerging markets worsens the revised forecasts in Table 1 could still prove to be overly optimistic. In particular, a slower rebound from recent declines in developing economies’ imports could shave half a percentage point off of global trade growth in 2015.
Finally, nominal merchandise trade statistics sometimes provide a better indication of current trade trends than statistics in volume terms since the former are generally timelier. These are illustrated by Charts 3 and 4. However, trade statistics in dollar terms are highly sensitive to fluctuations in prices and exchange rates and should be interpreted with caution.
Trade values in dollar terms have declined in most countries since last year and were down roughly 12% year-on-year in July at the world level. This is partly the result of a strong general appreciation of the US dollar over this period (+15% in nominal effective terms against major currencies according to the Bank for International Settlements). As Chart 3 shows, there is generally an inverse relationship between world trade values in current dollar terms and the value of the US currency. For example, Germany’s exports and imports were both down 14% year on year in dollar terms in July, but they were up 6% in euro terms.
Click here to view Chart 4 in full.
[1] Data are sourced from WTO short-term trade statistics, which can be downloaded here.
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Exchange rates still matter for trade
Exchange rate movements still have sizable effects on exports and imports, according to new research from the International Monetary Fund.
Recent currency movements have been unusually large. The U.S. dollar is up more than 10 percent in real effective terms since mid-2014. The yen is down more than 30 percent since mid-2012 and the euro by more than 10 percent since early 2014. Brazil, China, and India have also seen unusually large changes in their currency values.
Not surprisingly, these movements have kindled a debate on their likely effects on trade. Some predict strong effects on exports and imports, based on conventional economic models. Others argue that the increasing fragmentation of production across different countries – the so-called rise of global value chains – means that exchange rates matter far less than they used to for trade, and may have disconnected altogether.
This is an important debate, says Daniel Leigh, Deputy Division Chief in the Research Department, and lead author of the report. “A disconnect between exchange rates and trade would complicate policymaking. It could weaken a key channel for the transmission of monetary policy, and complicate the reduction of trade imbalances, as in the case of imports exceeding exports, via the adjustment of relative trade prices.”
From exchange rates to trade: lessons from history
Concerns about a disconnect between exchange rates and trade are not new. Back in the 1980s, the U.S. dollar depreciated, and the yen appreciated sharply after the 1985 Plaza Accord, but trade volumes were slow to adjust. Some commentators then suggested a disconnect between exchange rates and trade. But by the early 1990s, U.S. and Japanese trade balances had adjusted, largely in line with the predictions of conventional models.
The question is whether this time is different, or whether the apparent disconnect between exchange rates and trade will once again dissipate.
A new study, for the October 2015 World Economic Outlook, contributes to the debate by taking stock of the relationship between exchange rate movements and exports and imports.
The study examines the experience of both advanced and emerging market and developing economies over the past three decades – a broader sample than is typically examined. It uses both standard trade equations and an analysis of historical cases of large exchange rate movements.
“We find that, on average, a 10 percent real effective exchange rate depreciation comes with a rise in real net exports of 1.5 percent of GDP,” says Leigh, noting that there is substantial variation around this average (Chart 1). “Although it takes some years for the effects to fully materialize, much of the adjustment occurs in the first year,” he says.
Among economies experiencing currency depreciation, the rise in exports tends to be greatest for those with slack in the domestic economy and financial systems operating normally.
Disconnect or stability?
The study also finds little sign of a breakdown in the relationship between exchange rates and exports and imports.
There is some evidence, however, that the rise of global value chains, with different stages of production located across different countries, has weakened the relationship between exchange rates and trade in intermediate products used as inputs into other economies’ exports. This is particularly relevant for economies such as Hungary, Romania, Mexico, and Thailand, which have substantially increased their participation in global value chains.
But this finding needs to be seen in perspective: global-value-chain-related trade has increased only gradually through the decades and appears to have decelerated, and the bulk of global trade still consists of conventional trade.
There is also little sign, at least so far, of a generalized weakening in the relationship between exchange rates and total exports and imports. There is little evidence of disconnect for various country groups, including Asia and Europe, where the process of production fragmentation across countries has been particularly noticeable, as well as for samples of economies used in other recent studies.
Importantly, the rising size of exports and imports in GDP means that even a weaker relation between exchange rates and trade volumes could be consistent with exchange rate mattering more for trade in percent of GDP than before.
A key exception to this pattern of broad stability is Japan, which displays some evidence of disconnect. Export growth has been weaker than expected, despite substantial exchange rate depreciation. However, this weak export growth reflects a number of Japan-specific factors that have partly offset the positive impact of yen depreciation on exports and that do not necessarily apply elsewhere. These include, in particular, the sharp acceleration in production off-shoring since the global financial crisis and the 2011 earthquake, which created uncertainty about energy supply.
Redistributing net exports
These results are important because they mean that recent currency movements are shifting net exports from some economies to others. But this only speaks to the direct effects of exchange rate movements.
Overall changes in exports and imports also reflect shifts in the underlying fundamentals driving exchange rates themselves. These include demand growth at home and in trading partners, and movements in commodity prices.
But, in terms of the direct effects, the currency movements since January 2013 point to a shift of real net exports from the United States and economies whose currencies move with the dollar to the euro area, to Japan, and to economies whose currencies move with the euro and the yen (Chart 2).
“For policymakers, a key implication of these results is that exchange rate adjustments can still help to reduce trade imbalances,” says Leigh. Exchange rate changes also continue to have strong effects on export and import prices, with implications for inflation dynamics and the transmission of monetary policy.
In sum, exchange rates still matter!
The authors of this study are Daniel Leigh (team lead), Weicheng Lian, Marcos Poplawski-Ribeiro, and Viktor Tsyrennikov, with support from Olivia Ma, Rachel Szymanski, and Hong Yang.
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Entering uncharted waters: El Niño and the threat to food security
Millions of poor people in Southern Africa, Asia and Central America face hunger and poverty this year and next because of droughts and erratic rains as global temperatures reach new records, and because of the onset of a powerful El Niño – the climate phenomenon that develops in the tropical Pacific and brings extreme weather to several regions of the world.
Despite record global temperatures in 2014, an El Niño did not appear; nevertheless, in an unusual development, the climate in many parts of the world behaved as if one was occurring and growing seasons were seriously disrupted, mainly by drought. Temperatures have continued to soar this year and now an El Niño has indeed developed. It could be the most powerful since 1997-98, 2 which caused climate chaos and humanitarian disasters in many countries. With the boost of El Niño, unprecedentedly high temperatures are likely to continue into 2016.
Already, Ethiopia is facing a major emergency: 4.5 million people are in need of food aid because of successive poor rains this year. Floods, followed by drought, have cut Malawi’s maize production by more than a quarter; between two and three million people may face a food security crisis by February next year, at the peak of the lean season. In Zimbabwe, drought has reduced the maize harvest by 35 percent, and it is estimated that 1.5 million people will need assistance in early 2016. Farmers across the ‘dry corridor’ of Central America have been hit by drought for two years running, with huge harvest losses. Disruption to maize production in both Southern Africa and Central America is driving a surge in the price of maize on local markets, making it increasingly hard for people living in poverty to afford sufficient food.
Over the next few months the El Niño will attain maximum strength. This will coincide with the coming rains in Southern Africa, due from November onwards. Meteorologists predict a high probability of below-average rains again as a result. A second successive poor rainy season across Southern Africa will bring serious food security problems next year. The next rains in northern Ethiopia from March may also be affected.
El Niño has also already reduced the Asian monsoon over India, and is raising the odds of a prolonged drought in East Asia, coinciding with the planting and early development of the main rice crop in Indonesia; if world prices for rice increase there could be knock-on effects on poor urban consumers in import-dependent West African countries. In Papua New Guinea, 1.8 million people have been affected by drought already and El Niño will make this worse.
Yet meteorologists and international agencies such as the World Food Programme have provided ample warning of El Niño; the regions likely to be affected and the potential effects are understood. Agencies such as Oxfam have been monitoring conditions on the ground, helping communities cope with the current food crises and, increasingly, sounding the alarm that more must be done. Disasters are not inevitable at this point. If governments and agencies take immediate action, as some are doing, then major humanitarian emergencies next year can be averted. Prevention is better than cure.
In the immediate future, increasing climatic disruption, driven by rising temperatures, threatens to increase pressures on the humanitarian system at a time when resources and capacity are under enormous strain. Furthermore, scientists are warning that recent events could signify that big changes may be underway in the Earth’s climate system, 4 driven by rising surface temperatures and changes in major atmospheric and oceanic circulation systems such as those which give rise to El Niño.
Warming seas could double the frequency of the most powerful El Niños, and as global warming creates more and more sea-surface temperature ‘hot spots’ in the world’s oceans, and wind systems change as a result, extreme weather and greater climate disruption may be what a ‘normal’ future looks like if greenhouse gas emissions are not urgently and drastically reduced.
The combination of record warmth one year followed by an El Niño the next is unique and the climatic implications are uncertain. If 2016 follows a similar pattern we are entering uncharted waters.
Just one week after leaders adopted an historic new goal of eradicating hunger by 2030, as part of the package of Sustainable Development Goals, this unfolding crisis shows the scale of threat that climate change poses to its realization. For those leaders, the first test of their commitment will be to strike an agreement at the UN climate talks in Paris this December that delivers for the women, men and children on the frontlines of climate change.