Search News Results
Trade Experts in Addis to discuss the launch of the Continental Free Trade Area
The three-day Senior Officials Meeting of the 9th Ordinary Session of the African Union Conference of Ministers of Trade (CAMOT-9) opened on Monday 1st December at the African Union Headquarters in Addis Ababa, Ethiopia. The Senior Officials session is taking place to prepare for the Ministerial session which will be held on 4th and 5th December, of which will discuss, among other things; global trade and Mega Regional Trade Agreements, Declarations on WTO EPAs, AGOA and investment trends, their implications within the context of Africa’s commitment to forge ahead its integration notably towards the launch of the Continental Free Trade Area (CFTA) negotiations in 2015.
The African Union Conference of Ministers of Trade is meeting this year at a point where the Economic Report for Africa 2014 mentions that the industrialization is a “precondition for Africa to achieve inclusive and sustainable economic growth.” The report also highlights that in the past decade the contribution of manufacturing and industry to aggregate output and GDP growth has either stagnated or declined for most countries, while, the agriculture sector, which employs up to 60 per cent of the African labour force, is characterized by limited value addition, as forward linkages to industry and service sectors are weak.
In her opening statement, the AUC Director for Trade and Industry, Mrs. Treasure Maphanga, reminded the experts that as Africa meets to discuss the advancement of its regional integration agenda, the world is moving, mentioning examples of the Trans-Atlantic Trade and Investment Partnership (TTIP), a trade and Investment agreement that is presently being negotiated between the European Union and the United States, the Trans-pacific Partnership negotiations between the US and Pacific Countries, as well as the FTA which in being negotiated between China, Japan, and South Korea.
Mrs. Maphanga hence stressed that CFTA is an important opportunity to develop and harmonize regulations in a number of trade-related services sectors that will backstop the industrialization process. “As you consider the draft texts for the CFTA negotiations, we wish to remind all of us that the continent is looking for greater ambition than the Tripartite Negotiations. We are seeking to develop an agreement that enables deep integration amongst all African economies, with a focus on Boosting Intra-African Trade and implementing the Action Plan that includes Trade-related Infrastructure, Productive capacity and Trade facilitation”, suggested Mrs. Maphanga.
In his remarks on behalf of Dr. Carlos Lopes, United Nations Under-Secretary General and Executive Secretary of the Economic Commission for Africa (UNECA), Dr. Stephen Karingi, Director, Regional Integration and Trade Division, noted the robust economic growth experienced by Africa over the last decade and driven by high commodity prices had little impact on poverty eradication and had not altered economic structures.
Hence, he said, it is clear that if business as usual persists, Africa is likely to continue seeing growth that will not impact on widespread poverty levels and economic structures will likely remain the same, and that Africa’s transformation will be still born, and the risk of being caught up in the middle income trap will become real. “Therefore, as we meet here, it is my hope that our discussions will be informed by the big picture of sustainability and structural transformation of our economies,” said Dr. Karingi.
The Establishment of the Continental Free Trade Area (CFTA) was decided in the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union which was held in Addis Ababa, Ethiopia in January 2012, which will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $ 1, 2 trillion dollars.
Statements
» Statement by H.E. Mrs Fatima Haram Acyl - AU Commissioner for Trade and Industry
» Statement by Abdalla Hamdok Deputy Executive Secretary UN Economic Commission for Africa
» Speech delivered by ITC Executive Director Arancha González
Related News
Fighting climate change and poverty at the same time
Worldwide, close to 1 billion people live in poverty on less than $1.25 per day and more than 800 million are undernourished. Many of them are on the front lines of climate change. Extreme weather and droughts can put their food and water supplies at risk, raise prices, and destroy homes and businesses that are often built at the edges of livable land. They have little resilience to the volatility or economic havoc climate change can bring.
More shocks can also pull those just above the poverty line under, threatening to reverse decades of progress toward eradicating extreme poverty. At the World Bank Group, we are working on ways to address both climate change and poverty at the same time.
As climate negotiators gather in Lima for the latest round of UN climate talks, the impact on poverty should run throughout the discussions of risks and solutions.
“We’re only beginning to see the clear impacts of climate change. As these impacts deepen, the poor will have less means to cope. Climate change will put at risk the international community’s goal of ending poverty,” said World Bank Group Vice President and Special Envoy for Climate Change Rachel Kyte.
“To protect the poor, we must invest in resilience, including social protection measures, access to insurance, natural resources restoration – everything that will help them bounce back better when shocks come,” Kyte said.
That combination of climate action and social protection is important and urgent. The recent Turn Down the Heat report warns that the world will see the effects of temperatures about 1.5°C above pre-industrial times even with concerted action to lower emissions, and much worse if emissions continue unabated, making poverty even harder to escape. Even 1.5°C of warming will bring more severe droughts and sea level rise that can flood low-lying areas and contaminate coastal cropland.
Protecting the Poor and the Planet
Policies for mitigating and adapting to climate change must be designed to protect the poor. That is why the World Bank works with client countries to analyze the impacts of climate change risks and responses on poverty.
Research underway this year and next is finding that climate-related policies paired with social policies can both reduce poverty and modernize economies that were once carbon-intensive.
British Columbia, for example, has shown how revenue from a carbon tax can provide targeted support for the poor while also reducing business and income taxes. The Canadian province created a low-income climate action tax credit that provides quarterly payments to the poor to offset higher prices. Today, British Columbia has one of the lowest income taxes in the country, a thriving economy fueled in part by green growth, and its emissions have fallen.
Similarly, governments can reduce harmful fossil fuel subsidies and use the savings to create targeted support for the poor who most need assistance when fuel prices rise. Studies have found that fossil fuel subsidies tend to be inefficient and regressive: The wealthiest 20 percent of households in low- and middle-income countries receive about six times more of the benefit than the poorest 20 percent. Building in new sources of support for the poor – such as energy credits, reduced public transit fares, or cash transfers – while phasing out harmful subsidies can provide the intended support more efficiently.
Building resilience also helps poor communities deal with the effects of climate change. Better land-use planning and improved infrastructure, for example, can reduce vulnerability to future climate change. When Hurricane Tomas hit St. Lucia in 2010, the damage cost the island nation 43 percent of GDP. The World Bank has helped St. Lucia improve data sharing to build back better, reduce future losses, and improve its disaster preparedness and capacity to respond.
Eliminating poverty and keeping it at bay as we deal with climate change requires wider use of what we already know works: well-funded social protection programs that can easily be scaled up in the event of a disaster; the data and capacity to identify the transient poor and provide them with support; and financial inclusion that allows the poor to save and borrow so they can bounce back more quickly from shocks. Access to health care and education are also important for recovering from shocks and getting out of poverty.
Opportunities in Climate Action
At the UN Framework Convention on Climate Change Conference of Parties in Lima, we will be talking about these and other policy options.
Our research has found that with smart policies and careful urban planning, the same development work needed to accommodate a growing population today, such as clean and accessible transportation systems and energy efficient buildings, can help mitigate climate change, increase resilience to its effects, and increase opportunities for the poor through new jobs and greater access to work, health care, and education.
Climate action can create new income opportunities. Many ecosystem-based adaptation and mitigation measures require labor-intensive activities, such as reforestation and land restoration. Policies that encourage green industries also create new opportunities through retraining and diversification of economic activity and trade patterns. Inclusiveness is a critical part of green growth and building livable cities.
Turn Down the Heat and the recent IPCC Fifth Assessment Report make clear that we must deal with climate now. Failing to do so will raise the costs and risks for everyone.
Related News
Beyond tariff walls: Non-tariff hurdles in sub-Saharan Africa
It is often said that international trade is no longer a game of tariffs but rather a game of quality, standards, and compliance with the requirements of the global market. Exporters, more specifically those from developing countries, feel this the most as they struggle with what is known as non-tariff measures (NTMs) in their daily quest for international competitiveness.
NTMs are officially defined as “policy measures on export and import, other than ordinary customs tariffs, that can potentially have an effect on international trade in goods. They are mandatory requirements, rules or regulations legally set by the government of the exporting, importing or transit country”. NTMs become an obstacle to trade for exporters and importers when they are perceived to be “burdensome” by the latter. Since 2010, the International Trade Centre (ITC) has been working with the private sector from developing countries, collecting information on the various obstacles to trade faced by the business community in these countries. This project was initiated in order to increase transparency about NTMs by disseminating relevant information and by analysing the non-tariff obstacles to trade. The ultimate goal is to reduce or eliminate those barriers, thus improving the business environment. In sub-Saharan Africa (SSA), the ITC NTM Surveys have already been conducted in Burkina Faso, Côte D’Ivoire, Guinea, Kenya, Madagascar, Malawi, Mauritius, Senegal, Rwanda, and Tanzania.
Beneficiary countries are already using the findings of the ITC NTM Surveys to remove impediments to trade. To mention but a few: In 2013, Mauritian customs authorities eliminated the need for imports of rooibos tea to be cleared by the Tea Board; the Senegalese export promotion agency is considering the NTM Survey findings and recommendations in its export development strategic plan for 2014-2017; and similarly the government of Madagascar intends to integrate some of the findings into its trade policy and trade negotiations. The ITC NTM Surveys are also extensively used to inform the work of other development partners, such as in the framework of diagnostic trade integration studies, for example in Malawi.
Which are the most burdensome NTMs for African exporters?
The results of the surveys done in the ten SSA countries show that the top three NTMs identified by exporters as most burdensome are conformity assessments, technical requirements as well as rules of origin and the related certificates of origin. Other identified barriers include pre-shipment inspections and further entry formalities, charges, taxes and other para-tariff measures, including licensing or permits to export. Overall, 64 percent of the interviewed companies in SSA were reported being affected by NTMs. The figure of 64 percent found in SSA is above the average (50 percent) obtained from the total number of countries surveyed by the ITC so far. This would imply therefore that exporters and importers in this region seem to be more affected by burdensome NTMs.
In the agricultural sector, “technical requirements”, which include sanitary and phytosanitary measures (SPS) implemented to protect human, animal and plant life (e.g. requirements such as tolerance limits for residues and measures for labelling and packaging), and “conformity assessments” are perceived as the most challenging by SSA exporters. Conformity assessments refer to control, inspection and approval procedures (such as testing) which confirm that a product fulfils the technical requirements and mandatory standards imposed by the importing country. These two categories are known as SPS measures and Technical Barriers to Trade (TBT) in the NTM classification. They are inevitable for most agricultural products since they are put in place to meet public policy objectives, such as consumer protection. These product-specific, legally binding requirements are challenging predominantly in developed markets like the EU. Exporters usually complain that such regulations are particularly burdensome in their implementation process because of associated delays and high fees.
This result comes as no surprise, as the globally most widespread NTMs relate to technical factors like SPS measures. Most developed nations have strict quality and food safety standards and are increasingly introducing stringent food safety regulations. The EU, for instance, has a whole raft of regulations that require exporters from outside the EU to meet the same standards as EU members when it comes to foodstuffs. Moreover, new rules are increasingly being introduced, for example for labelling. The United States, through its own Food Safety Modernization Act (FSMA), also places extensive requirements on imports.
With TBTs increasing globally, they leave SSA exporters (including those concerned with conformity assessments) vulnerable especially due to the lack of the necessary infrastructure in their respective home countries. Furthermore, delays experienced with the home administration (e.g. at customs) have dire consequences for exports, particularly of perishable agricultural products (e.g. fresh food).
As far as manufacturing exports are concerned, technical requirements are often less important than in the agricultural sector. However, challenges from conformity assessment still stand out at 44 percent and concerns about rules of origin, i.e. the criteria used by importing countries to assess whether a product is eligible for preferential treatment, are also quite pronounced (17 percent of total NTMs reported for SSA countries). For instance, burdensome NTMs related to rules of origin were commonly reported by exporters in Côte d’Ivoire.
Who applies NTMS?
The ITC NTM Surveys suggest that, among the challenging NTMs reported by exporting companies, on average around 70 percent are applied by the partner countries and 30 percent happen at home. Comparatively, in SSA, nearly 40 percent of NTMs are reported to be applied by the home country, while about 60 percent are reported to be applied by partner countries. Therefore, if SSA countries want to boost their competiveness and establish themselves on the main stage of international trade, their national and local authorities need to address the obstacles to trade linked to NTMs occurring at home, although it is also clear that domestic efforts need to be complemented with a continued engagement with international trading partners.
The findings also show that many burdensome NTM cases are associated with partner countries with which SSA countries already have free trade agreements (FTAs) or regional trade agreements (RTAs). For example, in Guinea there were reports about customs surcharges (e.g. surtax or additional duty) imposed by Mali and Côte d’Ivoire, all of whom are members of the Economic Community of West African States (ECOWAS). 64 percent of NTM reports from Guinea concern neighbouring ECOWAS countries. We see similar results for other regions: In Tanzania, for example, an overwhelming majority (64.4 percent) of the reported cases of NTMs are applied by partners from within regional frameworks, i.e. the East African Community (32.9 percent), followed by the Southern African Development Community (31.5 percent). This indicates that there is still room for the elimination of non-tariff barriers by RTA/FTA counterparts. Tackling these obstacles could help achieve better trade integration among SSA countries.
The way forward
Problems linked with NTMs are often exacerbated for landlocked countries (such as Rwanda), where obstacles associated with transit countries are particularly severe, including in terms of weighbridge charges and delays before goods can be delivered. One significant intervention to consider is to establish a results-oriented dialogue and negotiation with regional partners or bilaterally with neighbours.
In addition to government requirements, SSA exporters sometimes face onerous standards imposed by private clients. For example, the Rwandans particularly reported Fair Trade certificates demanded by clients in the European Union, especially for Rwanda’s important coffee and tea products. The costs and delays associated with these certificates are said to cause serious hindrances for exporters.
Taken together, SSA exporters and importers report a large amount of NTMs faced in their efforts to engage in the global trading system. There seems to be consensus that technical measures, conformity assessments, different charges, rules of origin and customs procedures are among some of the most burdensome restrictions traders encounter. Hence, a number of initiatives are being launched to address these measures both internationally and domestically, but more work is needed to alleviate such constraints. For instance, there is scope for improved engagement between policy makers and their exporters and importers. Better dialogue between the different stakeholders from both private and public sectors can prepare the ground to develop effective and sustainable policies to remedy some of the concerns, as well as to clarify those instances where lack of awareness may be also one of the obstacles. Traders from a number of SSA countries indicated their desire for a one-stop shop or single window to process documentation. Others highlighted the need for a single enquiry point to obtain all the necessary documents required in destination and home markets to qualify for certifications.
Tackling such obstacles could help SSA countries take giant leaps towards improving their trade environment.
The debate surrounding NTMs is ongoing and numerous questions about their legitimacy are being raised. Even though it is generally accepted that NTMs may have the best policy intentions in terms of public health, their frequency and complexity negatively affect the trade flows of more vulnerable countries, such as those from the SSA region. Furthermore, they are sometimes perceived as protectionist measures used by governments. Regardless of their underlying motives, NTMs actually impose costs that have negative impacts on trade competitiveness, particularly for small and medium-sized enterprises (SMEs) in emerging and developing countries. Often NTMs themselves are not barriers per se, but the procedural obstacles associated with them have negative consequences for trade. The problems found impacting industries in SSA take an even more burdensome toll on trade and are more surprising at a time when individual governments and the international community are mobilizing all efforts to alleviate poverty and promote engines of growth.
Poonam Mohun is NTM Project Market Analyst, Market Analysis and Research, International Trade Centre. The views expressed herein are those of the author and do not necessarily reflect the views of the International Trade Centre or of the United Nations.
This article is published under Bridges Africa, Volume 3 - Number 10.
Related News
Governors of Central Banks appreciate regional growth
Governors of Central Banks in COMESA Member States have appreciated the 6.6% average growth performance of the region and emphasized that such growth should be sustained and be inclusive.
In their 20th Meeting that ended Thursday 27th November 2014 in Kinshasa, Congo (DR) the Governors emphasized the importance of policies that stimulate demand and trade within the region.
According to a report of the meeting sent by the Director of COMESA Monetary Institute (CMI) Mr. Ibrahim Zeidy the Governors underscored the importance of laying a solid foundation in the medium term for a fully-fledged inflation targeting framework, in order to make the region a zone of macroeconomic stability.
“Volatility in exchange rates tend to impact on trade and subsequently on output, inflation, FDI and the investment climate in general,” they noted.
In his address to the meeting Secretary General of COMESA, Mr. Sindiso Ngwenya, underlined the need for speedy implementation of Regional Payment and Settlement System (REPSS).
“I want to urge all member Central Banks to expeditiously use REPSS for payment for their intra-COMESA transactions as it will significantly contribute to the expansion of intra COMESA trade,” he said.
His address covered strategic issues of the COMESA integration agenda including the removal of tariff and non-tariff barriers, progress report on COMESA FTA, progress report on Tripartite Arrangement, trade promotion and facilitation, strategies to move to high value addition to export products, COMESA industrial policy and COMESA activities related to extractive industries.
Mr Ngwenya emphasized the importance of member countries to get a greater share of resource rents from extractive industries and underscored the COMESA Monetary Cooperation programme that would make trade and investment easy and inexpensive.
He therefore emphasized that member countries should intensify the process of macroeconomic convergence and intermediation in the region.
The Committee of Governors of Central Banks also reviewed the activities that were undertaken by the COMESA Monetary Institute (CMI) and COMESA Clearing House (CCH) for enhancing monetary cooperation in the region and making the region a zone of macroeconomic and financial stability.
These activities included the outcome of workshops, trainings and research activities which were undertaken by CMI and activities undertaken by CCH for the operationalization of the Regional Payment and Settlement System (REPSS).
They also deliberated on challenges in the disbursement of loans by commercial banks in the region. They agreed that an Action Plan proposed by the Central Bank of Congo should be used as inputs into the existing COMESA Financial System Development and Stability Plan which was adopted by the COMESA Committee of Governors of Central Banks in 2009.
TTIP: What are the implications for emerging powers and the international order?
The Transatlantic Trade and Investment Partnership (TTIP) currently under negotiation by the United States (US) and the European Union (EU) promises to unleash significant opportunities to generate jobs, trade and investment across the Atlantic. An independent study by the Centre for Economic Policy Research forecasts that an ambitious and comprehensive TTIP agreement could generate US$159 billion in annual economic gains for the EU, US$127 billion a year for the U.S., and boost global income by almost US$134 billion. TTIP would generate greater economic gains than would the deal on the table in the Doha Development Round.
TTIP at its core is an economic negotiation seeking agreement in three pillars. The first pillar addresses such market access issues as tariffs and rules of origin. It could result in clearer, more straightforward and transparent rules of origin arrangements that could serve as the basis for future preferential rules of origin. Clear, simple and aligned rules of origin would facilitate global trade and thus serve as a public good.
The second pillar seeks to reduce, where feasible, non-tariff barriers and to find coherence, convergence or recognition of substantial equivalence between US and EU approaches to specific regulatory issues. It could pioneer new ways for countries to ensure high standards for consumers, workers, companies and the environment while sustaining the benefits of an open global economy. Mutual recognition of essentially equivalent norms and regulatory coherence across the transatlantic space not only promise economic benefits at home but could form the core of broader international norms and standards.
The third pillar seeks common agreement on a range of norms and standards regarding such issues as investment, intellectual property rights, discriminatory industrial policies and state-owned enterprises. Some of these standards are likely to extend prevailing WTO standards (WTO-plus); others could go beyond existing multilateral norms (WTO-extra). Agreement on such issues as intellectual property, services, discriminatory industrial policies or state-owned enterprises could strengthen the normative underpinnings of the multilateral system by creating benchmarks for possible future multilateral liberalisation in the WTO. US-EU agreement on such principles, and agreement to act together to advance such norms globally, could not only take the international trading system further but establish broader political principles regarding the rule of law, human rights, labour, environmental and consumer standards.
In addition, the TTIP will not necessarily be concluded with a final document; negotiators seek a “living agreement” that is likely to consist of new consultative mechanisms regarding regulatory and non-tariff issues that can anticipate or respond to evolving innovation, economic friction due to changing legislation, or other developments in trade and technology.
Taken together, these elements underscore that TTIP is not just another trade agreement, it is a new-generation negotiation aimed at repositioning the US and European economies for a more diffuse world of intensified global competition. TTIP is about creating a more strategic, dynamic and holistic US-EU relationship that can generate jobs and growth, engage third countries more effectively, and strengthen the ground rules of the international order.
U.S. and European governments would prefer a global agreement on more open trade, but the multilateral system administered by the WTO is under challenge, especially by a number of countries that show little interest in new market-opening initiatives and do not share the core principles or basic structures that underpin open rules-based commerce.
In addition, even if the Doha Round were concluded tomorrow, it would still not address a host of non-tariff and regulatory issues related to the distinctive deep economic integration that binds the US and European economies. These non-tariff and regulatory issues, not trade, are at the heart of the TTIP. In short, TTIP is a means to energise the multilateral system while addressing issues particular to the transatlantic economy.
TTIP and rising powers
TTIP is important in terms of how the transatlantic partners together relate to rising powers, especially the emerging growth markets. Whether those powers choose to challenge the current international order and its rules or promote themselves within it depends significantly on how the United States and Europe engage, not only with them but also with each other. The stronger the bonds among core democratic market economies, the better their chances of being able to include rising partners as responsible stakeholders in the international system. The more united, integrated, interconnected and dynamic the international liberal order – shaped in large part by the United States and Europe – the greater the likelihood that emerging powers will rise within this order and adhere to its rules. The looser or weaker those bonds are, the greater the likelihood that rising powers will challenge this order.
TTIP clearly puts pressure on countries that choose to stand apart from international market-opening initiatives. According to Vera Thorstensen and Lucas Ferraz, a TTIP agreement that goes beyond simple tariff reductions could result in a 5-10 percent decline in Brazilian exports to the United States and the EU and a 4-8 percent decline in Brazilian imports from the United States and the EU. In addition, since a TTIP agreement is likely to boost US and EU competitiveness and spark additional US and EU exports, Brazil's overall share of world trade is likely to decline. In contrast, if Brazil adhered to TTIP provisions in a scenario of a 50 percent reduction of EU and US agricultural tariffs, a 50 percent reduction of Brazilian industrial tariffs and a 50 percent reduction of non-tariff barriers for all partners, Thorstensen and Ferraz calculate that Brazilian exports to the United States and the EU would increase by 67.6 percent, corresponding to US$51.1 billion, and Brazilian imports from the United States and the EU would increase by 52.9 percent, a gain of US$42.3 billion.
Additionally, North-South American commercial ties are burgeoning, and Europe’s commercial ties to Latin America are substantial. Latin American and Caribbean countries export more than twice as much to their Atlantic partners as to the rest of the world. Latin American exports to the eurozone are 40 percent more than to China. Brazil is the single biggest exporter of agricultural products to the EU. Countries that decide to lift their standards to access the world's largest and richest market are likely to see significant increases in commercial interaction; those that do not are likely to encounter significant hurdles to growth and jobs.
There are already signs that TTIP is affecting third countries. TTIP was the elephant in the room at the 2013 EU-Brazil summit; it is causing Brazilian leaders to reframe how they think of their evolving role and position. Japan’s decision to join the Trans-Pacific Partnership (TPP) arguably was due as much to the start of TTIP negotiations as to inner-Asian dynamics. With the EU now also negotiating a bilateral trade agreement with Japan, both the United States and the EU are in direct talks with Tokyo about opening the Japanese market – a goal that for decades seemed unattainable.
TTIP is lazily portrayed as an effort to confront and isolate China. Yet it is less about containing China than about the terms and principles guiding China's integration and participation in the global economy. China’s burgeoning trade with both the United States and Europe attests to US and EU interest in engaging China, not isolating it. Yet Beijing has yet to embrace some basic tenets of the international rules-based order, and has sought to translate its economic clout into military, diplomatic and political influence, for instance by holding down the value of its currency to boost its companies, leveraging its near-monopoly on rare earths to advance its strategic objectives, or directing state-owned companies not just to generate profits but to wield power on its behalf. TTIP and related initiatives such as the TPP are important instruments to help frame Beijing's choices – by underscoring China's own interests in an open, stable international system as well as the types of norms and standards necessary for such a system to be sustained. China itself has changed its position and signalled a willingness to join plurilateral talks on services. Its motivations remain unclear, but there is no denying that TTIP and related initiatives are injecting new movement and energy into efforts to open markets and strengthen global rules.
Since TTIP is not just about achieving greater regulatory coherence across the Atlantic, but also about setting global benchmarks, it is more ambitious than TPP or ASEAN’s Regional Comprehensive Economic Partnership, known as the RCEP. In fact, a successful TTIP would be a TPP-plus or RCEP-plus agreement with regard to regulatory coherence and potentially with regard to WTO-plus and WTO-extra norms. In this sense, TTIP is likely to have more impact on Asian economies than TPP or RCEP are likely to have on European economies.
Despite TTIP’s inherent potential to leverage US-EU efforts to engage rising powers on the terms of their integration into the international rules-based order, governments have not stated whether and how the eventual TTIP agreement, once concluded, might be open to others willing and able to commit to similar goals and ground rules. Framing the TTIP as an element of ‘open architecture’ accessible to others could give the United States and the EU tremendous leverage in terms of ensuring ever broader commitments to the high standards and basic principles governing modern open economies.
Long live the TTIP?
Getting a TTIP deal will be tough. Remaining transatlantic tariff barriers, especially in agriculture, often reflect the most politically difficult cases. Long phase-in periods may be needed to eliminate tariff and quota barriers completely. Some of the most intense transatlantic disagreements have arisen over differences in regulatory policy. Issues such as food safety or environmental standards have strong public constituencies and are often extremely sensitive in the domestic political arena. Responsibility for regulation is split in the EU between Brussels and the member states, and in the United States between the federal and state governments. Investment barriers, especially in terms of infrastructure and transport sector ownership, will be very difficult to change. There is considerable debate how and whether to include financial services. Also, it is questionable whether either side is prepared to gore its sacred cows on the TTIP altar – for example the Jones Act on merchant marine for the United States. The EU has already taken audiovisual services off the negotiating table. Defense trade also seems off limits. Finally, investor-state dispute settlement mechanisms envisaged under TTIP are contentious.
Nonetheless, TTIP’s potential payoff is high. The geostrategic impact of such an agreement could be as profound as the direct economic benefits. If leaders on both sides of the Atlantic grasp the moment, America’s first ‘Pacific President’ and his EU partners may well become best known for having re-founded the Atlantic partnership. If they do not, then issues of failing trust and confidence, so visible today, will continue to eat away at the relationship like termites in the woodwork.
Daniel S. Hamilton is an Austrian Marshall Plan Foundation Professor and Executive Director of the Center for Transatlantic Relations, Johns Hopkins University School of Advanced International Studies, Washington, D.C., USA.
This article is published under Bridges Africa, Volume 3 - Number 10.
Related News
Ghana teams up with UN-backed alliance in move towards cashless economy
The Government of Ghana on 1 December 2014 took steps towards enhancing fiscal transparency and promoting the financial inclusion of its citizens by committing to a United Nations-backed initiative that supports countries’ transitions to electronic payments.
With the assistance of the Better Than Cash Alliance, which is hosted by the UN Capital Development Fund (UNCDF), the Government of Ghana will focus on transitioning forms of Government payments to electronic ones, beginning with the digitization of government workers’ salaries.
It subsequently plans to expand the use of electronic payments to the Livelihood Empowerment against Poverty (LEAP) social welfare programme in the hope that 71,000 Ghanaian households will reap the benefits of transparency, cost savings and financial inclusion.
“Ghana’s digital innovation is renowned and is reflected in this commitment to transition away from cash in all government payments. Evidence and the experience of our members show that electronic payments has great potential to increase people’s access to financial services when designed appropriately and we look forward to seeing greater inclusion in Ghana,” Dr. Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance, said in a press release.
“There is also strong evidence to show that integrating digital payments into the economies of emerging countries such as Ghana will promote broad economic growth and individual financial empowerment.”
Funded by the Bill & Melinda Gates Foundation, Citi, Ford Foundation, MasterCard, Omidyar Network, United States Agency for International Development and Visa Inc, the Better Than Cash Alliance works with governments, the development community and the private sector to promote the use of electronic payments as a safer and more efficient form of financial transaction. Efforts aim to help people who lack access to formal financial services such as bank accounts, and who often subsist almost entirely in an informal, cash-only economy.
» Related story: Rwanda to accelerate digital payments by joining the Better Than Cash Alliance
Related News
Update on the economic impact of the 2014 Ebola epidemic on Liberia, Sierra Leone, and Guinea
The Ebola epidemic continues to cripple the economies of Liberia, Sierra Leone, and Guinea. The crisis is resulting in flat or negative income growth and creating large fiscal needs in all three countries, as they work to eradicate the virus.
This update presents the World Bank’s most recent analysis of the economic effects of the Ebola epidemic on the three countries. All three had been growing rapidly in recent years, and into the first half of 2014. But GDP growth estimates for 2014 have been revised sharply downward since pre-crisis estimates. Projected 2014 growth in Liberia is now 2.2 percent (versus 5.9 percent before the crisis and 2.5 percent in October). Projected 2014 growth in Sierra Leone is now 4.0 percent (versus 11.3 percent before the crisis and 8.0 percent in October). Projected 2014 growth in Guinea is now 0.5 percent (versus 4.5 percent before the crisis and 2.4 percent in October).
As the epidemic continues, these economies will face a difficult year in 2015, as second-round effects kick in and investor aversion takes a further toll. 2015 growth estimates are 3.0 percent in Liberia, -2.0 percent in Sierra Leone, and -0.2 percent in Guinea, down from pre-Ebola estimates of 6.8 percent, 8.9 percent, and 4.3 percent respectively. In Sierra Leone and Guinea these growth forecasts are lower than our October estimates (7.7 percent for Sierra Leone; 2.0 percent for Guinea). In Liberia, where the epidemic may be abating and where there are some signs of economic activity picking up, the 2015 estimate is an increase on October’s (1.0 percent). These projections imply forgone income across the three countries in 2014–15 of well over $2 billion (over $250 million for Liberia, about $1.3 billion for Sierra Leone, about $800 million for Guinea).
Combining the effects on revenue and spending with cuts made to public investment to finance the response, the total fiscal impact is well over half a billion dollars in 2014 alone. Liberia has been hardest hit fiscally. Relative to pre-Ebola forecasts, revenues are down $86 million while public spending has increased $62 million, a combined impact of more than 6 percent of GDP. In Sierra Leone, revenues are down $85 million while spending has increased $43 million, a combined impact of more than 2.5 percent of GDP. In Guinea, revenues are down $93 million while spending has increased $106 million, a combined impact of more than 3 percent of GDP. Although the resulting fiscal deficits in the three countries have so far been financed by inflows from development partners, governments have also cut public investments by more than $160 million across the three countries, damaging future growth prospects.
The World Bank’s October report on the economic impact of Ebola (released at the 2014 Annual Meetings of the IMF and the World Bank) found that if the epidemic continues in the three worst-affected countries and spreads to neighboring countries, the two-year regional financial impact could range from a “low Ebola” estimate of $3.8 billion to a “high Ebola” estimate of $32.6 billion. These scale estimates of potential impact remain valid: the epidemic is not yet under control. Containment, combined with a full-fledged financial recovery effort to restart business activity and bring back investors, are now both therefore urgently needed for the region to improve on the downbeat forecasts in this update.
» Related story: Ebola: Long-term economic impact could be devastating
Related News
Slow trade
Part of the global trade slowdown since the crisis has been driven by structural, not cyclical, factors
What’s up with world trade growth? After bouncing back in 2010 from the historic low of the Great Recession, it has been surprisingly sluggish.
Trade grew by no more than 3 percent in 2012 and 2013, compared with the precrisis average of 7.1 percent (1987-2007; see Chart 1). For the first time in over four decades, trade has grown more slowly than the global economy. Economists wonder whether this global trade slowdown is a cyclical phenomenon that will correct itself with time or is attributable to deeper and more permanent (that is, structural) determinants – and what the answer means for the future of world trade and income growth.
Cyclical or structural
Many economists argue that the global trade slowdown is mostly a cyclical phenomenon, driven by the crisis that has afflicted Europe in recent years. This view has some empirical support. The European Union (EU) accounts for roughly one-third of total world trade volumes because, by convention, trade between EU countries is counted in world trade totals. The crisis depressed import demand across Europe. Imports in the euro area – the epicenter of the crisis – declined by 1.1 percent in 2012 and increased by a mere 0.3 percent in 2013. From this point of view, if European economies recover, world trade growth should pick up again.
Cyclical components such as the crisis in Europe, however, are only part of the story. A look at the ratio of imports to GDP over the past 10 years suggests that there are longer-term components of the current trade slowdown. Although most economies recorded a stable ratio of imports to GDP after the crisis, this flatness in import shares appears to predate the crisis for China and the United States. For these two countries, import volumes as a share of real GDP have been roughly constant since 2005: a “Great Flatness” seems to have set in before the Great Recession, pointing to the presence of longer-term determinants of the global trade slowdown (see Chart 2).
Indeed, this prolonged flatness reflects something deeper: a structural change in the relationship between trade and income in the 2000s compared with the 1990s. In a recent paper (Constantinescu, Mattoo, and Ruta, 2014), we analyze this relationship for the past four decades and find that the responsiveness of trade to income – what economists call the long-term trade elasticity to income – rose significantly in the 1990s but declined in the 2000s to the levels of the 1970s and early 1980s. In the 1990s, a 1 percent increase in global income was associated with a 2.2 percent increase in world trade.
But this tendency for trade to grow more than twice as fast as GDP ended around the turn of the century. In the 2000s, a 1 percent increase in world income has been associated with only a 1.3 percent increase in world trade. Our research confirmed that there was a statistically significant change in the trade-income relationship in the 1990s compared with before and after that period.
These results suggest that since the global financial crisis, trade has been growing more slowly not only because world income growth is lower but also because trade itself has become much less responsive to income growth. The trade slowdown has roots deeper than the cyclical factors that are affecting world GDP growth. Indeed, analysis of the long- and short-term components of trade growth shows that, in contrast to the trade collapse of 2009, the current global trade slowdown is mostly driven by structural rather than short-term factors (see Chart 3).
A drunk and his dog
Studying the relationship between global trade and income is like analyzing the behavior of a drunk and his puppy dog: neither is walking in a straight line, but we nevertheless expect them to remain fairly close to each other. After all, the world is a closed economy and the magnitude of exchanges of goods and services must be related to the economic activity that takes place within it.
But the relationship between trade and income changes over time; a number of factors sometimes bring them closer together and sometimes push them farther apart. There are several possible explanations for the lower responsiveness of trade to income:
-
changes in the structure of trade associated with the expansion or contraction of global supply chains;
-
changes in the composition of world trade, such as the relative importance of goods versus services;
-
changes in the composition of world income, such as the relative importance of investment and consumption; and
-
changes in the trade regime, including the rise of protectionism leading to the fragmentation of the global marketplace.
Our analysis shows that the changing relationship between trade and income at the world level is driven primarily by changes in supply-chain trade in the two largest trading economies, the United States and China, rather than by protectionism or the changing composition of trade and income.
The composition of trade cannot fully explain the lower trade elasticity in the 2000s, because its components (that is, goods and services) have been remarkably stable in recent years. Similarly, the changing composition of demand is not an adequate explanation, because the long-term investment and consumption elasticity of trade are similar. And finally, the rise in protection has not been substantial, even in the aftermath of the financial crisis, suggesting that trade policies are playing a minor role in explaining the reduction in world trade elasticity.
A country-level analysis reveals that the United States and China both experienced significant declines in the responsiveness of trade to growth (a drop from 3.7 to 1.0 for the United States and from 1.5 to 1.1 for China). Europe, in contrast, saw virtually no change. Other regions experienced sizable changes in trade elasticity over time, but they account for a small share of global trade and hence explain little of the change in world trade elasticity.
Variations in the trade-income relationship at the regional and country level are related to the changing structure of international trade. China offers an example of the economic forces at play.
Changing chains
The increased elasticity of trade to income in the 1990s likely reflected the growing fragmentation of production across borders (Escaith, Lindenberg, and Miroundot, 2010). The information and communication technology shock of the 1990s led to a rapid expansion of global supply chains, with an increasing number of parts and components being imported, especially by China, for processing and reexportation. The resulting increases in back-and-forth trade in components led measured trade to race ahead of national income.
Conversely, the decline in China’s trade elasticity may well be a symptom of a further change in that country’s role in international production. There is some evidence that China’s international supply chains may have matured in the early 2000s, resulting in lower responsiveness of Chinese trade to GDP. This development is reflected in a fall in the share of Chinese imports of parts and components in total exports, which decreased from its peak of 60 percent in the mid-1990s to the current share of about 35 percent.
All these changes do not mean that China is turning its back on globalization. The lower share of imported parts and components in total exports does reflect the substitution of domestic inputs for foreign inputs by Chinese firms, a finding that is corroborated by evidence of increasing domestic value added in Chinese firms (Kee and Tang, 2014). But the increased domestic availability of inputs has been linked to foreign direct investment. There may also be a geographical dimension to these changes, with China’s coastal regions beginning to source relatively more from the Chinese interior because the costs of transportation and communication with the interior have declined more sharply than those with the rest of the world. Trade integration may now be taking the form of greater internal trade than international trade, but official statistics usually capture only the latter.
The reduced responsiveness of trade to income for the United States mirrors in some ways developments in China. The United States was the primary source of the boom in Chinese and other emerging market economies’ imports in parts and components and was the major destination for their exports of assembled goods. In the 1990s, as U.S. firms increasingly relocated stages of production outside the United States, trade tended to respond more to changes in income. In recent years, even if there has been no retreat from offshoring, the pace of the international fragmentation process seems to have declined. U.S. manufacturing imports as a share of GDP have been stable at about 8 percent since the turn of the century, after nearly doubling over the preceding decade and a half.
In contrast to China and the United States, the responsiveness of trade to GDP in the euro area has remained high in the 2000s. This may be a result of the continuing expansion of supply chains to eastern and central Europe from euro area countries such as Germany.
Old and new engines
Will the global trade slowdown persist? Will it have implications for world growth and for countries seeking to use trade as an engine of growth? Our findings show that the 2012–13 slowdown was driven by a structural (and, hence, more durable) change in the trade-income relationship, indicating that the phenomenon is likely to persist in the coming years. This might affect the growth potential of the world economy because trade and income are not independent of one another.
But we must also recognize that the changing long-term relationship between trade and income underpinning the trade slowdown is a symptom of changing patterns of international production. The high responsiveness of trade to growth in the 1990s reflected the increasing fragmentation of production driven primarily by the United States and China. That particular engine appears to have exhausted its propulsive energy for now. But the scope for increasing international division of labor is still strong in Europe and could be important tomorrow for regions that have not yet made the most of global supply chains, such as south Asia, Africa, and South America. The trade agenda of the Group of Twenty advanced and emerging economies has a role to play in making sure that these opportunities are not missed.
Cristina Constantinescu is a Research Assistant and Michele Ruta is a Senior Economist, both in the External Sector Unit of the IMF’s Strategy, Policy, and Review Department, and Aaditya Mattoo is Research Manager, Trade and International Integration, at the World Bank.
This article is published in Finance & Development, December 2014, Vol. 51, No. 4.
Related News
Why Europe needs to regulate the trade in minerals
“That diamond upon your finger, say how came it yours?” asks Shakespeare’s Cymbeline. “Thou’lt torture me,” responds the villainous Iachimo, “to leave unspoken that which, to be spoke, would torture thee.” The story behind certain parts of the global trade in natural resources today, whether spoken or not, is no less a source of anguish.
Natural resources should be a major contributor to development in some of the countries that need it most. And yet, in some of world’s poorest and most fragile states, they bring just the opposite. In many of these countries, the trade in natural resources motivates, funds, and prolongs conflict and egregious human-rights abuses. Resources such as diamonds, gold, tungsten, tantalum, and tin are mined, smuggled, and illegally taxed by violent armed groups, and provide off-budget funding to abusive militaries and security services.
Consider just four African countries: Sudan, South Sudan, the Central African Republic, and the Democratic Republic of Congo. Together, these resource-rich countries account for just over 13% of the population of Sub-Saharan Africa, but some 55% of the region’s internally displaced persons (and one in five worldwide) due to conflict. But the problem is global, with similar patterns in parts of countries such as Colombia, Myanmar, and Afghanistan.
The deadly trade in conflict resources is facilitated by supply chains that feed major consumer markets, such as the European Union and the United States, with cash flowing back the other way. Natural resources, such as tin, tantalum, tungsten, and gold – all minerals that have been linked in some parts of the world to conflict and human-rights abuses – are found in our jewelry, cars, mobile phones, games consoles, medical equipment, and countless other everyday products.
There is clear consumer demand for information that will help buyers make sure that their purchases do not implicate them in appalling abuses. But the responsibility to reconcile global commerce with the protection of basic human rights does not fall first and foremost on consumers. Conflict prevention and human-rights protection are primarily the responsibility of states, and it is increasingly recognized that businesses must play their part as well.
Indeed, we are now at a critical point in what has become a global movement to stop irresponsible corporate practices from being viewed as business as usual. Since 2010, companies working in conflict areas have had a global standard at their disposal. The OECD offers guidance on how to source minerals responsibly. Developed in close collaboration with the industry, it offers “detailed recommendations to help companies respect human rights and avoid contributing to conflict through their mineral purchasing decisions and practices.”
The United Nations has also endorsed similar requirements. In 2011, the UN published a set of Guiding Principles on Business and Human Rights, according to which companies whose “operating contexts pose risks of severe human rights impacts should report formally on how they address them.”
And yet, with the exception of a few progressive industry leaders, few companies have responded to this voluntary guidance. In 2013, Dutch researchers surveyed 186 companies listed on European stock exchanges that make use of conflict minerals. More than 80% made no mention on their Web sites of what they had done to avoid funding conflict or human rights abuses. Similarly, the European Commission’s Directorate General for Trade found that only 7% of 153 EU companies refer to a due-diligence policy for conflict minerals in their annual reports or on their Web sites.
The United States has already taken the next logical step. The Securities and Exchange Commission requires companies that use tantalum, tin, gold or tungsten in their products to investigate these raw materials’ origin, and to mitigate risks in their supply chains in line with the OECD Guidance if they are found to originate in certain conflict-affected or high-risk areas. The 12 member countries of Africa’s International Conference on the Great Lakes Region have committed to similar mandatory due-diligence requirements.
That is as it should be. Responsible sourcing is a duty, not a choice. And here, the EU is lagging behind. In March, the European Commission proposed a plan under which disclosure would continue to be voluntary, meaning that the minerals that enter the EU would not be subject to mandatory checks. The proposal, furthermore, focuses exclusively on raw ores and metals, and excludes products that contain the relevant minerals, such as mobile phones, vehicles, and medical equipment.
The proposal is now being reviewed by the European Parliament and the European Council. It is crucial that both institutions seize this opportunity to strengthen the EU’s response by making disclosure and compliance mandatory and extending coverage to include finished and semi-finished products. Better regulating the trade in these resources will not itself bring peace to conflict-affected areas. But funding conflict and human-rights abuses is not an acceptable cost of doing business.
Published in collaboration with Project Syndicate.
Michael Gibb is Campaign Leader for Conflict Resources at Global Witness.
Related News
Elumelu Foundation launches $100m program to boost African business
One of Africa’s richest businessmen, Tony Elumelu, has launched a $100 million program to support and promote entrepreneurship across the continent. Elumelu, the chairman of Nigeria-based pan-African investment group Heirs Holdings and founder of the Tony Elumelu Foundation, describes the initiative as “a $100 million endowment to encourage the maturation of African entrepreneurs.”
The program, which Elumelu first discussed publicly on the sidelines of the August 2014 U.S.-Africa Leaders Summit in Washington, is intended to help up to 10,000 budding African entrepreneurs to develop their ideas into sustainable businesses.
The foundation plans to provide 1,000 entrepreneurs a year for the next 10 years with seed capital of $5,000 and additional returnable capital of up to $5,000.
By making half of the money returnable, Elumelu hopes to encourage program participants to develop a sense of responsibility. “I want to make sure there is some spirit of accountability,” he says.
In order to be eligible for the initial $5,000 seed capital, successful applicants will have to go through a 12-week online mentoring and training program.
Parminder Vir, director of the entrepreneurship program, explains: “The business skills training program will give them tools they need to go out and physically implement the lessons they learn.”
The online program will draw on content specifically designed to address the challenges African businesses will face. “During that stage they will have mentors to help them, as well as access to a curated online library to enable them to find information that is relevant to their business,” Vir adds.
At the end of the 12 weeks, the 1,000 startups will attend a three-day forum in Nigeria. “That event will sow the seed for intra-Africa trade, for pan-Africa trade,” she says.
For Elumelu, promoting the long-term growth of intra-African trade is one of the key goals of the project. “Intra-African trade is quite low, partly because Africa was wired from colonial times to facilitate trade only with the rest of the world, and partly because of the nature of what we’re trading. We have raw materials but we don’t have the processing capacity to transform them into products that will be useful in Africa.”
The relatively low level of trade between African countries is considered one of the key factors holding back the continent’s economic development. According to a recent study, sub-Saharan Africa has the lowest level of connectedness of any region worldwide.
“We hope that the successful entrepreneurs in this program will show interest in industrialization of the continent,” Elumelu says. “That will help us produce more finished goods, which will encourage trade and also put pressure on political leaders to create economic zones, or to enable the movement of goods, people and payments that will facilitate intra-African trade.”
Elumelu and Vir believe that the long-term nature of the program will also help ensure the participants make the connections that will help them build pan-African businesses. “Over the 10 years we will build an alumni network… that will lay the foundations for generations to come,” Vir says.
Wiebe Boer, CEO of the Tony Elumelu Foundation, says he hopes the businesses supported by the program will create at least one million new jobs and generate $10 billion of new revenues.
Beyond the promise of receiving financing, mentoring and support, entrepreneurs have an additional incentive to apply: The chance of having their business noticed by Elumelu as a potential investment opportunity.
“Heirs Holdings is pan-African private investment company. If we see very promising companies that need support, we can do that – through impact investing, through pure commercial investment, through financial support, or even through wider capital raising,” he says.
Elumelu acknowledges that the program is ambitious, both in its scale and complexity, and that it’s unlikely all the entrepreneurs who join will emerge with successful businesses. “If we achieve 30%-50% success rate we will have helped significantly in helping the development of the continent,” he adds.
The application process will begin in January 2015 with the announcement of the first 1,000 participants expected by the end of March.
Related News
Illovo seeks sweeter trade deals in Africa
Illovo Sugar has set its eyes on east and west Africa for growth as it prepares its exit from EU markets in the medium to long term, according to Gavin Dalgleish, the managing director of Africa’s biggest sugar producer.
Dalgleish said similar to the world market, EU sugar prices had continued to deteriorate as industry producers repositioned themselves for the 2017 sugar reforms.
The EU sugar industry reforms will see the EU move from being a net importer of sugar to a net exporter.
“We are getting a much lower contribution for our EU sales than we were previously, that is why we are trying to move into markets that give us better return on our sales than the EU,” he said.
In Africa, Illovo was looking at growing its footprint in Kenya, Ethiopia and west Africa. The company already operates in Malawi, Zimbabwe, Tanzania, Swaziland and Mozambique.
“Moving away from EU and maximising domestic market sales is what we [are] trying to do. This will include growing the regional market and this will involve creating pre-pack brands that we can try and position into the market and get [a] consumer pool.”
This meant that Illovo had to refresh its marketing skills base in response to the lower world prices, Dalgleish said.
“We are moving to being more dependent on sales that are in Africa.”
This would be done through expansion into the eastern and western parts of Africa.
East Africa made more geographical sense for Illovo given the company’s current footprint, Dalgleish said.
“For demographic growth, it would make sense for us to move into the fastest-growing markets in the western parts of the continent.”
For the six months to September, Illovo’s revenue declined by 5 percent to R5.9 billion as a result of a 9 percent drop in sugar production and reduced export market prices.
The group’s operating profits fell 14 percent to R1.3bn. Profits were down due to a fall in total sugar cane and sugar production, as well as the decline in EU market prices.
These results saw Illovo’s shares on the JSE close 3.63 percent lower at R26.
“We are not happy with our results. We had a very tough trading period over these six months,” Dalgleish said.
Variable weather conditions and the effects of industrial action in Swaziland and in South Africa also affected Illovo’s poor performance.
“Notwithstanding these challenges, our operations in Zambia and Mozambique are expected to achieve record sugar and cane production for the year,” he said.
Illovo’s throughput amounted to 10.7 million tons, reflecting an 11 percent decrease compared with the period last year.
The group said the season to date had been affected by variable conditions such as later summer rainfall and a very dry winter accompanied by frost damage in South Africa.
Cane production in Swaziland was affected by an industry strike and climate factors.
However, Dalgleish said in relation to full-year sugar production, Zambia had produced record production at its Nakambala factory, as well as noting operational improvement in Mozambique, which should also result in record cane and sugar production.
Related News
Members seek more information on policies affecting latest cotton market trends
WTO members questioned each other about the trade policies that they believe could be affecting falling prices, slack trade and shifting market shares, when they met on 28 November 2014 for the second dedicated discussion on cotton under the agriculture negotiations.
Several key delegations signalled the importance they attach to this discussion by sending their ambassadors to the meeting. They had before them the latest Secretariat document (download below) updating information on cotton subsidies and other policies, based on information that members had notified. They also heard the latest market assessment by the International Cotton Advisory Committee (ICAC).
A number of them called for additional information either from each other or via a proposed Secretariat questionnaire that members would reply to voluntarily. This was partly because for some major producing and trading nations, the latest notified information dates back several years. It was also because delegations felt that the notified information did not provide enough detail to explain policy trends and shifts in the market.
“This process provides a unique opportunity to get the facts right about members’ cotton trade-related policies from a WTO perspective and to have a constructive exchange around these facts and relevant related developments,” said chairperson John Adank, who is New Zealand’s ambassador.
“As such, these dedicated discussions on relevant trade-related developments for cotton are complementary to the negotiation track per se.”
Meanwhile, the US and Brazil reported on the agreement they had reached to settle their dispute over US cotton subsidies and on some of the details relating to the technical assistance part of the deal. This includes a $300m payment by the US to the Brazilian Cotton Institute to be spent on aid for the cotton sector in Brazil and in Sub-Saharan Africa, Mercosur and its associate members, Haiti or elsewhere. Some delegations said they wanted to know more about the implications of the deal.
This was the latest in a series of meetings kicked off by the decision on cotton agreed at the Bali Ministerial Conference in December 2013. In the decision, members said they would hold “dedicated discussions” twice a year to “enhance transparency and monitoring” of cotton trade policy, within the agriculture negotiations. Members said the discussion was boosted by the decisions taken in the General Council the previous day that broke the deadlock over post-Bali work.
Market situation
ICAC’s assessment of the latest market situation was similar to its report in the morning session on the development aspects of cotton, but with additional information on exports and trade. Among the points in ICAC’s presentation were:
-
the US and India are the two largest cotton exporters with market shares of 31% and 16%, and India is also expected to overtake China as the world’s largest producer in 2014/15
-
China, Pakistan and Turkey, all large producers, are also importers although Chinese imports are declining following a policy change and will play an important role in changes in the market
-
Cotton is considered more of a valued product in developed countries than developing countries. In developed countries, which account for 40% of world fibre consumption, cotton’s market share is stable at around 43%. But in developing countries, with 60% of fibre consumption, cotton’s market share has fallen over the past decade from about 40% to 26% because of the switch to cheaper manmade fibres.
More details in ICAC’s presentation here (pdf).
Trade policies
Following up on the information provided by the Secretariat and ICAC, the US noted a significant increase in India’s cotton exports in recent years and the recent evolution of cotton support policies in China. The Cotton-4 – Benin, Burkina Faso, Chad and Mali – and the EU asked China to comment on recent announcements on limiting the level of cotton imports in 2015.
China noted that in recent years it has been the world’s largest cotton producer, consumer and importer. It justified the decision to limit imports – while conforming with China’s WTO commitments – by the high level of accumulated stocks. China also said that developed countries’ restrictions on textile imports impeded cotton processing and observed that its cotton producers are usually small scale farmers.
As part of his report on the broader agriculture negotiations Chairperson Adank said that he plans to convene a negotiating meeting on 4 December, to follow up on the last meeting in July.
“My intention will be to suggest that we restart the discussion process where we left it before the summer break, ie, more or less where we were at the 23 July informal meeting of the Special Session of the Committee on Agriculture,” he said.
“The idea will be to build upon the various discussions and ideas exchanged in the first half of 2014 rather than starting from scratch as we resume our discussions. We will also have to prepare for the dedicated sessions on the public stockholding issue.
“Cotton will be an important element of this reflection on the way forward for our unfinished business, and I will continue to reach out to concerned members to see how best to ensure substantive consideration of outstanding issues and to deliver on the cotton mandate within the framework of the agricultural negotiations, in the context of the post-Bali work programme,” Ambassador Adank said.
Want more?
Sudan has circulated a document on the situation of cotton in the country and the reforms it is undertaking. Sudan is an observer still negotiating WTO membership and circulating a document outside its membership talks is an unusual step for an observer.
Sudan thanked the WTO Secretariat’s Development Division and Burkina Faso, one of the “Cotton-4”, for help in preparing the paper.
The next meeting will be before the 2015 summer break, date to be announced.
Related News
Sitting on the sidelines: How will mega-regionals affect African LDCs?
Although the final substance and eventual ratification of Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) negotiations remain uncertain, the ability of African nations to diversify market opportunities, integrate their economies in global value chains and attract sustainable investment could be affected.
The long-term balance of benefits against risks will depend on the design of these agreements, supportive international policies and the strategic response of African policy-makers and firms. Four issues are relevant: new compliance measures, geopolitical dynamics, preference schemes and international production networks.
Transparency and monitoring will be an important basis on which sub-Saharan African nations can frame a proactive response.
New compliance measures
The TTIP and TPP differ in their motivating factors and negotiating dynamics. However, beyond their geographical spread and respective weights in world economic output and trade, they hold in common the objective of reaching binding commitments on “21st century”, or “WTO-Plus”, trade-related issues.
The TPP’s main focus is to reach agreement on disciplines configured to support the formation of transnational production networks, including intellectual property, investment, competition policy, services, customs procedures and investor-state dispute settlement. The TTIP builds on this with its core ambition of eroding non-tariff barriers to trade by agreeing to common standards and working towards regulatory convergence (through harmonisation or mutual recognition). Both sets of negotiations further include chapters on labour and environmental norms, financial services, public procurement practices and market access.
Should new regulatory standards and disciplines emerge from the TPP and TTIP negotiations, they will, in all probability, apply to trade and investment relations with the rest of the world, including sub-Saharan Africa. The ability of African nations to attract investment and gain reliable access to mega-regional markets, most importantly the EU and the US, will progressively depend on compliance with non-tariff measures – both technical and non-technical – that go beyond the realm of traditional trade policies.
In the case of standards, meeting higher thresholds will entail regulatory changes without which African producers could be shut out of the markets concerned. This raises the problem of resource constraints and the ability to strengthen regulatory capacities. In regard to compliance with disciplines covering investment or intellectual property rules, domestic policy changes will be expected. This raises the issue of the appropriateness of adopting “gold standard” policies in weak institutional settings.
The depth of these behind-the-border requirements will not be without controversy. Yet, they could be exploited by African nations as an impetus for reform in areas of domestic priority. Depending on the nature of institutional and supply-side constraints, as well as the capacity to conform to new standards and disciplines, targeted assistance under the aegis of the Aid for Trade programme and broader capacity building efforts will be required.
Geopolitical dynamics
The geopolitical foundations and possible implications of the mega-regionals on the international trading system should not be lost in the discussion on their potential impact on sub-Saharan Africa.
There is disagreement among analysts whether the mega-regionals represent “building blocks” towards multilateral convergence or “stumbling blocks” towards fragmentation. Systemic scenarios will hinge, to a great extent, on how China responds and whether one of the unstated objectives of the US-led mega-regional drive, that of not necessarily excluding China but rather compelling the world’s second largest economic power towards accepting new norms and rules on pre-established terms, leads to gradual consent or contest – particularly in the context of a powerful Asia-Pacific coalition like the TPP where China is by design an outsider to negotiations.
This geopolitical dimension is of relevance to sub-Saharan Africa at a time when the continent’s trade and investment patterns are undergoing a profound and seemingly secular shift from traditional economic partners to intensified relations with fast-developing centres of world commerce.
The EU as a bloc remains sub-Saharan Africa’s largest trading partner, yet its share of total African trade halved between 1989 and 2011 from 50 percent to 25 percent. In 2011, the US accounted for 12 percent while China had become sub-Saharan Africa’s biggest bilateral trading partner with 15 percent of the region’s total trade. The speed and scale of China’s engagement with the continent has been a game-changer.
The backdrop to the mega-regional effort is one in which sub-Saharan African nations are concurrently engaged in discussions with major partners over institutional arrangements of long-term developmental and strategic importance. The African Growth and Opportunity Act (AGOA) – the centrepiece of US economic relations with the region since 2000 – is up for renewal in 2015 with a fair degree of uncertainty regarding the terms of any new agreement. AGOA has been characterised by its unilateral and non-reciprocal nature, features that are up for discussion, specifically with regards to sub-Saharan Africa’s biggest economies and most dynamic markets. An important factor behind this reasoning is that the EU is hoping to finalise arduous negotiations on regional Economic Partnership Agreements – the foundation since 2008 of Europe’s economic integration with sub-Saharan Africa, which (with the exception of least developed countries) is built on reciprocity, hence preferential access to African markets for European firms.
Since 2000, the Forum on China-Africa Cooperation has served as the main stage for Sino-African bilateral relations. Recently, there have been moves to formalise trade and investment arrangements with African regional groupings through initial Framework Agreements with the East African Community (EAC) and the Economic Community of West African States (ECOWAS). China, too, may start to demand reciprocity with certain partners.
A question that arises is how sub-Saharan African nations and regions will react should mega-regional agreements fail to reach coherence and lead to fragmented governance structures within the international trading system. The immediate tendency may be to gravitate towards European and US partners – especially if existing preference schemes are strengthened and the EU makes African economic development a strategic priority. However, the emerging centres of growth, trade and investment are largely to the east. While the future velocity of this shift in world economic gravity can be debated, the expectation is that Asia will continue to experience significant economic convergence and that South-South trade and investment dynamics with Africa will amplify. A discussion on the region’s double-edged economic relationship with China, including the possibility of future regulatory demands, would seem to be a priority.
Preference schemes
The TTIP could provide an opportunity for the EU and the US to jointly revisit trade preference schemes to support the development objectives of sub-Saharan African low-income countries. The transatlantic partners apply distinct non-reciprocal arrangements that offer special access to African nations and least developed countries – the most comprehensive of which are AGOA and the Everything but Arms (EBA) regime of the EU.
In 2013, sub-Saharan Africa accounted for 2 percent of world trade and less than 3 percent of global foreign direct investment (FDI) flows, with extractive industries drawing the lion’s share. Liberal access to developed markets, as envisioned by the policy thinking behind AGOA and EBA, could help stimulate investment and job creation in agricultural, manufacturing and service export sectors.
However, despite their successes, both schemes suffer from limitations that curtail their utilisation and effectiveness.
To cite some of the most commonly echoed weaknesses: AGOA excludes and applies tariff quotas to key products that the region can produce competitively, not least agricultural products; EBA provides full duty-free, quota-free coverage but only to countries classified as LDCs, thereby driving an arbitrary wedge within the region; the administrative costs of compliance to complex local content requirements can be prohibitive to firms operating in LDCs; the rules of origin required for product eligibility are seen as ill-adapted to the development of value chains; and AGOA’s annual review mechanism added to the uncertainty of the scheme’s renewal post-2015 reduces security of access.
There is as yet no evidence that the harmonisation of preference schemes is on the agenda of the TTIP. However, short of integrating their preferential arrangements, the EU and the US could send a strong message to their African partners that the agreement is about coherence and inclusion by mutually recognising requirements covering rules of origin.
This not only would reduce information costs and ease compliance procedures for African exporting firms, it also, in principle, would allow imported products from African countries covered by preferences to be granted reciprocal access to EU and US markets.
International production networks
The fight for relevance in 21st century trade is increasingly being conducted via global value chains (GVCs). Despite the developmental potential that disaggregated production networks hold for low-income economies in Africa by allowing for the formation of capabilities and clusters in a narrow set of specialised tasks, the region has essentially been bypassed.
Most models predict that the mega-regionals will not lead to significant trade diversion and that any loss could be compensated by the efficiency gains to the global economy.
This prognosis will depend on how the agreements are designed (e.g. an approach based on open regionalism with accession clauses or “docking stations”) and the manner in which the EU and the US decide to integrate the many trade agreements they hold with third countries and regions (e.g. mechanisms covering the cumulation of rules of origin).
The TTIP, TPP and the Regional Comprehensive Economic Partnership (RCEP) incorporate all three GVC hubs: Europe, North America and East Asia. There is a risk that these agreements could have negative spillover effects on the incentive to invest and stimulate actual and potential production in sub-Saharan Africa.
As discussed, generous preference schemes in developed markets with rules adapted to the realities of modern trade could spur African export diversification. The operationalisation of the LDC Services Waiver and the implementation of the Trade Facilitation Agreement as agreed at the WTO Ministerial in Bali, may also form part of a supportive international policy environment, which will need to be complemented by national and regional policies.
Although many economies in sub-Saharan Africa have consistently grown faster than other regions of the world in recent years, primary commodities have driven a large share of this growth. Most African nations need to implement reforms that improve their business environment and attractiveness as investment destinations so they can develop their potential in manufacturing activity and agricultural productivity. Modernised infrastructure and backbone services (logistics, telecommunications and transportation) are further preconditions to competitiveness and the ability to tap into sophisticated production networks.
Securing greater depth and coherence to existing regional integration efforts will also be an important strand in sub-Saharan Africa’s effort at creating an environment conducive to the expansion of value chains. Official intra-regional trade between African nations stands at around 10 percent (compared to 30 percent for ASEAN nations). This weak integration is partly driven by the lack of complementarities between the region’s economies, but also by the prevalence of high barriers to trade: The cost and complexity of conducting business across borders severely restricts the ability to form regional value chains. Given the low level of intra-African trade, Africa will remain dependent on external forces for a long time, and these forces will require the greatest adjustments in the near term. However, initiatives at the regional level could be used as laboratories for reform and for building regional value chains with an eye on graduation into global production networks.
A recent initiative of note that underscores the awareness of the need to better integrate and harmonise regional economic communities is the Tripartite Free Trade Area spanning the EAC, the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). The agreement is to be based on three pillars (market integration, infrastructure and industrial development) with an agenda in two phases that includes trade in goods (tariffs, non-tariff measures, rules of origin, customs cooperation, dispute resolution) followed by services, intellectual property, competition policy and investment – all of which were until recently rarely considered in African regional trade agreements and could better prepare Africa for the post mega-regional environment.
Conclusion
One of the consequences of mega-regional activity is that the influence of sub-Saharan Africa on the global trade and investment agenda will diminish – the region relies on the World Trade Organization to be heard and has very little bargaining power to push its interests forward outside of the organisation. Nevertheless, sub-Saharan African policy-makers can devise strategies aimed at building on the opportunities and curtailing the risks occasioned by the mega-regional agreements. This entails closely monitoring the negotiating chapters, working with partners to ensure that the potential for discrimination is minimised and creating a domestic and regional economic environment that invites confidence.
Peter Draper is a Senior Research Fellow, Economic Diplomacy Programme, South African Institute of International Affairs. Salim Ismail is Group Chairman and Chief Executive Officer, Groupe Socota, Mauritius.
This article is published under Bridges Africa, Volume 3 - Number 10, by the ICTSD.
This article is an adaptation of a longer article which appeared in Mega-regional Trade Agreements: Game-Changers or Costly Distractions for the World Trading System?, World Economic Forum, July 2014. Read a blog by Richard Baldwin, Professor of International Economics, Graduate Institute of International and Development Studies, Switzerland, here.
Related News
Xi outlines ‘big country diplomacy’ Chinese foreign policy
China must establish “big country diplomacy with Chinese characteristics,” President Xi Jinping said in a speech that laid out his goals for making the nation a major strategic power, a further sign he’s jettisoned a long-standing policy to limit involvement in foreign affairs.
The Central Conference on Work Relating to Foreign Affairs, the Communist Party’s highest-level meeting on foreign relations, sought to establish “the guidelines, basic principles, strategic goals and major mission of China’s diplomacy in the new era,” the official Xinhua News Agency reported.
“China must have big country diplomacy with Chinese characteristics,” Xi was quoted by Xinhua as saying at the meeting last weekend. Foreign relations under his leadership should bear “distinctive Chinese style, Chinese manner and Chinese attitude.”
The meeting, attended by the other six members of the Politburo Standing Committee, was the first such gathering in eight years. Xi’s predecessor Hu Jintao convened the central conference in August 2006, nearly four years after he became party chief.
The speech by Xi reflects how China is shifting from its long-held dictum “hide your brightness, bide your time,” as set by late leader Deng Xiaoping more than 20 years ago. Since coming to power Xi has traveled extensively in Asia, Europe and Africa and recently hosted the Asia-Pacific Economic Cooperation forum, touting China’s role as a major security and economic power after years of U.S. dominance in the region.
“It’s clear that the current leader doesn’t want to practice this dictum any more,” said Niu Jun, a professor of international relations at Peking University in Beijing who has researched the Communist Party’s foreign relations for 30 years. “This is a very significant indicator of a transforming foreign policy.”
Military, Economy
Under Xi, China is modernizing its military, asserting its territorial claims in the East China Sea and South China Sea, and boosting investment and trade with its neighbors. Xi has also pushed a plan to revive the ancient Silk Road trading route to Europe, part of his “Chinese dream” to rejuvenate the Middle Kingdom and expand its sphere of influence beyond economics to politics and culture.
Xi urged those at the meeting to “keep in mind new tasks that should be carried out under new conditions” and to work hard to “creatively pursue China’s diplomacy in both theory and practice, highlight the global significance of the Chinese dream,” according to Xinhua.
China must keep abreast with global developments and make “sound, accurate and thorough assessments of the changing international environment” if it wants to be strong and achieve the Chinese dream, Xi said at the meeting, also attended by senior diplomats and military officers.
‘Big Ambitions’
Compared to Deng’s “hide and bide” approach, which was born out of an era when the party was focused on developing the economy and maintaining political stability, Xi’s concept looks outward and is more driven by his personal style, Niu said. “Xi’s style is Xiong Xin Bo Bo,” or “full of big ambitions.”
“This speech confirms that China has moved to a different kind of posture – one where China pro-actively tries to shape its own environment,” said Zhang Baohui, director of the center for Asian Pacific studies at Lingnan University in Hong Kong. “China is no longer the passive actor that Deng prescribed.”
‘Mutual Benefit’
In his speech, Xi said the Chinese dream is “a dream of peace, development, cooperation, and mutual benefit” and pledged to “appropriately resolve the territorial and island disputes” with neighbors while safeguarding China’s sovereignty. China’s claims in the South China Sea have been contested by Southeast Asian nations including Vietnam and the Philippines.
“Although the speech certainly suggests a self-confident China that will be active in its diplomacy, it also suggests that Xi might want to smooth some of the rough edges off China’s recent diplomacy,” said Joseph Fewsmith, a professor at Boston University who studies China’s leadership. “He talks about creating a periphery that shares a common fate.”
The speech reflects China’s efforts to use its economic clout in the region and preempt concerns from neighbors about its rise, said Zhang from Lingnan University. Such a strategy plays to China’s strengths, he said, because “territorial conflicts drive others toward the United States.”
Peace, Development
Xi said foreign policy should help realize two goals for the party: Doubling China’s national income from 2010 levels and achieving the renewal of the nation by the 100th anniversary of the Communists gaining power in 2049.
“We should be fully aware that the global economic adjustment will not be smooth sailing; but we also need to recognize that economic globalization will not stop,” Xi said. “We should be fully alert to the grave nature of international tensions and struggle; but we also need to recognize that peace and development, the underlying trend of our times, will remain unchanged.”
Related News
Lima COP kicks off with inspiring calls to action
The UN Climate Change Conference in Peru (1-12 December) kicked off on Monday with inspiring calls to climate action.
In her opening address, the UN’s top climate change official Christiana Figueres called on delegates to take inspiration from Peru’s famous Nazca lines etched into the soil by Peru’s indigenous Nazca people many centuries ago. These lines depict symbols of Nazca mythology, and include the monkey, the hummingbird and the condor.
Ms. Figueres said the world now needed lines of action on climate change that are “as indelible over time as the Nazca lines”.
Drawing parallels to the hard work delegates need to undertake to design the 2015 global Paris agreement, and ramping up immediate climate action, she said:
“We must emulate the hard work it took to etch these lines into the soil, embody the tenacity of those who carved them, and create global climate and development agendas with the durability of this ancient art form.”
According to Ms. Figueres, key deliverables for the meeting are:
-
a draft of a new, universal climate change agreement on the table and clarification of how national contributions will be communicated next year
- consolidating of progress on adaptation to achieve political parity with mitigation, given the equal urgency of both
- enhancement of the delivery of finance, in particular to the most vulnerable
- stimulation of ever-increasing action on the part of all stakeholders to scale up the scope and accelerate the solutions that move us all forward, faster.
Ms. Figueres said:
“With success in these areas, COP 20/CMP 10 is poised to deliver pre-2020 action, set the stage for a strong Paris agreement and increase ambition over time, ultimately fulfilling a long-term vision of climate neutrality in the pursuit of development that is truly sustainable for all.”
Mr. Manuel Pulgar-Vidal, Environment Minister of Peru, was elected President of the Conference of the Parties (COP 20/CMP 10).
In his opening address, he said that the meeting was taking place against a background of announcements to curb emissions by several major emitting countries and the large public mobilization and many initiatives launched at the September Climate Summit in New York.
He also praised countries for making pledges towards the initial capitalization of the Green Climate Fund.
Alluding to the summary of the latest findings of the UN’s International Climate Change, published in October in Copenhagen, COP President Pulgar-Vidal said:
“This report contains several messages that are undeniable: never before has there been so much evidence of social and natural effects of severe and irreversible climate change. Never before has it been so clear that the window of opportunity to reduce emissions will soon close. Never before has it been so necessary to ensure that our cities and sectors can adapt to climate change. Never before have we so clearly seen the multiple opportunities for co-benefits through accelerated efforts to curb greenhouse gas emissions and to adapt to climate change.”
This message was underscored by the Chair of the UN’s intergovernmental Panel on Climate Change, Dr. Rajendra Pauchari, who reminded the audience that unchecked climate change would lead to irreversible consequences.
COP President Pulgar-Vidal said the conference would include space for dialogue and high-level cooperation between states and non-state actors, which should be recognized and encouraged.
He announced that December 11 would be a “Day of Climate Action” at which for example representatives of civil society, women's groups and youth could take the floor.
More than 100 Heads of State and Government and Ministers are scheduled to attend the high-level segment of the conference next week, which begins on 9 December and ends with a decision-making plenary on 12 November.
Also next week, the UNFCCC secretariat will celebrate Momentum for Change lighthouse activities, climate action that demonstrates positive results for innovative finance, women, the urban poor, along with contributions of the information and technology sector to curb emissions and increase adaptive capacity to respond.
Further highlights are a UNFCCC Pre-2020 Action Fair 5, 8 and 9 December in Lima to showcase how action is being scaled up and how many countries and non-state actors are taking action, plus a special “NAMAs day” to promote plans of developing countries to reduce emissions and to develop sustainably which can be supported by developed countries.
The full set of speeches and presentations given at the opening of COP 20 can be found here.
Related News
Doing business with corruption
When we think about trade barriers hindering developing countries, we often think of tariffs and regulations. However, IGC research suggests another hidden cost, corruption at border posts, plays a significant but underappreciated role in hindering trade and development
When we think about the costs for the developing world to engage in international trade, what often comes to mind are the cost of tariffs, transport and non-tariff barriers, usually in the form of stringent regulatory requirements that the products they are trying to trade have to meet. However, there are other hidden, less predictable, costs that firms still need to grapple with when trying to move goods across space: corruption at border posts. With the World Bank estimating that the burden to the global economy per year is US$ 1 trillion, or 3% of its GDP, corruption may play an important role in hindering trade. But how can corruption affect firms’ trading decisions?
Costs versus benefits
On the one hand, corruption can be beneficial to firms. Corruption, conceived as ‘grease’ to oil the wheels, can allow firms to overcome cumbersome regulations, by providing underpaid bureaucrats with incentives to perform and so improving allocative efficiency. On the other hand, corruption could have a negative impact, acting as a form of distortionary taxation which reduces allocative efficiency via lost revenues for government and the increased transaction costs, uncertainty, and unenforceable contracts which hamper business activity.
Business behaviour
To understand how corruption is affecting firms’ behaviour, we need to look at how corruption alters the marginal price of the public service to firms, and how their demand for the service changes in response to variations in that marginal price.
We examined this question in the specific context of how corruption could increase the cost of international trade in Sub Saharan Africa. To do so, we looked at firms in Northeastern South Africa with a choice between using two ports with very different levels of corruption: Maputo in Mozambique or Durban in South Africa. We drew a random sample of three types of firms: those drawn from an area equidistant to the two ports, an area in South Africa that would be considerably closer to the more corrupt port of Maputo and Mozambican firms located close to Maputo, which did not have the option of shipping through the port of Durban.
An important aspect of this setup was that the location of firms and the decision of which product to trade pre-dated the opening of the Maputo port to international business following an almost two-decade long civil war in Mozambique. By collecting information on directly observed bribe payments for the shipment of different types of products, we could then combine this information to see how corruption affects firms’ choice of which port to use.
The price of corruption
An important finding was that corruption varied significantly depending on the type of product being shipped. In particular, South African products that fell under a high tariff grouping according to the tariff code of Mozambique were more vulnerable to being stopped to pay a bribe when travelling from Maputo to South Africa. Falling under a high tariff grouping according to the tariff code of a neighbouring country was uncorrelated with any important shipment attributes such as its size, value, or level of perishability, and was uncorrelated with whether that product would ultimately pay a high or low tariff once arriving at its final destination in South Africa. This strategy thus allows us to see how corruption affects South African firms’ choice of which port to use, and how firms substitute higher transport costs for higher corruption costs.
What we found indicates that firms do respond to the price effects of corruption, organising production in a way that increases or decreases demand for the public service. We found that different border bureaucracies created opportunities for officials to engage in two different types of corruption. First, there was indeed collusive corruption where officials were able to sell tariff evasion, mostly to Mozambican firms importing goods through Maputo. This reduced trade costs and meant there were high rents acquired by private agents (as bribes were often only 0.2% of the total tariff due) and significant losses in government revenue (equal to, on average, a 5% nominal tariff reduction). However, we also observed instances of coercive corruption, with private agents being forced to pay an additional fee to see the shipments go through, thus increasing trade costs for the firm.
Pricing peace of mind
Of the two types, coercive corruption affected South African firms’ choice of which port to use. Given the chance that an imported good would fall under a high tariff code in Mozambique (and so have a higher chance of being subjected to coercive corruption in Mozambique) firms appeared to prefer to double their transport costs and ship their imports through the port of Durban just to avoid the bribe. In the most extreme case, the cost incurred to reroute via Durban rather than Maputo (where the mean bribe was triple what it was in Durban) was three times higher than the cost of the actual bribe. For South African firms that have 57% lower transport costs to Maputo rather than Durban, 46% still chose to use Durban – that figure jumped to 75% of firms for perishable cargo, and 74% for urgent cargo. This is hard to square with standard price theory and suggests that it is the uncertainty created by corruption that firms strongly dislike.
The cost of this diversion to a less corrupt port went beyond the additional transport costs directly incurred by the firms: it created imbalanced flows of cargo through the transport network, introducing significant distortions in local transport markets. Overall, this research suggests that reducing corruption may improve allocative efficiency, but that there could be heterogeneous effects on firm-level trade costs depending on whether the reduction is in coercive or collusive forms of corruption.
3 implications for policymakers
There are some implications from this we can draw for policy:
Firstly, incentives for corruption are partly shaped by the organisational structure of public bureaucracies, as these can create differential structural opportunities for bureaucrats to extract different types of bribes. Two possible options are to reduce in-person contact between private agents and port officials, or reducing the steps in the process of public service delivery (e.g. using online submission of documents and single windows for the submission of clearance documents)
Secondly, a better understanding of the rules of thumb used by different officials to identify bribe opportunities would enable more targeted anti-corruption strategies.
Thirdly, the distribution of rents between public and private agents will determine the degree of public support anti-corruption policies will have: if private agents are getting large rents by for instance evading tariffs; it will be difficult to rely on them to enforce anti-corruption measures.
Numerous factors shape how bureaucrats engage in different types of corruption and these can in turn change the costs and benefits for firms involved in international trade. At a more aggregate level, the effects of corruption can go beyond price effects for firms, to generate imbalanced trade flows and lost government revenues. More effective evidence and research-based anti-corruption strategies provide a great opportunity for governments to start cleaning up corruption at borders, thus providing the developing world with a greater chance at reaping the benefits brought by international trade.
Sandra Sequeira is Lead Academic for the IGC’s Mozambique programme. She is also a Lecturer in Development Economics at the London School of Economics and a research affiliate at STICERD.
Related News
Actions to improve the business environment discussed in Khartoum at the presentation of the Investment Policy Review of Sudan
Sudan has made progress in improving its investment climate but challenges remain, an UNCTAD review has concluded.
A review of investment policies in Sudan, prepared by UNCTAD at the request of the Sudanese government, was presented to high-level government officials, private sector representatives and other development partners at a workshop in Khartoum on 25 November 2014.
The Investment Policy Review (IPR) of Sudan recommends a series of measures to improve the legal framework for investment, in parallel with modernization of the investment promotion institutions.
During the workshop, participants exchanged views on the IPR’s main findings and recommendations with an UNCTAD team.
Ahmed Shawer, Secretary General of the National Investment Authority, said the Review’s detailed recommendations would help to enhance the business climate in Sudan. “We hope to implement the recommendations with technical assistance from UNCTAD” he added.
Chantal Dupasquier, Chief of UNCTAD’s IPR section, said that the purpose of the IPR was to assist Sudan in achieving its national development objectives through attracting more foreign direct investment (FDI).
The IPR takes into account Sudan’s substantial, but largely unexploited, potential to attract foreign investors, especially in agriculture, mining and tourism – key sectors targeted for economic diversification by the Sudanese government.
The IPR recognizes that the Sudanese government has made efforts to build a more favourable business environment, but challenges remain.
Current laws related to investment are generally modern and in line with good international practice, according to the IPR, but their implementation could be improved through adoption of secondary legislation, strengthened institutions and better coordination among different levels of the government.
Other policy challenges include the need to clarify and streamline the process of establishing investors, improving access to land, and reviewing the tax regime to generate much needed public revenue.
The report also recommends improvements in institutional structure and FDI promotion efforts through the establishment of an independent and publicly funded investment promotion agency.
The presentation of the report, which was organized in cooperation with the United Nations Development Programme office in Sudan, was followed by an in-depth and lively discussion about proposed regulatory reforms and what was needed to upgrade investment promotion.
UNCTAD has carried out more than 40 IPRs at the request of developing-country governments.
Related News
Parliamentary Roundtable Panel Discussion on SA’s White Paper on Foreign Policy
The roundtable was aimed at assisting the committee members in unpacking and understanding South Africa’s strategic foreign policy orientations from a regional, continental and global perspective – South Africa’s White Paper on Foreign Policy entitled: ‘The Diplomacy of Ubuntu’
On 5 November 2014, the Portfolio Committee on International Relations and Cooperation in the National Assembly of the South African Parliament hosted in partnership with the Institute of Global Dialogue (IGD) based at UNISA in Pretoria a roundtable panel discussion on South Africa’s White Paper on Foreign Policy entitled: ‘The Diplomacy of Ubuntu’. The roundtable was aimed at assisting the committee members in unpacking and understanding South Africa’s strategic foreign policy orientations from a regional, continental and global perspective. In evaluating whether the White Paper succinctly captures South Africa’s foreign policy identity, the discussion included questions of what are the strategic imperatives that inform South Africa’s role and behaviour in Africa; to what extent does the White Paper articulate a coherent understanding of what is meant by “the Diplomacy of Ubuntu’; and, how does one conceptualise South Africa’s national interests from regime interests. The panel consisted of Dr. Sphamandla Zondi (Director of IGD); Prof. Chris Landsberg (SARCHI Chair on African Diplomacy and Foreign Policy, University of Johannesburg); Ms Sanusha Naidu (Senior Research Fellow at IGD, and Project Manager of the Emerging Powers project at Fahamu) and Ms Michelle Pressend (independent analyst based in Cape Town).
Below is the presentation from the panelists.
Dr. Zondi (IGDi): Matters of paradigm, orientation and Africa
Dr Siphamandla Zondi, Director; Institute for Global Dialogue (IGD), said that South Africa had formerly had a Green Paper on foreign policy, but that had been abandoned because it confined South Africa to a concise paradigm. Countries that had ascribed their foreign policy to human rights based foreign policy had withdrawn their statements because it was impossible to hold that line. A conscious decision was made by the Late Head of State and former President of South Africa, Mr Nelson Mandela, that South Africa should allow some space in its foreign policy. The process of discussion on the Green Paper was too long, and it was felt that if it was pushed too far could cause difficulties among the constituencies. If the Green Paper was abandoned by the first South African democratic government, then he questioned what were the reasons for having the White Paper now. The ANC conference of 2007 had taken a decision on that point. However, whether the conditions that had led to the abandoning of the Green Paper had changed was another question, and other topics that needed to be discussed were whether South Africa had the capacity to choose a specific foreign policy framework, in a fluid environment.
The question of “What is South Africa’s outlook on world affairs” was not a static point, given that a foreign policy must be based on the world today, South Africa’s aspirations and the diplomatic efforts it was making.
Two positions were held in South Africa’s outlook on Africa. One asserted that the possible problem was that Africa suffered from lack of democracy and hence solutions must be internal. The second asserted that Africa’s problems were both internal and external, and the solution here would be to fix the problems internally and externally. However it seemed that South Africa has abandoned the African Renaissance.
South Africa carried some baggage from its apartheid past and had, at different points, led from the front, like France, and like Germany, from the back, due to that country’s historic position as well.
The paradigm behind the White Paper was the diplomatic ideal inherent in Ubuntu. However, the question was whether this amounted to abandonment of the African Renaissance. The presenter also suggested that it was necessary to decide what “ubuntu” meant, and whether that idea - in terms or otherwise – was expressed in the report. Although it was generally accepted that ubuntu, means kindness, humanness and cooperation, Ubuntu could also mean destruction and confrontation for anything that was not compliant with the ubuntu ideals.
The statement was made: “The tiger does not announce its tigritude, but it pounces”. The presenter said that a consideration here was whether South Africa should be announcing the diplomacy of ubuntu, or should it express ubuntu. by actions.
The White Paper said that Foreign Policy has to support institutions, and promote an African common position on structural changes in the Continent but did not explain what that meant. South Africa now had to consider whether, given the fact that there might not be consensus on the national question, South Africa would get to the point of approaching the real issue.
Ms Sanusha Naidu (IGD/Fahamu): South relations and Global Governance
She noted that the White Paper essentially had two main tenets: South-South Solidarity and Pan Africanism. South-South solidarity had been dominant since 2005, with South Africa recognising that the global South had a homogeneous group of actors, although some actors were more powerful than others. The question was where the South African identity lay in this. The White Paper stipulated the need to reform the architecture of the global system, because it was outdated, and it excluded the voice of Africa. South Africa wanted to champion the concerns of the South, but wanted to reassure others that the South would not become a block too powerful in itself. It was necessary to recognise the new ideas from the global South, in relation to terrorism and environmental management. The intentions of South African foreign policy did not come out clearly, in the White Paper, in relation to championing the realisation of the South agenda, or to say whether it was to give room to a more inclusive legislative based system where countries in the periphery had a say in global issues.
She asked the question how the White Paper and its concerns related to the ever changing global environment. It seemed that South Africa had shifted towards “the global South Africa”, as evident from the discussion on the role that BRICS could play.
Actors in the global South had vested interests, and South Africa’s interests were not clear. The question was where the policy of ubuntu fitted in all of this, and where did South Africa’s own paradigm fit, in the context of the global South. The definition of economic diplomacy was not only about access to markets, but was a process where the regime of global trade was defined. However, the White Paper fell short of mentioning the difference in its aims and narrative.
Professor Chris Landsberg (SARCHI Chair, University of Johannesburg): Matters Relating to the North and decision making
Professor Chris Landsberg, noted that South Africa was a member of BRICS and spent approximately the same amount of Gross Domestic Product (GDP) as its counterparts, per capita, on Research and Development (R&D), yet the statistics showed that one university produced 5 000 students in India, while the whole of South Africa produced 2 000. The question was whether South Africa could sustain a highly incoherent foreign policy that sought to please everyone.
He discussed the initial triggers for ubuntu, and pointed out that the new administration, post-democracy, felt the desperate need to prove that the new South Africa was radically different from the former attitudes. Although consultation done in 2011 had cautioned against the idea of having foreign policy documented, those recommendations were not considered. The White Paper was a reflection of world politics when it was written, which raised the question of how relevant it would be in the coming years. He noted that new alliances were rising: MIKTA (Mexico Indonesia Korea Turkey Australia) and MINT (Mexico Indonesia Nigeria Turkey) which were competing with BRICS. The question was being asked whether South Africa should be the only country in the G20, and in BRICS.
He submitted that at this juncture, it was dangerous to include foreign policy in a White Paper. If anything was stated along those lines, it should only pertain to non-negotiable constitutional elements and values that everyone in South Africa agreed to.
There was a serious mis-characterisation of foreign policy during the Mandela era, from 1993 and when he assumed the office of President. The foreign policy was seen as pursuing human rights on the global platform. The policy emphasised regional integration in Africa. 20 years later, the question must be asked whether South Africa was committed to driving the African agenda and whether there was a fundamental commitment to the rule of law. The “DNA” of South Africa’s politics was negotiative politics, and that was South Africa’s identity that set South Africa apart from many other countries. The question was also whether South Africa made enough capital to invest in this identity.
Another point that must be discussed was whether South Africa confused positional leadership with strategic leadership, and whether it did indeed have the latter. On paper, there was continuity, with the late South African President Mr Nelson Mandela, former President Mr Thabo Mbeki and the current President Mr Jacob Zuma, insofar as foreign policy was concerned, but in reality there was a large gap.
It was recommended that the Portfolio Committee must play a part in the implementation of the foreign policy, utilitarian and economic development policy, but there might be a risk that emphasis on economic diplomacy could be seen as a regime agenda in foreign policy rather than national driven policy.
The document touched on the most fundamental weakness of the previous foreign policies, that there was fundamental gap between the domestic and foreign affairs. Ubuntu was poorly defined in the document, and there could have been more done. Ubuntu in this sense could suggest that South Africa did believe in confrontational, “big brother” ideals.
Ms Michelle Pressend (Independant Analyst: Cape Town): Discussant
Ms Michelle Pressend, Independent Analyst, said that the White Paper appeared to be “obsessed” with the idea of attracting foreign direct investment (FDI) with the hope of aiding economic growth and alleviating poverty and creating jobs. However, twenty years on from the time that this was adopted, there were still not enough jobs created. The White Paper was contradictory in that it emphasised the need to enhance its competitive advantage at the other end, emphasising cooperation, and hence it was trapped in neo-liberalism. South Africa seemed nervous to lead.
She added that in a recent vote, when South Africa voted for Ecuador, Ecuador lost three votes, and this highlighted how the rest of the world tended to view South Africa, as manipulative. Co-operation had become more powerful than many states on their own. Wal-Mart and the Royal Dutch Shell had bigger revenues than cooperation could seek to achieve. There was a need to re-align this imbalance. The White Paper also fell short in that it did not mention civil society engagement.
» White Paper on South Africa’s foreign policy: Departmental briefing
Related News
Central banks need independence to pursue politically-determined goals
The theme of my address this afternoon is the role, responsibilities and governance of the central bank in a modern market-oriented economy, such as that of Uganda.
If Uganda is to create and implement a successful development agenda in 2015 and beyond, it must build strong institutions of economic governance.
Academics and economic policymakers have learned many lessons about macroeconomic policy and central banking over the last fifty years, and these lessons have influenced radical changes in the practice of monetary policy and the governance of central banks around the world, including in Uganda.
In some important respects, including the operational independence of the central bank, the adoption of an inflation-targeting monetary policy framework and risk-based bank supervision, Uganda has been among the pioneers of radical reform in Africa.
Proper role of a central bank
Central banks are institutions which have a monopoly on the issuance of fiat money; notes and coins which are legal tender within a given jurisdiction or set of jurisdictions. From this monopoly of the central bank is derived its two critical functions. First, the central bank can determine the quantity of money in circulation in the economy or, alternatively, set the price of this money, which is the interest rate.
Determining the quantity or the price of money is the essence of monetary policy. No other type of institution can conduct monetary policy because no other institution has the monopoly on the issuance of legal tender.
Secondly, the central bank’s monopoly of the issuance of legal tender means that it is the only institution which is able to carry out the function of lender of last resort to illiquid banks, which is sometimes necessary to avert a banking crisis. From this function, there arises the need to impose prudential regulation on banks, because in the absence of prudential regulation, a bank which has access to lender of last resort facilities when it incurs financial distress does not have adequate incentives to manage itself in a sound manner.
All countries impose prudential regulation on banks and in most, but not all, countries this regulation is carried out by the central bank.
Monetary policy is one of the three main tools of macroeconomic policy; the others are fiscal and exchange rate policy. Because monetary policy affects private sector expenditures, which constitutes the vast bulk of spending in a market economy (approximately 88 per cent of total final expenditure in the Ugandan economy is by the private sector), it is particularly important for macroeconomic stability.
Sound monetary policy is a prerequisite for a stable macro-economy, with low inflation, although it is not always sufficient in the absence of sound fiscal policy. It is also important to recognise what monetary policy can realistically achieve and what it cannot. Monetary policy can influence the level of private sector spending in the economy, and thereby the level of nominal aggregate demand; it is a tool of demand management.
Controlling the level of aggregate demand in the economy is crucial for the control of inflation, but it is much less relevant for the long-term growth of the economy, because the latter depends on supply side factors, such as capital investment, the growth and education of the labour force, and improvements in productivity. Fiscal policy is far more important for the supply side of the economy than is monetary policy.
What does this mean for the mandate of the central bank? The central bank should have clearly- defined policy goals which it can realistically be expected to deliver, given the monetary policy tools it has at its disposal. That is why the BOU has, as its primary policy objective, the control of inflation.
A well-formulated and implemented monetary policy should be able to achieve a target for inflation, on average over a medium-term horizon, although not in every single month over that horizon because prices are subject to short-term shocks, such as those caused by food supply shocks. The BOU aims to hold annual core inflation to a maximum of five per cent over the medium term.
The public should judge the BOU on how well it performs relative to its target for inflation. Over the last 24 months, annual core inflation in Uganda has averaged 4.8 per cent; hence the inflation outturns indicate that the BOU’s monetary policy has been successful over this period.
Operational independence of the central bank
In common with many other central banks around the world, the BOU has operational independence. In Uganda this independence is guaranteed by the Constitution which explicitly states that: “in performing its functions the Bank of Uganda shall conform to this constitution but shall not be subject to the direction or control of any person or authority”.
What does operational independence actually mean in the context of the central bank and why is it important?
In essence operational independence pertains to the independence of the central bank to set its monetary policy instruments, such as the policy interest rate, free of any interference from other persons or authorities, such as ministries of finance. It does not mean that the central bank is free to set its own policy priorities or objectives.
Whether or not the central bank should prioritise the control of inflation or some other objective is an inherently political question which must be determined by a political organ. Often this will be determined by the legislature, with the policy objectives set out in legislation, as is the case in Uganda where the Bank of Uganda Act specifies the functions of the BOU and places emphasis on “achieving and maintaining economic stability.”
Within the specific framework of politically-determined policy objectives, a central bank with operational independence is free to set its policy instruments to best achieve those objectives.
Operational independence is regarded as being of fundamental importance in the institutional governance of central banks because of the notion of the “time inconsistency” of economic policy making.
This refers to the incentives that policymakers with short-time horizons have to take decisions which may generate short-term gains but at the expense of long-term costs, and the recognition that rational private sector agents will understand the incentives facing these policymakers and take actions which will circumscribe any short-term gains without necessarily mitigating the long-term losses.
Policymakers with short term horizons include politicians seeking election. A central bank, which is not independent of political interference, would face pressure to pursue expansionary monetary policies which generate short-term gains in output at the expense of higher inflation in the future.
Granting operational independence to the central bank is, therefore, an institutional mechanism to insulate the central bank from pressures to undertake actions which would have damaging long-term consequences, and thus can deliver better monetary policy over the long term.
Moreover, monetary policy is likely to have more credibility with the private sector if the central bank is insulated from political pressures. In turn, the greater credibility of monetary policy means that the private sector is likely to take a more optimistic view of inflation prospects and, as expectations about inflation are to some degree self-fulfilling, this will help to bring about lower inflation.
Separation of fiscal and monetary policy
The implementation of monetary policy and bank regulation does not, in general, have significant distributional consequences. For example, an increase in the policy interest rate has macroeconomic affects but it does not usually favour one section of the population at the expense of another.
If the implementation of monetary policy and bank regulation had significant distributional consequences, the operational independence of the central bank would be much more problematic, because distributional issues should be determined in the domain of politics, not by technocrats alone.
In contrast, fiscal policy is intrinsically distributional in its consequences. How taxes are raised and where government spends public resources does not have an equal impact on all citizens. Consequently it is imperative, in a democracy, that elected politicians are closely involved in determining the details of fiscal policy.
For example, in Uganda all government expenditures must be approved by Parliament, as must all public borrowing and all changes to tax policy. This principle is enunciated in the Ugandan Constitution.
Given that fiscal policy has distributional consequences and requires Parliamentary approval if it is to command political legitimacy, it is imperative that the central bank is not expected to undertake policies which are quasi fiscal in nature, such as providing subsidised credit from its own resources to industries or firms which are regarded as priorities for development.
If government desires to pursue such policies, they should be implemented through the government budget, after the necessary Parliamentary approval has been obtained. It is essential to maintain a strict separation between monetary and fiscal policies.
Sound macroeconomic policy also requires the avoidance of “fiscal dominance”, which refers to government persistently borrowing from the central bank to finance its own budget deficits. Central bank financing of budget deficits creates money and thus is a source of inflationary pressure.
Consequently, the ability of a central bank to achieve its targets for inflation will be undermined if it also has to finance government budget deficits. Sound economic governance requires that governments fully fund their borrowing requirements by issuing debt to the markets, and as is often the case for developing countries, by mobilising concessional external finance. This is a second reason for insisting on a clear separation between fiscal and monetary policy.
Over the last two decades, legislative, institutional and policy reforms have been implemented in Uganda which have put in place a framework which incorporates essential elements of an institutional framework for central banking in the post-2015 era, although we still have some way to go to make them fully effective.
I am confident, therefore, that the Bank of Uganda is well placed to support Uganda’s development agenda beyond 2015.
The author is the governor, Bank of Uganda.
This is an abridged version of his speech to the 10th annual meeting of the African Science Academies at Lake Victoria Serena Resort, November 11, 2014.
Related News
South Africa trade gap widens to record on oil imports
South Africa’s trade deficit widened to the highest in at least four years as oil importers increased purchases to benefit from lower prices.
The trade gap swelled to 21.3 billion rand ($1.9 billion) from a revised 3.05 billion rand in September, the Pretoria-based South African Revenue Service said in an e-mailed statement on 28 November 2014. The median estimate of 16 economists surveyed by Bloomberg was for a shortfall of 6.3 billion rand.
The oil price has dropped 37 percent since June, leading to lower inflation forecasts and prompting importers to step up their purchases. The volume of South African crude purchases rose 72 percent in October from the month before, revenue service data shows.
“South Africa’s cumulative deficit is in record-high territory,” Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities, said by phone from Johannesburg today. “This does not bode well for the currency, particularly in light of the fact that we’re still running a current-account deficit of around 6 percent of gross domestic product.”
The trade shortfall so far this year widened to 95.11 billion rand compared with 73.08 billion rand for the same period in 2013, the revenue service said.
Rand Weakens
The rand weakened 0.5 percent to 11.0371 per dollar as of 2:33 p.m. in Johannesburg. The yield on government rand bonds due December 2026 fell six basis points to 7.62 percent.
Imports in October surged by 17.8 percent to 110.32 billion rand as purchases of mineral products, which include oil, rose by 7.16 billion rand, or 33.5 percent.
Machinery and electronics purchases advanced 14.9 percent, while imports of vehicles and transport equipment rose 24 percent.
Exports decreased by 1.8 percent to 89 billion rand in October as shipments of precious metals and stones fell by 2.12 billion rand, or 13.6 percent, and vegetable products dropped by 38 percent.
The monthly trade figures are often volatile, reflecting the timing of shipments of commodities such as oil and diamonds.
The revenue service revised its data in November last year to include trade with Botswana, Lesotho, Namibia and Swaziland.
SA Trade Statistics for October 2014 (SARS)
The South African Revenue Service (SARS) on 28 November 2014 released trade statistics for October 2014 that recorded a trade deficit of R21.33 billion. The trade statistics include trade data with Botswana, Lesotho, Namibia and Swaziland (BLNS).
The R21.33 billion deficit for October 2014 is due to exports of R89.00 billion and imports of R110.32 billion. Exports decreased from September to October by R1.63 billion (-1.8%) and imports increased from September to October by R16.65 billion (17.8%).
The cumulative deficit for 2014 is R95.11 billion compared to R73.08 billion in 2013.
The trade data excluding BLNS for October 2014 recorded a trade deficit of R 31.27 billion. The deficit is as a result of exports of R76.17 billion and imports of R107.44 billion. Exports decreased from September to October by R 2.29 billion (2.9%) and imports increased from September to October by R 16.23 billion (17.8%). The cumulative deficit for 2014 is R 180.70 billion compared to R143.25 billion in 2013.
Trade statistics with the BLNS for October 2014 recorded a trade surplus of R 9.94 billion. The surplus is as a result of exports of R 12.82 billion and imports of R 2.88 billion. Exports increased from September to October by R 0.66 billion (5.4%) and imports increased from September to October by R 0.42 billion (16.9%). The cumulative surplus for 2014 is R 85.58 billion compared to R 70.17 billion in 2013.
Trade highlights by world zone
The world zone results for October 2014 are given below.
- Africa:
Exports: R 29 426 million – this is an increase of R 1 279 million from September 2014
Imports: R 18 697million – this is an increase of R 7 142 million from September 2014
Trade surplus: R 10 729 million
This is a 35.3% decrease in comparison to the R16 593 million surplus recorded in September 2014.
- America:
Exports: R 9 178 million – this is an increase of R 938 million from September 2014
Imports: R 12 356 million – this is an increase of R 3 305 million from September 2014
Trade deficit: -R 3 177 million
This is a 292.0% increase in comparison to the -R 811 million deficit recorded in September 2014.
- Asia:
Exports: R 26 099 million – this is an increase of R 167 million from September 2014
Imports: R 44 769 million – this is an increase of R 685 million from September 2014
Trade deficit: -R 18 670 million
This is a 2.9% increase in comparison to the -R 18 152 million deficit recorded in September 2014.
- Europe:
Exports: R 17 723 million – this is a decrease of R -4 805 million from September 2014
Imports: R 32 984 million – this is an increase of R 5 257 million from September 2014
Trade deficit: -R 15 260 million
This is a 193.5% increase in comparison to the -R 5 199 million deficit recorded in September 2014
- Oceania:
Exports: R 1 336 million – this is an increase of R 338 million from September 2014
Imports: R 1 452 million – this is an increase of R 284 million from September 2014
Trade deficit: -R 116 million
This is a 31.9% decrease in comparison to the -R 171 million deficit recorded in September 2014
For further information, visit the SARS website.