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Uganda risks WTO blow
Only the National Environment Management Authority and Uganda National Bureau of Standards have responded to new World Trade Organisation (WTO) reforms requiring member countries submit notifications on new regulations and measures that affect international trade.
Sam Senkungu, the Director of Trade, Industry and Cooperatives at the trade ministry said, this makes Uganda not fully compliant with its notification obligations under the (WTO) Technical Barrier to Trade (TBT) and Sanitary and Phytosanitary (SPS) Agreements.
The WTO is based in Geneva.
“This makes our market not predictable to our trading partners and this may cause unnecessary obstacles to trade,” Senkungu said.
He was speaking at the opening of a two-day training on WTO Technical Barriers to Trade and Sanitary and Phytosanitary Measures online submission systems.
The training, that attracted a cross section of participants, involved in trade chains, was organised by Uganda National Bureau of Standards (UNBS) and the trade ministry.
The training targeted building capacity of Ministries, Departments and Agencies (MDAs) to improve compliance.
The WTO officially launched the World Trade Organisation Technical Barriers to Trade and Sanitary and Phytosanitary Measures online submission systems, an online program in October 2013 to facilitate international trade among members.
Uganda has had a number of notifications submitted to the trade organisation since last year when it kicked off a pilot project.
“All MDAs formulating trade related regulations and SPS measures that affect trade must notify the proposed regulations and measures when they are still at draft stage through Ministry of Trade to WTO secretariat,” Senkungu told participants.
The Ministry is the WTO National Notification Authority (NNA) for both the TBT and SPS agreements.
Senkungu however said the Ministry of Trade cannot perform the role if MDAs do not initiate notifications of new and revised regulations and SPS Measures.
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AEO 2014: African countries need to tap global markets more effectively to strengthen their economies
Empowering people through investments in skills and technology needed to boost development
By participating more effectively in the global production of goods and services, Africa can transform its economy and achieve a development breakthrough, according to the latest African Economic Outlook, released at the African Development Bank Group’s Annual Meetings.
Produced annually by the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP), this year’s report shows that Africa has weathered internal and external shocks and is poised to achieve healthy economic growth rates.
The continent’s growth is projected to accelerate to 4.8 percent in 2014 and 5 to 6 percent in 2015, levels which have not been seen since the global economic crisis of 2009. Africa’s economic growth is more broad-based, argues the report, driven by domestic demand, infrastructure and increased continental trade in manufactured goods.
Africa’s economic growth
Note: (e) estimates; (p) projections. Source: African Economic Outlook 2014.
“In order to sustain the economic growth and ensure that it creates opportunities for all, African countries should continue to rebuild shock absorbers and exercise prudent macro management. Any slackening on macro management will undermine future economic growth,” said Mthuli Ncube, Chief Economist and Vice-President of the African Development Bank.
“In the medium- to long-term, the opportunity for participating in global value chains, should be viewed as part as part of the strategy for achieving strong, sustained and inclusive growth,” he added.
The report argues that more effective participation in regional and global value chains – the range of activities in different countries that bring a product from conception to delivery to the consumer – could serve as a springboard for Africa in economic diversification, domestic resource mobilisation and investments in critical infrastructure. In order to do so, however, the continent needs to avoid getting stuck in low value-added activities.
For instance, Africa’s exports to the rest of the world grew faster than those of any other region in 2012, but they remain dominated by primary commodities and accounted for only 3.5 percent of world merchandise exports in 2012.
Avoiding that trap involves investing in new and more productive sectors, building skills, creating jobs and acquiring new technology, knowledge and market information. These interventions require sound public policies, as well as entrepreneurs that are willing and capable of helping achieve these gains.
The report uses the example of South Africa, which achieved a remarkable turnaround in its automotive industry by removing obstacles and providing incentives for component producers and assembly lines. It also shows that the development of agribusiness value chains in countries such as Ghana, Kenya and Ethiopia has contributed to economic growth and job creation.
“African economies have a great potential to build on their demographic dynamism, rapid urbanisation and natural-resources assets. The challenge now for many of them is to ensure that greater insertion into global value chains is achieved and has a positive impact on people’s lives,” said Mario Pezzini, Director of the OECD Development Centre.
“Public policies need to be articulated in a targeted strategy that promotes more equitable economic and social transformation and an environmentally sound development,” he added.
The African Economic Outlook shows that there has been remarkable progress in human development, with lower poverty levels, rising incomes and improving rates of school enrollment and health coverage.
Further achieving real human development gains requires empowering people and ensuring environmental sustainability, so that economic growth can yield benefits for all. In order for value chains to effectively integrate the poor and marginalized, often including women, targeted public policies and inclusive business models should facilitate access to productive assets such as land and financing, enhance productivity, and improve the resilience of small producers.
“As engagement with global value chains deepens, the appropriate measures need to be in place to mitigate the risks which they can bring about, such as volatile prices, unfair competition and increased vulnerability,” said Pedro Conceição, Chief Economist at UNDP’s Regional Bureau for Africa.
“While regional and global economic networks present immense opportunities, women, men and communities must be able to compete from a position of strength.”
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The new globalization is not about the West
There can be little doubt that we live in a “G3” geo-economic landscape, dominated by the US, the Eurozone and China. But economic convergence continues across all regions. The 10-strong ASEAN (Association of Southeast Asian Nations) grouping is the world’s fastest-growing region; Africa remains largely on the fast track; and Latin America’s 800 million people represent almost two-thirds the GDP of China.
This growth is driven by investment, consumption and trade, building up a resistance to external shocks such as the US Federal Reserve’s tapering program. What most economists miss when analyzing individual emerging markets are the intraregional and interregional foundations of their growing resilience. ASEAN’s exports to the sluggish Eurozone, for example, have dwindled substantially since the financial crisis, but its internal trade volume has risen to 30% of its total trade in the same period. In 2015, it will launch a free-trade area comprising more than 600 million people, with a GDP substantially larger than India’s.
The interregional dimensions of the global economy are equally powerful in explaining more robust distributed growth. Over the past decade, trade and investment flows between South America, Africa, the Middle East and East Asia have risen anywhere from 700 to 1,500% -- yes, quadruple-digit growth. Of course, what was once called “South-South” trade has risen from a very low base, but today China has surpassed Europe and America as Africa’s primary trade partner. As new supply-chain connections and flows of investment and trade flourish across various regional borders, a new pattern of diversified interdependence has taken shape. It is increasingly clear that globalization does not, in fact, require a Western anchor.
Not all growth markets are on a smooth, linear path to success, and instability surely lies ahead for the ill-prepared. Those with excessive credit growth, high short-term external debt and weaker reserve positions remain at substantial risk of volatility stemming from rapid capital outflows. According to an Economist index, the most vulnerable countries are in Latin America and Eastern Europe. Turkey tops the list, with a plummeting lira and misallocation of capital causing the credit bubble to pop and spread unrest across the country. Other developing-country heroes such as Brazil and India have also witnessed huge economic setbacks in the past couple of years owing to very low infrastructure investment, which weakens economic and social mobility and reminds us of the narrow base of growth that plagues many emerging economies, including the Middle East.
Still, we should not underestimate how the forces of demographic growth, urbanization, middle-class expansion, economic openness, institutional modernization and infrastructure renewal have been and can become increasingly robust foundations for worldwide growth.
Smart Western exporters such as Germany are well ahead in capitalizing on these trends: Germany’s intra-Eurozone trade is falling while its exports to emerging markets are expected to reach 70% of total trade by 2025. The US is just as keen to ride the global growth wave. Currently it is negotiating both the Transatlantic Trade and Investment Partnership (TTIP) with Europe and the Trans-Pacific Partnership (TPP) with Asia. The former would harmonize the US-EU regulatory landscape and reduce the remaining inefficiencies among Western economies, and the latter could help break up inefficient state-backed monopolies and unfair competition in Asia. The more seamless global trade and financial integration becomes, the more we can continue on the path away from gravity models and regional blocks towards truly global complementarities.
Growth markets have also become key power brokers in the arena of international economic diplomacy. The World Bank’s outgoing Chinese chief economist has strongly advocated a plurality of growth models, and the IMF has endorsed limited capital controls that have helped protect growth markets from excessive financial volatility. Emerging markets have also been high on the agenda at the G20. Beyond the perfunctory statements about the need for coordinated stimulus and limited protectionism, the G20 emphasized the need for investment in job-creating infrastructure as the backbone of a broad-based global economic recovery, advocating jump-start investment funds, more multilateral risk insurance and long-term private-capital flows into infrastructure projects.
The G20 economies should not only endorse this approach, they should act on it. Growth markets are clearly pursuing a smarter path towards their own economic development, and are wisely recruiting Western investors and institutions (and each other) into the process. Globalization is alive and well.
The author is a senior research fellow at the New America Foundation and author of The Second World: Empires and Influence in the New Global Order [2008] and How to Run the World: Charting a Course to the Next Renaissance [2011]. He is a Young Global Leader of the World Economic Forum. This piece was especially written for the World Economic Forum which will be held in Manila on May 21-23.
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TTIP – an update
Negotiations between the EU and US on the proposed Transatlantic Trade and Investment Partnership (TTIP) are gathering pace, with four rounds of talks already held and the fifth round due to take place later this month in Arlington, Virginia.
At the end of the fourth round held in Brussels in March, the EU and US chief negotiators emphasised their commitment to ensuring that the partnership especially helps small and medium enterprises, which form the backbone of both economies and which particularly bear the brunt of regulatory barriers the TTIP is striving to eliminate.
Chief US Negotiator Dan Mullaney described small business in the US as “engines of growth, job creation and innovation” and said this was also true in Europe.
It is envisaged that the final TTIP document will include a chapter dedicated to SMEs in order to assist them to take full advantage of the benefits the partnership will offer, and this has been described as a first for Europe by the chief EU negotiator Ignacio Garcia Bercero, who said this inclusion demonstrated how seriously the issue was being taken. He said over 20 million EU firms and over 28 million US (over 99 per cent of all companies) are SMEs.
At a public consultation seminar held in Malta last week, a representative of the Finance Ministry said there were no studies on the potential impact of TTIP in individual member states. Having said this, Maltese exports to the US in 2012 amounted to an estimated four per cent of all local exports, mainly consisting of pharmaceuticals and electrical machinery. The elimination of trade and investment barriers between the two blocs presents an opportunity for Maltese SMEs to examine the potential advantages of penetrating the US market, possibly for the first time.
Maltese businesses are also in line to reap the benefits resulting from TTIP, with the most obvious one being the removal of trade tariffs. This situation is prevalent in the US in the case of food and drink exports from the EU. It is reported that US tariffs on some dairy products are as high as 139 per cent while certain canned foods are subject to a tariff of 15 per cent.
Likewise, it was also claimed that EU duty on US exports of women’s denim jeans had increased to 38 per cent.
Once such tariffs are eliminated, it is anticipated that both US and EU companies will be exploring the possibility of exporting their goods across the Atlantic.
It is envisaged that SMEs stand to benefit to a greater extent from the elimination of regulatory barriers and non-tariff barriers, which very often impact on them and act as a greater disincentive, owing to their disproportionate financial burden when compared to the financial clout of larger firms, and the value of the goods or services exported.
US SME exporters have cited the complexities in obtaining the CE mark on various products – ranging from toys to machinery – as a clear example of an effective trade barrier. Examples of such non-tariff barriers cited by their EU counterparts include the ban on the provision of certain maritime transport services by foreign service providers.
Another clear example of non-tariff barriers is the strict regulation of pharmaceuticals and chemical exports by both the US and the EU, resulting in two different sets of strict compliance rules for manufacturers. These duplicated requirements result in high testing requirements and can be prohibitive to SMEs, since the costs are fixed, irrespective of the eventual quantity of the products shipped.
It is anticipated that the elimination of such barriers to trade would also benefit service providers working in smaller businesses and would also create improved transparency and access to participate in public procurement markets.
Tanya Sciberras Camilleri is the honorary secretary of the American Chamber of Commerce in Malta.
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EPA is not anti-industrialisation - Foreign Minister
Ms Hannah Serwaah Tetteh, Minister of Foreign Affairs and Regional Integration has observed that the Economic Partnership Agreement (EPA) is not anti-industrialisation.
She said most of the people criticising the government are not aware of its benefits to the country, and urged them to exercise restraint until the full text of the Agreement is made available to them.
Ms Tetteh was interacting with participants attending a day’s ECOWAS Sensitisation Workshop for Public Sector Workers in Sunyani, in the Brong Ahafo Region.
It was on the theme: “Enhancing Public Sector Participation in the ECOWAS Regional Integration Process,” and was attended by Heads of Ministries, Departments and Agencies and Civil Society Organisations (CSO) in the Region.
The workshop organised by the Ministry in collaboration with Media Response, a CSO has been held in the Greater Accra, Eastern, Volta, Western, Central and Ashanti Regions.
Ms Tetteh pointed out that after signing the agreement, government has the option to opt out after giving a six-month notice or call for a review every five years of its implementation on sectors that are suitable to the country.
She announced that yearly imports to Ghana from the European Union (EU) is about 550 million Euros and this could be increased under the agreement but failure to sign it would affect some local entrepreneurs.
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SD wants steady flow of revenue from SACU
Minister of Finance Martin Dlamini has revealed that Swaziland is seeking more certainty from the Southern African Customs Union (SACU) revenue sharing formula (RSF).
He said this during the familiarisation tour of the new SACU Executive Secretary Paulina Elago, a Namibian national, who resumed her duties at the beginning of last month.
The minister said due to Swaziland’s fiscal policy’s heavy reliance on revenue from the customs union, the hope was that there will be a steady reliable stream coming in.
Dlamini explained that the country does not at any point want to lose the benefits that come with the current formula. He said that stability would enable the country to budget and not be vulnerable as it was a few years ago with the reduction of the receipts. According to the current formula, each country gets a cut based on its share of the intra-SACU imports.
The formula benefits the smaller members which are Lesotho and Swaziland. Other member states of SACU are South Africa, Namibia and Botswana.
The minister said Elago’s visit served as an introduction on the issues that the country is interested in. He said the issues they had discussed are those that will make SACU forward looking, integrated in the region and revenue sharing issues. He said she was also party to discussions that form the backbone of SACU.
The minister affirmed that the call for SACU to become a development fund is still at suggestion stage and had not been seriously discussed by member states. He said as far as the way member states used the money, it was in part for development in any case. He was responding to questions on whether there was any political basis for the old SACU and it needed to be revised to become a development union in ways similar to what South African Trade Minister Rob Davies has often suggested and was reported last year by the South African publication Mail and Guardian. It was reported that the SACU funds should be used to create a development community, ending the old revenue-sharing arrangement and creating a new one based on mutually beneficial and agreed development spending.
The minister further revealed that the revenue sharing formula proposals are at consolidation stage. He explained that Swaziland was not looking for an equal share of the revenue pool since there are factors that need to be considered first. Dlamini said since the formula considered each country individually, it would not be practical for equal sharing of the revenue. He reiterated that the talks on the sharing were at a final stage
The visiting SACU executive secretary said she has already paid a visit to Botswana and Lesotho during her familiarisation tour. She said she was on a quest to better understand the work she will be undertaking in the coming months.
Sharing
The South African Customs Union (SACU) Revenue Sharing Formula (RSF) has been revised substantively twice; once in 1969 and in 1994-2002 since the creation of the customs union in 1910 and each time the changes in the treaty were a reflection of the historic changes occurring in southern Africa. The apartheid regime created a RSF that served to increase the share of revenue of Botswana, Lesotho and Swaziland (BLS), leaving the South African share as a residual of revenues. As this made South Africa a residual claimant it was unsustainable and required reform in the post-apartheid era. The 2002 formula increased the share to the Botswana, Lesotho, Namibia and Swaziland (BNLS) and removed South Africa as a residual claimant but did not change the fundamental economic relationship between members.
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Easing movement of goods and services within Africa is critical, says DHL
A key topic of discussion among global leaders at the 24th World Economic Forum on Africa was the need for free movement of talent and goods across Africa, in order to significantly strengthen businesses and boost intra-Africa trade on the continent.
This sentiment is echoed by Charles Brewer, MD of DHL Express Sub-Saharan Africa, who attended the forum which took place in Abuja, Nigeria from 7 – 9 May 2014. “There was a collective consensus among African leaders on the topic of mobility in Africa, as well as the importance of efficient border and visa policies. We have seen good follow-up particularly in East Africa and it is imperative to continue to work on the border and customs environment to grow intra-Africa trade.” says Brewer.
He says that the forum took place against a backdrop of significant economic growth in Nigeria – having recently overtaken South Africa as the largest economy in Africa – and that this has spurred investment interest in the country. “Africa is clearly on the global agenda. Despite security concerns, delegates and heads of state from all parts of the world gathered in Abuja to discuss inclusive growth for Africa.”
A key view expressed by a number of African leaders at the Forum was the need for a proactive approach to border management, which will enable trade between various regions. The creation of an environment that enables business growth on the continent as opposed to obstructing it was also addressed by various parties.
Recognising the importance of travel facilitation and talent mobility as drivers to integrate and develop the region, President Paul Kagame of Rwanda, President Uhuru Kenyatta of Kenya and Prime Minister Moussa Mara of Mali have all signed The Call to Action on Travel Facilitation & Talent Mobility, which urges all African States to work together towards the establishment of joint policies and the removal of barriers to facilitate movement of people.
Brewer adds that it was also positive to witness how small and medium enterprises (SMEs) are increasingly being recognized as the primary driver of economic growth in Africa and how they are being supported across Africa. “A growing SME base will create thousands of new jobs, which is an absolute must for this ever-growing continent, as it is a critical driver of sustainable economic growth.”
Having entered Africa in 1978, DHL Express has witnessed the continent grow its economy to what it is today, as well as the evolving opportunities available to SME owners and entrepreneurs. “Nigeria, as an example, previously generated its wealth from the oil and gas industry, but today is a thriving economic hub of diversified sectors, such as finance, retail, telecommunications, as well as its rapidly growing film industry, Nollywood. The expanding sectors offer multiple opportunities to business owners looking to capitalize on the continent’s expansion and economic growth.”
Brewer adds that it is also difficult to ignore the opportunities stemming from the rising middle class in Africa. “The thoughts and preferences of African consumers are changing in that they are increasingly seeking access to new markets and this is only creating further opportunities for both local and international businesses.”
With that said, Brewer says some of the challenges SMEs face include infrastructure challenges and customs regulations and controls. “The fact that world leaders have recognized these issues and put actions in place towards easing the difficulties experienced can only bode well for future business development and success on the continent.”
He points to the commitment made by the Chinese Government to prioritize infrastructure development in African, which is necessary in order to develop connectivity and promote trade between various regions.
“Infrastructure is vital for connecting regions and by improving this, the number of investments within Africa will grow exponentially, creating further opportunities for its people,” says Brewer.
He says that in order to fuel the continent’s momentum, sustained trade from international markets, as well as intra-Africa trade is needed. “If Africa is to compete with global, advanced countries, investment is needed in facilitating trade and the ease of doing business. We walk away from the meeting feeling positive, having witnessed various influential leaders from business, government, civil society and academia, all having similar views of facilitating trade on the continent,” concludes Brewer.
Distributed by APO (African Press Organization) on behalf of Deutsche Post DHL.
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Foreign direct investment in Sub Saharan Africa on the rise
Africa’s share of global foreign direct investment (FDI) projects has reached the highest level in a decade, according to Executing Growth, EY’s 2014 Africa Attractiveness Survey.
The report combines an analysis of international investment into Africa since 2003, with a 2014 survey of over 500 global business leaders about their views on the potential of the African market. The latest data shows that while there has been a decline in FDI project numbers from 774 in 2012 to 750 in 2013, primarily due to ongoing uncertainty in North Africa, they remain easily in excess of the pre-crisis average of 390 projects per year.
There is a noticeable divide between FDI trends in North Africa versus Sub Saharan Africa (SSA). While FDI projects in North Africa declined by nearly 30%, projects in SSA increased by 4.7%, reversing the decline of 2012. This further widened the gap between the two sub regions, with SSA’s share of FDI projects exceeding 80% for the first time.
While the UK remains the lead investor into the continent, intra-African investment continues to steadily rise. Investors are also looking beyond the more established markets of South Africa, Nigeria and Kenya to expand their operations, as well as moving into more consumer-related sectors as Africa’s middle class expands.
Ajen Sita, Chief Executive Officer, EY Africa, comments, “Africa’s share of global FDI projects has grown steadily over the past decade and it is a promising sign that investors are now looking across the continent and to new sectors. Further regional integration and infrastructure development should continue to entice investors to the exciting investment opportunities that Africa can offer.”
New FDI hotspots are emerging
There was significant movement in the list of top 10 countries by FDI projects in 2013. Only South Africa and Nigeria retained their first and third positions from 2012 with 142 projects and 58 projects, respectively. However, FDI projects in both these countries witnessed a slight decline. Countries such as Kenya with 68 projects, Ghana with 58 and Mozambique with 33 all moved up the ranks.
Zambia and Uganda were the new entrants in the top 10 list in 2013 with 25 and 21 projects respectively, an increase of more than 20%. In contrast, North African countries such as Morocco, Tunisia (ranked 8th in 2012) and Egypt slipped on the rankings.
In 2013, both West and East Africa surpassed North Africa for the first time, becoming the second and third most attractive sub regions in Africa after Southern Africa.
UK leads investment into the continent
The UK became the clear leader in 2013 with 104 projects, while the US fell from joint first place to second place with 78 projects, a 20% decline from last year. South Africa, the third largest investor, directed 63 investment projects into the rest of Africa, a 16% decline on last year but a significant increase from pre-crisis levels when it registered on average 12 projects. There was a sharp uptake in FDI projects by Spanish and Japanese companies with increases of 52% and 77%, respectively.
Intra-African investment is gaining momentum. African investors nearly tripled their share of FDI projects over the last decade, from 8% in 2003 to 22.8% in 2013. This growth is fuelled by the need for improved regional value chains and strengthening regional integration. Another driver of growth is the African investors’ understanding of the market and of the potential opportunities and challenges.
Michael Lalor, EY’s Lead Partner Africa Business Center, comments, “External investors supply long-term capital, skills and technology, and intra-African investment creates a virtuous circle that encourages greater foreign investment.”
Significant shift away from extractive industries towards consumer related sectors
The top three sectors – technology, media and telecoms (TMT) with 150 projects, retail and consumer products (RCP) with 131 projects and financial services with 112 projects – accounted for more than 50% of the total projects in 2013. During the year, RCP overtook financial services to become the second most attractive sector in Africa.
FDI projects in the real estate, hospitality and construction sector increased by 63%, making the sector the fifth most attractive, up three positions from 2012. On the other hand, for the first time ever in 2013, mining and metals exited the top ten sectors when measured by FDI project numbers.
When asked about the three sectors that would offer the highest growth potential for Africa in the next two years, investors highlighted the rising importance of agriculture which ranked only marginally behind mining and metals. Increasingly, infrastructure is also perceived as a key growth sector as well as consumer-facing industries including financial services, telecommunications and consumer products.
Michael comments, “Although perceptions indicate that resource driven sectors are expected to remain the industries with the highest potential over the next two years, the actual numbers show that infrastructure and consumer-facing sectors will increase in prominence as the middle class expands and consumer spending on discretionary goods increases.”
Dramatic improvement in perceptions of Africa
Africa’s perceived attractiveness relative to other regions has improved dramatically over the past few years. The overall survey results show that Africa has moved from third last position in 2011, to become the second-most attractive investment destination in the world, behind North America.
Sixty percent of survey respondents said that there had been an improvement in Africa’s investment attractiveness over the past year, up four percentage points from last year’s survey.
Ajen comments, “The good news in this year’s survey is that perceptions about the continent seem to be shifting. For the first time, Africa is seen as the second most attractive investment destination in the world. It has strong fundamentals to encourage investment including steady democracy and macroeconomic growth; an improving business environment; rising consumer class; abundant natural resources and infrastructure development.”
However, there remains a stubborn perception gap between those already operating on the continent and those who are not yet present. For the first time, this year’s survey shows that companies with a presence on the continent perceive Africa to be the most attractive investment destination in the world. In stark contrast, those with no business presence in Africa still view the continent as the world’s least attractive investment destination.
Seventy-three percent of those who are already established in the region believe Africa’s attractiveness has improved over the past year versus 39% who are not established.
Urban centers
Africa’s cities are now emerging as the hotspots of economic and investment activity on the continent. Nearly 70% of respondents stressed the significance of cities and urban centers in their investment strategy in Africa.
In terms of perception, city attractiveness closely maps country appeal. In SSA, half of the respondents quote Johannesburg as the most attractive city in which to do business, ahead of Cape Town. Nairobi and Lagos are ranked as third and fourth most attractive cities, respectively. In North Africa, Casablanca, Cairo and Tunis are perceived as the top three cities in which to do business.
Investors highlighted that in order to attract greater investments, cities need to focus on the following critical factors: infrastructure (77%), consumer base (73%), local labor cost and productivity (73%) and a skilled workforce (73%).
Looking ahead
Ajen concludes, “Africa’s stronger investment attractiveness is best explained by its own sustained growth rates in the context of slower global growth. Africa’s growth prospects are likely to remain solid, as an urbanizing and rising middle class drives demand for consumer products and improved services.”
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Is an all-or-nothing WTO fisheries subsidies agreement achievable?
To make progress towards eliminating harmful fishing subsidies world-wide there is a need to align such effort with the interest of fishing nations.
Since a back of the envelope calculation by the Food and Agriculture Organization (FAO) revealed that the total amount of fisheries subsidies in maritime countries globally could be as high as $50 billion annually in the early 1990s, eliminating harmful fisheries subsidies has become essential in the quest to achieve sustainable fisheries globally. More recent detailed studies put this number at $15-27 billion. This is a substantial amount given that the total gross revenue from the world’s fisheries is estimated at $80-85 billion.
There is a strong connection between fisheries governance, sustainable development, and how subsidies serve as a stumbling block for meeting sustainability goals. The crucial issue is that subsidies that motivate fishermen to exert more fishing pressure make fisheries governance – and therefore the attainment of sustainability and conservation goals - difficult to achieve. The negotiation for the improved discipline on fisheries subsidies at the WTO has stalled in recent years and considerable challenges remain before a meaningful agreement can be attained.
Challenge to the WTO negotiations
A key reason for the lack of progress in these negotiations, after seven years of trying, is that the negotiations suffer from the problem of “lumpiness.” By this, I mean negotiators aim for an all-inclusive deal or no deal at all. This lumpiness takes two forms.
Firstly, the WTO negotiations are conducted as a “single undertaking,” meaning that results must be achieved in all areas of the negotiations, not only in those regarding fisheries subsidies, and must be applicable to all member countries. Any potential breakthroughs in the negotiations on fisheries subsidies are dependent on similar breakthroughs in the Doha Development Agenda (DDA). A late realisation of this implication during negotiations led to a vain attempt to separate negotiations on fisheries subsidies from the rest, which in my opinion is necessary in order to progress.
The second lumpiness, which is the focus of this contribution, relates to the goal of negotiators to arrive at a deal on subsidies that is all-inclusive. Within this all-or-nothing setting, the Chair’s Draft Report (2007) was designed to have two core elements: a broad set of prohibited subsidies and a list of general exceptions to these prohibitions, with complementary regulations guarding against circumvention; and Special & Differential treatment, giving policy flexibility to developing countries through provisions of additional exceptions based on various combinations of factors, such as types and locations of fisheries.
As with many international agreements, it is always a sticky issue when, even though there are often good reasons for doing so, developing countries are given special exemptions. I think some of the resistance to such exemptions, in the case of fisheries subsidies, is the fact that developing countries are not a homogenous group – they consist of global powers, such as China, and very small developing island states, like the Seychelles.
Response to the challenge
The starting point is to split the world’s fisheries into (i) domestic, (i.e., fisheries that operate within country’s Exclusive Economic Zones (EEZ) and target fish stocks that spend all their lives within the EEZs); and (ii) international fisheries, made up of fish stocks that do not qualify as domestic fisheries as defined herein. They consist of transboundary fish stocks, highly migratory stocks, such as tunas that straddle the EEZs of countries and the high seas and discrete high seas stocks that spend all their lives in the high seas.
There are at least three reasons why the above split is necessary to help move WTO negotiations forward. Firstly, the incentives for countries to eliminate harmful or overfishing subsidies differs significantly, depending on whether a fishery is domestic or international; and within the latter, whether a fishery is a transboundary, highly migratory, or discrete high seas stock. Secondly, the institutional framework needed to support the elimination of harmful subsidies is different, in the case of domestic fisheries. However, in the case of highly migratory international fish stocks, a coordinated international framework is needed because unilateral action by one country is not likely to eliminate the problem of overfishing. Thirdly, by dividing fisheries into these groups, it would be easier to identify the leverage points for eliminating harmful subsidies.
If a country depletes its domestic fish stock, it would suffer the consequences.
Disciplining harmful subsidies to domestic fisheries
If a country depletes its domestic fish stock, it would suffer the consequences. Hence, the battle for eliminating or at least redirecting harmful subsidies for domestic fisheries should rightly be at home in individual countries. The key to success is to make it abundantly clear to fishing countries that it is in their best interest to divert harmful subsidies into more constructive uses. Countries could use the resources in a number of innovative ways to help their fishermen adapt to the elimination of harmful subsidies. Countries that divert their harmful subsidies to provide skills to fishermen to help them transition to more sustainable livelihood activities would see win-win benefits in the sense that they would keep the money in the fishing communities while reducing the pressure to deplete a renewable food source.
In this framework, the international community, through institutions such as the World Trade Organisation (WTO), the Food and Agriculture Organisation (FAO), and the UN Environment Program, and regional intergovernmental bodies, such as the OECD, African Union, and APEC could provide guidelines and incentives to help countries implement home-grown plans to discipline harmful subsidies to their domestic fisheries.
Disciplining harmful subsidies to international fisheries
At the international level, the incentives are less clear and more complicated: If a country subsidises and over-fishes a highly migratory fish stock, the country enjoys the benefit of doing so while the negative consequences are suffered by many countries. As a result of the asymmetric nature of the distribution of cost and benefits, the battle ground for eliminating harmful subsidies is at the international level – at the level of the WTO, especially.
The trick here is to identify the low-hanging fruit. Examples include fisheries based on high and deep seas fish stock and highly migratory high seas tuna species. Ecologically, high and deep sea fish stocks are known to have life history characteristics that make them vulnerable to overfishing. In addition, the legal and management structures are weak to say the least. These fisheries are operated by a few, mostly, developed countries, producing a small percentage of the world total fisheries catch while employing only a few people. It has been estimated that without subsidies many of the bottom trawl fleet operating in the high seas will not be economically viable. In effect, the production-distorting effects of fisheries subsidies are most pronounced in high seas fisheries. Thus, obtaining a WTO agreement on these fisheries would be a significant win for conservation and sustainability.
My suggestion then is to move the battlefront for dealing with harmful subsidies to domestic fisheries to home countries, with the international and regional communities providing guidelines and incentives to help countries transition to harmful subsidies-free fisheries.
Conclusion
In this contribution, two types of lumpiness were identified. The first relates to the fact that results must be achieved in all areas of the negotiations, not only in those regarding fisheries subsidies, and must be applicable to all member countries. There is already an effort to decouple fisheries subsidies negotiations from the others in the round. I think this decoupling is needed to make progress in the negotiations.
The second lumpiness relates to the goal of negotiators to arrive at a deal on subsidies that is all inclusive. This approach, I argue, has limited the ability of the negotiators to make progress. I propose that we need to categorise fish stocks and fisheries into domestic and international fisheries. My suggestion then is to move the battlefront for dealing with harmful subsidies to domestic fisheries to home countries, with the international and regional communities providing guidelines and incentives to help countries transition to harmful subsidies-free fisheries.
The battlefront for dealing with harmful subsidies to international fisheries remains with the international community via institutions like the WTO. This is because of the asymmetry in the distribution of cost and benefits of providing subsidies. Focusing on international fisheries is attractive, particularly from an environmental perspective, but this does not mean that the international community should ignore what happens to harmful subsidies domestically. From the environmental perspective, the international community should be interested in disciplining domestic subsidies if only for global food security reasons. In particular, the trade distorting aspects of subsidies to domestic fisheries should still make them a matter of concern to the global community.
To implement this proposal, more details need to be worked out. For instance, how would countries be able to distinguish among subsidy programmes to target only certain species? Is this feasible in the context of groups of countries, such as those fishing in the Benguela Current large Marine Ecosystem; the Gulf of Guinea Large Marine Ecosystem or the Western Indian Ocean? Still, the principles behind my proposal are clear: in order to succeed in disciplining these subsidies, angle the efforts to discipline harmful subsidies more towards the interest of fishing nations, and deal domestically and internationally where appropriate.
Rashid Sumaila is the director of the Fisheries Economics Research Unit, Fisheries Centre at the University of British Columbia, Vancouver, Canada.
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Inclusive growth: AfDB wants Nigeria, South Africa, Kenya to synergise
The African Development Bank (AfDB) has advocated appropriate synergies between Nigeria, South Africa, and Kenya to engender an economic growth that is inclusive in the region.
By the recent GDP rebasing, Nigeria is currently Africa’s largest economy as well as the dominant economy in the West Africa sub-region, while South Africa is the continent’s second largest and the biggest in the Southern Africa sub-region, just as Kenya is the biggest economy in East Africa.
AfDB’s Chief Economist, Prof. Mthuli Ncube, who was a panelist on "Driving Competitiveness through Cooperation, Integration and Economic Growth" at the 24 the World Economic Forum (WEF) on Africa, in Abuja yesterday, said the region’s growth was positive, regretting however that this had been blighted by inequalities.
According to him, appropriate synergies between Nigeria, Kenya and South Africa would help to drive down the present average poverty rate of 48 per cent in the region.
"These three economies - Nigeria, Kenya, South Africa and Egypt, when they come up, must inter-tie and must work together to drive African Economy," he said, adding that the informal sector of the economy where the small businesses are high should be supported.
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Chinese Premier Li Keqiang’s visit to Africa: A (rail)road to success in Sino-African relations?
On Monday, Chinese Premier Li Keqiang concluded his eight-day, four-country tour of Africa. His visits to Ethiopia, Nigeria, Angola and Kenya focused heavily on expanding economic ties with the continent and resulted in dozens of agreements on trade, energy, investment and development. A highlight of his trip was his appearance at the World Economic Forum (WEF) on Africa in Abuja on May 8. In a special address at the Plenary Session of the meeting, he laid out the grand strategy of China’s aid plan, calling for “more investment and financing, and expanded cooperation in infrastructure projects.”
His words reflected a pledge he made earlier in the week of increasing Chinese aid to Africa by $12 billion, which includes $10 billion in loans and $2 billion for the Chinese Africa Development Fund. With this commitment, China has extended a total of $30 billion in credit to the continent and $5 billion in development assistance. Moreover, in response to the recent kidnapping of over 200 schoolgirls in Nigeria, Li made a promise to support rescue operations to recover the missing girls. In general, he also pledged to “assist Africa’s capacity-building in such areas as peacekeeping, counterterrorism and anti-piracy.” These commitments fall in line with the general trends exhibited by the Africa policy of President Xi Jinping’s administration, which has emphasized peace and security as well as economic cooperation.
The trip culminated on a high note in Nairobi, where Li signed agreements with Kenyan President Uhuru Kenyatta and other East African leaders to construct a $3.6 billion, 380-mile railway line linking Nairobi to the important Kenyan port of Mombasa. This link will be a part of a regional railway system that will eventually extend through Rwanda, Uganda, Burundi and South Sudan. Construction is expected to begin on October 1, 2014 and end in March 2018. The Export-Import Bank of China will fund 90 percent of the project while the Kenyan government will cover the remaining 10 percent.
The railway project represents a major opportunity to promote trade among East African countries, where the transaction costs of transporting goods and people are generally very high. The new railway link is expected to be significantly more efficient and reliable than Kenya’s existing, colonial era lines, reducing journey times and the costs of shipping freight—from 20 cents per ton per kilometer to 8 cents—according to President Kenyatta. These gains in efficiency have serious implications for expanding access to markets and taking advantage of economies of scale, especially for farmers who lose an estimated half of their crops in transport annually. It may also help spur foreign investment since investors often consider poor infrastructure a major deterrent to investment.
On the other hand, critics of the project argue that, in the past, Chinese infrastructure projects have sourced much of their labor from China, failed to train African workers and neglected labor laws in host countries. Concerns over the increase of Kenya’s national debt by nearly one-third and interest payments on external debt by 50 percent have also been raised. Furthermore, questions over the funding necessary to maintain the railroad after it is built still remain. As this railway project and other Chinese-funded projects such as the $13.1 billion railway project in Nigeria get underway, it is important that discussions between African and Chinese leaders focus on ensuring that Chinese funds benefit Africa as much as they do China.
Transparency over financing and other terms of Chinese engagement in African countries will benefit everybody in the long term. Transparency will help African voters better assess the expected costs and benefits of the deals and know how much future generations will have to pay for them. If the projects are successful, other foreign investors will be able to better assess the political risk and other risks associated with large infrastructure projects and will participate in future ones. And China will have the satisfaction of playing a leadership role in the development of infrastructure in Africa.
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Beneath the surface: Natural resources and national economies
Among the world’s most coveted commodities, gold has long been associated with wealth, beauty, and even immortality. But sourcing the precious metal can often have serious environmental and social costs, ranging from deforestation and mercury emissions, to child labour and conflict.
For example, a study published last October by the Carnegie Institution and Peru’s Ministry of Environment found that forest loss in Madre de Dios in the Peruvian Amazon – a biodiversity hotspot – has tripled since the economic crisis began in 2008. As the global economy crashed, gold prices soared, further raising incentives to mine, particularly among individuals and small groups in poor nations. Booming illegal rackets have also sprung up in countries such as Peru and beyond.
The lead article in this issue of BioRes tells of a multi-stakeholder effort to address these challenges in order to harness artisanal and small-scale mining (ASM) activities for sustainable development. Through a system implemented across the value chain, buyers purchase gold that meet recognised standards, with a percentage of the sale re-invested in environmental and social projects, as well as aiding non-certified mines move towards sustainable certification. Challenges remain, but efforts aimed at improving gold extraction practices are crucial to helping ensure remote and fragile communities benefit from the presence of industry.
Mitigating the impacts of natural resource extraction has been a high profile issue in recent years, with many environmentalists expressing concern over the effects of shale gas extraction. The controversy is unlikely to abate any time soon, with the White House recently confirming that the US is projected to remain the world’s largest producer of oil and gas in the world through 2030, spurred on by the country’s shale gas “revolution.”
Shale gas has quickly climbed up national and international policy agendas, playing a particular role in recent weeks in relation to Europe’s energy security woes and the escalating crisis in Ukraine. ICTSD Senior Fellow Thomas Brewer takes a look at some of the environmental concerns raised around shale gas extraction, as well as possible future trade flows, putting forward policy recommendations to navigate the road ahead.
This issue also features a reflection on the treatment of fisheries and marine ecosystems in the ongoing formulation of the sustainable development goals, while another article takes a look at opportunities and limitations for legal trade models to conserve wildlife.
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Plunder of timber and fisheries is holding Africa back – Kofi Annan
Africa’s rich natural resources offer a unique opportunity for a breakthrough in improving the lives of Africa’s citizens, says a major new report launched by Kofi Annan, the former UN Secretary-General, but too often these resources are plundered by corrupt officials and foreign investors. Rising inequality is also blocking Africa from seizing that opportunity, the report shows.
The 2014 Africa Progress Panel report, Grain, Fish, Money: Financing Africa’s green and blue revolutions, calls on Africa’s political leaders to take concrete measures now to reduce inequality by investing in agriculture. It also demands international action to end what it describes as the plunder of Africa’s timber and fisheries.
“After more than a decade of growth, there is plenty to celebrate,” Mr Annan will say when he releases the report. “But it is time to ask why so much growth has done so little to lift people out of poverty – and why so much of Africa’s resource wealth is squandered through corrupt practices and unscrupulous investment activities.”
“Africa is a continent of great wealth so why is Africa’s share of global malnutrition and child deaths rising so fast? The answer is that inequality is weakening the link between economic growth and improvements in wellbeing,” he said.
Although average income has risen by one-third in the past decade, there are more Africans living in poverty now – around 415 million – than at the end of the 1990s. New global development goals are likely to aim to eradicate poverty by 2030 – but on current trends, one African in five will still be in poverty when that deadline arrives.
Mr Annan, who played a central role in shaping the Millennium Development Goals, says: “When countries sign up to the new global development framework, they should pledge not only to meet ambitious targets but also to narrow the region’s indefensible gaps between rich and poor, urban and rural, and men and women.”
The report’s authors identify agriculture as the key to growth that reduces poverty. They point out that most of Africa’s poor live and work in rural areas, predominantly as smallholder farmers. “Countries that have built growth on the foundations of a vibrant agricultural sector – such as Ethiopia and Rwanda – have demonstrated that the rural sector can act as a powerful catalyst for inclusive growth and poverty reduction,” Mr Annan will say at the launch.
The report calls for a “uniquely African green revolution” that adapts the lessons provided by Asia to African conditions. Africa currently imports US$35 billion worth of food because local agriculture is dogged by low productivity, chronic underinvestment, and regional protectionism. Increased investment in infrastructure and research could dramatically raise the region’s yields and the incomes of farmers. Meanwhile, eliminating the barriers that restrict trade within Africa could open up new markets.
While critical of African governments, the Africa Progress Report 2014 also challenges the international community to support the region’s development efforts. It highlights fisheries and logging as two areas in which strengthened multilateral rules are needed to combat the plunder of natural resources.
Illegal, unregulated and unreported fishing has reached epidemic proportions in Africa’s coastal waters. West Africa is conservatively estimated to lose US$1.3 billion annually. Beyond the financial cost this plunder destroys fishing communities who lose critical opportunities to fish, process and trade. Another US$17 billion is lost through illicit logging activities.
“Natural resource plunder is organized theft disguised as commerce. Commercial trawlers that operate under flags of convenience, and unload in ports that do not record their catch, are unethical,” Mr Annan said, adding that these criminal activities compound the problem of tax evasion and shell companies. The Africa Progress Report 2014 calls for a multilateral fisheries regime that applies sanctions to fishing vessels that do not register and report their catches. The report also calls on governments around to world to ratify the Port State Measures Agreement, a treaty that seeks to thwart the poachers in port from unloading their ill-gotten gains.
African political leaders have failed to manage natural resources in the interests of the true owners of those resources – the African people.
As well as losing money through natural resource plunder and financial mismanagement, Africans miss out on money from abroad, not only when aid donors fail to keep their promises but even when those in the African diaspora send remittances home to their families. It is estimated that that the continent is losing US$1.85 billion a year because money transfer operators are imposing excessive charges on remittances.
With greater resource revenue, African governments now have the opportunity to develop more effective taxation systems – and spend public money more fairly, the report adds. For example, 3 per cent of regional GDP is currently allocated to energy subsidies that principally go to the middle class. That money should be diverted into social spending to give the poor a better chance of escaping the poverty trap.
“Africa’s resilience and creativity are enormous,” Mr Annan says. “We have a rising and energetic youth population. Our dynamic entrepreneurs are using technology to transform people’s lives. We have enough resources to feed not just ourselves but other regions, too. It is time for Africa’s leaders – and responsible investment partners – to unlock this huge potential.”
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Statement at the conclusion of the IMF’s 2014 Article IV Consultation Mission to Swaziland
A mission of the International Monetary Fund (IMF) led by Mr. Jiro Honda visited the Kingdom of Swaziland during April 28-May 12, 2014 to conduct the 2014 Article IV consultation with Swaziland.
The mission met with the Prime Minister, Hon. Sibusiso Dlamini; Minister of Finance, Hon. Martin Dlamini; the Governor of the Central Bank of Swaziland, Mr. Majozi Sithole; other senior government officials, as well representatives of the private sector and development partners. The mission would like to express its gratitude to the authorities and their staffs for the highly professional, productive, and open discussions.
At the end of the mission, Mr. Honda issued the following statement:
“Swaziland’s economic growth has recovered since 2011 when it experienced a fiscal crisis following a significant reduction in revenues from the Southern African Customs Union (SACU). In 2013, economic activity is estimated to have grown by 2¾ percent. The recent surge in the SACU revenue helped to improve international reserve coverage to about four months of imports by March 2014. With a return of confidence in the economic outlook, commercial bank credit to the private sector has been growing, while the recent government bond auctions were oversubscribed. Inflation remained modest at 5.1 percent in March 2014.
“Swaziland’s challenges, however, remain significant. The recent fiscal crisis points the need to strengthen Swaziland’s resilience to shocks, while the economy has suffered from weak growth performance, which adversely affects social developments. Furthermore, there are risks to Swaziland’s economic prospects, in particular the uncertain global and regional economic outlook that could lower SACU revenues. Swaziland’s key economic policy challenges are to strengthen its resilience to exogenous shocks and achieve high, inclusive growth, while meeting critical social and development needs.
“In light of these challenges and the need to safeguard the exchange rate peg, the mission encourages the authorities to maintain prudent fiscal policy (with a fiscal deficit less than 2 percent of GDP) over the medium-term, while protecting spending for critical social and development needs. Such a prudent fiscal policy stance would help build a sufficient international reserve buffer (five to seven months of imports) and maintain modest debt distress, and provide Swaziland with better protection for possible shocks. To help implement the prudent fiscal policy, the mission also encourages the authorities to enhance efforts for public sector reforms and public financial management reforms, while welcoming further efforts to enhance tax administration.
“The mission echoes the authorities’ concerns about weak growth performance. This weak performance has been largely associated with low private sector development (depressed private investment in particular). In this light, the mission encourages the authorities to proceed with wide-ranging structural reforms, including further improving business climate, facilitating financial intermediation, and pursuing land management reforms. To this end, the mission commends the Central Bank of Swaziland’s plan to formulate a Financial Sector Strategy, with technical assistance from the IMF and the World Bank.”
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US and Europe must approach trade partnership talks in responsible manner
The Dialogue Forum on the Transatlantic Trade and Investment Partnership (TTIP) between the United States of America and the European Union that took part in Berlin on May 5 ahead of the next round of talks planned on May 19 stimulated the foreign mass media to resume the debate on the viability of the planned agreement and the potential dangers it could present if signed.
During the forum, such politicians as Sigmar Garbiel, Vice Chancellor of Germany, Michael Froman, US Trade Representative, and Karel de Gucht, European Commissioner for Trade, spoke in favour of signing the agreement as soon as possible.
“With a free trade area, we can set standards with respect to third countries and the entire world: on labour rights, environmental standards or protection of intellectual property rights,” Michael Froman stated during the forum, emphasizing the fact that the planned changes will lead to jobs creation, competitiveness improvement and innovation promotion.
Sigmar Gabiel addressed TTIP opponents to take part in the talks, saying that they will lose an opportunity to introduce wanted changes and protect their positions otherwise. In his turn, Karel de Gucht pointed out that setting common trade standards between the US and the EU will help both sides promote their interests in the WTO.
Nevertheless, the agreement in question has many opponents. In their opinion, creation of the free trade zone will lead to the rise of unemployment due to more severe competition, law down-leveling and potential legislatorial impotence of governments against companies, as well as large expenses for equalizing European and American regulations.
Martin Häusling, MEP from the Green Party of Germany and one of TTIP critics, called the above points in favour of the Transatlantic Partnership “naïve” and described them as a “dangerous heresy.”
According to him, the agreement may lead to degradation of environmental and consumer standards by commercial companies in order to earn a profit.
Martin Häusling added that the US trade representatives are not interested in preserving the highly treasured European principles and intend to demote the EU standards to American levels.
In his turn, Robin Niblett, Director of Chatham House, noted that the creation of the Transatlantic trade zone is important for Washington not for economic, but for strategic reasons.
“TTIP is meant to be a confirmation of of the continuing strength of the relationship between Europe and the US. Given the geopolitical environment and great tension with Russia, there is great desire to show that America and Europe can complete an agreement like this despite the difficulties,” the expert said in an interview to “PenzaNews” agency.
According to him, the most important change caused by the free trade zone creation will be not reduction of tariff duties, but adjustment of trade regulations for both sides to a common standard, which will lead to improved economic efficiency for the US and the EU.
“What makes TTIP unique compared to any other agreement is the extent to which it seeks to reduce non-tariff barriers to trade and investment across the Atlantic. Most studies conclude that after reducing those, there will be an increase in the rate of GDP growth,” Robin Niblett explained.
Speaking of the rifts between the negotiating parties, he suggested a possible scenario that would help both sides make the process easier which involves signing a backbone agreement and beginning the process of setting common trade zone rules and standards.
“Rather than try to come to agreement in the next year to 18 months on removing, harmonizing or recognizing lots of standards on each side of the Atlantic, [it is possible to] set up a process of ongoing regulatory negotiations between America and Europe,” Chatham House Director said.
However, in his opinion, even in its current form, the Transatlantic Partnership project may undergo big changes.
“It may turn out that certain sectors end up not being included into TTIP. The ambitious plans that were developed in the beginning may end up not happening as a result of the negotiations,” Robin Niblett noted.
The expert named a possible decrease in personal data protection and potential collection and use of such data as one of the ideas that produce questions from one of the negotiating parties.
“Potentially, some of the lack of protection of privacy and personal data of citizens exposed by the Edward Snowden affair would be formalized. The Europeans are trying to stop it, the Americans are trying to have an ‘open digital market’,” Chatham House Director said.
Stefan Liebich, Bundestag member and representative of the Left Party of Germany, continued this topic by stating that TTIP represents a threat to the citizens' rights.
“In contrast to what apparently is discussed, the agreement is not mainly about the reduction of custom duties or about trade regulations. It's about setting new monitoring standards, new basic laws and rules. For the Left Party of Germany, this agreement is an attack on our hard-won rights,” he said.
The politician criticized the secretive nature of the previous talks on TTIP, and noted that since the Transatlantic Partnership will influence everybody and affect such issues as employment rights and financial market regulation, everybody has the right to know what is being discussed.
In addition to that, Stefan Liebich pointed out the vital role of public response to these events.
“In both Europe and the USA more and more people fight against TTIP. DIE LINKE is cooperating with everyone who tries to stop the agreement. We can only be successful if we work together. More than 400.000 people have signed the online petition against the agreement. The critics against TTIP become more and more visible and the politicians supporting the free trade area are under increasing pressure,” he emphasized.
Speaking on when will the document be signed, Stefan Liebich suggested that the agreement will not be signed in the immediate future.
“I think considering the growing resistance against the agreement in Europe and in the USA it's going to be hard for the parties to keep the planned timeframe,” the politician explained.
Dean Baker, Co-Director of the US Center for Economic and Policy Research and author of many books on economics, supported this opinion.
“It will likely be at least 2015 before we see a draft agreement,” he added.
In the expert's opinion, the point of the agreement is to create a pro-business regulatory structure that would never be approved trhough the democratic process.
“Presenting this pact as being about free trade is tremendously misleading. The trade barriers between the EU and the US are already minimal. The document is rather about imposing rules limiting the ability of national and sub-national governments to put in place environmental, consumer, and health and safety regulations. TTIP would make many such measures trade violations and subject to penalties,” Dean Baker said.
In his opinion, investor-state dispute resolution boards that will be established by the Transatlantic trade zone agreement will tend to make rulings that are tilted towards business which may significantly limit the capabilities of European governments. For example, the latter may no longer have the right to require labelling of genetically modified foods.
“These forms of protectionism which are directly opposite to free trade will raise prices of items like pharmaceuticals, creating economic distortions and slowing growth,” the analyst emphasized.
Per Åsling, Swedish MP and Centre Party representative, also noted that it is important for TTIP statements to conform to the principles of democracy.
“It is important that democratic values are not undermined in the process,” he stated, also saying that investment protection mechanisms, a part of the planned free trade zone, may require adjustments.
However, in the politician's opinion, TTIP will eventually facilitate economic growth.
“Our party supports this agreement. We live in a global world where each country's prosperity is based on free trade, making them closely interdependent. When the Transatlantic Partnership enters into force, it will make trade easier, erase many of the trade obstacles, and contribute to greater transparency and predictability. This is important for business development and free movement of people, products, services and capital between the EU and other countries,” Per Åsling noted.
Speaking of the common regulations within the free trade zone, the Swedish MP pointed out certain European standards that would be advantageous to keep unchanged during the formation of TTIP, such as a ban on the use of antibiotics and hormones in animal husbandry sector.
“The growing problem of antibiotic resistance is one of today's greatest threat to public health, and one could therefore expect that the Swedish-European model should continue to gain ground over the world. The EU shares these basic values, and the European Commission has made it clear that the basic rules concerning hormones and GMOs is not up for discussion,” he emphasized.
Kimmo Sasi, Finland MP and Head of the country's Finance Committee, bringing up the topic of influence of TTIP on business, expressed his opinion that free trade will positively affect both intrazone and global enterprises.
“We believe that better and more just competition improves productivity. Greater economic area improves the power of competition globally as well,” the politician stated; however, he also emphasized the fact that ailing industries will have difficulties to survive in new conditions.
Speaking on when will TTIP agreement be signed, he expert pointed out that the document is still in its early phase.
“It is difficult to estimate how long the negotiations will continue. My estimate is that the agreement will be ready at the end of Obama´s term,” Kimmo Sasi stated his opinion.
In his turn, Thomas Klau, Senior Policy Fellow at the European Council on Foreign Relations, said that he would not risk to make any speculations on when will the Transatlantic free trade zone be formed and pointed at the large quantity of uncertainties in the situation.
“Do I expect it to be concluded? Yes, I think it is more likely to be concluded. However, there is no certainty because of the resistance in countries like France from the European side, but also in the American Congress,” he emphasized.
Thomas Klau noted that as the presidential elections in the US come near, it will be increasingly difficult for Barack Obama, President of the United States, to push the free trade zone idea through.
Speaking of the after-effects of TTIP creation, the expert pointed out that the Transatlantic Partnership may become a means of achieving reciprocal adoption of common trade norms and safety regulations.
However, Thomas Klau emphasized the fact that the complex structure of the modern world makes the attempts to measure growth caused by the creation of the free trade zone highly hypothetical.
“You have too many other external factors to the agreement which have an impact on the development of the real economy. I don’t think it will make sense to attempt to quantify the positive impact of TTIP,” said the member of the European Council on Foreign Relations, mentioning that the after-effects may take years to surface.
Concluding the topic, the expert noted that the Transatlantic Partnership agreement, as any other trade pact, will cause not only positive but negative consequences, and for both parties. In particular, he mentioned that producers of goods and services may come under the increase of competitive pressure.
In his opinion, TTIP may also become a catalyst of other political and economical changes, just like the inclusion of China in the world trading system led to the making of the PRC as the leading export power.
“As always with the trade agreements, history shows that there are often unintended consequences. Their entry into force comes together with other developments. Trade agreements are always to some extent shots in the dark, and any prediction about what the effect will be, how soon it will materialize, any attempt to quantify it always carries a high degree of speculation, or, depending on who produces the speculation, propaganda,” Thomas Klau summarized.
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African countries lose billions through misinvoiced trade
Fraudulent trade transactions channeled at least US$60.8 billion illegally in or out of 5 African countries from 2002-2011
The fraudulent misinvoicing of trade is hampering economic growth and potentially resulting in billions of U.S. dollars in lost tax revenue in Ghana, Kenya, Mozambique, Tanzania, and Uganda, according to a new report published Monday by Global Financial Integrity (GFI), a Washington DC-based research and advocacy organization.
The study – funded by the Ministry of Foreign Affairs of Denmark – finds that the over- and under-invoicing of trade transactions facilitated at least US$60.8 billion in illicit financial flows into or out of the five African countries between 2002 and 2011.
“It is deeply disconcerting that illicit financial flows are taking such a serious toll on the economies of Ghana, Kenya, Mozambique, Tanzania, and Uganda,” noted Mogens Jensen, Danish Minister for Trade and Development Cooperation.
“Denmark has for several years supported Ghana, Kenya, Mozambique, Tanzania, and Uganda in fighting poverty and promoting economic growth and job creation. These efforts are clearly at risk of being undermined by fraudulent trade transactions which rob the people of these countries of funds that could otherwise have been used for investments in infrastructure, schools, hospitals, and other much needed public services. I hope that the study can help the governments in their efforts to curb illicit financial flows.”
“Trade misinvoicing is stymieing economic growth and likely decimating government revenues in these countries,” said GFI President Raymond Baker, a longtime authority on financial crime. “The consequences are simply devastating. The capital drained from trade misinvoicing means that local businesses in Uganda and Tanzania have less money to grow their companies and hire more workers. The potential revenue loss from trade misinvoicing means that Ghana has less money to spend on healthcare, Kenya has less money to devote to education, and Mozambique has less money to invest in infrastructure. Trade misinvoicing is perhaps the most serious economic issue plaguing these countries.”
Titled “Hiding in Plain Sight: Trade Misinvoicing and the Impact of Revenue Loss in Ghana, Kenya, Mozambique, Tanzania, and Uganda: 2002-2011,” the study estimates that, collectively, trade misinvoicing may have cost the taxpayers of these five African nations US$14.39 billion in lost revenue over the decade. The potential average annual tax loss[1] from trade misinvoicing amounted to roughly 12.7% of Uganda’s total government revenue over the years 2002-2011, followed by Ghana (11.0%), Mozambique (10.4%), Kenya (8.3%), and Tanzania (7.4%).
Authored by a team of GFI experts, the analysis reviews the components and drivers of trade misinvoicing in Ghana, Kenya, Mozambique, Tanzania, and Uganda, it estimates the potential impact on tax revenue for each government, it analyzes the policy environment in each country, and it provides general policy recommendations as well as specific suggestions tailored to the circumstances in each nation.
Policy Recommendations
Based around two themes – greater transparency in domestic and international financial transactions, and greater cooperation between developed and developing country governments to shut down the channels through which illicit money flows – the report recommends a number of steps that can be taken by these five countries to ameliorate the problem of illicit flows of money into and out of the country. Among other steps, GFI recommends that:
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Governments should significantly boost their customs enforcement, by equipping and training officers to better detect intentional misinvoicing of trade transactions;
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Trade transactions involving tax haven jurisdictions should be treated with the highest level of scrutiny by customs, tax, and law enforcement officials;
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Government authorities should create central, public registries of meaningful beneficial ownership information for all companies formed in their country to combat the abuse of anonymous shell companies;
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Financial regulators should require that all banks in their country know the true beneficial owner of any account opened in their financial institution;
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Ghana, Kenya, Mozambique, Tanzania, and Uganda should actively participate in the worldwide movement towards the automatic exchange of tax information as endorsed by the G20 and the OECD;
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Kenya and Uganda should follow the lead of Ghana, Mozambique, and Tanzania in joining and complying with the Extractives Industry Transparency Initiative (EITI); and
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Government authorities should adopt and fully implement all of the Financial Action Task Force’s anti-money laundering recommendations.
“It is our view that this is just the beginning of the conversation surrounding trade misinvoicing and illicit flows in these countries,” added Mr. Baker, GFI’s president. “Our analysis makes it clear that more research can and should be done to further identify areas for improvement. It’s our desire to work constructively with the governments of Ghana, Kenya, Mozambique, Tanzania, and Uganda to meaningfully curtail the scourge of illicit financial flows.”
[1] GFI notes that – due to data issues, varying customs rates by commodity and sector, and various other factors – it is difficult to assess the true tax revenue loss stemming from trade misinvoicing in a particular country. The tax loss figures presented in this study are rough estimates of the possible impact that trade misinvoicing could have on government revenues in Ghana, Kenya, Mozambique, Tanzania, and Uganda.
Key Findings of the Report
Ghana
Over the decade:
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US$7.32 billion flowed illegally out of the country due to trade misinvoicing;
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US$7.07 billion flowed illegally into the country due to trade misinvoicing;
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US$14.39 billion in illicit capital flowed either into or out of the country due to trade misinvoicing;
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Gross illicit flows were pegged at 6.6% of the country’s GDP;
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Gross illicit flows roughly equaled ODA provided to the nation;
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The under-invoicing of exports amounted to US$5.1 billion;
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The under-invoicing of exports was the primary method for shifting money illicitly out of the country;
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The under-invoicing of imports amounted to US$4.6 billion;
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The under-invoicing of imports was the primary method for illegally smuggling capital into the country;
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Tax revenue loss from trade misinvoicing potentially totaled US$3.86 billion, averaged US$386 million per year;
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Tax revenue loss from trade misinvoicing roughly equaled 11.0% of total government revenue.
Kenya
From 2002-2010:
-
US$9.64 billion flowed illegally out of the country due to trade misinvoicing;
-
US$3.94 billion flowed illegally into the country due to trade misinvoicing;
-
US$13.58 billion in illicit capital flowed either into or out of the country due to trade misinvoicing;
-
Gross illicit flows were pegged at 7.8% of the country’s GDP;
-
Gross illicit flows were twice the ODA provided to the nation;
-
The under-invoicing of exports amounted to US$9.26 billion;
-
The under-invoicing of exports was the primary method for shifting money illicitly out of the country;
-
The under-invoicing of imports amounted to US$3.94 billion;
-
The under-invoicing of imports was the only method for illegally smuggling capital into the country;
-
Tax revenue loss from trade misinvoicing potentially totaled US$3.92 billion, averaged US$435 million per year;
-
Tax revenue loss from trade misinvoicing roughly equaled 8.3% of total government revenue.
Mozambique
From 2002-2010:
-
US$2.33 billion flowed illegally out of the country due to trade misinvoicing;
-
US$2.93 billion flowed illegally into the country due to trade misinvoicing;
-
US$5.27 billion in illicit capital flowed either into or out of the country due to trade misinvoicing;
-
Gross illicit flows were pegged at 9.0% of the country’s GDP;
-
Gross illicit flows amounted to 32.6% of ODA provided to the nation;
-
Export under-invoicing amounted to US$1.26 billion;
-
Import over-invoicing amounted to US$1.08 billion;
-
Both export under-invoicing and import over-invoicing were common for shifting money illicitly out of the country;
-
Import under-invoicing amounted to US$2.22 billion;
-
Import under-invoicing was the primary method for illegally smuggling capital into the country;
-
Tax revenue loss from trade misinvoicing potentially totaled US$1.68 billion, averaged US$187 million per year;
-
Tax revenue loss from trade misinvoicing roughly equaled 10.4% of total government revenue.
Tanzania
Over the decade:
-
US$8.28 billion flowed illegally out of the country due to trade misinvoicing;
-
US$10.44 billion flowed illegally into the country due to trade misinvoicing;
-
US$18.73 billion in illicit capital flowed either into or out of the country due to trade misinvoicing;
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Gross illicit flows were pegged at 9.4% of the country’s GDP;
-
Gross illicit flows amounted to 77.6% of ODA provided to the nation;
-
Import over-invoicing amounted to US$8.28 billion;
-
Import over-invoicing was the only method for shifting money illicitly out of the country;
-
Export over-invoicing amounted to US$10.34 billion;
-
Export over-invoicing was the primary method for illegally smuggling capital into the country;
-
Tax revenue loss from trade misinvoicing potentially totaled US$2.48 billion, averaged US$248 million per year;
-
Tax revenue loss from trade misinvoicing roughly equaled 7.4% of total government revenue.
Uganda
Over the decade:
-
US$8.39 billion flowed illegally out of the country due to trade misinvoicing;
-
US$457 million flowed illegally into the country due to trade misinvoicing;
-
US$8.84 billion in illicit capital flowed either into or out of the country due to trade misinvoicing;
-
Gross illicit flows were pegged at 7.1% of the country’s GDP;
-
Gross illicit flows amounted to 58.9% of ODA provided to the nation;
-
Import over-invoicing amounted to US$8.13 billion;
-
Import over-invoicing was the primary method for shifting money illicitly out of the country;
-
Export over-invoicing amounted to US$457 million;
-
Export over-invoicing was the only method for illegally smuggling capital into the country;
-
Tax revenue loss from trade misinvoicing potentially totaled US$2.43 billion, averaged US$243 million per year;
-
Tax revenue loss from trade misinvoicing roughly equaled 12.7% of total government revenue.
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Breakthrough in EAC-EU trade talks
Some progress has been made in talks on Economic Partnership Agreement (Epa) between the East African Community and the European Union.
Richard Owora, the head of corporate communication and public affairs at EAC Secretariat, told The New Times that negotiations on the Rules of Origin Protocol, including the product specific rules, successfully ended on March 27.
“In addition, both parties agreed on provisions for a comprehensive dialogue on agriculture & rural development policy and transparency on domestic policy measures relating to agricultural support,” Owora said.
However, some issues remain outstanding and had been referred to a ministerial meeting scheduled for June. They include export taxes, domestic support and export subsidies, and relations with the Cotonou agreement on prohibition of proliferation of weapons of mass destruction, human rights and corruption. Others are good governance on tax matters and measures to mitigate effects of customs union agreements concluded with the EU.
The Ministry of Trade and Industry is monitoring the talks being coordinated by the Ministry of EAC Affairs.
Peace Basemera, the officer monitoring the negotiations, said the EAC position of export taxes is that member countries should be free to “impose tax whenever they need to get revenue from exports, and this comes after fostering the development of domestic infant industries” as a temporary measure.
Another element is that a country or the bloc cannot be compelled to export food when there is scarcity at home.
The EU head of delegation in Tanzania, Filberto Sebregondi, recently said the two sides would reach consensus soon. Sebregondi told The Citizen newspaper that the talks were approaching the end and that the two sides expect positive results. He said that the process that started in 2007 had taken long due to misinformation.
He allayed fears that the region would be flooded with cheap European products after the deal is sealed. “The process will be protected by tariffs, so there will be fair competition between the two sides; what I can say is that Epa will boost both sides.”
Background
The EAC countries are among the African, Caribbean and Pacific (ACP) group of countries with a special relationship with the EU since 1957 when it committed to help promote economic and social development in ACP.
The current trading relationship between the ACP and the EU is guided by the Cotonou Partnership Agreement signed in Cotonou, Benin, in 2000, and is based on five pillars: comprehensive political dimension; participatory approaches; strengthened focus on poverty reduction; new framework for economic and trade co-operation; and reform of financial co-operation.
Why the EPAs?
The Trade Cooperation Chapter of the Cotonou Agreement under which the EU extended non-reciprocal trade preferences to ACP expired on December 31, 2007.
The Cotonou trading regime was not compatible with international trade rules under the World Trade Organization because the EU discriminated against other trading partners, by exempting exports of the ACP to EU from tariffs while exports of other WTO members were subjected to either duties or taxes.
International trade rules permits this kind of discrimination only when the two countries or trading blocs enter a Free Trade Agreement, or are in a Customs Union, or under a Generalized System of Preferences (GSP) arrangement, a preferential tariff system which provides for a formal system of exemption from the more general rules of the WTO.
To guard against legal challenges to the incompatibility, the EU, in 2001, sought a waiver from WTO members. The waiver allowed the EU to derogate from her international trade commitments, and to discriminate in favour of the ACP until December 31, 2007.
For the waiver to be granted, the EU had to compensate her trading partners that felt that their trading rights were being curtailed by the ACP-EU trading arrangement.
The expiration of the waiver necessitated the negotiation of a reciprocal WTO-compatible trade agreement with ACP countries.
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Manufacturing, intra-African trade critical for inclusive growth in Africa
Africa's economic growth has been tremendous over the past decade with seven of ten of the world's fastest-growing countries coming from the continent, according to the United Nations Sustainable Development report in 2013.
The World Bank and International Monetary Fund (IMF) both projected the continents growth to reach 5.5 percent in 2014.
In the midst of these impressive growth figures with somehow strong macroeconomic indicators, certain critical social indicators have however been missing in Africa's growth.
"The African economy has seen growth over the last decade, but it is a growth that has not created jobs," Ngozi Okonjo-Iweala, Minister for Finance for the Federal Republic of Nigeria said in Abuja, Monday ahead of the just ended World Economic Forum on Africa.
The forum, which was under the theme Forging Inclusive Growth, Creating Jobs, had more than 1,000 participants from across politics, business and civil society.
Besides, Okonjo-Iweala said the growth was also not a type that carried everybody along, describing the situation as a collective problem which needed collective solutions.
For instance, Nigeria has youth unemployment alone reaching 5 million according to the minister, with the country only able to fill the annual job needs partially, asking, "How do we get a growth that also creates jobs and provides social protection measures?"
In the case of Nigeria, she said the issue was both the unavailability of jobs, and the lack of the appropriate skills for the jobs that economic growth throws up.
"The necessity is for us is the development of skills and investment into creating jobs, while pursuing inclusiveness by putting women and girls at the center of development, with the provision of social protection measures because Nigeria cannot grow without the inclusion of girls," the minister stated.
Why is it that only a few are getting rich in Africa in spite of the reported economic development on the continent, and over 80 percent of its population are still living on less than one dollar a day? quipped Winnie Byanyima, the Executive Director, Oxfam UK.
She called for a reduction in the current level of raw material exportation by African countries to other continents, and rather focus on industrialization, in order to reduce the inequity and inequality in Africa's growth story as this could also culminate in the creation of more jobs for the youth of Africa.
"when Africa's growth translates into health and free social services for the poor, inclusive growth would have been achieved," Byanyima said during one of the side events of the World Economic Forum in Abuja.
The growth rate across Africa has been very impressive, observed Paul Kagame, President of Rwanda, wondering whether this growth has generated jobs or improved the well-being of the people.
"You cannot get growth by few companies. Not a situation where people continue to grow at the expense of others, while others lose. We are talking about equity, equality and how job creations can be achieved," Kagame stressed in his interventions during the panel discussion on "Unlocking Job creating Goals."
The Rwandan president explained that since his government knew agriculture affects many lives, it invested in the people in such a way that they were able to have food security, conceding however that incomes from agriculture were still low.
"Intra-Africa trade has huge potentials, but how much are we contributing to encourage trades among African?" Kagame asked.
To Nigerian billionaire Aliko Dangote, the issue about job creation is critical to solving the problem of armed rebellion in the region.
He faulted African countries for the low level of intra-African trade that goes on with imports rather on the ascendency.
"The intra-Africa trade, as of 2012, is actually just about 100 billion U.S. dollars only. And that is less than 50 percent of trade in West Africa. It means majority of what we consume are imported. And when you import, it means you are importing poverty and exporting job creation," Dangote remarked.
A lot of people are still left behind in Africa as the continent grows, with widening income inequality. The exclusivity still remains with access to finance, title to property, education, among others, observed Sampson Akligoh, Economist with Ghanaian Investment bank, Databank.
The biggest challenge to job creation in Africa, according to him, is access to finance, and the fact that salary levels for the middle class are so low that accumulating saving towards setting up new companies is very difficult over the youthful life of a typical middle class person.
"Angel financing is also difficult due to the closed nature of most developing countries, and general lack of trust. I think family businesses must open up, and aim to become well capitalized companies to help the unemployment situation," Akligoh said in a mailed response to Xinhua inquisitions.
He however believed governments could do a lot to induce the creation of jobs through tax incentives for the poor and low middle income earners and easing access to finance.
"We must make it easy for the poor to have title to property and be able to access finance, and public policy must give incentives for the poor to have substantial tax breaks at the beginning if they are roped into the formal sector," the economist urged.
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African Trade Ministers split on EPA path forward as deadline looms
The October deadline for African countries to conclude their Economic Partnership Agreements (EPAs) with the EU took centre stage at a meeting of African Union (AU) trade ministers in Addis Ababa, Ethiopia, with countries remaining divided over the path forward.
During last week’s meeting, officials also discussed the continent’s role in the WTO’s post-Bali process, while reviewing other bilateral and regional trade initiatives, including the hoped-for renewal of the US’ African Growth and Opportunity Act and the preparations for a future Continental Free Trade Area.
EPAs fuel scepticism
At last week’s meeting, several African trade ministers openly sided with Nigeria against the planned EU EPAs, despite recent progress made by some regional blocs towards finalising these trade pacts.
“We must not sign an agreement without first of all carrying out a robust economic analysis of the overall impact the agreement will have on the region, our children and future generations,” reiterated Nigerian trade minister Olesugun Aganga.
One trade expert who has been following the negotiations closely indicated that such a strong declaration could negatively influence those countries involved in the process that still remain indecisive.
Zambian commerce minister Robert Sichinga agreed with Nigeria, encouraging African countries to further deepen their intra-regional trade through value addition of their raw materials. Similar sentiments were also expressed by Niger trade minister Alma Oumarou, who urged fellow African countries to evaluate the EPAs’ impacts realistically before signing.
AU Trade Commissioner Fatima Haram Acyl agreed with the ministers, explaining that there remains little clarity on the way forward regarding the EPAs, while noting the potential challenges that these could pose for the continent’s structural transformation.
“As far as Europe continues to insist on the present model of EPA... Africa should not agree to the EPAs,” she declared. Should the negotiations continue along the same vein, she added, Africa should consider EPA alternatives – such as deepening intra-African trade ties and pushing for alternative arrangements with Brussels, such as the EU Generalised System of Preferences (GSP).
Some experts say, however, that the EU GSP is not a genuine alternative to EPAs, given that the former is a unilateral scheme – thus having limited predictability. The GSP, they note, addresses only market access issues, without other development components. The reciprocity required under EPAs, meanwhile, is likely to pose challenges for African countries.
According to the draft report of the conference, a copy of which has been seen by Bridges, the AU Commission and the UN Economic Commission for Africa (UNECA) were both mandated to analyse the impact that the 1 October withdrawal of the EU Market Access Regulation – which provides these countries with preferential access to the European market – would have on Africa.
They have been also been asked to consider alternative solutions in order to avoid trade disruptions, should that October deadline not be extended.
“Even if we were to say, ‘Oh no, what a bad idea, let’s do something,’ it would take us two years,” one EU official told the Financial Times, suggesting that the deadline might not be pushed back.
Despite these concerns, efforts are still underway to conclude regional EPAs in Africa before the deadline. West African leaders reached a compromise earlier this year on their pact with Brussels – despite reservations by some African countries, most vocally Nigeria, over the deal’s potential impact on their industrial development.
Some experts warn that the EPA negotiations now appear to be taking a different path, and still have no clear end in sight. The situation seems to be particularly challenging for countries such as Kenya, Ivory Coast, and Ghana which are struggling to balance the need to preserve their EU market access with the position of their respective regional blocs.
ECOWAS committee review
Last March, ECOWAS heads of state and government established an ad hoc committee – consisting of Nigeria, Ghana, Côte d’Ivoire and Senegal – to continue work on the EU-West Africa EPA, including the analysis of the remaining technical concerns raised by Nigeria on the current compromise. The committee was asked to respond within two months.
Sources confirm that Nigeria reaffirmed its EPA objections during a separate meeting held in Accra, Ghana last week. Nigeria argues that the current market access structure – market opening of 75 percent over the next 20 years, with 90 percent of products to be liberalised during the first 15 years – would significantly hamper its economy.
It has instead requested a reclassification of 181 tariff lines in other categories of the offer, which some warn could dismantle the current compromise. The results of the Accra meeting should be submitted to the trade ministers of these four countries when they meet on 10 May.
Post-Bali
In Addis, trade ministers also discussed the implications of the WTO Trade Facilitation Agreement, which was concluded at the global trade body’s Ninth Ministerial Conference in Bali, Indonesia in December 2013.
The draft conference report says that the trade facilitation pact – which was the pinnacle of the “Bali package” – should be implemented on a provisional basis, in line with paragraph 47 of the Doha Declaration. The pact, they urge, should later be reviewed for balance with the rest of the Doha Round areas once these are resolved, in line with the WTO principle of the “single undertaking.”
The comments come as the WTO Preparatory Committee on Trade Facilitation prepares to enter the second phase of its work toward implementing the pact, having finished a legal scrubbing of the English version of the text last week. The committee will now begin drafting a Protocol of Amendment in order to formally insert the trade facilitation deal into the overall WTO Agreement.
Once that process is complete, the deal will then be open for ratification by the global trade body’s members from 31 July 2014 to the same date next year. Approval from two-thirds of the membership will be required in order for the pact to enter into force.
Negotiators for the African Group in Geneva have therefore been instructed by the AU trade commissioner to formally submit language on the Protocol of Amendment to the Preparatory Committee as it begins this next stage. Furthermore, ministers have mandated the AU Commission to send a new request to WTO Director-General Roberto Azevêdo to help mobilise financial resources for implementing the pact’s new requirements, once these enter into force.
A representative from Lesotho, which is the current African Group coordinator, also reportedly urged African trade ministers in Addis to provide guidance on what the group’s position should be in the post-Bali process, especially ahead of next year’s ministerial conference.
WTO members are in the process of developing a work programme aimed at resolving the remaining issues of the organisation’s Doha Round of trade talks, which have been at an impasse for years. They have been given until the end of 2014 to establish such a plan.
The AU meeting report draws lessons for the African Group on the way forward, such as the need for the continent to speak with one voice in the multilateral negotiations. To this end, the group has held quarterly retreats with the goal of harmonising its position on the post-Bali negotiations.
AGOA extension
African trade ministers also discussed the need for extending the US’ African Growth and Opportunity Act (AGOA) for the next 15 years, while continuing to consolidate regional integration in parallel. The US legislation is set to expire in September 2015, and currently provides about 6500 African products with preferential quota and duty-free access to its markets.
The conference draft report highlights better market access, flexible rules of origin, sanitary and phytosanitary (SPS) measures, and capacity building as priority areas that should be put forward for the US’ consideration.
The Obama Administration has already committed to pursuing a “seamless” AGOA renewal, while stressing that it wants to review and update the scheme in order to maintain the US’ competitive edge in Africa. As part of the review, Washington has indicated that it will drill down into the thousands of duty-free tariff lines under AGOA to determine if some sectors or countries should gradually be eased out of the programme as they become more competitive.
In response to an impact assessment requested by the US last year, the UN Economic Commission for Africa undertook a similar assessment of the scheme with a view to enhancing its effectiveness, and presented the results during last week’s conference.
Continental Free Trade Area
Trade ministers also highlighted the importance of improving regional integration in order to ensure the continent’s structural transformation and development. According to the report, negotiations for a planned Continental Free Trade Area (CFTA) could cover trade in goods and services, investment, intellectual property rights, and other “new” issues, provided such talks are sequenced.
Chad trade minister Aziz Mahamat Saleh noted that efforts towards establishing such a pact by 2017 have already shown some progress, in line with the road map adopted by the AU Summit of Heads of States and Government in January 2012. The proposed CFTA is a key component of the AU’s strategy to boost trade within the region by at least 25-30 percent in the next decade.
In this context, ministers reviewed various documents last week, including the draft objectives and guiding principles for negotiating the CFTA, with a view toward outlining negotiating objectives and suitable institutional arrangements.
Intra-African trade currently represents 12 percent of Africa’s trade with the rest of the world, compared to 60 percent for Europe, 40 percent for North America, and 30 percent for the Association of Southeast Asian Nations (ASEAN), according to WTO data.
Some African countries have cited the uncertainties involved in the current multilateral and bilateral trade negotiations as an additional incentive to maintain the momentum towards establishing a CFTA. For example, the end of the EU’s quotas on African sugar exports in 2017 and falling world prices will likely force African producers to focus on maximising regional trade, a point highlighted by the Swaziland Sugar Association at a separate event last month.
Furthermore, observers note that the draft report implicitly refers to other free trade agreements currently under negotiation – such as the EU-US Transatlantic Trade and Investment Partnership (T-TIP) or the 12-country Trans-Pacific Partnership (TPP) – as further reason for Africa to step up its own integration efforts.
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UNCTAD places trade at the heart of sustainable development agenda beyond 2015
The sixth session of the Trade and Development Commission included an informal meeting in the afternoon of its first day to consider “The Role of International Trade in the Post-2015 Development Agenda”.
With the form of the sustainable development goals (SDGs) that will replace the Millennium Development Goals (MDGs) currently under discussion, UNCTAD is making a contribution to integrating economic development and related global economic issues into the UN-led agenda beyond 2015.
The idea that economic growth can lift people out of poverty and form the basis of an aspiration for improving lives underpinned the MDGs – but the topic of trade was confined to Goal 8 (to “develop a global partnership for development”). Trade was mainly referred to as a matter of market access and tariff reduction, and in just three of 16 indicators used to track Goal 8.
However, UNCTAD’s work has shown that international trade should be mainstreamed as an “enabler” for achieving a broad range of social, economic and environmental development goals through promoting inclusive and sustainable economic growth. Exactly how this idea will be integrated across the SDGs, and what targets will be used to measure the outcomes of such goals as gender equality, for example, is currently a matter for consideration.
As part of UNCTAD’s ongoing contribution to the formulation of the SDGs, the Third Geneva Dialogue, to take place during UNCTAD’s fiftieth anniversary events held in Geneva from 16 to 20 June, takes as its theme “Trade as a means of implementation of sustainable development”.
One commitment supported by UNCTAD is the eradication of extreme poverty. UNCTAD has backed this aim since the first United Nations Conference on Trade and Development (UNCTAD I) was held in 1964.
“The States participating in the Conference are determined… to find ways by which the human and material resources of the world may be harnessed for the abolition of poverty everywhere,” read the Final Act of the UNCTAD I, which was held in Geneva.
While trade liberalization can raise incomes, it does not automatically reduce poverty in an equitable way. But UNCTAD’s work has shown that there are means to counter such distortions and uphold a rights-based approach to development, even as countries open up to trade.
The transformative nature of the new development agenda, currently being discussed by United Nations Member States, centres on the broad developmental concept of sustainability. This will hopefully ensure that development can be made lasting and self-perpetuating in all its dimensions, rather than seeking singularly to minimize impact on the environment.
Over the past 50 years since UNCTAD was founded, the international economy has sometimes supported and sometimes hindered more inclusive and sustainable growth in developing countries. UNCTAD has shown, for example, how unregulated financial markets and unrestricted capital flows have often been an impediment to stable and inclusive growth. At the same time an open and predictable multilateral system has also been shown to stimulate trade growth.
It is equally important that developing countries can pursue inclusive and sustainable development strategies in a system that provides not only rules but the support and space to use policy instruments to promote structural transformation and to manage the adjustments that this implies. There must be an effort to ensure that existing agreements ensure sufficient policy space.
When properly harnessed, the opportunities brought by international trade in goods and services can be a powerful force for creating jobs, enabling efficient use of resources, providing incentives to entrepreneurs and ultimately improving standards of living in all countries.