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Europe considers dropping ban on South African orange juice
The European Commission has proposed dropping a ban on South African citrus imports to keep orange juice on Europe’s breakfast tables this summer but said it could be re-imposed if shipments contain a fungal disease.
The European Union, which buys 1 billion euros ($1.4 billion) of South African citrus exports every year, banned mainly oranges, lemons, and tangerines from South Africa late last year because of a fungal disease found in shipments.
But in a document obtained by Reuters, the Commission, which coordinates trade policy for the 28-member bloc, says a ban is not necessary. It recommends considering blocking the fruit only if the black spot disease is found in five different shipments from South Africa during the 2014 season.
The document said proper checks and tracking of fruit origin were enough to allow citrus into the EU. “The specified fruits shall be visually inspected by the responsible official body at the point of entry,” it said.
EU governments will vote on Wednesday whether to extend the ban, which would block 600,000 tonnes of citrus fruit for the May-October season, potentially inflating the price of orange juice in Europe this summer and forcing South Africa to sell at lower prices elsewhere.
South Africa supplies about a third of the European Union’s total citrus imports and is the main source of oranges for the juice drunk by consumers in Britain, Germany and France during Europe’s summer.
Last year’s ban followed the interception of 35 citrus shipments from South Africa that were contaminated with the fungal black spot disease, which growers in southern Europe fear could take hold in their citrus groves.
While harmless to humans, citrus black spot causes unsightly lesions on the fruit and leaves, reducing both harvest quality and quantity. There is no known cure, but fungicides can be used to control the spread of the disease.
‘END OF AN INDUSTRY’
The dispute comes at a sensitive time because the European Union is offering to improve the terms of its free-trade deal with South Africa in return for Pretoria’s support for the trade deals that Europe is seeking with sub-Saharan Africa.
EU trade chief Karel De Gucht told South African officials during a visit to Johannesburg in November that the contaminated shipments were “serious and problematic”.
South African growers say banning their citrus produce from all the European Union’s countries is unfair because there are no citrus groves in northern Europe due to the colder climate, meaning there was no risk from the black spot fungal disease in places such as Britain and Germany.
“It’s what we’d term an industry-ending event should we be banned out of Europe,” Justin Chadwick, head of the Citrus Grower’s Association of Southern Africa, told South African media earlier this year.
The EU’s ban last year was largely symbolic because it came at the end of South Africa’s season. But the European Union’s food safety watchdog said in February there was a risk of the fungal disease taking hold in Europe’s estimated 500,000 hectares of citrus groves.
EU farm union Copa-Cogeca wrote to EU Health Commissioner Tonio Borg this month to call for an immediate ban from any South African farms found to be contaminated with the black spot disease. Citrus-producing Spain, Italy and Greece support such a measure but face resistance from northern European nations.
“We want measures for 2014,” the group’s head Pekka Pesonen said. “We faced a very high risk of contamination last season and we cannot repeat it this year.”
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Gas exports to make Dar es Salaam logistic centre
Tanzania will become a leading exporter of liquefied natural gas (exploration ship pictured below) by 2025, supplying markets as diverse as Pakistan, China, Spain and Chile.
A PricewaterhouseCoopers (PwC) report states infrastructure in Tanzania is undergoing impressive investment in recent years and there is more to come.
Transport and utilities infrastructure projects worth $19 billion are in the pipeline. Last year, Tanzania signed aframework deal with China Merchants Holdings (International) to construct a new port at Bagamoyo, 75 kilometres north of Dar es Salaam in a project expected to involve more than $10 billion.
The construction of the port will also involve building infrastructure for a special economic zone (EPZ) and railway network. The new port will be able to handle 20 times more cargo than the Dar es Salaam port and is expected to relieve pressure on the Dar port once it begins operating in 2017. Construction of the ambitious project is expected to begin in earnest later this year.
Tanzania also has ambitious plans for investment in rail infrastructure to serve the neighbouring landlocked countries of Uganda, Burundi, Rwanda, DR Congo, Zambia and Malawi.
The report says rail projects with an estimated value of more than $14 billion are currently in various stages of development. These include a $2. 7 billion project to develop a new railway line from Tanga to Musoma on Lake Victoria. The Chinese Government has signed a $42 million agreement with the Tanzania- Zambia Railway Authority (Tazara) enabling Chinese companies to rehabilitate the railway.
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It takes a region
Developing a regional trade market in East Africa is vital to U.S. political and economic security.
You have to either admire or look askance at the Obama administration’s commitment to Africa. On the one hand, the dollar commitment made to Africa by the administration is but a third of that made by Japan or China, However, the longer I study the Obama plan, the more I am impressed by the daring, optimism and the simple genius behind it, especially if it actually succeeds.
The U.S. commitment is only $7-$9 billion in loan guarantees for American companies wishing to invest in the power industry. There is not a direct commitment to the African nations themselves, although six countries have been given priority. One can and should, however, argue that the PowerAfrica commitment is a major one to Africa’s development, as well as to our own economy. PowerAfrica is one of four pillars of the Obama plan for Africa announced last year. As noted in my last post, it addresses perhaps the most critical need for African development.
The second pillar of of the administration’s plan for African development is referred to as TradeAfrica, and like PowerAfrica it has its proponents and skeptics. It addresses another major need for African development, both economically and politically: the need for regional cooperation among nations. It is also a plan that assists U.S. companies that want to invest in Africa, but have not done so because of the lack of market size.
TradeAfrica focuses almost entirely on building a viable regional economic community, as an example for all other regions in Africa to follow. A regional market can only be built through unprecedented cooperation among African nations, in this case among those of the East African Community: Kenya, Tanzania, Rwanda, Uganda and Burundi.
A regional market becomes much more attractive to investors as the market size grows significantly and the access to all countries in the regional market becomes equal. To develop a regional market, however, requires a harmonization of customs duties, roads, rail systems and an increasingly common set of laws, much like those in the European Union. However, because the stage of development varies so greatly throughout Africa, the administration has chosen to focus on the regional market area deemed most likely to evolve into an effective working regional community, the East Africa Community.
It will not be easy for the East Africa Community to effectively develop into a regional market, even though historically Uganda, Tanzania and Kenya once were linked as a regional market shortly after their respective independence. Kenya is the economic giant and linchpin to the region, a fact that Tanzania has been reluctant to accept. Burundi lags far behind the other four, and is the only purely Francophone country since President Paul Kagame made English the official language of Rwanda. Kenya, Uganda and Rwanda have pledged to move forward together, regardless of any differences with Tanzania, but Uganda’s anti-gay laws have complicated possible cooperation with the United States. Kenya-U.S. relations, meanwhile, have been prickly, with President Uhuru Kenyatta under indictment from the International Court of Justice. It seems likely, however, that those charges will be dropped soon. But, aside from South Africa, the East Africa community is the most advanced region economically and politically. There is not a better region for U.S.-Africa cooperation to develop.
It will not be easy, for not only will agreements of trade facilitation have to be built between the United States and the East Africa Community, but the five nations of the community must also develop a more effective means of working together. Customs duties will need to be harmonized and shared. Trust must be built and the egos of leaders must be sublimated for the common good. It will not be easy, but it is essential for the economic and political security of the region and of Africa.
Stephen Hayes is president and CEO of the Corporate Council on Africa.
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AU pushes for AGOA extension
The African Union has urged member countries to push for the extension of the Africa Growth and Opportunity Act (AGOA) for the next 15 years to enable them maximize benefits through trade relations with the world economy. Local media reports Monday quoted the AU’s commissioner for Trade and Industry, Mrs. Fatima Haram as saying that there should be renewed efforts to strengthen Africa’s link with AGOA, a trade mechanism by the US government to offer tangible incentives to African countries to continue their efforts to open their economies and build free markets.
Haram said it was also crucial to maintain the momentum towards the establishment of the Continental Free Trade Area (CFTA) as soon as possible due to the uncertainties in the various bilateral and multilateral trade negotiations with developed economies.
Haram who was speaking during the ongoing Extra Ordinary Conference of AU Ministers of Trade in Addis Ababa which opened on Sunday added: “It has become even more critical for Africa to create and maintain momentum towards the establishment of CFTA that is ambitious for the shortest possible time as possible.”
She stressed the need to prioritize Africa’s economic integration agenda over other bilateral and multilateral agreements because “it is this agenda that is key to Africa’s economic transformation and development.”
The conference was convened in response to the directive from the AU Summit of January as recommended by the High Level Africa trade Committee (HATC).
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Pushing the Limits of International Trade Policy
Over the last two decades, tariffs in nearly all emerging economies have dropped substantially. In many cases, the average tariff rate applied by a given country has fallen below 10 percent, a historical low since the Second World War. Despite this clear downward trend, over the same time period the world has witnessed a commensurate increase in non-tariff barriers, partially offsetting the benefits of reduced tariffs.
These and many other findings on current and future challenges in trade policy were discussed by Chad P. Bown, lead economist in the World Bank’s research department, at April’s Policy Research Talk. The Policy Research Talk series is a monthly event held by the research department to foster a dialogue between World Bank researchers and operational colleagues.
“We know that as countries develop they inevitably become more integrated into the global economy, and trade policy becomes a key part of a successful development strategy,” said World Bank Research Director Asli Demirguc-Kunt, who hosted the event. “But today’s trade policy has become more challenging than ever to get right, particularly in the face of growing concern about globalization, jobs, and inequality.”
Bown’s research builds on the Temporary Trade Barriers Database, a unique set of data collected by the World Bank’s research department that covers more than thirty countries’ use of policies such as antidumping, global safeguards, and countervailing duties. The freely available database covers the period from the 1980s until 2012, and allows users totrack the evolution of the frequency and incidence of temporary trade barriers.
Drawing on these data, Bown has demonstrated that even as tariff levels have plummeted as part of multilateral and regional trade agreements, trade policy continues to respond to political and economic shocks. For example, while India’s average applied tariffs dropped from 35 percent in the late 1990s to 14 percent in 2012, it also enacted a sixfold increase in the share of products covered by temporary trade barriers over the same period. His research suggests that although there have been large gains in international cooperation in trade policy, further extending those gains may be progressively more difficult.
On a more positive note, the current achievements in trade policy have proven to be highly durable. Again drawing on the Temporary Trade Barriers Database, Bown was able to track the evolution of trade policy prior to and during the Great Recession. GDP growth rates collapsed around the world in 2008-2009, with trade simultaneously experiencing what has been dubbed ‘The Great Trade Collapse.’ At the time, the media was filled with alarming reports about the potential for a downward spiral of protectionism. Bown’s research shows that while import protection increased in 2009, the spike of new protection was relatively mild and has subsequently leveled off.
Having weathered the Great Recession, what are the next challenges that need to be tackled in trade policy? According to Bown, “understanding the linkages between trade policy and domestic policy is increasingly important” given the growth of non-tariff barriers to trade. He continued: “The future of trade policy is at the intersection of law, economics, politics, and domestic policy.”
The World Bank has a critical role to play in helping developing countries navigate this increasingly rocky terrain. Through instruments like the Diagnostic Trade Integration Surveys, the World Bank can play an important role in helping countries assess the distribution of benefits and costs of signing on to various trade agreements. This knowledge can also help countries do a better job of extracting the benefits from international agreements.
Sudhir Shetty, Director of the World Bank’s Poverty Reduction and Economic Management Department for East Asia and Pacific, also emphasized the role that the World Bank can play in supporting developing countries’ integration into the global trade regime. Through its provision of data, research, and country-level analytics, the World Bank provides a global public good. And at the level of individual countries, it can also act as an honest broker with tailored advice, including for low-income countries that face pressure to join preferential regional trade agreements that may impose significant costs. Shetty also pointed to areas where further work is required, including tracking and understanding barriers to trade in services – an area of growing importance for a range of developing countries.
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Investors conquer difficulties in African market
Chinese investors are conquering more difficulties in the diversified and competitive African market, as the continent paves the way for many Chinese companies’ to go global.
“Chinese companies are investing in large size in the African market and the investment cycle is always long. It is difficult for them to gain capital support and they are in need of better services in credit and insurance,” said Zhang Wei, vice-chairman of the China Council for the Promotion of International Trade.
Zhang was speaking at the 2014 China-Africa Financial Investment Forum on Tuesday in Beijing.
Zhang said more than 2,000 Chinese companies are investing in Africa in sectors such as agriculture, infrastructure, finance, logistics and construction.
However, these investors still lack knowledge about the local investment environment and the culture.
“The market is becoming more competitive as investors from Europe and the United States are trying to capture a market share in recent years,” said Stephen Priestley, co-head of Africa wholesale banking at Standard Chartered Bank, which has been operating in Africa for more than 150 years.
“It is always difficult for companies to get money. This often deters a lot of investors,” he added.
Priestley suggested Chinese companies further collaborate and innovate their business activities, and also consider different situations in different countries.
Priestley said the rise of the middle class in Africa is generating more consumers for retail.
In addition, to support urbanization in Africa, there is huge potential in the fixed-asset sector, including airports, roads and railways.
In the first 10 months of 2013, China’s direct investment in African non-financial sectors surged 71.6 percent year-on-year to $2.54 billion, according to the Ministry of Commerce.
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U.S., Japan unlikely to wrap up trade deal by May TPP talks - Japan official
Japan and the United States have found “common ground” to forge a two-way trade deal, but may not be able to resolve remaining sticking points in time for a mid-May meeting of top negotiators seeking a broad regional deal, a senior Japanese official said.
Marathon talks during U.S. President Barack Obama’s state visit to Tokyo last week yielded progress - hailed by the two sides as a “key milestone” - but the two sides stopped short of announcing a deal vital to the Trans-Pacific Partnership (TPP), a 12-nation bloc that would extend from Asia to Latin America.
The upbeat tone, however, was a contrast to the emphasis on “gaps” after previous rounds of talks on a bilateral deal that has been stalemated by differences over access to Japan’s agriculture market and both countries’ car markets.
“What Obama’s visit produced after many lengthy negotiations was a common ground on which the two sides believe we can continue to work to find a mutually acceptable solution,” the senior Japanese official told Reuters. He declined to be identified because of the sensitivity of the talks.
“We no longer have to worry that the lack of a Japan-U.S. pathway is going to block negotiations with other countries. This is a very important landmark Obama was able to produce,” he said. But he added he was “not optimistic” that Washington and Tokyo could work out remaining issues “in a month or two”.
Negotiators from the 12 TPP countries are to meet in Vietnam in mid-May, followed by a gathering of Asia-Pacific trade ministers in China on May 17-18. Obama and Abe will likely meet next at an Asia-Pacific summit in China in November.
Both Obama and Abe have domestic constituencies keen to see their leaders stick to rival stances: a U.S. demand that Japan scrap all tariffs and Japan’s pledge to protect politically powerful farmers in five sectors including rice, beef and pork.
TOTAL PACKAGE
Yet both leaders are keen for a deal - Obama because TPP is central to his “pivot” of military, diplomatic and economic resources to Asia and Abe because he has touted the trade deal as a key element of reforms needed to generate economic growth.
Japan’s Yomiuri newspaper reported over the weekend that the two sides had in fact reached a “basic agreement” in last week’s talks, but that Tokyo wanted to avoid announcing it for fear of hurting the ruling party’s prospects in a Sunday by-election for a seat in parliament’s lower house.
Obama faces opposition from a wary Congress and farm good exporters worried that Washington will settle for “TPP-Lite”.
Commenting on the Yomiuri report, the Japanese official said both sides had offered significant compromises, with the United States dropping insistence on scrapping all tariffs and Tokyo offering bolder market access improvements than previously.
But he said no deal would be reached until all elements were in place.
“Nobody is dreaming that we have concluded everything,” he said.
“All professional trade negotiators know that unless everything is agreed, everything is open,” he said, adding stakeholders in both countries had to be brought on board.
Among the issues yet to be thrashed out are the period of time over which tariffs will be reduced and what sort of steps Japan can take to soften the blow on farmers.
“There are a lot of uncertainties we need to resolve, either technically or politically,” the Japanese official said.
Both sides expressed optimism that progress on a U.S.-Japan deal will breathe momentum into the push for a regional pact covering 40 percent of the world economy and creating a rule-based framework that could entice Asian giant China to join.
The Japanese official echoed that view but said there was no timetable set for when exhausted U.S. and Japanese negotiators would meet, nor could he predict when a long-delayed broader deal would be reached.
“That part is not in sight right now,” he said.
Click here to view the U.S.-Japan Joint Statement: The United States and Japan: Shaping the Future of the Asia-Pacific and Beyond
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IMF worries that Chinese slowdown could damage sub-Saharan economies
Africa’s rising economic star is in danger of burning out from even a modest contraction in China’s economy as that country’s demand for natural resources decreases, warns the International Monetary Fund.
After a meteoric rise for most of the past decade, China’s economic growth rate has cooled off to a modest 7.4 percent in the first quarter of this year and officials have tightened fiscal policy, which could make investments abroad less appealing.
The economies of many sub-Saharan countries are expected to rise, but their dependence on Chinese trade could be a stumbling block in the future, notes the IMF in its Regional Economic Outlook for Sub-Saharan Africa, which was released on Thursday.
“Growth in the BRICs, notably China, has fueled growth in sub-Saharan Africa through high commodity prices and investment inflows,” the report reads, adding that “the rebalancing of China’s growth toward relatively more reliance on consumption and less on investment are likely to reduce demand and lower prices for commodities, especially for industrial inputs such as copper and iron ore.”
Trade between China and Africa has increased 5.6 percent year over year to hit $201 billion in 2013, according to figures released from the Chinese Ministry of Commerce, reported Xinhua. And on Wednesday executives from Standard Chartered Bank told Chinese and African officials that they expect China-Africa trade volume to hit $280 billion by 2015.
In 2012, exports to China accounted for 15 percent of all global exports from sub-Saharan Africa, up from just 2.6 percent in 2001, according to IMF data. By the end of last year there were more than 2,000 Chinese companies based in Africa, ranging in sector from agriculture to manufacturing, resources to finance.
But that depth of integration, with high levels of infrastructure and mining investment, could be a double-edged sword.
“Too much of Africa’s recent prosperity depends on China’s own continued prosperity and rapid growth,” wrote Robert Rotberg, a senior fellow at the Center for International Governance, in an April 4 blog post. “If China goes, so goes Africa,” he added.
That has some economists urging low-income, resource-rich countries to diversify and decrease their dependence on China, especially given a commodities market that has whipsawed over the last year.
The IMF predicts that iron ore and coal prices will have the largest downward adjustment this year but cocoa and coffee prices will be much higher, which should benefit Cote d’Ivoire, Ghana, Rwanda and Uganda.
“The greater exposure countries have to China today is the result of larger exports from sub-Saharan African countries to China, which has helped drive economic growth in the region, especially at a time when their exports to advanced economies were being hit by the slowdown,” said Drummond.
“Chinese investment has had an impact on global growth and commodity prices, and for countries that are resource rich there will be an impact through commodities,” said Drummond. During the boom, countries that exported resources such as ore and metal, cotton or timber did well.
Zambia is one example. As one of the largest copper producers in the world, its economy has been steadily increasing to meet demand for the metal from China. Nearly a fifth of the country’s total exports went to China in 2012, up from 0.03 percent in 2001.
Today, more than 30 percent of the country’s tax revenue comes from its mines, up from just 16 percent in 2008, according to a study from the International Council on Mining and Metals.
However, the price of copper has fallen more than 50 percent since it hit its zenith in 2011. In a report last year, the IMF listed “trade and commodity implications of a slowdown in emerging markets, such as China,” as one of the primary risk factors to the country’s economy.
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Angola’s new import tariffs putting the squeeze on the poorest residents in one of the world’s most expensive cities
In a bid to diversify its economy, the oil-rich nation has raised tariffs on imports, hitting expats hard but pushing those most in need even closer to the brink
In Luanda’s Jumbo supermarket, a half-litre tub of imported vanilla ice-cream used to cost $25 (£15), testament to the Angolan capital’s rank as one of the world’s most expensive cities.
With new import tariffs imposed last month, that price has jumped to $31, enough to make even wealthy locals and expatriates pause and putting the treat even further beyond the reach of millions of poor Angolans struggling to feed their families.
Luanda already ranks as the world’s most expensive city for expatriates, with the presence of thousands of foreign workers, many involved in the oil industry, helping to drive up prices.
Sub-Saharan Africa’s second-largest oil producer, still rebuilding after it emerged in 2002 from a 27-year civil war, imports three quarters of the goods it consumes.
The government of President Jose Eduardo dos Santos, who has ruled since 1979, imposed higher import tariffs last month on hundreds of items, from garlic to cars. The stated aim is to try to diversify the heavily oil-dependent economy and nurture farming and industry, sectors which have remained weak.
But this is expected to hike prices for consumers, hitting the less privileged sectors of society especially hard. Mr Dos Santos, one of Africa’s longest-ruling leaders, has been accused by critics of widening a dangerous gap between the rich and the poor that risks causing social unrest.
“Things were already hard and this will make it even tougher,” says Jessy Andrade, 32, a mother of four shopping at Jumbo. She pointed to the meagre contents of her bag before going back to her occupation as a street-corner currency trader.
Some staples – flour, beans, rice, palm oil, sugar, powdered milk and soap – will be exempt from the tariffs. But not other vegetables and fruit, imported from Europe or neighbours such as Namibia, which will carry a new top rate of 50 percent duty. The government believes these can be produced at home and the tariff barrier is designed to encourage this.
Oil output has soared since 2002, but the south-west African nation’s agriculture and industry are relatively undeveloped. They make up 17 percent of gross domestic product, compared with oil’s 41 percent.
“The tariff increases will create inflation, at least in the short term, and affect consumption, especially for those with low incomes,” says Salim Valimamade, an economist at Luanda’s Catholic University.
Angolan officials, however, play down the inflation risk.
“We can think about the possibility of a rise in prices of the products for which duties were increased, but generalised inflation, which affects the essential goods which are exempt, we cannot see,” says Garcia Afonso, the head of trade and commerce at Angola’s Customs Service.
Inflation has fallen over the past decade from 70 per cent to 7.7 per cent at the end of last year. But shopkeepers say the import tariff hikes have forced them to hike prices by up to 20 percent.
Mr Dos Santos estimated last year that 36 percent of Angola’s 18 million people live in poverty, but dismissed the risk of income inequalities causing social upheaval, saying most people supported the government’s policies.
The UN High Commissioner for Human Rights, Navi Pillay, had a different view, urging Mr Dos Santos to reduce the inequality gap and warning about the high cost of living.
Nowhere is that gap more visible than in Luanda’s Ilha do Cabo, a peninsula that separates Luanda Bay from the Atlantic. Ritzy beach bars and luxury condominiums that cater to expats and rich Angolans are mixed amid more humble eateries where poorer Luandans enjoy a cold Cuca beer and grilled fish.
Sandra Oliveira is one of a dozen women grilling cuttlefish on small barbecues in a lot they have occupied for decades. Their clients sit on shabby plastic chairs placed directly on the dusty ground.
“I can sell a beer for $1 and a plate of cuttlefish for $10, but the margins are tight, and pushing our costs up will end up pushing us out of here and take away our livelihoods,” she says.
“Which business do you think the higher price will hit? My little barbecue or the expensive places?”
On the Atlantic side of the peninsula, upmarket restaurants with names such as Caribe, Coconuts and Chill Out attract a wealthier clientele. Here, a Cuca can easily cost $4 and a meal for less than $50 is deemed a bargain.
“This is already a madly expensive city for everyone. A weekly trip to the supermarket for two already takes $500,” says a British oil worker outside one of the Ilha restaurants.
While authorities in Luanda have cracked down on informal traders, an oil-driven construction bonanza in the city has seen modern European-style superstores, such as Jumbo and the Kero chain, springing up.
“I only come to these shops when I cannot find basic items at the informal markets,” money changer Andrade says, adding she earns about $15 on “good days”, which she says are becoming rare.
When the government knocked down the historic Kinaxixi market in 2008 and then two years later did the same to Roque Santeiro, Africa’s biggest open-air market, it put thousands of vendors onto the streets.
Since then it has tried to corral them into newly built markets, often using rough tactics and confiscation of goods, but most say the new locations are too far away for customers.
Prices at markets in informal settlements such as Sambizanga, outside Luanda, are sometimes even higher than in shiny new supermarkets.
Meanwhile, the new supermarkets, with their huge cooled areas, spacious car parks and conspicuous security guards, are drawing expatriates and Angolans lucky enough to work in oil, banking or construction.
The average national salary in 2010, the latest year for which official data is available, was around $260 per month. In the finance sector the average was 10 times higher and in the oil business over 20 times higher, or around $5,400.
“Portuguese, Chinese, South Africans, they shop here but more and more Angolans too,” says a worker at a Kero shop, asking not to be named. “You can see from their cars and clothes that they are the ones doing well.”
At the other end of the scale, the Pombinha market in the Sambizanga slum near central Luanda is a maze of muddy alleys crammed with women selling goods. Most products here are also imported, the only local ones visible are baskets and bananas.
“Prices are only just lower here than in the supermarkets, sometimes even higher since we buy from middlemen while the big shops buy in bulk from abroad,” says vendor Esperanca Gil. “But people come here as they don’t have money to shop monthly or weekly, so they have to buy day-by-day.”
Customs officer Garcia Afonso says the new tariff table actually increased the number of goods with zero or low duties from the one in place since 2007. He says the tariffs should not be seen as protectionism, but as an incentive for local firms to be able to compete when Angola joins the Southern African Development Community’s free trade area in 2017, an accession that has already been delayed.
But economist Valimamade says many challenges remain for Angola to deliver on its farming and industrial potential. “The business environment has to improve… It is being done but the government itself says efficiency on big projects isn’t satisfactory.”
Critics say a small group of business owners with ties to the government may benefit most from the tariff hikes
“The protection must have a set time frame, or we aren’t protecting those who need it, only creating rents to line the pockets of a minority of so-called entrepreneurs at the cost of the majority,” economist Carlos Rosado de Carvalho said in an editorial in the business paper Expansao.
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African Union engages talks with stakeholders over the Continental Free Trade Area
The Senior Officials Session of the extraordinary Session of African Union (AU) Conference Ministers of Trade and Industry kicked off 23 April 2014. During four days, the Member States of the African Union, the Regional Economic Communities (RECs), the United Nations Economic Commission for Africa (UNECA) and the African Regional business organizations will be discussing some pertinent issues which impact on Africa’s continental integration agenda.
The main objective of this meeting is to implement the mandate given by the High Level African Trade Committee (HATC) of Heads of State and Government to discuss and provide sound recommendations on the Work Programme, Negotiating Modalities and Principles towards the 2015 launching of the Continental Free Trade Area (CFTA) negotiations as well as to consider reports on Africa’s response and implications of the WTO Bali Agreement. The meeting will also considers assessment studies on Africa’s Growth and Opportunity Act (AGOA) and the state of play of negotiations of Economic Partnership Agreements (EPAs).
“As we proceed to build the CFTA let us put African people at the centre of this agenda, I mean this in the broadest sense especially, with the involvement of constituencies such as civil society, private sector constituents, women and youth organizations inter alia. We are building the architecture for the future of the continent and not the past”, the Director for Trade and Industry, Mrs. Treasure Maphanga highlighted in her speech. She noted that intra-regional trade flows among African countries are lower than in other regions, averaging 10-12% compared to 71% in Europe, 52 in Asia and 52 in intra-North America among others. But she underscored the fact that, about 60 to 70% of African families are sustained by the informal economy which could explain why the figures of intra-African trade are low. In this regard, Mme Maphanga stressed that unity is what makes Africa stronger and will present greater market opportunities for the private sector, both domestic and international firms. “The challenge before us is to ensure that all of us gathered here become the first champions and commit ourselves by the end of this meeting to play a key role in mobilizing support at the national and regional levels for the AU agenda on the CFTA and African market integration. If we do not believe in our own agenda, how can we be custodians that are accountable for the enormous resources that go into organizing such gatherings?” she said.
In his opening remarks, the chair Mr. Abel Guetimbaye Mbaïkombe, Deputy Secretary General for Trade and Industry in Chad, reminded the participants that the meeting also aims at preparing working documents to be submitted to the ministerial session in order to get orientations and paths to follow throughout the different negotiations phases. “I would therefore beg your insightfulness, your sense of responsibility and seriousness so that our meeting draws meaningful conclusion and lives up to our expectations. This is why we must seize the opportunity to exchange, share and evaluate the outcomes of the different studies related to the agenda because the economic history teaches us that in order to take better advantage of the multilateral cooperation, we have to first consolidate the internal acquis, to forge the sense of solidarity by building a united block to win regional and world markets”, he emphasized.
The meeting was prepared on the basis of the decisions taken by the last summit whereby the High Level African Trade Committee directed Ministers of Trade to hold an Extraordinary Session. This ministerial session will be held from 27 to 28 April 2014 at the AU Headquarters in Addis Ababa, Ethiopia.
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For Africa, good policies bring good prospects
Once again, the latest review of growth prospects for sub-Saharan Africa shows that the region’s economy is in strong health. Growth in the region is set to pick up to 5½ percent in 2014 compared to 4.9 percent last year (see Chart 1). My view is that this growth momentum will continue over the medium term if countries rise to new challenges and manage their economies as dexterously as they have over the past decade or so.
So what explains this continued strong growth performance? Apart from good macroeconomic policies in the region, the growth has been underpinned by investment in infrastructure, mining, and strong agricultural output. And favorable global tailwinds – high demand for commodities and low interest rates – have played a major supporting role.
That said, I do worry about the global shifts that are taking place and what they mean for the region. Unless countries navigate the new environment adroitly, the current growth momentum will slow down considerably.
So what are the downside risks to the otherwise favorable outlook? Let me mention four.
Export demand
First, growth in emerging markets could prove less supportive. If growth in these economies slows down considerably, then export demand will decline, especially for some base metals such as copper and iron ore. Countries such as the Democratic Republic of Congo,Liberia, and Zambia would be particularly hit. At the same time, tighter financial conditions in China could reduce the appetite for Chinese companies investing abroad. China has been a major source of foreign direct investment and infrastructure financing for Africa.
Second, as advanced economies unwind their highly accommodative monetary policies, global financial conditions will become tighter and countries in sub-Saharan Africa could experience a hike in interest rates and a slowdown, or even a reversal, of private capital flows.
But the risks to the growth momentum are not all external.
Security conditions remain difficult in some countries. The conflicts in the Central African Republic and South Sudan are exacting a heavy human and economic toll. At the same time, they are having negative spillover effects for the neighboring countries in terms of lower trade flows and higher security outlays.
I also worry about high fiscal deficits in some countries. Four years after the global crisis, fiscal policy has remained on an expansionary footing despite a recovery in both growth and revenue. I’ll go back to this theme shortly.
Warning signs
The issue of rising fiscal imbalances is worth dwelling on. A number of economic observers have asked the question: are countries heading back to the bad old days of rapid debt accumulation that may need to be forgiven down the line? Are these fears well grounded?
We all applauded when many countries in sub-Saharan Africa in 2009 were able to mitigate the worst effects of the global crisis by actively deploying countercyclical fiscal policy, or at least avoiding fiscal procyclicality. When revenue tanked in the wake of decelerating growth, many countries kept spending up and hence maintained growth. This was quite remarkable as, in all previous global recessions, countries had no option but to do the opposite: cut spending as revenue declined, and hence deepen the impact of the recession.
One concern now is that, five years on, many countries continue to show relatively high deficits despite the fact that growth and revenue have recovered rapidly. To illustrate the point, in the years preceding the crisis (that is, in 2004–08), the region saw a fiscal surplus that averaged about 2 percent of GDP (see Chart 2). Between 2010 and 2013, the average fiscal deficit amounts to some 3 percent of GDP, a deterioration of 5 percentage points compared with pre-crisis levels.
So, what explains the lack of adjustment despite the recovery in growth and revenue? Why has spending kept on growing so fast?
Higher-quality spending
In many cases, increased spending is the result of boosts to public investment and pro-poor spending. And this is exactly what we and others have often been arguing for. After all, the Heavily Indebted Poor Countries Initiative was precisely designed to give countries the necessary fiscal space to undertake socially useful spending in health and education, and rebuild decaying public infrastructure. And, over the long run, higher investment in human capital and infrastructure should raise potential growth sufficiently to pay off the debt, assuming that the quality of spending is high.
The solution to every protruding nail is not to hit it down with a sledgehammer. So deficits of the order of 2–3 percent of GDP are probably not a bad thing, and will not leading to rising debt burdens given that GDP growth rates are much higher.
And it is true that overall debt levels are not particularly high as of now, and they have been quite stable over the past five years. Overall, public debt-to-GDP ratios have continued to decline, from a regional average of 37 percent in 2004–08 to some 33 percent in 2010–13 (see Chart 3). Debt burdens have been kept in check by relatively high GDP growth rates.
I am concerned about those countries where fiscal policy has continued to weaken and debt levels have risen rapidly. Particularly vulnerable are countries that depend heavily on portfolio flows to finance their deficits. It stands to reason therefore that to avoid the debilitating effects of a new shock on growth, these countries need to put their fiscal house in order.
Preparing for future shocks
We must first take lessons from the past. Sub-Saharan Africa was able to recover quickly from the effects of the global crisis because most countries started from an already strong position. To utilize perhaps an overused term, they had “fiscal buffers.” They had lowered their deficits and slashed their debt-to-GDP ratios in the preceding years. Now is the time to make hay while the sun shines.
Countries should aim to increase their resilience to shocks, notably by boosting their revenue base and avoiding excessive spending growth. Countries with large fiscal deficits and high or rapidly rising debt levels should intensify efforts to bring public finances on a more sustainable path. Fast-growing countries should take advantage of the growth momentum to strengthen their fiscal balances. And all countries should strive to improve the quality and efficiency of public spending.
Antoinette Monsio Sayeh is Director of the IMF’s African Department.
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Fix the broken BRICS
They did well when China was driving commodities demand and finance was flowing into emerging markets. All that’s over.
Since Jim O’Neill coined the phrase BRIC back in 2001, the grouping has come a long way, from being formalised in 2009 to the incorporation of South Africa.
Today, BRICS (Brazil, Russia, India, China and South Africa) is a formidable economic and political force to reckon with. The high economic growth of BRICS economies and the natural demographic dividend of the BRICS are signs that a structural edge relative to the rest of the world rests with the BRICS.
The BRICS countries collectively represent almost 3 billion people (43 per cent of world population) with a combined nominal GDP of $14.8 trillion (about a quarter of global income), 17 per cent of world trade, and an estimated $4 trillion in total foreign reserves.
But the BRICS grouping seems to have lost steam along the way. While a long-term potential to return to a stable high-growth trajectory is not ruled out, as of now, there is sufficient reason to worry about the five-nation cluster.
Downward trend
Compared to the developed West, the BRICS economies have been performing badly in the last year or so. Even as the developed world seems to be on a slow path to recovery and BRICS are still growing faster than the West, the BRICS graph is on a downward trend. China’s growth rate fell below 8 per cent in 2013 on the back of slowing exports.
India’s growth scenario is bleak, with the government scrambling to make it to a moderate 5 per cent, while growth in Brazil fell from a high of 6 per cent to 2.5 per cent recently. South Africa and Russia registered growth rates of 1.9 per cent and 1.3 per cent respectively during 2013.
Three of the BRICS economies – Brazil, India and South Africa – are now part of what is known as the ‘Fragile Five’ that share macroeconomic weaknesses such as large current account and fiscal deficits, and rising inflation coupled with political uncertainty.
At home, with general elections around the corner and anti-incumbency at an all-time high, investor confidence has hit rock bottom, economic growth has fallen, inflation has remained stubbornly above comfort levels and interest rates have been rising continuously.
Unsustainable growth
China, on its part, is on an unsustainable growth path as debt fuelled, export-led expansion has resulted in huge public debt and an unhealthy dependence on world demand.
And now that Russia is embroiled with Ukraine in a serious diplomatic tussle, impending EU and US sanctions might hurt its energy sector and the economy at large.
Brazil’s mineral extraction industry, on the other hand, is disproportionately dependent on external demand and thus its growth is volatile. Truth is, the BRICS economies somehow found themselves in a comfortable arrangement during their heyday, where high Chinese growth and consumption fuelled a huge demand for commodities. Major commodity exporters such as Russia (energy), Brazil (minerals, agricultural products) and South Africa (raw materials) tapped into this demand to ride high on the back of primary-exports led growth. Chinese import from BRICS partners rose manifold over the years and, while it is a sign of intra-BRICS trade going up, it also signals profound China-centrism and China-dependence which, as is manifest already, is a flawed path to growth. The boom years eventually led to the end of the commodity cycle, as it were, leaving other BRICS economies in the lurch.
Second, it seems that the good performance of BRICS was a by product of the West’s relative underperformance. For instance, after years of continued investor faith in the developing economies, all it took for investors to flock back to US markets was the Fed announcement that the Quantitative Easing would be tapered.
As for the real economy, recent manufacturing data from the EU and the UK showed not just a growth in recovery in the region but a parallel slowdown in China, where output fell to a seven-month low. French and German manufacturing output, on the other hand, registered strong growth, suggesting these economies are on the road to recovery, however patchy.
India’s industrial sector, however, is battling a horrible slowdown. Its gross fixed capital formation growth of 0.7 per cent in April-September 2013 coupled, with an abysmally low IIP (index of industrial production) growth of 0.1 per cent in January 2014, after registering a 20-year low in average IIP growth as of March 2013, shows the economy has almost come to grinding halt.
Change of strategy
The premise on which BRICS was instituted was that the group would be positioned as a viable alternative to the West in an increasingly multi-polar world, less dominated by the West.
But while there has been some geopolitical solidarity in the recent past amongst BRICS countries, the set must continue to perform well on the economic front to continue to be relevant.
Already, newer formations like MINT (Mexico, Indonesia, Nigeria, Turkey) seem to be catching investor, academic and policymaker attention, while the Philippines is being keenly watched for its curiously high growth rates.
There is a need to fix the BRICS, by altering growth strategies, reducing external dependence, securing domestic demand and investments, providing jobs to the unemployed, and aiming at lowering untenable inequality.
The writers are with Observer Research Foundation
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Top 10 economies best set up for trade
“We’re back in business” – these are the words of Roberto Azevêdo, the freshly elected director general of the World Trade Organization, uttered in December 2013. He was referring to the adoption in extremis of the Bali Package after an intense, exhausting and suspenseful WTO Ministerial. The package includes the Trade Facilitation Agreement, which aims to simplify and harmonize international trade procedures.
This success – the first in almost 20 years of the WTO – is good news for international trade, the convalescent global economy, and for global welfare. After much debate, the connection between trade, growth and development is now well established. The agreement is also a victory for international governance after repeated failures of the system to come together on a number of global issues, and at a time of extreme geopolitical tensions.
In a difficult global context, trade remains a vector of prosperity, opportunity and peace, as has been the case throughout history. “Peace is the natural effect of trade. Two nations who traffic with each other become reciprocally dependent,” wrote Montesquieu in his influential The Spirit of Laws in 1748.
Yet, many and significant trade barriers still prevent countries, particularly the poorest, from reaping the full gains of trade. The Global Enabling Trade Report 2014 features an index that assesses the capacity of countries to facilitate trade, using 56 indicators distributed in seven categories, or “pillars”: 1) domestic market access; 2) foreign market access; 3) border administration; 4) transport infrastructure; 5) transport services; 6) ICT infrastructure; and 7) the operating environment.
Here we look at the 10 best performers in the latest Enabling Trade Index, which ranks 138 economies in order of their performance:
1. Singapore tops the index for the fourth edition in a row, as a result of an outstanding performance across the board. The city state leads two of the seven pillars of the index, features in the top five of three more, and ranks eighth and 13th in the remaining two. A leading trading platform and a champion of government efficiency, Singapore established the world’s first national single window for trade in 1989.
2. Hong Kong ranked second, and is arguably the world’s most open market: it does not levy any customs tariff on imports or exports. There is also no tariff quota or surcharge, no value-added taxes or general-services taxes. Hong Kong’s exporters do not enjoy a similar level of openness abroad, facing some of the highest tariffs in the world. Hong Kong offers the world’s friendliest operating environment for traders and businesses and boasts world-class transport infrastructure, combined with excellent logistics and transport services.
3. Netherlands features in the top 10 of five pillars. The country boasts the best port infrastructure in the world. The transparency and efficiency of its border administration are excellent, even though customs procedures are, on average, costly. Its overall performance on the index is weakened by its market access.
4. New Zealand’s border administration is among the world’s most efficient and transparent. While corruption gangrenes public administrations around the world, it is essentially absent in New Zealand. Low tariffs and an easy-to-navigate tariff regime provide favourable access conditions to the market. The country’s domestic transport infrastructure could be improved and international air and maritime connectivity is, understandably, limited.
5. Finland ranks fifth, owing to the excellence of its border administration and an operating environment among the most conducive in the world to trade. Finland is also one of the most digitally connected societies in the world. On a less positive note, the quality of transport and logistic infrastructure and services could be enhanced.
6. The United Kingdom ranks sixth, thanks to its world-class border administration and infrastructure. The country ranks second in terms of the availability and use of ICTs and first in terms of internet use for business-to-consumer transactions. A strong protection of property rights (fourth) and an efficient and transparent judicial system make the UK one of the best operating environments in the world. Just as with other advanced economies, however, market access remains a weak spot.
7. Switzerland is another example of a small economy that has built its prosperity on exporting high quality, added-value “Swiss made” products to the four corners of the world. This exporting machine shipped $220 billion worth of goods in 2012 – almost as much as Brazil. Despite being landlocked, Switzerland boasts top-notch transport infrastructure, logistics services and connectivity, as well as extremely efficient border administration. Switzerland’s performance is tainted by the complexity of its tariff schedule, composed of nearly 7,000 distinct tariffs – an unenviable world record.
8. Chile has improved its trade policy, gaining great access to foreign markets and facilitating entrance to the domestic one. Infrastructure remains a weak spot, with the country ranking 64th in terms of availability and use of transport infrastructure. Border administration is efficient and transparent, while Chile’s operating environment benefits from good openness to foreign participation. Protection of property, in particular intellectual property, could be improved.
9. Sweden comes in ninth, benefiting from outstanding ICTs (first, worldwide) and good border administration and favourable operating environment. Logistic and transport services are also well-developed, while the country has room for improvement in terms of transport and hard infrastructure. In line with other EU members, market access (both foreign and domestic) is a weak spot.
10. Germany is 10th. The country’s performance is based on excellent transport infrastructure (fifth) and logistics (third), efficient border administration and an operating environment characterized by strong protection of property rights and high levels of accountability and efficiency within the public administration. Foreign direct investment and hiring of foreign labour remain constrained by restrictive regulations and, as with other EU countries, Germany suffers from restricted access to its domestic market.
Thierry Geiger is Associate Director and Economist for the Global Competitiveness and Benchmarking Network at the World Economic Forum.
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Call for probe into ‘excessive’ charges for African money transfers
Africans are effectively paying a ‘super tax’ on money transfer fees that are more than double the global average, according to a report by the Overseas Development Institute (ODI).
The ODI, a UK-based think tank, said cutting the costs of money transfers (remittances) to Africa would enable the continent’s diaspora “to make a bigger contribution to the region’s development and strengthen self-reliance”.
The ODI has called for an investigation of global money transfer operators (MTOs) by anti-trust bodies in the EU and the US to identify areas “in which market concentration and commercial practices are artificially inflating charges”.
Regulatory reform in Africa is also needed to revoke ‘exclusivity agreements’ between MTOs, banks and agents and promote the use of micro-finance institutions and post offices as remittance pay-out agencies. Governments and MTOs should work to promote mobile banking as a strategy to support the development of more inclusive financial systems, the ODI added.
In its report, the ODI said: “Remittances to Africa are rising. In 2013, remittances to the region were valued at $32 billion or around 2% of gross domestic product (GDP). Projections to 2016 suggest that remittances could rise to more than $41bn. With aid set to stagnate, remittances are set to emerge as an increasingly important source of external finance.”
The report added: “Charges on remittances to Africa are well above global average levels. Migrants sending $200 home can expect to pay 12% in charges, which is almost double the global average. While the governments of the G8 and G20 groups of nations have pledged to reduce charges to 5%, there is no evidence of any decline in the fees incurred by Africa’s diaspora.”
Reducing charges to world average levels and the 5% G8 target would increase transfers by $1.8bn annually, the ODI said.
According to the report, ‘remittance corridors’ within Africa itself have “some of the highest charge structures in the world”. “Migrant workers from Mozambique sending money home from South Africa or Ghanaians remitting money from Nigeria, can face charges well in excess of 20%.”
The “highly opaque nature” of remittance markets and the complex range of products make it difficult to find out why charges are so high, the ODI said. “Much of the relevant commercial information needed to establish detailed structures is unavailable.”
However, the report said factors that “combine to drive up charges” include limited competition, evidence of ‘exclusivity agreements’ between MTOs, agents and banks (“which restrict competition”), financial exclusion and poor regulation.
The report added: “Few Africans have access to formal accounts – which limits their choice of pay-out providers and most governments require payments to take place through banks, most of which combine high costs with limited reach and low efficiency.”
According to the ODI the UK, as one of the largest sources of remittance transfers to Africa, contributes to the loss of finance through high charges. Some $5bn was remitted to Africa from the UK in 2012. “Reducing average UK remittance costs to the global average would increase transfers by $85m, rising to $22.5m if charges were lowered to 5%,” the report said. “The bulk of these losses can be traced to large MTOs in the UK. On a conservative estimate, Western Union and MoneyGram secure $49m in payments through charges above world market averages.”
The ODI said the potential for development gains through lower remittance charges can be illustrated by studying current aid flows. For comparative purposes, the ODI used a “mid-range” figure between its ‘upper-bound’ and ‘lower-bound estimates’ of $1.8bn. “This is equivalent to half of the aid provided to Africa by the UK, the region’s third largest bilateral donor, or some 40% of remittances to Africa through the World Bank’s International Development Association – the largest source of multilateral aid for Africa.”
World Bank figures indicate that between 2007 and 2012 remittances to Africa grew by 34.5% and reached a total amount of $60.4bn in 2012. The same year, for the first time, remittances became the largest external financial source to Africa, ahead of foreign direct investment (FDI) and official development assistance (ODA), with 35% of global remittances to Africa originating in the EU.
In 2011 the World Bank, with support from the African Institute for Remittances Project, launched the ‘Send Money Africa’ remittance-price database – to monitor the cost of sending money to Africa. According to the bank, 30 million African migrants sent close to $60bn in remittances to 120 million recipients in 2012 alone. The bank said South Africa, Tanzania, and Ghana are the most expensive sending countries in Africa, with prices averaging 20.7%, 19.7% and 19% respectively.
The OECD’s ‘African Economic Outlook 2012’ report said countries such as Nigeria, Tunisia, Morocco, Senegal, Kenya, Swaziland and Lesotho rely on remittances as the largest external inflow. Remittances, ODA and FDI contributed to the “vast financial resources” required for improvements to schools, hospitals, public services and roads.
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The trend towards increased regionalism could be reversed, new WTO research suggests
A new attempt to paint a picture of the world economy in 2035 shows that the share of trade within major regional trade agreements might decline.
Under various scenarios, including the possibility that countries will form large blocs (“mega-regionals”), trade among and outside these areas would be dominant, according to a WTO working paper released on 4 April 2014. And that would suggest that trade cooperation at the multilateral level remains crucial.
The paper also finds that a dynamic economic and open trade environment will be needed for new players to continue to emerge in the world economy, for South-South trade to intensify and for countries to diversify into skill-intensive activities.
The paper – by Lionel Fontagné of the University Paris 1 and CEPII (Centre d’Études Prospectives et d’Informations Internationales, the French research centre in international economics), Jean Fouré of CEPII and Alexander Keck of the WTO – says this means that the stakes for developing countries are particularly high.
Technological progress is likely to have the biggest impact, it says. Population changes will also play a part in future economic trends. For some countries, improving workers’ skills will be crucial; for others labour shortages may be addressed through migration, the paper says. And it adds that several developing countries would benefit from increased capital mobility; others will only diversify into more dynamic sectors when the costs of trade are further reduced.
The paper, “Simulating world trade in the decades ahead: driving forces and policy Implications”, uses the analytical techniques of linking a macroeconomic growth model and a sectoral computable general equilibrium (CGE) framework in order to project the world economy forward to 2035. It assesses to what extent current trends in trade are expected to continue and to what extent individual policy areas may matter for specific countries and regions.
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Appeals announced by China in rare earths dispute and by US in products from China dispute
China announced to the WTO Secretariat on 17 April 2014 its decision to appeal certain issues of law and legal interpretation in the panel report in the case “China – Measures related to the exportation of Rare Earths, Tungsten and Molybdenum” (WT/DS431). The panel report was appealed by the United States in a notification dated 8 April 2014.
The WTO Secretariat also received on 17 April 2014 a communication by the United States notifying its decision toappeal to the Appellate Body certain issues of law covered in the panel report in the case “United States – Countervailing and Anti-Dumping Measures on Certain Products from China” (WT/DS449/R) and certain legal interpretations developed by the panel in this dispute. The panel report was appealed by China on 8 April 2014.
Further information is available in documents WT/DS449/7 and WT/DS431/10.
Parties to a dispute can appeal a panel’s ruling. Appeals have to be based on points of law, such as legal interpretation – they cannot re-open factual findings made by the panel. Each appeal is heard by three members of a permanent seven-member Appellate Body comprising persons of recognized authority and unaffiliated with any government. The Appellate Body membership broadly represents the geographic range of WTO membership, with each member appointed for a fixed term. Generally, the Appellate Body has up to 3 months to conclude its report.
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Experts to look into integrating Aid for Trade into global markets
The Economic Commission for Africa will host an inter-regional forum of over 60 experts from around the world to share experiences and views on how Aid for Trade can best facilitate the integration of developing countries into the global market. The meeting will take place from 22 to 25 April, in Tunisia’s capital, Tunis.
The forum is the culmination of a 2-year project involving the four UN Regional Economic Commissions, Economic Commission for Europe, Economic Commission for Latin America and the Caribbean, the Economic Commission for Asia and the Pacific and the Economic Commission for Western Asia.
Each regional commission has a specific Aid for Trade focus. In Africa, the project has concentrated on developing a set of guidelines for the formulation of bankable Aid for Trade projects, as well as strengthening the capacities of selected Programme for Infrastructure Development in Africa (PIDA) project developers in marketing their project proposals and unpacking its trade component.
The attending stakeholders have been active in the various activities carried out in the framework of the Aid for Trade project. Moreover, it will feature the participation of key institutions and development partners, including the World Trade Organization (WTO), the African Development Bank, the World Bank, European Union, Regional Economic Communities and corridor management organizations.
The forum will also debate the progress achieved by developing countries, the common challenges, and the way forward in the Aid for Trade Agenda; and look at ways in which countries can formulate bankable Aid for Trade projects and promote access to dedicated resources.
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EU farmers demand stricter disease checks on South Africa citrus
European Union farm lobby Copa-Cogeca called on the 28-nation bloc to tighten controls on citrus imports from South Africa to prevent the introduction of the plant disease black spot.
The EU should widen proposed control measures to include all South African citrus, including fruit for processing, Copa-Cogeca Secretary General Pekka Pesonen wrote in a letter to EU Health Commissioner Tonio Borg. Imports from zones with black spot disease should be automatically banned the moment six contaminated cargoes are intercepted, Pesonen said.
South Africa is the biggest supplier of citrus fruit to the EU from outside the bloc, shipping 471.5 million euros ($651.3 million) of oranges, grapefruits, mandarins and lemons last year, Eurostat data show. The EU intercepted 34 shipments from the country last year that contained black spot disease, the Europhyt database shows.
“The high number of interceptions in 2013 demonstrates that South Africa’s competent authorities are incapable of carrying out effective phytosanitary controls,” Pekonen wrote. “Copa-Cogeca is therefore highly concerned that the proposed control system will once again fail to function properly.”
A March proposal by the EU to inspect fruit for the fresh produce market at packaging stations provides a derogation for fruit that’s earmarked for processing, which accounts for 10 percent of imports, according to Copa-Cogeca.
Copa-Cogeca “regrets” the checks don’t apply for processing fruit, and said the ban on imports upon detection of a sixth contaminated batch should apply to both imports for processing as well as the fresh produce market, Pekonen wrote.
Mandarins, Lemons
The EU imported 433,074 metric tons of oranges from South Africa last year, with a value of 286 million euros, as well as 104,429 tons of grapefruit, 80,934 tons of mandarins and 25,112 tons of lemons, Eurostat data show.
Spain, the EU’s largest citrus grower, produced 3.68 million tons of oranges last year, as well as 2.02 million tons of mandarins, 767,200 tons of lemons and 62,700 tons of grapefruit, the country’s agriculture ministry estimates.
Black spot spreading into the EU through trade is considered “moderately likely,” increasing to “likely” for imported fruit with leaves, the European Food Safety Authority wrote in a February report.
EU citrus growers in November demanded the bloc take immediate “drastic measures” to ward off black spot, such as a ban on imports of citrus fruit from South Africa, according to Spanish young farmers’ association Asaja.
Trade Measures
South African citrus growers last year halted most exports to the EU, their biggest market, as of Sept. 18 in a bid to head off trade measures.
A call to Justin Chadwick, chief executive officer of the Citrus Growers Association of South Africa, wasn’t immediately answered. The assocation said in February it was preparing to supply citrus fruit in total compliance with EU plant health regulations.
Black spot disease is caused by the fungus guignardia citricarpa Kiely and results in leaf spotting and fruit blemishes, with lemons particularly susceptible, according to EFSA. The regulator has said there are no reports of eradication once the fungus is established in an area.
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Ghana to be guided by collective position of ECOWAS on EPA
Mr Haruna Iddrisu, Minister of Trade and Industry, on Thursday said Ghana would be guided by the collective position of the Economic Community of West African States on the Economic Partnership Agreement (EPA).
The EPA agreement between the bloc and the European Union must be signed before October 1.
He said the West Africa-European Union (EU) EPA would be well managed to ensure inclusive economic growth and development for Ghana.
Mr Iddrisu was speaking at a Public forum on the Economic Partnership Agreement with the European Union, organised by the Ministry of Trade and Industry in Accra.
The meeting was to provide avenue for stakeholders including religious leaders, civil society organisations, non-governmental organisations as well as those in academia to share their views and opinion which would inform governments position moving forward.
Mr Iddrisu recalled that over the last three decades the African, Caribbean and Pacific (ACP) Group of countries enjoyed special trading relationships with the EU under various Lome Conventions, which granted ACP countries non-reciprocal preferential access to the EU market.
He said the regional EPA negotiations proceeded at a slow pace and by late 2007 became apparent that a regional EPA would not be concluded by December 2007 deadline.
He said in such an event, Non-Least Developing Countries such as Ghana would be forced to export to the EU market under the less favourable Generalised System of Preferences (GSP) from January 2008, which would add up to 25 per cent tariff rates on exports, thus making them non-competitive in the EU market.
Mr Iddrisu also noted that to prevent that scenario, Ghana and the EU concluded an Interim EPA (IEPA) in December 2007.
He said the regional EPA would supersede the IEPA when signed.
He said the EU out of frustration over the lack of sufficient progress in many of the regional EPA negotiations initiated a process to amend its market access regulation, which would deny Duty-free and Quota-free market to ACP countries and regions which would not have signed EPA or IEPA by October.
He said with the renewed participatory negotiations approach by the Authority of Heads of States and Governments of ECOWAS at their meeting on October 25, 2013 in Dakar, reached a consensus over the resumptions of negotiations with EU with the view to concluding the Regional Agreement as soon as possible.
He stated that subsequent meeting of the Ministerial Monitoring Committee meeting on the West Africa EPA made enormous progress towards the conclusion on the EU-ECOWAS EPA.
Mr Iddrisu noted that in the new arrangement, market access offer of 75 per cent under the West Africa EPA with a traditional period of 20 years is better than Ghanas IEPA with the EU which offered 80 per cent for market access with a traditional period of 15 years.
He said other clauses in the West Africa EPA including rules of origin, Most Favoured Nation, Non-Execution Clause and Agricultural subsidies are more favourable than what is contained in the Ghana IEPA.
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Financial services sector growth to provide great opportunity
Retail banking in Sub-Saharan Africa (SSA) is projected to grow at a compound annual rate of 15 per cent between now and 2020.
Sumesh Rahavendra of DHL Express SSA says that the continent’s growing economy, increased political stability and willingness to trade with international partners presents a significant opportunity for financial service entities to expand their customer base and derive revenue from traditional banking products.
DHL sees a robust growth from their financial services customers in Africa and while the banking sector continues to play a significant role in economic development for the continent, the sector also fueled DHL’s expansion into Africa in 1978 when global banks needed to get documentation to Africa.
Rahavendra says that the retail banking, in particular, is a key focus for both international and regional banks, and requires these entities to extend their footprint and make financial services products available in regions previously unexplored.
According to KPMG’s 2014 Financial Services in Africa report, retail banking in Sub-Saharan Africa (SSA) is projected to grow at a compound annual rate of 15 per cent between now and 2020, bringing the sector’s contribution to the continent’s collective GDP to 19 per cent from an estimated 11 per cent in 2009.
Opportunities for financial service companies
According to Rahavendra, opportunities for financial service companies moving into Africa include trade finance for corporate customers and retail banking for private individuals, which appear to be the most immediate needs in the region.
“Retail banking in particular is a key opportunity, as the demand for formal banking services that enable the provision of credit and loans for vehicles and homes are growing. This can be attributed to the burgeoning middle class in Africa,which according to the African Development Bank, has tripled over the past three decades to 355 million or more than 34 per cent of the continent’s population. Whilst interest rates remain high in most countries across the continent, having access to structured banking products, and credit in particular, enables economic growth,” says Rahavendra.
“There is also a trend where multinational banking institutions partner with local entities who are familiar with the region, which allows them to meet the needs of their customers across diverse regions. Similarly, having access to partners that are familiar with the continent is the key to success for many banks expanding into the region. It is necessary to partner with suppliers that have the security, flexibility and reliability to offer quality and reliable service, despite the many challenges that the region may present.”
“Being open to opportunities in historically unattractive countries is also key to success in Africa. Whilst perceived risks may be high, the rewards are equally so since Africans are discerning consumers and readily pay for quality products and services.”
Challenges for financial service companies
Rahavendra explains that despite the many opportunities, financial service providers are also likely to experience challenges in the region. “Customs clearance can present challenges in some markets, with varying regulations and tariffs that may impact the movement of physical goods such as IT equipment, marketing material and bank cards. Understanding these regulations, anticipating the impact of customs clearance and the related customs charges such as VAT and duties will assist the sometimes difficult processes.”
“Despite new technology to enable document transmission, real document shipment numbers within the region continue to grow year-on-year. The financial services industry therefore continues to make a significant contribution to our overall shipment volumes, and investment in innovative solutions for this sector remains a priority for DHL Express across Sub-Saharan Africa and across the world,” concludes Rahavendra.