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Row about chicken imports rages on
Consumers could face further increases in chicken prices in the next two months, which is when the government is expected to take a decision on anti-dumping duties on frozen bone-in chicken portions from certain European countries.
According to BusinessDay, import duties on various chicken products were increased in September last year in an attempt to halt cheap imports from Brazil, in particular, which local producers said were causing financial and job losses.
The higher duties have contributed to retail prices of 2kg bags of individually quick-frozen chicken portions, excluding promotional items, rising by between 15 per cent and 30 per cent in the past six months, according to David Wolpert, CEO of the Association of Meat Importers and Exporters.
Frozen chicken represents more than 70 per cent of South Africa’s poultry production and sales.
Duties on bone-in chicken portions were increased from a specific duty of 220c/kg (roughly 17 per cent) to an ad valorem duty of 37 per cent. An analysis of import data indicates that imports from Brazil declined significantly between October last year and January, whereas imports from some European markets, which are not subject to import duties, have increased.
Total imports of bone-in chicken portions in the 12 months to the end of January have declined 10.42 per cent compared with the same period ending January 2013, according to detailed Association of Meat Importers and Exporters statistics.
The decline is attributed to higher tariffs and a weaker currency. “The higher duties, however, affected only non-European Union (EU) imports and EU imports are still running at relatively brisk volumes,” said Mr Wolpert.
This may end if the South African Poultry Association is successful in its application to have anti-dumping duties imposed on frozen bone-in chicken portions from Germany, the UK and the Netherlands.
The International Trade Administration Commission is wrapping up its investigation into the alleged dumping. A preliminary decision was expected within two months, said its spokesman, Thembinkosi Gamlashe.
The poultry association has asked for duties of 91 per cent to be imposed on frozen bone-in chicken from Germany and the Netherlands and 58 per cent on the same product from the UK.
Kevin Lovell, the poultry association’s CEO, said it wanted an anti-dumping tariff to be imposed to correct unfair trade action, not to punish importers. “The possible effect on retail prices is difficult to model until we know the quantum and how it changes import volumes and pricing. Our primary concern has always been to have fair trade.
“Our second concern is to have stable trade, meaning that we would want the importers to have to compete with us onthe same terms as we do and not simply use their access to non-market prices to sell their product with ease.
“This will hopefully result in more stable levels of imports with less monthly volatility, which wreaks havoc with the local industry as our production cycle involves long-term planning,” said Mr Lovell.
International Trade Advisors, acting on behalf of the Association of Meat Importers and Exporters, has highlighted several alleged flaws in the International Trade Administration Commission’s investigation, raising the possibility of a trade dispute with the EU.
Flaws pointed out included the prices used for comparison in certain cases such as for fresh rather than frozen chicken, ignoring the high levels of brining in local chicken and comparing retail prices in Europe with bulk export prices.
South Africa had to withdraw preliminary anti-dumping duties on Brazilian chicken early in 2013 after flaws in its investigation led to a complaint from Brazil to the World Trade Organisation. According to its rules, anti-dumping duties can be imposed only when dumping is proved, material injury has occurred in the local market and there is a causal link between dumping and material injury.
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15 April marks the 20th anniversary of the WTO’s founding agreements
Twenty years ago today, 15 April 1994, the WTO agreements were signed in Marrakesh, Morocco. They were the result of the 1986-94 Uruguay Round negotiations, and are the basis for the multilateral trading system in its present form. They also created the WTO.
At that time, most of the 123 participating governments signed the agreement, concluding the largest trade negotiation ever, and most probably the largest negotiation of any kind in history. Now, the number has reached 159.
The WTO’s creation on 1 January 1995 marked the biggest reform of international trade since after the Second World War. It also brought to reality – in an updated form – the failed attempt in 1948 to create an International Trade Organization.
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Kenya says EAC-EU trade talks could be concluded by May
The ongoing trade talks between the East African Community (EAC) and the European Union could be concluded by the end of May, a government official said on Tuesday.
Foreign Affairs Principal Secretary Karanja Kibicho told journalists in Nairobi that the number of contentious issues in the Economic Partnership Agreement (EPA) has been reduced to three.
“The EAC is therefore optimistic that a deal will be reached by the end of next month,” Kibicho said during a workshop on trade in the Great Lakes region.
The one day event brought over 100 participants to strategize on ways of enhancing Kenya’s exports in the Great Lakes region. The EU parliament has set a deadline of October for the agreement to be concluded.
He said that EAC’s position is that the EU should eliminate export subsidizes on its agricultural products. “If these products are allowed duty free access to our markets, they could negatively impact our farmers,” Karanja said.
“However if the EU continues to support its agricultural sector through subsidizes, the EAC should be allowed to impose import duties on these goods,” Kibicho said. The other contentious issue is the EAC’s use of taxes to discourage export of raw materials.
“This is a deliberate effort to encourage value addition of our commodities before they are exported,” he said. The government official said that one of the reasons that the region has a high unemployment rate is due to its low manufacturing base.
The summit comes at a time when EU-EAC negotiations on a full Economic Partnerships Agreement (EPA) have made considerable progress and are on the verge of conclusion.
The EAC region has a tangible opportunity to seize the advantages offered by the EPA and to maintain Duty Free Quota Free access for all Kenyan exports to the 500 million consumer EU market.
The East African nation stands to benefit from foreign exchange earnings, employment opportunities and penetration to the European Union market with EPAs.
The country has enjoyed preferential access to the EU market for the last 38 years through four successive Lome Conventions signed between 1975-2000.
The intention is to reciprocate the trading terms that the African Caribbean and Pacific (ACP) countries have been enjoying since 1959.
The EU and EAC are also yet to agree on the inclusion of non trade issues on the trade negotiations. “The EAC’s position is that the EPA’s should only concentrate on trade issues,” he said.
The EU is proposing to include agreements on human rights and corruption and other issues on the trade pact. “We feel that these issues are already being dealt with other channels and international conventions,” he said.
Ministry of Foreign Director of the Office of the Great Lakes Region Ken Vitisia said that European market used to absorb over 50 percent of all Kenyan exports over two decades ago.
“However, the volume of trade now accounts for less than 20 percent due to the emergence of other trading partners in Africa as well as China and India,” he said.
Kenya Association of Manufacturers Head of Policy Phyllis Wakiaga said that Kenya’s trade with Africa will continue to expand due to the region’s rapid population growth.
“The continent has numerous natural resources and various social and economic needs that are yet to be exploited,” Wakiaga said.
“Our economies are gradually becoming integrated and interdependent and this is clearly manifested through the expanding trading relationships,” she said.
She added that Africa should utilize its numerous rivers and lakes to accelerate intra-regional trade.
“Water transport is a cheaper method of transporting bully goods especially to the landlocked countries,” he said.
Kenya Private Sector Alliance Chairman Vimal Shah said that one of the challenges of trading in Africa is the presence of tariff and non tariff barriers.
Shah noted Kenya is one of the biggest investors in the other EAC countries. He added that Kenya’s relatively developed economy places it in a disadvantaged position compared to its neighbors which are classified as least developed countries.
“Our neighbors have access to developed markets due to their underdeveloped status,” he said.
The East African nation’s position as the regional gateway is expected to improve with the launch of an on-line cargo clearance system in May.
The long-awaited single electronic window, which is to be officially rolled out on May 2 by President Uhuru Kenyatta, is expected to facilitate international and domestic trade at the port of Mombasa, and has been touted as the solution to the persistent delays at the port.
It is expected to reduce the time it takes to process goods through customs at the port by half – from seven days to three days.
Kenya National Chamber of Commerce and Industry Chairman Kittony Kiprono said that most of African countries are frontier markets.
“They offer good trade opportunities due to their low industrial base and so demand for consumer goods is increasing,” he said. The chairman said that Kenya has a competitive advantage in the agriculture, manufacturing and the services sectors.
Ministry of Foreign Affairs Director of Economic and International Nelson Ndirangu said that Kenya has a positive trade balance with Africa and deficit with the rest of the world. “We therefore want to concentrate in growing African markets,” he said.
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SA must integrate with global economic system, says Gordhan
South Africa is not an island, Finance Minister Pravin Gordhan said on Wednesday, and economic growth and development depends on the extent to which the country is integrated with the dominant global economic system.
In a speech to mark 20 years of democracy in South Africa, Mr Gordhan – fresh from a recent trip to Washington in the US – told a round table discussion at the University of Johannesburg that poverty, inequality and jobs were becoming big issues around the world.
Two decades since democracy in 1994, the extent to which South Africa has addressed the triple challenges of poverty, inequality and unemployment has become a standard measure of the progress the country has made in improving the lives of its citizens.
In his state of the nation address in February, President Jacob Zuma described these challenges as “a central focus of all democratic administrations”. The World Economic Forum’s latest Global Risk Report identifies severe income inequality as one of the 10 global risks of highest concern in 2014.
Mr Gordhan said on Wednesday that unemployment levels in developed countries were beginning to match those of developing countries.
Political analyst Steven Friedman agreed, saying the world today appeared to be looking at countries such as South Africa, Brazil and India for solutions to poverty and inequality as developed countries were no longer able to provide answers.
Mr Gordhan said South Africa had to bring more entrepreneurs and small businesses into the economy in the next 20 years. He said the current structure of the economy showed some lasting apartheid legacies, including monopolies in some sectors.
He said there was not enough black ownership and participation in the economy despite government interventions through black economic empowerment. The country needed an inclusive growth model, not one that would entrench inequality.
Mr Gordhan also said the pdf National Development Plan (18.58 MB) , the government blueprint for development until 2030, would help “focus on the things we can actually deliver, while we continue to debate those that need to be debated”. However, he warned, perpetual debate may also lead to paralysis.
He said the question of better delivery for poor people depended on the nature of the state, and building state capacity was critical to enable development.
South Africa’s integration with the global economic system is critical to exploit new spaces created by geopolitical and economic shifts. Another unique feature of the global economic system is that “sentiments shift very easily”.
“One day South Africa is a good investment destination, the next day it is not,” he said, adding that he disagreed with an extreme negative narrative of the country.
Prof Friedman said South Africa could be proud of its important achievements over the past 20 years. “There is a great deal that we need to acknowledge and I think we tend to forget where we were 20 years ago,” he said.
Mr Gordhan also commended the growth of South African companies on the continent. He said the emergence of Nigeria as Africa’s biggest economy, overtaking South Africa, showed that the economy in Africa was on the right path.
This meant South Africa would have to “work harder in order to demonstrate that our economy is still important in the African continent”.
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At high-level forum, UN officials urge steps to ensure financing of sustainable development
Even with a slow recovery from the economic and financial crisis under way, severe effects of the upheaval linger and serious risks remain, United Nations Deputy Secretary-General Jan Eliasson warned a high-level gathering of global finance institutions on 14 April, urging measures to channel financial investment into vital areas that can help secure sustainable development for all.
“Placing our world on a sustainable path needs to be infused with a new global partnership for development. This partnership must be based on equity, cooperation and accountability. It must aim for transformative change,” Mr. Eliasson said, opening the Economic and Social Council’s annual Spring Meeting with the Bretton Woods institutions and UN agencies.
Along with ECOSOC President Martin Sajdik, the meeting featured presentations by high-level officials from the World Bank, the International Monetary Fund (IMF), the World Trade Organization (WTO) and the UN Conference on Trade and Development (UNCTAD).
Delivering remarks on behalf of the Secretary-General, Mr. Eliasson said that in the wake of the 2009 crisis growth remains insufficient and the employment situation is dire in many countries. Inequalities are growing. The world’s wealthiest 85 people have as much wealth as the poorest half of our planet’s population.
While this year marks the 70th anniversary of the Bretton Woods institutions and the 50th anniversary of UNCTAD, the world continues to wrestle with many of the challenges they were set up to address, he noted.
“Bold leadership is indeed needed for strengthened multilateralism,” he said of the major development financing bodies, adding that macro-economic policies must focus on a strong, balanced and sustainable recovery, with particular emphasis on jobs.
“Our task ahead is two-fold. We must ensure that hard-won development gains are preserved…and as we now look beyond the Millennium Development Goals (MDGs), our agenda for post-2015 should be ambitious, inclusive and focused on the concrete challenges for us and for future generations, as well as on strong institutions to meet these challenges.”
Mr. Eliasson said the role of ECOSOC and the organizations represented at the Meeting is crucial. “You can channel financing for critical long-term investments, such as infrastructure. You have the capacity to act counter-cyclically, contributing to greater stability in the financial system,” he said, adding: “Your institutions can wield vast influence in the success of the climate and post-2015 development agendas.”
Echoing that sentiment, Mr. Sajdik said the success of the new development agenda depends on a strong global economy. Achieving a stable and equitable economic growth will in turn require greater cooperation and coherence in macroeconomic policies.
This is why “Coherence, coordination and cooperation in the context of financing for sustainable development and the post-2015 development agenda” was chosen as the theme of this year’s two-day Meeting.
“The post-2015 development agenda will require a comprehensive financing framework that ensures the mobilization of financial resources and their effective use for sustainable development,” he said, adding: “We need a comprehensive strategy that incorporates all forms of financing, including public and private, domestic and international.”
Also addressing the Meeting, Jorge Familiar Calderon, Acting Executive Secretary of the World Bank Development Committee, reported on the body’s annual session last week in Washington, D.C., where, he said, the Committee’s Governors recognized that policy adjustments and appropriate coordination and communication will be required to fostering strong, inclusive and sustainable growth in today’s interconnected global economy.
As such, the Committee encouraged the World Bank Group (WBG) and the IMF to work jointly and with all member countries in pursuing sound and responsive economic policies; addressing underlying macroeconomic vulnerabilities; rebuilding macroeconomic buffers; and strengthening prudential management of the financial system.
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Africa rising: A tale of growth, inequality and great promise
The World Bank cautioned on 12 April 2014 against any complacency in tackling Africa’s enduring development challenges.
The warning came even as the World Bank praised Africa for being on course to mark 20 years of substantial growth with the region forecast to post a GDP growth rate of 5.1% in 2014.
“The last two decades have been very good for Africa which continues to reverse decades of decline vis-à-vis other regions of the world,” the Chief Economist for the Africa Region at the World Bank Francisco (Chico) Ferreira told a jammed-to-capacity auditorium of delegates attending this weekend’s Spring Meetings of the World Bank and International Monetary Fund (IMF) in Washington, DC.
Speaking at the same event, the Central Bank Governor of Tanzania, Benno Ndulu said Africa’s last two decades of growth “represent a quantum jump” especially when compared against the average annual growth rate of 0.8 percent posted by the continent over a 34-year period, from 1960 to 1994.
Mr. Ndulu revisited an old economic yardstick for Africa: “Sub-Saharan Africa’s economy,” he recalled, “used to be compared to Belgium’s only to point out that Africa’s economy was smaller than Belgium’s.”
Well – not anymore! According to Mr. Ndulu, “the GDP of Sub-Saharan Africa (SSA) is now $1.7 trillion, while Belgium’s is $500 billion, meaning that the SSA economy is now three times bigger than Belgium’s.” The African economy, he added, is now bigger than Australia’s (estimated at $1.5 trillion) and is about the same size as the economies of Canada and India.
“Africa’s problem going forward is not only to invest more, but to invest better,” according to Jean-Claude Brou, the Industry and Mining Minister from Cote d’Ivoire, who spoke on behalf of Prime Minister Daniel Kablan Duncan.
Africa’s growth is not yet a tide that is lifting all boats. While the middle-income countries in Africa has risen from six in 1995 to 23 in 2013, inequalities have expanded and Africans today enjoy less than one-twentieth of the living standards of Europeans.
All is not bad news, though. Africa’s GDP per capita has expanded 40 percent since 1995. Some of the fastest per capita growers include Equatorial Guinea (15.7 percent increase in the last 17 years); Liberia with a 23 percent increase over the last seven years; Mauritius with above 3.9 percent increase for the past 29 years; and resource-poor Burkina Faso, whose per capita income has risen over the last 18 years.
Sources of Africa’s Growth
Africa’s growth is widespread and has, almost everywhere, been investment-driven (rather than consumption-led), according to Chico Ferreira, increasing the possibility of impacting more Africans than otherwise.
Thanks to the improved performance by the continent’s so-called “population giants” (Nigeria, Ethiopia, Kenya, etc.), 60 percent of Africans now live in the 22 fastest growing countries. A majority of the 22 countries -13 countries in all – are resource-rich (five of them oil producers). However, and happily, fast growth is not a preserve of resource-rich African countries. Nine of Africa’s 22 fastest-growing economies are non-resource-rich countries.
Even countries emerging from violent conflict (such as Angola, Mozambique, Uganda, Rwanda, Liberia, Sierra Leone, etc.) have benefited from what the World Bank Vice President for the Africa Region, Makhtar Diop described as “the catching up effect”.
Four major changes are unfolding at sector level across Africa, according to Ferreira. First, African agriculture is growing faster than agriculture anywhere else. Second, growth seems to be bypassing Africa’s manufacturing sector – now accounting for only 7 to 8 percent of GDP – and performing at about the same level as in other developing countries. Third, Africa’s natural resources sector has tripled its contribution to growth. And, fourth, the growth in Africa’s services sector has been enormous and is bound to be a lot higher than estimated now, given the recent rebasing of the Nigerian economy.
Growth has also been fuelled by a higher contribution from taxation, according to Mr. Ndulu and by a better integration of Africa with international trade, according to Mr. Ferreira.
Wanted: More Pro-Poor Growth
So far, Africa’s growth has, sadly, not been inclusive and has had a lower impact on poverty reduction in comparison to other developing regions. “The richest Africans have seen their fortunes increase by 8 percent over the last decade, while the poor have seen theirs increase by only 1 percent,” Mr. Ferreira regretted, adding: “While growth is essential for poverty reduction, it is not sufficient”.
Mr. Ndulu called for Africa’s growth to be made more pro-poor; more job creating; more supportive of the integration and gainful employment of the African youth and woman. He urged African leaders to foster “wealth preservation” by investing revenue earned from extracting natural resources (depleting them in the process) in the much-needed structural transformation of African economies.
Boosting shared prosperity and curbing inequality can use the help of a “redistributive tax policy” that puts money back in the wallets of the poor, said Mr. Diop citing the success of similar policy in Brazil.
Mr. Brou called for action to boost regional integration and intra-African trade which, according to him, currently accounts for less than 20 percent of Africa’s total trade, being far below the 60 percent and 50 percent figures reported respectively for intra-European and intra-Asian trade.
In addition to calls for African countries to maintain macroeconomic stability, panelists stressed the positive impact investments in value-added agribusinesses can do for a continent still heavily dependent on agriculture. In order to have the most impact on poverty, growth must create jobs, especially jobs for youth and women. Investments must also aim to reduce the exorbitant costs of energy and transportation which render “Made in Africa” goods less competitive globally.
Projecting Africa’s Future Growth
Looking into the future, panelists at the event were unanimous in agreeing that Africa can be expected to grow into the foreseeable future, judging among others from the ever growing number of natural resource deposits being discovered on the continent.
Besides extractives, the modern services sector holds great potential for boosting Africa’s growth, according to Mr. Ferreira.
“We need to promote labor intensive industrialization and technology-driven innovations,” said Mr. Ndulu, stressing the “leap frogging potential” technology and cheap, young labor offer an African continent that needs to do everything “to preserve the gains made in peace and stability over the past decades” and avoid the “turning back of the arms of the clock” effect that violent conflict has on Africa’s development.
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Africa should keep an eye out for EU-US trade talks
The current EU-US negotiations should be a wake-up call for African governments to be proactive and limit the burden that a trade deal of this magnitude will unquestionably bring along.
The 4th EU-Africa Summit has concluded with leaders expressing their commitment to “develop globally competitive industries that can succeed in today’s global markets”.
While the intercontinental trade regime is in sore need of reform, the summit failed to provide the political momentum to reinvigorate this relationship. Economic Partnership Agreements (EPAs), while not on the official agenda, unsurprisingly invited themselves onto the sidelines of the summit. It is now high time to consider the other side of the coin: a transatlantic free trade deal currently negotiated between the European Union and the United States could have wide-ranging impact on the overall African economy.
With peace, security and governance on the agenda of the EU-Africa Summit, there was no shortage of elephants in the room. The Summit declaration states “EPAs should be structured to ensure that trade expands and that it supports growth of intra-regional trade in Africa”. It is indeed a multifaceted issue, which deserves particular consideration in the current international framework.
The United States and the European Union recently concluded their fourth round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP), an ambitious trade deal designed to reinforce ties between the two largest economies. If successful, the transatlantic bloc would become the largest integrated market in the world, with both sides already accounting for half of the world’s GDP and 30% of global trade. The partnership would undoubtedly boost US and EU firms’ ability to compete in other markets. Last but certainly not least, TTIP has the potential to set the global trade agenda for decades.
Clearly TTIP is not a mere addition to the current patchwork of international free trade agreements. EU’s main trading partners – and African countries in particular – have an interest in how these negotiations develop and in their ultimate outcome.
TTIP vs EPA vs coherence in the EU-Africa trade regime
In the context of bilateral free trade agreements, legitimate concerns are often raised regarding the impact on third parties: a high degree of economic integration generally goes hand in hand with significant trade diversion effects. Given its preferential access to EU markets, Africa should keep an eye out for TTIP’s long-term implications, as it would then have to compete with the world’s largest free trade zone in a marketplace of 800 million of the world’s richest consumers.
TTIP’s ramifications go far beyond the transatlantic region and, whatever the final scenario, the African economy will have to deal with the consequences. North and West Africa – which share the Atlantic with the USA and the EU – would be particularly affected, given their extensive trade relations with Europe. Furthermore the Ivory Coast and Guinea can expect detrimental effects as their exports into the EU are affected by the USA. According to a study commissioned by the Bertelsmann Foundation, Sub-Saharan Africa – which currently accounts for 2% of global trade and clearly needs wider access to developed consumer markets – stands to lose ground in the transatlantic market.
A wake-up call for African leaders to manage the impact
African economies are changing fast and coming on strong but they are still exposed and sensitive to changes in global trading schemes.
Of course Africa will have no direct say in the TTIP negotiations. However substantial implications can be foreseen for the private sector, which has a fundamental role to play in Africa’s capacity to compete at the global level. For African business leaders with international ambitions, TTIP could come as an opportunity or a threat – either way ignoring the current talks can be costly in the long-term. By way of example it can be noted that new global trade rules might include ways to handle public enterprises, labor laws and energy subsidies in international trade.
The current EU-US negotiations should be a wake-up call for African governments to be proactive and limit the burden that a trade deal of this magnitude will unquestionably bring along. African countries are under pressure to sign comprehensive Economic Partnership Agreements (EPAs) covering intellectual property rights, sanitary and phytosanitary standards, public procurement, investment, and services – all areas revisited in TTIP. A lot is at stake, including the added value of the Africa-EU partnership. African leaders are facing a challenge of priority setting with strong policy implications. Should they adopt a wait-and-see approach until they have a better understanding of how TTIP, if successful, will roll out in practice? Or take proactive steps to ensure that improved transatlantic ties do not come at their expense? The clock is ticking.On their way out of Brussels, African political leaders should not turn a blind eye to this major issue – it is set to become increasingly self-evident over time. And African economies definitely deserve a fair deal.
This is a guest post; views may not represent that of SpyGhana.com.
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Africa’s ‘fork in the road’ pointing to industrialization, says Lopes
A decade after former UN Secretary-General Kofi Annan’s made his landmark ‘fork in the road’ speech to the General Assembly calling for the reform of the global body, the Executive Secretary of the Economic Commission for Africa, Carlos Lopes told the Yale African Development Colloquium, Monday that “the fork in the road for Africa, now points to one direction and one choice, which is the path to industrialization.”
He highlighted numerous developments in Africa that constitute a radical departure from what he described as “deep divisions and underperforming collective institutions that marked the UN member States in 2003.”
“The world is very different today than it was in 2003 and while Africa is now at a fork in the road, this metaphor needs to be contextualized to reflect the developments taking place on the continent today,” said Lopes, adding, “I do not see indecisiveness on the part of continent; on the contrary, there is heightened assertiveness.”
He said a new brand of Africa is emerging; “one that exudes confidence, attractiveness for investments and that has considerably lowered risk, with investment reaching US$50 billion in 2012.”
Yet, cautioned Lopes, Africa still needs to move from 5 to 6 % average growth to the magic 7% – the minimum required to double average incomes in a decade.
“There is still a long way to go as poverty remains high, access to social services weak and pervasive conflict undermines gains,” he said.
He told the gathering that if Africa’s aim is to become “a prosperous and integrated continent in peace with itself”, its negotiating stance has to be consistent with – and supportive of its transformative agenda, as envisioned for 2063.
He stressed that the Continent must innovate in the business of transformation and called for policy tools and economic enablers.
“The commonality between the investments in Prato, Guanajuato and Itú-São Paulo is that they have attracted the attention of Africa’s number one trading partner: China,” he said, adding: The lesson for Africa is that industrialization is a competitive business.
“The continent needs to find its own recipe, its own miracle recipe, if it wants to become one the factory floors of the world,” he stressed.
The Yale statement comes in the heels of the 2014 Economic Report on Africa, launched in New York over the weekend and in Abuja on 30th March. The Report urges Africa to build credible institutions to boost industrialization. As noted by Carlos Lopes during the launch, to succeed, “industrial policy has to be organic, it has to be contextualized, it has to be specifically African.”
Present at the Colloquium were: Mr. Ernesto Zedillo, Former President of Mexico, Donald Kaberuka, President of the African Development Bank, Ernest Aryeetey, Vice Chancellor, University of Ghana and Shanta Devarajan, Chief Economist of the Middle East and North Africa Region, The World Bank.
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UNCTAD issues annual update on investor-State dispute settlement (ISDS) cases – Message from Mr. James Zhan
It is my pleasure to share with you UNCTAD’s IIA Issues Note on the latest developments in investor-State dispute settlement. ISDS continues to be in the spotlight thanks to new developments, such as the European Union’s launch of public consultations on the topic and the recent $5bn settlement between Repsol and Argentina.
The Issues Note provides fully updated statistical data on treaty-based ISDS cases as well as an overview of arbitral decisions issued in 2013. Among the Note’s highlights are:
- In 2013, investors initiated at least 57 treaty-based disputes. This comes close to the previous year’s record high number of new claims.
- An unusually high number of cases (almost half of the total) were filed against developed States; most of these have the Member States of the European Union as respondents.
- Claimants challenged a broad range of government measures, including changes related to investment incentive schemes, alleged breaches of contracts, alleged direct or de facto expropriation, revocation of licenses or permits, regulation of energy tariffs, allegedly wrongful criminal prosecution, land zoning decisions, invalidation of patents, legislation relating to sovereign bonds, and others.
- Thirteen of the new cases arise from two sets of government measures (regarding renewable energy), adopted by the Czech Republic and Spain. Two cases relate to the Greek financial crisis. Several arbitrations have an environmental dimension.
- By end of 2013, 98 States have been respondents in a total of 568 known treaty-based cases.
- The overwhelming majority of cases (85 per cent) have been brought by investors from developed countries. Together, claimants from the EU and the United States account for 75 per cent of all cases.
- In 2013, ISDS tribunals rendered 37 known decisions, 23 of which are in the public domain, including decisions on jurisdiction, merits, compensation and applications for annulment.
- In seven out of the eight decisions on the merits, the tribunal accepted – at least in part – the claims of the investors. The award of USD 935 million in the Al-Kharafi v. Libya case ranks as the second highest known award in history.
- The overall number of concluded cases reached 274. Of these, approximately 43 per cent were decided in favour of the State and 31 per cent in favour of the investor. Approximately 26 per cent of cases were settled.
- The public discourse about the usefulness and legitimacy of ISDS continues to gain momentum, especially in the context of important IIA negotiations that are currently ongoing.
I hope that you find our IIA Issues Note on the latest developments in investor-State dispute settlement useful and interesting – please feel free to also share it with your colleagues!
Let me also use this opportunity to draw your attention to the forthcoming fourth World Investment Forum (WIF), taking place from 13-16 October 2014 in Geneva. The WIF is the pre-eminent platform for high-level and inclusive discourse on investment policies for sustainable development, gathering on average 2,000 participants from 196 countries and convening the full range of investment for development stakeholders.
The WIF’s IIA Conference, scheduled for the morning of Thursday 16 October 2014, will provide an opportunity for IIA negotiators, investment practitioners, legal scholars, and representatives from civil society and the private sector to take stock of 60 years of international investment policy making. The debate will review key challenges and identify ways and means for reforming the regime of IIAs and ISDS so that they better contribute to sustainable development.
I look forward to welcoming you to Geneva in autumn.
James X. Zhan
Director
Investment & Enterprise Division
United Nations Conference on Trade & Development
Palais des Nations, Geneva
Click here to download the report: Recent Developments in Investor-State Dispute Settlement (ISDS)
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African trade routes shift focus from exports to local markets
For centuries, colonial-era merchants tussled for access to Africa’s raw materials, and huge swathes of Africa’s geography became synonymous with the main commodity they exported: Gold Coast, Ivory Coast, the Spice Island of Zanzibar.
But the continent’s booming economic growth and swelling population give it an opportunity to shift away from the traditional raw material export model towards consuming and transforming its own commodities and selling them to its own expanding local markets.
Miners, bankers and trading houses are seeking to position themselves to take advantage of emerging trade routes within Africa at a time when demand growth from China, the world’s biggest commodity consumer, begins to tail off.
Management consultancy McKinsey forecasts African consumer spending will be $1.4-trillion by 2020 and a more than doubling of the working age population to 1.1-billion people by 2040.
“Any statistics you take are uni-directional so I don’t see why demand should look the other way,” Singapore-listed commodities trader Olam Africa and the Middle East regional head Venkatramani Srivathsan said.
“For businesses like ours looking into Africa as a market, as a destination, countries like Nigeria and Mozambique are very, very interesting,” he said in a telephone interview during the Reuters summit on African business, held in several African cities.
For Mr Srivathsan, whose employer sources a quarter of its sales revenues from Africa and has invested 1.66-billion Singapore dollars ($1.33bn) on the continent, the secret is knowing how to adapt to the tastes and changing consumption patterns of each individual market in Africa.
Olam, which invests in plantations, food processing and the packaged food business, has introduced subtle differences in its West African tomato paste to suit different palates and is adapting to Nigerian demand for more sophisticated biscuits.
“You have to keep innovating. Even if you acquire brands you still need to keep adapting to changing tastes and changing levels of income,” he said.
Top oil trader Vitol has also targeted investments in Africa’s downstream sector, and is bidding for a new refinery in Uganda, to help it meet demand for the $440m-a-day fuels market.
Oil traders still export Africa’s crude oil to sell as refined products in the West, but Vitol now sees robust growth in fuel demand on the continent of about 3% a year, driven partly by growing power markets.
The company is targeting supplies of niche fuels like liquefied petroleum gas (LPG) – which can be distributed in portable canisters – into large cities of North Africa and Nigeria, a country of 170-million people that recently overtook South Africa as the continent’s largest economy.
“LPG will be a growing requirement because it fills the wealthier consumer market that needs alternative fuel as biomass becomes unsustainable in most urban settings,” Vitol director of origination and investments Chris Bake said.
One way that Africa could seek to supply local markets with commodities is by using mineral resources as bargaining chips to persuade investors to set up processing and manufacturing plants, United Nations (UN) Economic Commission for Africa executive secretary Carlos Lopes said.
He cited data showing that the continent had 12% of the world’s oil reserves, 40% of its gold, 80% to 90% of its chromium and platinum, 70% of coltan reserves, 60% of its unused arable land, 17% of the world’s forests, and 53% of the world’s cocoa.
“Resources such as these should be leveraged,” Mr Lopes told African finance ministers in Abuja on March 29.
“We have to find our own recipe, our miracle recipe, if we want to become one of the factory floors of the world.”
Barclays Capital Investment Banking MD Hasnen Varawalla said that he has an Indian client interested in shipping coal to a new power plant in West Africa from South Africa. “This is not about taking resources out of Africa to the rest of the world, they are seeing the opportunities within the continent and developing them,” he said.
But while such trade is feasible between two African ports – and could partially redraw export routes now dominated by flows to Asia and Europe – poor land infrastructure is a factor limiting the internal trade in commodities across the continent.
A UN study last year found that intra-Africa trade represents just 11% of the total, compared with around 70 percent within Europe, partly due to insufficient infrastructure.
Investors also say that an important factor limiting their ability to process locally is power supply, as many African countries struggle to increase generation capacity in pace with demand.
South Africa-based miner Exxaro said that Africa should consider trying to sell more commodities within the continent and process them there, as Chinese demand begins to slow.
“What would be fascinating for Exxaro would be if we supplied the iron ore from the Republic of Congo to steel mills within the Republic of Congo or in that region,” said executive head of strategy and corporate affairs Mzilane Mthenjane, referring to the company’s new 10-million tonne-a-year iron-ore project.
But he said that power prices meant production costs were more expensive than China and that this would limit Africa’s potential to process raw materials locally.
“For the continent to really make that huge step forward and step up in terms of development, electricity supply is one or two of the basic infrastructures that need to be in place.”
Modest trade growth anticipated for 2014 and 2015 following two year slump
World trade is expected to grow by a modest 4.7% in 2014 and at a slightly faster rate of 5.3% in 2015 WTO economists said today (14 April 2014).
Although the 2014 forecast of 4.7% is more than double the 2.1% increase of last year, it remains below the 20-year average of 5.3%. For the past two years, growth has averaged only 2.2%.
The sluggish pace of trade growth in 2013 was due to a combination of flat import demand in developed economies (0.2%) and moderate import growth in developing economies (4.4%). On the export side, both developed and developing economies only managed to record small, positive increases (1.5% for developed economies, 3.3% for developing economies).
“For the last two years trade growth has been sluggish. Looking ahead, if GDP forecasts hold true, we expect a broad-based but modest upturn in 2014, and further consolidation of this growth in 2015”, WTO Director-General Roberto Azevêdo said. “It’s clear that trade is going to improve as the world economy improves. But I know that just waiting for an automatic increase in trade will not be enough for WTO Members.”
“We can actively support trade growth by updating the rules and reaching new trade agreements. The deal in Bali last December illustrates this.”
“Concluding the Doha round would provide a strong foundation for trade in the future, and a powerful stimulus in today’s slow growth environment. We are currently discussing new ideas and new approaches which would help us to get the job done – and to do it quickly.”
Chart1: Growth in the volume of world merchandise trade and GDP, 2005-15a
Annual % change
a Figures for 2013 and 2014 are projections.
Source: WTO Secretariat.
Several factors contributed to the weakness of trade and output in 2013, including the lingering impact of the EU recession, high unemployment in euro area economies (Germany being a notable exception), and uncertainty about the timing of the Federal Reserve’s winding down of its monetary stimulus in the United States. The latter contributed to financial volatility in developing economies in the second half of 2013, particularly in certain “emerging” economies with large current account imbalances.
The preliminary estimate of 2.1% for world trade growth in 2013 refers to the average of merchandise exports and imports in volume terms, i.e. adjusted to account for differences in inflation and exchange rates across countries. This figure is slightly lower than the WTO’s most recent forecast of 2.5% for 2013, issued last September. The main reason for the divergence was a stronger than expected decline in developing economies’ trade flows in the second half of last year. For the second consecutive year, world trade has grown at roughly the same rate as world GDP (gross domestic product, a measure of countries’ economic output) at market exchange rates, rather than twice as fast, as is normally the case (Chart 1).
Recent business surveys and industrial production data point to a firming up of the recovery in the United States and Europe in early 2014. The gradual improvement of US employment data has allowed the Federal Reserve to proceed with its planned “tapering”, of their third round of quantitative easing (“QE3”) The outlook for the European Union has also improved, although growth there will remain uneven as long as peripheral EU economies continue to underperform core ones. Output growth in Japan should be slightly lower this year as planned fiscal consolidation is implemented. Finally, despite having hit a soft patch recently, developing economies (including China) should continue to outpace developed economies in terms of GDP and trade growth in the coming year, but some could encounter setbacks, particularly those most exposed to the recalibration of monetary policy in developed countries.
In 2013, the dollar value of world merchandise exports rose 2.1% to $18.8 trillion. This growth rate was slightly less than the WTO’s export volume growth estimate for the year (+2.4%), which implies that export prices declined slightly from one year to the next. Meanwhile, the value of world commercial services exports rose 5.5% to $4.6 trillion.
The trade forecast for 2014 is premised on an assumption of 3.0% growth in world GDP growth at market exchange rates, while the forecast for 2015 assumes output growth of 3.1%. Note that the GDP figures are consensus estimates and are not WTO projections. Risks to the trade forecast are still mostly on the downside, but there is some upside potential, particularly since trade in developed economies is starting from a low base. However, volatility is likely to be a defining feature of 2014 as monetary policy in developed economies becomes less accommodative.
Some developed economy risks factors have receded considerably since last year’s press release, including the sovereign debt crisis in Europe and fiscal brinksmanship between the executive and legislative branches of government in the United States. Developing economies are now the focus of several gathering risks, including large current account deficits (e.g. India, Turkey), currency crises (Argentina), overinvestment in productive capacity, and rebalancing economies to rely more on domestic consumption and less on external demand.
Geopolitical risks have introduced an additional element of uncertainty to the forecast. Civil conflicts and territorial disputes in the Middle East, Asia and Eastern Europe could provoke higher energy prices and disrupt trade flows if they escalate. However, since the timing and impact of these kinds of risks are inherently unpredictable, they are not considered directly in our forecasts.
Click here for a pdf version of the full WTO press release.
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Integrating East Africa’s markets
The leaders of the five members of the East Africa Community – Burundi, Kenya, Rwanda, Tanzania and Uganda – recently signed an agreement to form a single regional currency. This is an important move to integrate the region’s markets.
Following the establishment of the Customs Union in 2005, and then the Common Market in 2010, on 30 November 2013 five East African countries reached the agreement on the Monetary Union Protocol, which is the next step in regionalising the economy. Deepening regional integration in East Africa is critical to maintaining economic competitiveness as powerhouses Nigeria and South Africa increasingly attract foreign investment flows to the continent and push for further integration in their respective regions. Cross-border policies establishing the frameworks necessary to facilitate integration are critical but the successful development of regional market mechanisms driven by the private sector are equally important.
With a total population of about 135 million people, East Africa is attracting a dramatic increase in foreign investment, due primarily to natural-gas and oil discoveries of the East African coast. While Uganda and Kenya have discovered huge amounts of oil, Tanzania has massive natural-gas reserves. Global oil and gas companies have already begun exploration and the region is poised to become the next major energy hub in Sub-Saharan Africa.
In the 11 years since it was established, the EAC has achieved a great deal more than other regional organisations in Africa, which has begun to pay tangible dividends. For example, the region’s combined GDP has risen to $75 billion, up from $20 billion in 1999. Buoyed by this success, the Democratic Republic of the Congo and South Sudan have indicated interest in joining, primarily based on their critical need for access to ports in Tanzania and Kenya in order to realise the value of their energy and mineral endowments.
The current members’ reinvestment in the EAC comes at a critical time. In October 2013, Uganda, Kenya and Rwanda signed a Single Customs Territory deal, allowing the free movement of goods and services across their borders. Tanzania viewed this as a threat to their sovereignty but the real concern was the development of an export corridor through rival Kenya at the expense of Tanzania’s gateway to the sea. Adding to this tension are the number of regional infrastructure deals established such as cross-border oil pipelines and railway lines that leave Tanzania and Burundi behind.
The establishment of “hard” connections such as physical infrastructure is essential but so too is the development of regional markets that reply upon “soft” infrastructure. The best example of this is the East African Commodities Exchange (EAX), which seeks to form a single market through a combination of commodity trading, warehouse infrastructure and access to agricultural financing. The EAX strives to realise marketing efficiencies in commodity supply chains by providing a platform for transparent sales, promoting institutional developments, encouraging adherence to standards, and supporting the development of innovative financing models.
The EAX, which is the first of its kind on the continent, was formed entirely by the private sector: Nigeria businessman Tony Elumelu’s Heirs Holdings, Berggruen Holdings and 50 Ventures. On 5 November 2013, the exchange closed its inaugural transaction for 50 metric tons of maize between a Rwandan buyer, where the exchange is headquartered, and a Ugandan buyer. The initial success of EAX is a positive sign in the further integration of capital markets in East Africa, which is critical if the region is to stay competitive with other rapidly growing African economies.
To forward its integration agenda, the East African Securities Regulatory Authorities group is seeking to create a harmonised licensing framework for the region for brokers and dealers, and has also approved draft regulations on book-building for adoption by its members. Key policy initiatives under this scheme include:
- Ensuring strong, broad-based growth in community countries – Apart from the important ingredient of sound macroeconomic management, this raised questions of how to effectively implement the community’s customs union and common market to promote regional investment and trade.
- Promoting closer integration of the community’s financial markets – Electronic banking has been an area of success but the more traditional banking and capital markets remain segmented.
- Establishing budget management and drawing lessons from the euro zone on the fiscal requirements for effective monetary union.
- Harmonising monetary and exchange rate policies during the transition to monetary union.
The changes are part of ongoing efforts to standardise capital market regulations across East Africa to make it easier for businesses to tap into regional capital markets. Despite the region’s recent success in attracting FDI, even through the global financial crisis of 2008, regionalization of financial markets is essential to maintaining its standing as a investment destination.
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Jan withdraws AGOA Bill
The all-important Industrial Relations (amendment) Bill of 2014, whose passing is crucial to the kingdom’s continued AGOA eligibility status, has been withdrawn from parliament – exactly 34 days before the May 15 deadline.
The main reason for withdrawing the Bill, the Sunday Observer has been informed, is that it does not meet the five benchmarks related to the continued eligibility to participate in the AGOA programme.
Manzini North MP Jan Sithole, who is chairperson of the portfolio committee on labour and social security, withdrew the Bill on Friday – a day after a three-woman delegation from the United States of America left the kingdom.
The delegation, led by Constance Hamilton – the Deputy Assistant U.S. Trade Representative for Africa, arrived in the country on Monday to assess progress made by the government in implementing five benchmarks.
AGOA is a U.S. preferential trade programme that provides duty-free access to the U.S. market for products from eligible sub-Saharan African countries.
Labour unions estimate that, for Swaziland, the AGOA programme has led to the employment of around 20 000 people but government has put the figures at around 8 000.
Minister of Labour and Social Security Winnie Magagula and MP Sithole confirmed the Bill’s withdrawal.
The purpose of the Bill, which was tabled in parliament on February 14, 2014 by the minister, was to provide for the registration of federations and other incidental matters.
Provision
Having a provision in the Industrial Relations Act that allows for the registration of federations is one of the five benchmarks.
The other four are as follows: Full passage of the amendment to the Suppression of Terrorism Act; full passage of the amendment to the Public Order Act allowing for the full recognition of the freedom of assembly, speech and organisation; full passage of the amendments to Sections 40 and 97 of the Industrial Relations Act; and dissemination and implementation of the Code of Good Practice on Protest and Industrial Action.
Source
An impeccable source within government told this publication that the U.S. delegation, in its meeting with government representatives, made it clear that the Bill, in its current state, was not satisfactory.
“The Americans said the Bill did not address Sections 40 and 97, which put the liability on union leaders for any damage caused to public property during a protest action. The U.S delegation said as long as these sections were not amended, passing the Bill will be useless in as far as meeting the benchmarks is concerned,” said the source.
The delegation is reported to have maintained this stance even during its subsequent meetings with labour unions and the ministry of labour – with the latter meeting said to have dragged from morning until 9pm. “Government realised that the concerns raised by the American delegation was not without substance. It then met with the parliament portfolio committee and agreed that continuing to debate and pass the Bill as is would be futile and, therefore, the best thing was to withdraw it, related the source.
On Friday, MP Sithole, using Standing Order 68, moved to have the Bill withdrawn Bill and Manzini South MP Owen Nxumalo, who is also a member of the portfolio committee on labour, seconded him.
Speaker Themba Msibi then asked the minister what she had to say about the portfolio committee’s move and she confirmed the withdrawal stance.
Contacted yesterday, the minister said: “I confirm and agree with what the portfolio committee is saying.
As we speak, the Bill is now with the ministry and it will be submitted before Cabinet on Tuesday before it is taken back to the Labour Advisory Board.”
On the other hand, MP Sithole said: “It is true, the Bill has been withdrawn. It has been realised that the Bill has gaps in terms of the five benchmarks needed to retain AGOA and also meet ILO requirements. I would not have served any purpose for us to run quickly and pass the Bill yet it won’t help rescue AGOA. It is, therefore, important that the Bill be inclusive of all that is necessary to save AGOA.”
Patriotism, commitment needed – MP Jan
Manzini North MP Jan Sithole believes that parliament has the capacity to meet the May 15 AGOA deadline and is prepared to spend sleepless nights doing in order to achieve this.
“As parliament, we have an obligation to protect and save the economy.
We have to use every power and time available.
We don’t have the luxury to rest.
We can meet around the clock and work 24/7 if it calls for us to do so,” Sithole said.
The MP, who is also leader of the Swaziland Democratic Party (SWADEPA), said there was no one in parliament who wanted to lose AGOA and, therefore, nobody amongst them will sleep until the deadline is met.
“This calls for commitment and patriotism. I have no doubt that we’re ready to make sure that the Bill is passed within time.
We hope the Executive will hurry so that we are able to retain AGOA and win more additional jobs than we have. No one would be that irresponsible and unpatriotic and lose us AGOA,” Sithole added.
Can tripartite rescue AGOA threat?
With the Labour Advisory Board currently in shambles following last week’s withdrawal by TUCOSWA, there are concerns how the Industrial Relations (Amendment) Bill will be refined.
The LAB is a tripartite forum made up of government, employer and employee representatives.
The Trade Union Congress of Swaziland (TUCOSWA), which represents workers in the tripartite, withdrew from the forum citing various reasons but mostly that government was not honest in its dealings with the federation.
Minister of Labour and Social Security Winnie Magagula yesterday said government’s hands were tied because it couldn’t refine the Bill all by itself. “All is now at the mercy of the Labour Advisory Board to help us solve this problem. The ball is squarely in the Board’s court,” she said.
Magagula said as government, they would continue to play their role because they understood importance of addressing the concerns raised by the U.S. delegation.
She said it was important for TUCOSWA to return to the tripartite so that the issue was tackled as a collective.
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Aid-for-trade flows rebound, members told, as they mull future priorities
Aid for trade has bounced back, with Africa as the largest beneficiary, WTO members heard on 9 April 2014, in a meeting where they also discussed the priorities for next two years of initiative.
Preliminary figures for 2012 were presented by the Organization for for Economic Cooperation and Development (OECD) at this session of the Trade and Development Committee focusing on aid for trade. They showed a marked increase following a first fall registered in 2011.
Aid for trade is a WTO-led initiative aiming at increasing the capacity of developing countries, particularly least developed countries (LDCs), to engage in international trade. The OECD is a key partner in this initiative, and monitors the flow of foreign aid targeted at improving countries’ trade policy and regulations (including assistance for trade facilitation – streamlining customs procedures and cutting red tape), building economic infrastructure and building the production capacity of developing countries.
In presenting the aid for trade figures in 2012, Frans Lammersen of the OECD noted that commitments of aid for trade had increased by 20% in 2012. Over $39 billion was also disbursed. He termed this rising expenditure “impressive” given the backdrop of the economic crisis and governments’ tight budgets.
Mr Lammersen noted that the large increase in aid for trade was directed to middle-income countries, mainly in the form of loans. In contrast, the least developed countries’ share of total aid-for-trade flows fell 2% in 2012 and stood at $13.1 bn or 24% of the total. Commenting on the figures, the LDC group, represented by Ambassador Onyanga Aparr of Uganda, called for increased disbursement to benefit the least-developed countries.
The OECD presentation on 2012 Aid-for-Trade Flows is available to download below.
Priorities for new work programme
Members exchanged views on the elements of the new aid-for-trade work programme currently being developed. The work programme will provide a framework for activities over the period 2014-2015 in line with the decision adopted by Ministers at the 2013 Bali Ministerial Conference, which says the programme “should be framed by the post-2015 development agenda”.
Members welcomed the work in aid for trade and stressed the need to maintain the momentum. The committee’s chair of the Committee Pierre Claver Ndayiragije of Burundi said that a draft work programme would be prepared by the WTO Secretariat before the Easter break (18–21 April 2014) for members to review.
A presentation on the new aid-for-trade work programme is available to download below.
Activities
The meeting also heard about activities that WTO members and development agencies undertake in aid for trade. Australia, China and UN Conference on Trade and Development (UNCTAD) introduced their programmes that provide more resources and activities to help developing and least-developed countries to trade.
Peru shared its experience on making trade a government priority.
The Enhanced Integrated Framework, a multi-donor programme that promotes aid for trade among LDCs, presented an overview of its activities to help LDCs play a more active role in the global trading system. And the International Trade Centre, run jointly by the WTO and UNCTAD, shared its experience in supporting the private sector in developing countries.
The WTO secretariat presented a research paper, which shows that aid for trade is of particular importance for LDCs, and that financial inflows benefit their trade performance and development.
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Analysis: Forging a partnership of equals
The recent fourth Africa-EU Summit, held in Brussels, Belgium, under the theme of Investing in Peace, Prosperity and People, marked the beginning of a turning point in Africa-Europe relations.
The summit represented an opportune moment to reposition this relationship in line with the ever-changing global environment and the expectations of both regions.
In the context of unprecedented economic growth in Africa and economic decline in Europe, the summit afforded African and European leaders the opportunity to exchange views in order to strengthen political and socio-economic cooperation.
The summit adopted the 2014-2017 Road Map which sets out five strategic priorities and identifies the means to implement them. These are peace and security, democracy, good governance and human rights human development sustainable and inclusive development and growth and continental integration; and global and emerging issues.
The Brussels summit took place in the year of the 20th anniversary of South Africa’s freedom and democracy. We used this occasion to express our gratitude to the governments, organisations and citizens of Africa and Europe for the important role they played in the liberation of South Africa.
In the spirit of freedom and democracy, we have renewed our commitment to play a positive and constructive role in shaping a new architecture for Africa-Europe relations based on mutual respect and partnership. It behoves us that one year after the momentous Jubilee celebration of the AU, we change the paradigm of our relations with Europe from the erstwhile donor-recipient model to a partnership based on mutual respect.
In this regard, Africa’s aspirations are encompassed in Agenda 2063, which elaborates its plan for placing the continent on a path towards prosperity, promoting peace and security and occupying its rightful place in the global system.
Our engagement with the EU should be viewed within the framework of our commitment to promote North-South cooperation. We regard the engagement with the EU as an opportunity for advancing the African Agenda and broadening our partnership to fight poverty and underdevelopment. All the more so, as we begin the final countdown towards the Millennium Development Goals in 2015.
Since the Tripoli Summit in 2010, we have observed how the euro zone economic crisis has induced an unprecedented recession across the common market, impacting negatively on the global economic recovery.
In spite of Africa’s historical connection with Europe, the impact of the crisis has been varied across the continent’s regions with many African economies showing resilience in the face of this crisis.
On the other hand, Africa has experienced a staggering positive growth momentum in recent decades, registering previously unprecedented levels of economic growth.
The position of Africa as the new frontier of growth is demonstrated by the fact that eight of the fastest growing economies in the world are in Africa. These developments take place at a time when Africa is resolutely pursuing its plan of continental economic integration.
Our integration agenda places emphasis on the regional economic communities, which are the building blocks towards the establishment of a Common African Market.
It is for this reason that we believe that our trading relations with our partners, including the EU, should support and foster Africa’s development and growth trajectory, contributing to productive employment and prosperity for all.
Africa wants to set a new trade agenda based on partnership and mutual benefit. The continent is taking tentative, yet determined measures, to develop infrastructure and is embarking on an industrialisation programme that will see Africa achieving its ambition of producing and exporting value-added goods. We are determined to transform African economies from supplier-consumer to producer economies.
In this regard, the leaders at the Brussels Summit agreed that faster industrialisation and modernisation of the enterprise sector is essential for Africa to reach middle income status. The private sector also has a role to play by investing more in mining, energy, agriculture, and manufacturing sectors.
Consistent with this new paradigm, we are of the firm view that the economic partnership agreements with the EU should be developmental in nature and reinforce the process of economic integration currently underway in Africa. We are heartened by the fact that European leaders have committed to support intra-African trade and Africa’s regional integration efforts.
With regards to peace and security, African countries are increasingly taking the primary responsibility for peace-making and peace missions on the continent.
Africans are deployed in peace support operations in conflict areas in Africa, notably in Darfur (Sudan), Somalia, Mali and now Central African Republic, as well as the collective efforts in South Sudan and the Great Lakes Region, which has led to a reduction of conflict and its impact.
This includes intervention in the Democratic Republic of Congo (DRC) as part of a UN Special Intervention Brigade that successfully drove out the M23 rebels from the eastern DRC in November 2013.
These instances illustrate the point that the doctrine of African solutions for African problems is indeed gradually taking root in Africa.
While this doctrine places the onus on African countries, it nevertheless envisages cooperation with Africa’s partners. Hence, the leaders at the fourth summit agreed to intensify their efforts of implementing the Africa Peace and Security Architecture, giving priority to preventive diplomacy and boosting Africa’s capacity to deploy quickly and effectively in crisis situations.
The summit recognised that addressing non-traditional challenges to peace and security in areas such as climate change is crucial as it has an increasing influence on economic and social development.
Maite Nkoana-Mashabane is the Minister of International Relations and Cooperation
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Private Security Bill spells trouble
If President Jacob Zuma signs the regulation amendment into law, South Africa’s credibility will be put at risk, say critics.
The test case for what it takes to shatter investor confidence in South Africa is just one signature away from being written into law.
The Private Security Industry Regulation Amendment Bill, which includes a controversial clause that introduces a minimum 51% local shareholding requirement, has passed through the portfolio committee on police, the National Assembly and the National Council of Provinces and is at present sitting on President Jacob Zuma’s desk waiting to be signed into law.
The developments are being closely watched by the global community, including large economies such as the European Union and the United States, which have written to Parliament voicing their concerns that the Bill violates existing investment treaties. The concern is that the law could force a sell-off to local parties.
The private security industry is anticipating a challenge in the Constitutional Court.
It could be based on what it is claimed were irregularities in the way the Bill was passed through the portfolio committee.
National security
The ministry of police says it is a matter of national security and has dismissed fears about divestment. It has stated that,in implementing a foreign ownership cap, the correct procedures must be followed to protect investments and respect South Africa’s international trade obligations.
But the EU delegation in South Africa expressed its unease over the Bill in a letter, dated February 27 2014, that was addressed to the ANC chief whip and the chairperson of the select committee on security and constitutional development in the National Council of Provinces.
Signed by Axel Pougin de la Maisonneuve, the head of economics and trade at the delegation, the letter said foreign equity caps would violate South Africa’s commitment to unbounded market access under the General Agreement on Trade in Services (Gats) – a World Trade Organisation treaty to which South Africa is a signatory.
The delegation’s letter said the cap would also contravene bilateral investment treaties. For example, the agreement between South Africa and the United Kingdom obliges the South African government not to impair the investments of British nationals or companies, or offer treatment less favourable than what it accords to its own nationals or companies.
Also, the investments of British companies “shall not be nationalised, expropriated or subjected to measures having effect equivalent to nationalisation or expropriation”.
EU support
The British trade commissioner and the counsellor for economic and commercial affairs at the embassy of Sweden also wrote to the National Council of Provinces committee chairperson in support of the EU submission.
A letter from the American ambassador to South Africa, Patrick Gaspard, on February 28, also warned that the ownership requirement would violate South Africa’s Gats commitments.
It was first announced in 2011 that changes would be made to the law governing private security firms. The Cabinet approved a Bill but only released it for comment later in 2012. Following representations made by interested parties to Parliament, the local ownership quota was removed – until November last year.
“That’s when a very strange process was adopted,” said Martin Hood, an attorney representing the Security Industry Alliance (SIA), which represents many of the private security companies.
A redrafted version, with the contentious clause reinstated was handed to the portfolio committee for debate the next day, but several parties objected to the developments and the matter was delayed.
It was then debated in January this year and was approved by the committee, despite the refusal of opposition MPs to vote on it.
Ratified and passed
The National Assembly ratified the Bill in February before the National Council of Provinces passed it in March.
Both Hood and the Democratic Alliance’s spokesperson for police, Dianne Kohler-Barnard, said the procedure was irregular because the chairperson of the portfolio committee, Annelize van Wyk, had allegedly withheld letters that had been submitted by some embassies before the Bill was endorsed by the National Assembly.
But Van Wyk said the House had investigated the matter and said the claims were unfounded.
“I received one letter and I received it the day after we voted on the Bill. I was just cc’d [copied] in. I received another in December that I responded to.”
Van Wyk said the issues raised in the December letter were not new and had been raised in the committee before.
She said the clause was not sneaked back into the Bill. “Throughout the deliberations, I reminded members it could come back.”
Foreign threat
In minutes from the National Council of Provinces committee meeting at which the Bill was adopted, Major General Philip Jacobs of the police’s legal services division said the restriction on foreign ownership “spoke to the process required for the amendment or withdrawal of scheduled commitments to Gats, which [the] SAPS believed could be justified by the need for South Africa to protect its national security, which may be threatened by too large foreign ownership interest in the private security industry”.
But he said that trade obligations had to be respected, and referred to a clause in the Bill that says the implementation of the foreign ownership cap “must be done in accordance with legislation promoting and protecting investment in the republic and the republic’s international trade obligations”.
Jacobs said, under Gats, if any signatories were not happy with the way the republic was dealing with something, it could go to arbitration. Therefore, South Africa’s international obligations would not be ignored.
Kohler-Barnard described the passing of the Bill as a “political manoeuvre, as with so many Bills pushed through before the elections”.
She said the clause on expropriation speaks of a minimum of 51% local ownership but leaves it up to the minister to decide on a higher figure. “It’s a self-defeating Bill that should have never been put before us.”
Pietman Roos, a senior policy consultant for the South African Chamber of Commerce and Industry (Sacci), said a blanket ownership provision is irrational. “We do believe the Bill in its current form is unlikely to pass constitutional muster.”
Both Sacci and the SIA have requested Zuma not to sign the Bill.
Objections
Hood said the SIA has a number of objections, including procedural issues such as not enough information was provided to justify the need for the Bill.
He said it seemed to be government policy to ensure local ownership of the economy, as reflected the new mineral legislation, which stipulates a 20% free carry for the state in any new oil or gas venture. But the 51% proposed for the security industry is inconsistent with this.
Hood also said the ownership clause was unconstitutional as a forced sale of an asset would amount to arbitrary or irrational deprivation of property.
He added that many of the companies are owned by listed entities, whose shares are held by institutional investors. “On a practical level, this is unimplementable. How can you determine local ownership? It’s impossible to find out,” he said.
Another concern is that the legislation is written in such a way that the local ownership requirement covers the manufacturers and distributors of security equipment and, consequently, affects multinationals such as Sony and Bosch.
In his letter, Gaspard said almost all security technology is manufactured and distributed by international companies and “the proposed amendments could compel many of these companies to divest”.
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Modernizing foreign direct investment for the 21st century
As economies around the world become increasingly connected and intertwined, we must put a global trade system in place that can adapt to this ever-changing 21st century world. Foreign direct investment (FDI) has the potential to contribute significantly to sustainable economic development but we must have trade policies that meet the needs of not just the industrialized world, but also developing economies.
For decades, FDI has been largely guided by bilateral or multilateral investment treaties. Currently, there are more than 3,000 bilateral and regional agreements for the protection of investments around the world. These agreements provide the underlying legal structure for the international system of investments.
However, the implementation of these treaties has increasingly led to negative consequences to developing countries like Ecuador, leading to a growing wave of criticism. Those consequences have included the outsized power of international arbitrators to interpret these treaties; the lack of transparency in the process; and the marginalization of the capacity for a state to implement oversight policies. This all can have a negative impact not only on a government but on the people it serves.
For example, Nobel Prize-winning economist Joseph Stiglitz has correctly observed that this system has significantly hindered the ability of developing countries to protect their environment from extracting activities carried out by mining and oil companies; their citizens’ health from the tobacco companies; and their economies from the ruinous financial products that played such a large role in the 2008 global financial crisis.
In the mid-20th century, countries in Latin America often fell victim to this imperfect system as their resources were exploited by foreign companies drawn to newly discovered oil. Most of these nations at the time, like Ecuador, suffered from the lack of a cohesive structure for dealing with foreign companies and investors. We also suffered institutional weaknesses that undermined the ability to formulate appropriate public policies to regulate our markets.
Now, in 2014, countries in Latin America are seeing unprecedented growth due in part to reforms that have stabilized markets and have encouraged investments for the economic and social development of each nation. The region has experienced growth rates surpassing 4 percent for the last decade – during a time when even countries like the United States were experiencing economic difficulties.
Since being elected in 2007, Ecuadorean President Rafael Correa has been instrumental in achieving economic stability after nine presidents were dismissed from office since 1996. The steadiness during his presidency has positioned Ecuador as a regional leader, drawing recognition from the World Bank for advancing from being a middle-income economy to an upper middle-income one. Most recently, one major U.S. multinational company committed to expand by $1 billion over the next five years. Additionally, Ecuador has adopted one of the world’s most environmentally-friendly Constitutions – it provides nature with rights and a regulatory framework governing public and private operations.
On a broader scale, we convened a conference this week with the VALE Columbia Center on Sustainable Foreign Investment with world-class economists, attorneys and academics to discuss and develop solutions to improve development and investment treaties. To that end, Ecuador’s story provides an important lesson as we expand global trade initiatives and work to fix the current investor-state arbitrator system.
Oil was discovered in the Ecuadorean Amazon in the 1960s and its extraction controlled by Texaco (now owned by Chevron). Our rainforest is considered to be one of the most bio diverse habitats, and yet its ecology has suffered devastating damages as a result of the callous techniques used under Texaco’s direction. Over the past 20 years there have been countless legal actions between harmed citizens, Texaco, Chevron and the Ecuadorean state.
Despite years of litigation – ten in the United States and ten in Ecuador – the damage is not remedied. The Chevron case is a textbook example of why the arbitration system needs overhauling – the endless litigation has yet to produce a viable resolution and our people still suffer.
Reform should address the legitimacy, consistency, and predictability of the system by instituting: 1) a transparent selection of arbitrators who only exercise this role and do not defend companies in other venues, which can result in obvious interest conflicts, 2) the establishment of an appellate body within the arbitration system, 3) the incorporation in investment treaties investors’ obligation to file claims only after local legal avenues have been exhausted, and 4) the incorporation of the right of States to exercise their regulatory capacity on issues related to health, environment and industrial policy, among others.
These needed reforms cannot happen overnight but we must have open and transparent discussions on reforming the system so that we can have a regulatory and legal framework that works in the modern, global 21st century economy. The hard lessons we painfully learned in Ecuador must be a teachable moment. We cannot let this opportunity pass us by.
Suárez is the ambassador of Ecuador to the United States
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Global trade: Protectionism on the rise?
Three recent trade reports have suggested that with many economies still feeling vulnerable in the wake of the global financial crisis, governments are resorting to trade protectionism with increasing frequency. However, as this feature on global trade shows, there are perhaps more reasons to feel optimistic rather than pessimistic about the future for free trade.
In releasing the World Trade Organisation’s (WTO) global trade monitoring report in February 2014, WTO Director General Roberto Azevedo said that while trade volumes are expected to rise this year, so could the adoption of trade-restricting measures.
According to the report, trade is projected to grow by about 4-4.5 percent this year, slightly below the historical average since 1990 of 5.5 percent, and Azevedo reported himself to be “cautiously positive” about the overall outlook for world trade. However, he cautioned that there are still reasons to be concerned about trade restrictive measures. “We were not in great shape last year – and we have picked up a few bad habits which we need to shake off,” he said.
The trade-monitoring report says that the number of trade-restricting measure grew to 407 during the period from mid-October 2012 to mid-November 2013, up from 308 in the same period a year earlier. A total of 217 new trade remedy investigations were launched, which were mostly anti-dumping and safeguard measures. The number of other new trade measures also increased from 164 in the previous year to 190. The majority of these new measures were mostly import tariff increases and customs procedures. Compared with the trend in new restrictive measures, the number of new trade-facilitating measures reported by WTO members fell to 107 in 2013 – well down from 162 a year earlier.
The findings of the WTO report would seem to accord with the conclusions of a study by the European Commission released last September. The EU’s tenth ”Report on Potentially Trade-Restrictive Measures” found that 150 new trade restrictions were introduced over the 12-month period under review, with almost 700 new measures having been identified since 2008.
The EU began reporting such initiatives after the onset of the global financial crisis. Its aim is to track the extent to which G20 countries comply with their commitment not to resort to trade restrictions and to remove those already in place. The report detailed trade-restrictive measures implemented by the EU’s 31 main trading partners between May 1, 2012 and May 31, 2013 and it concluded there has been a sharp rise in the use of measures applied directly at the border, especially in the form of import duty hikes, with emerging economies the worst culprits.
The Commission identified about 150 new trade restrictions introduced over the period under review, whereas only 18 existing measures had been dismantled. A total of almost 700 new measures were identified as being introduced since October 2008. Brazil, Argentina, Russia, and Ukraine have increased their tariffs the most. However, Brazil and Argentina also accounted for a majority of reforms which force the use of domestic goods.
The Commission believes that Brazil and Indonesia provide the most striking examples of those countries shielding their domestic industries from foreign competition to the disadvantage of consumers.
“All of us need to stick to our pledge to fight back against protectionism”, commented EU Trade Commissioner Karel De Gucht. “It is worrisome to see so many restrictive measures still being adopted and virtually none abolished. The G20 agreed a long time ago to avoid protectionist tendencies because we all know these only hurt the global recovery in the long run”.
The EU has since reported that it has made good progress in securing the removal of third countries’ most trade-distortive barriers that hinder local companies’ access to a variety of markets, but it warned that many challenges remain.
The 2014 edition of the EU’s Trade and Investment Barriers Report (TIBR), published in March 2014, assesses the progress made toward the elimination of trade and investment barriers faced by European companies. However, the usual suspects – i.e. the large emerging economies – continue to erect the most barriers to foreign trade. Indeed, a separate chapter was devoted to market access barriers established in Russia, which has only just joined the WTO.
In July 2013, the EU launched its first WTO Dispute Settlement case with Russia, to tackle a recycling fee on motor vehicles applying to imported cars. Legislation has since been passed by the Russian Duma which will require domestic car makers to pay the same recycling fee as foreign manufacturers, but the TIBR warns that its implementation will need to be carefully monitored over the coming months.
The report also explains that, “for a list of more than 150 products including meat, garments, refrigerators, used vehicles, car bodies, paper products and Information Technology Agreement products, Russia has incorrectly implemented its WTO bound tariffs. Whereas some lines have been corrected on September 1, 2013, some issues still remain on products such as paper, car bodies, and agricultural products.”
The TIBR also points to the continued use of trade-restrictive measures in a number of other countries, including customs and tax measures in China, and the discriminatory treatment of imported wood in Japan.
On a positive note, the TIBR concludes that “a number of recent positive developments suggest that progress is under way and that the EU’s Market Access Strategy is delivering on many fronts”. For example, access to the Indian market for EU manufacturers of telecommunication products and electronic goods in particular improved in 2013. However, it warns that new barriers to trade are emerging “constantly” for European companies.
Given that the number of new trade barriers seems to be rising at a much faster rate than new trade-facilitating measures, it would be easy to draw negative conclusions about the state of the world trading environment from the WTO’s and EU’s reports. However, it must be remembered that these trade-restricting measures cover only a tiny percentage of overall world trade: the 407 trade barriers observed in the WTO report affect about 1.3 percent of world merchandise imports, or USD240bn; the trade remedy investigations cover around 0.2% of world imports; and the 190 other new trade measures affect 1.1% of global imports.
Other reasons for optimism include the recent breakthrough in the long-stalled Doha Round of world trade negotiations, and the forming of new regional free trade areas involving the world’s major economic powers.
Doha Round
In December last year WTO members approved the Bali Package, a selection of issues from the Doha Round designed to streamline trade, improve security in developing countries, and boost trade and development in the least developed countries.
In February 2014, Azevêdo urged members to work to implement the package this year and on March 14 he was able to announce that WTO members had made an ”excellent start” in talks to revive the Doha Development Agenda.
The Doha Development Agenda, launched in 2001, seeks to achieve a global agreement to cut trade-distorting agriculture subsidies, phase out tariffs on industrial goods, open trade in services, facilitate customs operations, open trade in clean technology, adjust anti-dumping rules, and offer duty-free and quota-free access to the exports of the world’s poorest countries. However, talks broke down in 2008 when about 80% complete broadly because developing nations suspected they were getting a raw deal from the developed world, especially in the contentious areas of agricultural market access, and on tariff cuts for certain industries.
“It seems that some factors were common among some of the Groups,” Azevêdo said. “For example in Agriculture, Market Access and Services, it came across strongly that our approach should be balanced across all three issues – and that all three should be tackled together, simultaneously. There was also a clear emphasis on the parameters during the discussions – particularly on the importance of development, and on ensuring that we focus on outcomes that are doable.”
He went on to say: ”I think we have made an excellent start. I have heard a lot of good feedback, and I think there is much which we can build on constructively. But, nevertheless, there remains a lot to do.”
A recent report from the Organization for Economic Cooperation and Development (OECD) emphasized the importance of concluding the Doha Round, noting that a multilateral agreement to cut red tape in international trade would dramatically reduce trading costs and add a substantial boost to the global economy. The OECD’s research determined that the comprehensive implementation of all measures discussed in the Doha Round would reduce total trade costs by 10 percent in advanced economies and by 13-15.5 percent in developing countries. Reducing global trade costs by just 1 percent would increase worldwide income by more than USD40bn, most of which would accrue in developing countries, the report says.
Transatlantic Trade and Investment Partnership
The proposed Transatlantic Trade and Investment Partnership (TTIP) between the EU and the United States is probably the most ambitious bilateral free trade agreement yet attempted.
In June 2012, a working group established jointly by the EU and the US issued an interim report and concluded that ”a comprehensive transatlantic trade and investment agreement, if achievable, could generate substantial benefits for the US and EU economies.” The report recommended the elimination of “all duties on bilateral trade, with the shared objective of achieving a substantial elimination of tariffs upon entry into force and a phasing out of all but the most sensitive tariffs in a short time frame.”
These sentiments were echoed in the working group’s final report, issued in February 2013, which reached the conclusion that a comprehensive agreement that addresses a broad range of bilateral trade and investment issues, including regulatory issues, and which contributes to the development of global rules, would provide the most significant mutual benefit of the various options considered. That same month, the TTIP was one of the major new policy announcements made by Obama in his 2013 State of the Union address, and the negotiations were officially launched at the G8 Summit in June 2013.
The scale of trade between the EU and the US is awe-inspiring, and the trading relationship between the two powers is the largest and most complex in the world: goods and services trade flows were valued at an estimated USD2.7bn a day in 2012 and transatlantic investment was directly responsible for approximately 6.8m jobs in 2010.
According to the European Commission, the final agreement could see EU exports to the US rise by 28%, earning its exporters of goods and services an extra EUR87bn every year. It is said that the average family of four living in the EU would see their disposable income rise by EUR545 as a result of the agreement, and the European Commission has estimated that could add 0.5% to global GDP. US businesses and consumers would see similar benefits.
Trans-Pacific Partnership
The TPP in its original form was signed by New Zealand, Chile and Singapore on July 18, 2005 and by Brunei on August 2, 2005. It entered into force on May 28, 2006 for New Zealand and Singapore, on July 12, 2006 for Brunei, and on November 8, 2006, for Chile. These original four members are known as the P4 bloc.
From the beginning it was intended to invite further countries to subscribe to the agreement, and in November, 2008, Australia, Vietnam, and Peru announced that they would be joining the P4 countries in the TPP, followed by the United States in November 2009 and Malaysia in October, 2010. Then in June, 2012, Canada and Mexico announced that they would join also, and did so in November after consultations between other members. Japan joined in July 2013.
The agreement is very comprehensive, covering trade in goods and services, rules of origin, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, intellectual property, government procurement and competition policy. Tariffs were reduced by 90% initially, and are to be reduced to zero by 2015.
According to an analysis supported by the Peterson Institute, by 2025, the TPP could generate an estimated USD305bn in additional world exports per year, including an additional USD123.5bn in US exports, and boost global income by USD223bn per year.
ASEAN Economic Community
The Association of Southeast Asian Nations (ASEAN) member states – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – and its free trade agreement (FTA) partners – Australia, New Zealand, Japan, China, India and South Korea – started detailed negotiations on the Regional Comprehensive Economic Partnership (RCEP) in May 2013.
The proposed RCEP, which aims to bring together the ASEAN’s existing FTAs into a single comprehensive agreement, is envisioned to become one of the largest FTAs in the world, covering 3bn people and making up one-third of the world’s gross domestic product at USD20 trillion.
Consistent with the RCEP Leaders’ Joint Declaration on the Launch of Negotiations for the RCEP of 20 November 2012, and the Guiding Principles and Objectives for Negotiating the RCEP endorsed by RCEP Ministers on 30 August 2012, the new agreement should broaden, deepen and improve significantly all elements, including tariffs, in the existing ASEAN+1 FTAs.
The RCEP will include provisions to facilitate and enhance transparency in trade and investment between the participating countries, as well as to facilitate their engagement in global and regional supply chains.
Taking into consideration the different levels of development of the participating countries, the RCEP will include appropriate forms of flexibility, including provisions for special and differential treatment, plus additional flexibility to the least-developed ASEAN member states, consistent with the existing ASEAN+1 FTAs, as applicable.
It is also envisioned that the RCEP will become a platform for future trade and investment integration in Asia. It is hoped that the trade treaty will be concluded by the end of 2015.
Africa
The statement issued at the end of the 18th summit of the African Union (AU) in February 2012 confirmed that African countries will target the establishment of a continental free trade area (CFTA) by 2017.
The AU has produced a three-step plan in preparation for the CFTA, with the first move being finalization of the tripartite agreement between the East African Community, the Common Market for Eastern and Southern Africa and the Southern African Development Community by 2014.
The second will be to urge other trade blocs to follow the experience of the tripartite agreement and reach parallel agreements before, finally, the tripartite and other regional free trade areas would be consolidated into the CFTA initiative.
“Enhanced intra-African trade and deepened market integration can contribute significantly to sustainable economic growth, employment generation, poverty reduction, the inflow of foreign direct investment, industrial development and the better integration of the continent into the global economy,” the statement said.
Africa has seven major regional trade blocs, including the Economic Community of West African States, the Economic Community of Central African States, the Arab Maghreb Union and the Community of Sahel-Saharan States, in addition to those within the proposed tripartite agreement.
Bilaterals
There are also numerous free trade agreements being negotiated at bilateral level, and the following list summarizes the main developments that have taken place so far in 2014 alone.
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China and the Gulf Cooperation Council (GCC) met on January 17, 2014 to draw up an action plan on cooperation from 2014 to 2017 and agreed to accelerate negotiations on a free-trade agreement.
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Following Australian Prime Minister Tony Abbott’s plan to wrap up the long-running talks for free trade agreements with China, Japan, and South Korea by the end of this year, it was announced in January 2014 that an agreement with Japan is expected to be signed in July; South Korea and Australia initialled their bilateral free trade agreement on February 10, and agreed to its signing within the first half of this year.
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At a joint press conference, following his official visit to Kuala Lumpur in January 2014, the Turkish Prime Minister Recep Tayyip Erdogan and his Malaysian counterpart Najip Tun Razak announced an April 2014 target for the signing of an FTA between their two countries. Turkey also agreed to begin FTA talks with Singapore in January.
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During a meeting on January 16 in New Delhi between South Korean President Park Geun-hye and India’s Prime Minister Manmohan Singh, the two leaders agreed to upgrade their comprehensive economic partnership agreement.
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During a meeting on January 21 in Seoul between South Korea’s Deputy Prime Minister and Minister of Strategy and Finance, Hyun Oh-seok, and the Vietnamese Deputy Prime Minister Nguyen Xuan Phuc, it was agreed to accelerate the on-going negotiations for a free trade agreement (FTA) between the two countries.
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Wang Yingqi, Commercial Counsellor at the Chinese embassy in Sri Lanka, disclosed in January 2014 that Sri Lanka and China hope to conclude a bilateral FTA by the end of 2014.
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Despite the ongoing political unrest, the EU remains eager to re-launch talks with Egypt on concluding a Deep and Comprehensive Free Trade Agreement.
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In what has been described as, predominantly, a cancellation of tariffs on Canadian beef imports into South Korea in return for the elimination of duties on South Korean car imports into Canada, the two countries announced on March 11 that they have agreed the terms of their long-delayed negotiations for a free trade agreement.
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In March 2014, the Swiss Council of States has adopted the FTA with China, signed in Beijing on July 6, 2013.
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Costa Rica’s legislature approved a free trade agreement with Colombia at its first reading on March 3, 2014.
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Following the cooperative attitude adopted in resolving recent trade dispute talks, leaders from the EU and China have discussed the prospect of concluding an FTA to add to investment treaty negotiations that were launched late last year.
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On April 3, Mexico and Panama signed a free trade agreement that could pave the way for the latter to become a full member of the Pacific Alliance trade bloc.
Outlook
It remains to be seen if the scale of the ambition to build regional free trade agreements like the TPP, the TTIP and the RCEP is matched by political will in all of the participating nations. Certainly, these are extremely complex and delicate negotiations covering some sensitive economic areas and it is no surprise that numerous lobby groups have emerged to fight their corner, often backed by politicians. The TTIP negotiations have already entered choppy waters over non-tariff issues such as regulation, while the Democrats’ reluctance to give President Obama the authority to fast-track free trade agreements through Congress could make it virtually impossible for the US to ratify new deals as complicated as the TTIP and the TPP. What’s more, the inclusion of Japan, with its tightly protected agricultural and automotive sectors, could prove a step too far for the expanded TPP negotiations.
Overall however, fears that the world would descend into a downward spiral of ‘beggar thy neighbour’ trade protectionism as the financial crisis began to bite have been largely unfounded. The use of trade barriers as an economic management tool by emerging economies remains a problem, but when weighed against the total volume of global trade these infractions are relatively minor. Generally speaking however, there seems to be an acceptance in most countries that international trade is better free than unfree, even if is often politically-problematic for leaders and government ministers to say so.
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New South Africa IP Policy unlikely before May elections
South Africa’s upcoming general elections on 7 May have thrown a spanner in the works of the much-anticipated national draft intellectual property policy from coming into effect anytime soon.
The general elections will elect a new National Assembly as well as new provincial legislatures in each province.
Health activists staged a protest action recently when they marched to Parliament to express their dismay over the long delay in making the draft policy a reality.
But despite the latest call from health activists to finalise and implement the IP policy, Minister of Trade and industry Rob Davies last week reiterated an earlier confirmation to Intellectual Property Watch that it was not going to happen before the upcoming country general elections.
He also confirmed that the last cabinet meeting for the year, held three weeks ago, did not have the item on the agenda.
Davies said that the inter-departmental team is continuing with its work to collate the responses to the draft policy received during the public participation process.
The current draft IP policy was published by the Department of Trade and Industry in the government gazette in September 2013. The draft IP policy is available here [pdf].
Pressure to Reduce Fragmentation
The Treatment Action Campaign (TAC), Doctors without Borders (Médecins Sans Frontières) and SECTION27 led over 1,500 health activists from 13 organisations to Parliament. They demanded that members of Parliament should “push the DTI (Department of Trade and Industry) to stick to their public promise to complete the National IP Policy by April.”
Activists complain that it has already taken the Department of Trade and Industry six years to work on the policy.
South Africa does not currently have a general IP policy, and critics have argued that this has resulted in a fragmented and unconsolidated approach to IP matters, a point which government has conceded.
The draft IP policy aims to remedy this fragmentation by coordinating the country’s approach to IP matters on both a national and international basis.
Other objectives driving the draft IP policy include improving IP enforcement, promoting research and development, ensuring IP laws are relevant to development and innovation, and promoting public awareness and education of IP in the country.
Specifically, the draft IP policy contains a substantive patent review system, which is a key feature of the policy.
The draft policy also states that IP protection regimes must not contradict public health policies and that the two should be balanced.
And the draft policy notes that provision should be made in the laws to facilitate the quick entry of generic competitors as soon as the patent has expired on a particular medicine.
Health activists have long campaigned for a patent review system given that no such system had existed before and have welcomed the draft policy as a positive development.
However, some pundits have expressed their misgivings of the draft IP Policy.
Owen Dean, who holds the Anton Mostert chair of intellectual property law at Stellenbosch University, was reported saying that South Africa lacks the specialist skills to assess applications for medicine patents.
Meanwhile, the TAC’s senior researcher, Lotti Rutter, said that a consequence of the elections could see a new Minister of Trade and Industry being appointed, but that the TAC is confident that the draft policy will not be shelved if that happens.
Rutter added that the TAC’s health manifesto, which included a consolidated IP Policy, was well-received by the major political parties and this could be used to “hold them accountable” post elections.
The draft plan became political when leaked documents showed it was the subject of a targeted campaign by foreign pharmaceutical companies.
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Aid to developing countries rebounds in 2013 to reach an all-time high
Development aid rose by 6.1% in real terms in 2013 to reach the highest level ever recorded, despite continued pressure on budgets in OECD countries since the global economic crisis.
Donors provided a total of USD 134.8 billion in net official development assistance (ODA), marking a rebound after two years of falling volumes, as a number of governments stepped up their spending on foreign aid.
An annual survey of donor spending plans by the OECD Development Assistance Committee (DAC) indicated that aid levels could increase again in 2014 and stabilise thereafter. However, a trend of a falling share of aid going to the neediest sub-Saharan African countries looks likely to continue.
“It is heartening to see governments increasing their development aid budgets again, despite the financial constraints they are currently facing,” said OECD Secretary-General Angel Gurría.
“However, assistance to some of the neediest countries continues to fall, which is a serious concern. We will need to address this issue when the Global Partnership for Effective Development Co-operation meets in Mexico next week, as well as the broader challenge of how to make the most of ODA in a growing pool of resources for development finance.”
Key aid figures in 2013
In all, 17 of the DAC’s 28 member countries increased their ODA in 2013, while 11 reported a decrease. Net ODA from DAC countries stood at 0.3% of gross national income (GNI.) Five countries met a longstanding UN target for an ODA/GNI ratio of 0.7%.
The United Kingdom increased its ODA by 27.8% to hit the 0.7% target for the first time. The United Arab Emirates posted the highest ODA/GNI ratio, 1.25%, after providing exceptional support to Egypt.
Aid to developing countries grew steadily from 1997 to a first peak in 2010. It fell in 2011 and 2012 as many governments took austerity measures and trimmed aid budgets. The rebound in aid budgets in 2013 meant that even excluding the five countries that joined the DAC in 2013 (Czech Republic, Iceland, Poland, Slovak Republic and Slovenia), 2013 DAC ODA was still at an all-time high.
Shifting aid allocations
Within bilateral net ODA, non-grant disbursements (including equity acquisitions) rose by about 33% in real terms from 2012. Total grants rose 7.7% in real terms; excluding debt forgiveness grants, they rose 3.5%. Net aid for core bilateral projects (excluding debt relief grants and humanitarian aid) rose by nearly 2.3% in real terms and core contributions to multilateral institutions by 6.9%.
Bilateral aid to sub-Saharan Africa was USD 26.2 billion, a decrease of 4.0% in real terms from 2012. Aid to the African continent fell by 5.6% to USD 28.9 billion. Excluding debt relief, which was high in 2012 due to assistance to Côte d’Ivoire, net aid in real terms rose by 1.2% to sub-Saharan Africa but fell by 0.9% to the continent as a whole.
Bilateral net ODA to the Least Developed Countries (LDCs) rose by 12.3% in real terms to about USD 30 billion. However, there was exceptional debt relief for Myanmar in 2013. Details on the impact of debt relief on aid flows to LDCs will be available later this year.
Donor performance
The largest donors by volume were the United States, the United Kingdom, Germany, Japan and France. Denmark, Luxembourg, Norway and Sweden continued to exceed the 0.7% ODA/GNI target and the UK met it for the first time. The Netherlands fell below 0.7% for the first time since 1974.
Net ODA rose in 17 countries, with the largest increases recorded in Iceland, Italy, Japan, Norway and the UK. It fell in 11 countries, with the biggest decreases in Canada, France and Portugal.
The G7 countries provided 70% of total net DAC ODA in 2013, and the DAC-EU countries 52%.
The US remained the largest donor by volume with net ODA flows of USD 31.5 billion, an increase of 1.3% in real terms from 2012. US ODA as a share of GNI was 0.19%. Most of the increase was due to humanitarian aid and support for fighting HIV/AIDS. By contrast US net bilateral aid to LDCs fell by 11.7% in real terms to USD 8.4 billion due in particular to reduced disbursements to Afghanistan. Net ODA disbursements to sub-Saharan Africa fell by 2.9% to USD 8.7 billion.
Further outlook
The 2014 DAC Survey on Donors’ Forward Spending Plans gives estimates of future aid allocations for all DAC members, major non-DAC and multilateral donors up to 2017, based on developing countries’ gross receipts of Country Programmable Aid. CPA thus differs from ODA, especially by counting multilateral agencies’ outflows rather than inflows.
The CPA increase predicted last year for 2013 did translate into increased overall ODA, and affected all income groups. Global CPA rose by 10.2% in real terms in 2013 to USD 103.1 billion, but with widely differing increases from DAC members (+2.0%), multilateral agencies (+17.6%), and non-DAC donors (+123.7%).
CPA is projected to increase slightly by 2.4% in real terms in 2014, due to continued increases by a few DAC donors and multilateral agencies, and is expected to remain stable beyond 2014.
The survey suggests a continued focus in the medium term on middle-income countries – many with large populations in extreme poverty – in particular countries such as Brazil, China, Chile, Georgia, India, Mexico, Pakistan, Sri Lanka, and Uzbekistan, where programmed increases above 5% are expected up to 2017. It is most likely that aid to these countries will be in the form of soft loans.
By contrast, the survey suggests a continuation of the worrying trend of declines in programmed aid to LDCs and low-income countries, in particular in Africa. CPA to LDCs and LICs is set to decrease by 5%, reflecting reduced access to grant resources on which these countries are highly dependent. Some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa.
Some Asian countries may see increases, however, so that by 2017 overall allocations to Asia are expected to equal those towards Africa.