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Resource nationalisation ‘risks breaking global trade rules’
Governments of resource-rich countries have to take care in pursuing higher taxes and rents on mining companies as they risk flouting international trade rules, the Mining Indaba in Cape Town heard on Tuesday.
In South Africa, amendments to the Mineral and Petroleum Resources Development Act mean mining companies would have to supply a percentage of their production of minerals, if they were considered strategic, and discount the prices to the government. If a designated mineral was exported without meeting the domestic quota for local beneficiation, or without the written consent of the minister, it would be an offence that could result in imprisonment or a penalty of 10% of annual turnover.
Peter Leon, a partner at law firm Webber Wentzel, said a number of countries were implementing resource nationalism policies, but it was important to avoid flouting World Trade Organisation (WTO) rules, which could violate international trade law. He believes the supply requirement in the draft South African law amounts to export licensing and may be illegal in terms of WTO rules.
Sheila Khama, director of the African Development Bank’s African Natural Resources Centre, said the rise of resource nationalism within African countries was due to a change in what governments saw as fairness, heightened expectations from mining and the high visibility of the company brands themselves.
She said media headlines saying how a mining company’s share had surged on a foreign stock exchange because it was mining a mineral in a certain country also gave the impression that the mining company was “flush with cash”.
“However, the local communities do not realise that there is a major difference between the shares of the company, which may have been talked up so they can be traded, and the value of the asset on the ground,” she said.
Lord Peter Mandelson, chairman of the Global Counsel, said consumers of products in countries outside those that produced the mineral resources would also demand sustainable practices were used, “otherwise they won’t buy them”.
He said: “I believe that miners (including the governments of mineral-rich countries) see the profound sustainability attack which is coming their way. They will have to embrace rather than repel it as it is not ‘repellable’.”
Ms Khama said governments were under increasing pressure to improve the lives of their citizens.
World Bank senior manager Paulo de Sa said the term “resource nationalisation” implied a conflict of some kind between governments and the mining companies, but that “this was not necessarily the case”.
Ghana Chamber of Mines CEO Toni Aubynn said that country’s donor aid had dried up after it was reclassified as a lower-middle-income country, and this forced the government to impose higher taxes on mining companies.
See also: SA ‘could fall foul of World Trade Organisation’ (BDlive, 14 February 2014)
Source: http://www.bdlive.co.za/business/mining/2014/02/04/resource-nationalisation-risks-breaking-global-trade-rules
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AGOA: Free-trade deal on the line
US poultry producers are lobbying their government to withdraw South Africa’s duty-free access in retaliation for anti-dumping duties, which they say are unfair.
South Africa enjoys duty-and quota-free access to the US market for about 6,800 product lines, in part thanks to the Africa Growth and Opportunity Act (Agoa), which grants most African countries preferential market access without any reciprocity required for US goods.
Latest available figures show South Africa exports to the US under Agoa totalled $3.7bn (R40.8bn) in 2012.
Lobbyists in the US have been trying to get South Africa excluded from Agoa, which is vital for the local automotive industry.”
The National Chicken Council and the USA Poultry & Export Egg Council have made submissions to the US International Trade Commission (ITC), saying the US poultry industry will strongly oppose another extension of Agoa benefits to South Africa unless “fair trade” in their products is resumed.
The controversial anti-dumping duties on US poultry products, which were calculated using the weighted average cost of production method, were imposed in 2000. Last August, the World Trade Organisation ruled against similarly imposed tariffs by China against US chicken.
South Africa, as an upper middle-income country, is under fire for its inclusion under Agoa.
Critics say it is unfair to give South Africa duty-free access to the US while poor countries such as Bangladesh do not enjoy the same benefits.
David Wolpert, CEO of the Association of Meat Importers and Exporters (Amie), said there was concern that South Africa’s protectionist policies, such as the increase in import duties on chicken and restrictive regulations on pork imports, may lead to retaliatory trade practices, harming the economy.
“As we have said many times before, such restrictive trade practices are of great concern, are highly inflationary, and therefore negatively affect pricing to an entire population, especially the hard-pressed poorer segment of our people, and invite retaliatory measures, which themselves harm our fragile economy,” Mr Wolpert said.
The International Trade Administration Commission, which hiked import tariffs on a range of chicken products last year, is considering imposing anti-dumping duties on chicken from certain EU countries. The EU has a free-trade agreement with South Africa and normal import duties do not apply on their poultry products.
“The renewal of the special duty preferences applicable to many of our exports under Agoa is of huge value and importance to us, especially in times of poor economic growth and precarious negative trade account balances,” Mr Wolpert said.
Catherine Grant Makokera, head of the economic diplomacy programme at the South African Institute of International Affairs, said there was a high likelihood the country would continue to receive the Agoa preferences in the short term.
“I don’t think there is significant enough pressure from the agricultural lobbyists. In the long term, however, I think the US will really start putting the pressure on to get a reciprocal trade agreement in place … particularly if we sign an economic partnership agreement (EPA) with the EU,” Ms Grant Makokera said.
The long-running EPA negotiations were expected to be concluded this year, and would replace the existing free-trade agreement with a new deal covering a wider range of issues than trade in goods, such as intellectual property rights.
Negotiations for a free-trade deal with the US failed in 2006 as South Africa saw US demands to include issues such as government procurement, investment and intellectual property rights as too onerous.
Many of these issues would be covered by the EPA, leaving the US at a competitive disadvantage to the EU in the local market.
Business Leadership South Africa asked in its submission to the US ITC for a 15-year Agoa extension. This would give the US time to start negotiations for regional trade deals, such as the case with the EPAs, which could lead to reciprocal, permanent trade deals on the continent, it said.
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Private sector urged to buy local
Trade and Industry Minister, Dr Rob Davies, says the private sector should join government’s move towards buying locally produced goods to stimulate domestic economic growth.
Speaking at the third annual Proudly South African Buy Local Summit on Monday, Davies said creating jobs and addressing poverty required a structural change in the South African economy.
With the advent of the global economic meltdown in 2009, the Department of Trade and Industry (dti) has championed the cause of strengthening economic policy to reindustrialise the country.
Government has set a target of 75% local content in its procurement of goods, and Davies said inroads were being made towards this.
“We can’t expect growth if we only import finished goods,” said Davies.
At the end of the current administration, R1 trillion would have been spent on infrastructure geared at transforming the country’s economic landscape, compared to the R480 billion spent by the previous administration.
The country’s infrastructure development plan would not only work to build schools and roads, among others, that are necessary but would also be used as a tool of industrial development.
“We have the capacity,” Davies said at the summit
“Over the course of the current administration, we have strengthened the regulatory framework,” he said, adding that the commitment to procure more goods and services locally has also been made.
Over the years, the department has made designations for local procurement across various industries, including those in medicine and work wear.
“We are doing further work on this,” said the minister.
The Department of Public Enterprises (DPE) Competitive Supplier Development Programme is among those that have made progress in procuring local content.
“It has been successful. For example, Transnet has procured 1 000 locomotives with the bulk of it being manufactured locally,” said Davies.
Public Enterprises Minister Malusi Gigaba said that the structure of the economy had made it difficult to “radically transform the economy”.
He said South Africa was determined to meet its set target of local procurement.
“We want private companies to at least match government in local procurement. We must move South Africa forward,” he said.
Davies said it was everyone’s responsibility to buy local products.
“Procurement is an important area to promote localisation,” said Davies, adding that the dti would not give up on its policy space.
Infrastructure state owned entities reporting to the DPE were set to invest R95 billion this year in the local economy.
Proudly South African CEO Lesley Sedibe said it was important to buy local not just for the sake of patriotism. “Government has shown commitment,” he said.
Source: http://www.sanews.gov.za/business/private-sector-urged-buy-local
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UN labour agency calls for major investment in rural Africa as key to prosperity
Rural development is key to Africa’s prosperity, yet it has been undervalued by Governments, international lenders and policy advisers, the UN International Labour Organization (ILO) said in a paper released today, calling for increased investment in the field.
“Boosting agriculture and building around it a strong rural economy is crucial for Africa. Done right, it would create millions of much needed jobs, as well as wealth, inclusion, food security, crisis resilience, and social and political peace,” ILO Deputy Director-General for Field Operations and Partnerships, Gilbert Houngbo wrote in a commentary.
“A key lesson from ILO rural work is recognizing that rural communities have much potential, and that investment can empower them through integrated approaches. This should start with basic physical and social infrastructures such as roads, energy, education and health facilities. Investments should also target relevant skills development and entrepreneurship support, including through cooperatives and innovative financial mechanisms.”
He said the failure to recognize the value of rural areas has resulted in per capita food production barely growing over the last 50 years, with agriculture representing only 17 per cent of Sub-Sahara’s gross domestic product (GDP), and its already low productivity even declining.
“It’s not surprising that over 60 per cent of rural people live in extreme poverty, and many flee to the cities, where they usually swell the ranks of the unemployed or the informal workforce,” Mr. Houngbo wrote, stressing the need to ensure proper occupational safety and health, social protection and basic rights.
He noted that the reality is not lost on African leaders and the African Union (AU) summit in Addis Ababa, Ethiopia, last month, which had the agricultural transformation as its lead theme.
Promoting rural areas also means combining agriculture with industrial and service activities to stimulate synergies and diversification, and to seize new opportunities in information and communication technology (ICT), tourism, bio-technologies, environmental protection and renewable energy generation, for instance.
Integrated approaches should include promoting links between public and private stakeholders, developing rural workers’ and entrepreneurs’ structures, encouraging dialogue between them and with the authorities, and giving capacities and a voice to youth and women, who are the true engines of rural innovation and growth.
“All important is disseminating the many winning practices,” Mr. Houngbo wrote, citing the Songhaï Centres in Benin where productive enterprises run activities in farming, processing, handicrafts, marketing, energy production, irrigation, repair, recycling and other services, with strong emphasis on holistic approaches, self-reliance, research and training.
Another good example is the Rwandan Telecentre Network, with rural centres that provide information technology (IT) services but also serve as delivery hubs where individuals, companies and government can advertise, sell, buy and exchange products and services from e-training to banking, insurance, taxation, healthcare, electricity and information.
The ILO has actively engaged in rural work since the 1920s, with growing attention to Africa. In 2008, the International Labour Conference adopted a resolution on Rural Employment for Poverty Reduction, which led to the ILO Rural Employment and Decent Work Programme (2009-13), and the declaration in 2013 of decent work in the rural economy as an area of critical importance for ILO.
See also: “The need to invest in Africa’s rural transformation” (International Labour Organisation, 12 February 2014)
Source: http://www.un.org/apps/news/story.asp?NewsID=47133&Cr=&Cr1=#.UvzxCvmSya8
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New report provides blueprint to close infrastructure financing gap
The importance of infrastructure as a key driver of growth, competitiveness and social well-being is well established. Yet, as highlighted in the World Economic Forum’s new report, Infrastructure Investment Policy Blueprint, a significant number of economically viable infrastructure investments are not moving forward.
The global investment shortfall in infrastructure is estimated to be at least US$ 1 trillion per annum. Enhanced participation from the private sector, while not a complete panacea, could do much to close this gap.
The report was overseen by the World Economic Forum’s Global Agenda Council on Long-Term Investing, which is comprised of thought leaders from institutional investors and academia. Chair of the Council Danny Truell said, “Within this report, we have set out a series of practical steps that can be taken by governments to increase the flow of long-term capital into infrastructure projects. Improving collaboration between the public and private sectors, including national and regional governments, corporates and investors, is a key part of this.” Truell is the Chief Investment Officer of Wellcome Trust, United Kingdom.
“While there is a significant supply of capital in many parts of the world today, the ability to attract and availability of patient, long-term capital is much more constrained. As a global institutional investor with an exceptionally long investment horizon, we target opportunities where returns are commensurate with the risk that we are taking. Under the right conditions, including an independent and predictable regulatory framework, infrastructure assets are ideally suited for the type of investor like CPPIB,” said Mark Wiseman, President and Chief Executive Officer, Canada Pension Plan Investment Board (CPPIB), Canada.
“Infrastructure is a necessary condition for economic development and prosperity. It is also at the nexus of public and private actors, each with their own paradigms and vocabularies,” said Michael Drexler, Senior Director and Head of Investors Industries at the World Economic Forum. “With this effort, we hope to bring those paradigms closer and enable joint efforts in creating infrastructure the world so badly needs for a prosperous and sustainable future,” he added.
The report details major recommendations, including:
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More projects need to be structured with appropriate risk allocation and clear investment propositions for the private sector. Projects should be developed with the understanding that investors are “global shoppers” for infrastructure and will rank opportunities based on their risk-adjusted returns.
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Governments need to proactively address political risk, which has emerged as one of the most pressing concerns for infrastructure investors in both emerging and developed markets. Numerous contract and regulatory structures are suggested that can better align public and private sector incentives and reduce renegotiation risk.
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Develop an ongoing pipeline of investment opportunities that will give private sector players the confidence to build internal capabilities and local expertise.
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Consider capital recycling – whereby existing brownfield assets are either leased or sold to raise funds for greenfield projects – as an effective strategy to attract private capital while bringing new infrastructure online.
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Address the tremendous costs and time delays often incurred in infrastructure procurement processes. For example, task a public-private partnership unit with improving the efficiency of the procurement process by increasing standardization and providing technical skills to line agencies. Where possible, mandate fixed deadlines for regulatory or environmental approvals and streamline processes by appointing a lead agency to manage and coordinate the process.
The report is part of the World Economic Forum’s Global Strategic Infrastructure Initiative. This initiative brings together governments, business, investors and civil society to:
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Develop new models for project preparation financing to enable more bankable projects to move from early concept phase to feasibility studies
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Share, disseminate and learn from infrastructure best practices and frameworks through an interactive virtual collaboration system known as the Global Agenda Platform
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Create long-term investment frameworks to attract private capital at the global and regional levels
The Infrastructure Investment Policy Blueprint was developed with the invaluable support and collaboration of Oliver Wyman.
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Trade policies and regional integration in Africa
To address the challenges impeding the flow of goods and services within the continent, policy makers must employ strategies that would strengthen Africa’s infrastructure development.
International trade has increased exponentially in recent years. Though African countries benefited from this increase, their share in world trade has remained low; Africa’s export trade amounts to only about 3 per cent of world exports.
While this poor trade performance is partly caused by trade protectionist policies of the advanced economies against African products, there are also constraints that inhibit trade within the continent.
With the expectation of a generally moderate recovery of the global economy and world trade, it is even more pertinent now than before to foster intra-African trade for improved trade performance.
Experts say rapid conclusion and resolution of the outstanding issues in the Economic Partnership Agreements (EPAs) negotiations are crucial to Africa’s medium-term prospects in both regional and international trade.
Indeed, among the different measures that several advanced countries adopted in 2009 to curb the effect of the financial crisis, trade protectionism has been on the rise. Protectionism increased despite repeated assurances in the context of the G20 meetings in London, as well as in the context of World Trade Organization (WTO) talks.
Often stimulus packages were geared to favour domestic sectors, such as through export support, or to favour buying, lending, hiring or investing in local goods and services. Such measures clearly discriminate against developing countries, including those in Africa, on several levels. Unfortunately, African governments lack the resources to curb the domestic impact of the crisis with the same type of measures.
Also, African companies face unfavourable treatment precisely in markets where additional spending is being promoted. Hence, with these new measures African products easily face discriminatory treatment in relation to similar domestic products and services in developed countries, despite the general agreements about preferential treatment they may enjoy.
FG’s Taskforce
To check the situation in the West African Sub-Regional, the Federal Government of Nigeria recently set up a taskforce on trade facilitation in Nigeria with a mandate to remove all bottlenecks to trade between Nigeria and its neighbouring countries.
The Taskforce member comprises representative from Ministries of Commerce and Industry (now trade and investment), Finance and Transport. Others are: the Nigeria Customs Service, Nigeria Shippers Council, the Nigerian Port Authority (NPA), National Agency for Food, Drug Administration and Control (NAFDAC), the Standards Organisation of Nigeria (SON), Nigeria Quarantine Services (NQS), the Nigerian Police, the Central Bank of Nigeria (CBN) and Nigeria Road Safety Corps.
While on a visit to the Managing Director of Nigerian Export Import Bank (NEXIM), Mr. Roberts Ungwaga Orya recently, the chairman of the taskforce, Mr. David Adejuwon, said the body has taken proactive steps to identify what constitutes technical and physical barriers to movement of goods in the sub region.
He confirmed that there are about 35 check points during the day and about 50 checkpoints at night from Lagos to Seme border hindering trade between both countries. This, he said, was against protocol that ECOWAS member countries signed to reduce it to 3 checkpoints.
According to him, all these have been impacting negatively on the country’s image and its competitiveness in the effort to attract Foreign Direct Investment (FDI) into the country.
He pointed out that once the taskforce was able to remove those barriers in the border post, it will go a long way to facilitate trade between Nigeria and other African States. He called for support and collaboration from NEXIM Bank to facilitate trade between Nigeria and other West African States.
Adejuwon on behalf of the taskforce sought for the support of NEXIM Bank in the provision of surveillance vehicles, trade facilitation workshop, sensitisation and public awareness as well as disseminating and publicising information on the operation of the Committee.
Earlier, the Managing director, NEXIM Bank, Orya, had pointed out that Nigeria has the biggest market in Africa and there was need to reduce the multiple checkpoints, which have militated against free movement of goods in the sub-region.
He added that Nigeria, being a strategic nation in both economic and political institution owned by ECOWAS, needs to explore the sub region market, saying that NEXIM Bank has started deepening payment system by supporting Nigerian exporters. Despite his promises at the time, nothing much has been done to show seriousness on the part of government.
NANTS Charges ECOWAS
However, despite Nigeria’s efforts, some African countries especially those in West Africa are not taking adequate steps to ensure hindrances in achieving regional integration are removed.
Recently, the National Association of Nigerian Traders (NANTS), charged Economic Community of West African States (ECOWAS) leaders to address the poor implementation of the ECOWAS Treaty and Protocols, especially the protocol on free movement by member states as a major hindrance in achieving regional integration objectives.
Also, the association, in a message and agenda to the speaker of the ECOWAS parliament, pointed out that there is poor adherence to the provisions of the protocol on Rights of Residence and Establishment.
It added that the problem is further complicated by the lack of access to the ECOWAS Court of Justice by community citizens on violations of their socio-economic rights under the Protocols and the ECOWAS Treaty itself.
“NANTS has been canvassing for the compliance of member states with these laws, but has also noted that the role of the ECOWAS Parliament in cases like this is unfortunately limited to merely advisory as it lacks law making powers necessary for the review of sub-optimal provisions in a Protocol,” the association said.
NANTS added that, “It is therefore our expectation that your administration as the Speaker of the Parliament would strengthen the extant weak powers of the ECOWAS Parliament, empower the ECOWAS Commission to be more efficient where necessary, enhance the laws of the Community by possibly infusing strict sanction mechanisms thereunto and effectively capacitate even the National Parliaments and other relevant institutions as fundamental organs in the enforcement of laws and or dispensation of justice and integration in West Africa.”
It urged the Speaker to swim into action to review the laws establishing the ECOWAS Court of Justice, with a view to broadening its mandate and jurisdiction in line with other regional Courts such as the European Court.
NANTS said it expects that the ECOWAS Parliament would be instrumental to driving the achievement of the ECOWAS Vision 2020 objectives, particularly of transforming ECOWAS from ‘an ECOWAS of States to an ECOWAS of people.’
“In this regard, we envisage that the Community Development Programme (CDP) would be institutionalised as a veritable instrument for realising the objectives of the Vision 2020 which is endorsed by the Authority of Heads of States and Governments of ECOWAS. This is essential given that the CDP seeks to anchor regional policies, programmes and plans shaped by the citizens themselves rather than erstwhile practice of approval of wholly-Consultant-drawn-policies and programmes,” NANTS said.
“Basically, the CDP seeks to rather institute a ‘bottom-up’ approach to policy making in the region as opposed to a ‘top-bottom’ approach. As representative of the community citizens, NANTS believes that the ECOWAS Parliament should play a more visible role in the entire transformation process.
“We would therefore cherish an opportunity to not just brief you in details on the CDP process but also explore options for the immediate involvement of the Parliament in the CDP process. Indeed, we wish to emphasise that NANTS believes that the ECOWAS Parliament is indispensable and crucial for the actualisation of the ECOWAS vision 2020,” NANTS stressed.
Trade Performance in Africa
Meanwhile, the Organisation for Economic Cooperation and Development (OECD), in a recent report on trade performance in Africa, noted that one critical reason for Africa’s relatively poor trade performance is the weak diversification of African trade both in terms of trade structure and destination.
Most African economies, OECD said, depend on very few primary agricultural and mining commodities for their exports and mainly import manufactured goods from advanced countries.
“As the traditional markets in advanced countries are expected to grow less than markets in emerging Asian and Middle East countries as well as markets within Africa, enhancing trade relations with these more dynamic markets is key. Several inefficiencies also constrain trade within Africa. These inefficiencies include poor transport infrastructure such as maintenance and connectivity, political instability and lack of security within and among several regions, and intra-African trade barriers.
“Despite progress, intra-African trade is still low, representing on average around 10 per cent of total exports. Many factors contribute to the low trade performance, including the economic structure of African countries, which constrains the supply of diversified products; poor institutional policies; weak infrastructure; weak financial and capital markets; and failure to put trade protocols in place, “OECD said.
OECD in the report pointed out that Africa’s trade performance is extremely low compared with other trading blocs outside the continent.
It said: “For example, trade within the Association of South East Asian Nations (ASEAN) accounts for about 60 per cent of their total exports. The same is true for the countries belonging to the North American Free Trade Agreement (NAFTA) area, whose intra-regional trade accounted for 56 per cent of total exports. It is no wonder that the economies of ASEAN and NAFTA are doing remarkably well.
“Barriers to external and internal trade in Africa are numerous, despite Africa’s determination to dismantle trade restrictions in order to create a common market within the framework of regional and sub-regional agreements. These barriers are mostly the consequences of the above-mentioned factors. In addition, 15 of the countries in Africa are landlocked.”
These countries, the report stressed, continue to face serious challenges in having direct access to the sea adding that lack of territorial access to the sea, remoteness and isolation from world markets, and high transit costs continue to impose serious constraints on the overall socio-economic progress of landlocked developing countries.
The situation, it said, has pushed many landlocked developing countries to higher poverty levels.
“Currently, the African Union Commission is focusing on its Minimum Integration Programme (MIP), consistent with previous AU Conferences of African Ministers in Charge of Integration (COMAI). This focus underscores the need for rationalising resources and harmonising the activities and programmes of Regional Economic Communities (RECs). The MIP is in line with a broader undertaking, namely the realisation of the African Economic Community (AEC), as envisaged in the Abuja Treaty and the Constitutive Act of the African Union, “the report said.
UNECA, AFDB Efforts
It added that, “Furthermore, the African Union Commission, together with the United Nations Economic Commission for Africa (UNECA), the African Development Bank (AfDB) and the RECs, has also made notable progress in establishing three-pan-African financial institutions: the African Central Bank, the African Monetary Fund and the African Investment Bank.
“The AfDB is also supporting the institutional setup for improving macroeconomic and financial convergence on the continent. It has also focused on the preparation of a continental Programme on Infrastructure Development in Africa (PIDA), as well as on the development of an EPA template to be used as a guide in the negotiations for EPAs. This last aspect will be particularly conducive to greater coherence between the different EPAs being negotiated and other regional agreements, which are already in place.”
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Namibia expects to miss deadline for renewing Europe trade deal
Namibia said it won’t be able to renew a trade deal with the European Union by the time an existing agreement expires in October because the 28-nation bloc is inflexible over food and agricultural imports.
Namibia won’t renew andeal that “erodes its policy space to industrialize and to pursue free trade arrangements” with regional neighborus, Trade and Industry Minister Carl Schlettwein said in a phone interview today from the Namibian capital, Windhoek. “It won’t make sense to proceed with it.”
The EU has given Namibia and other African countries until Oct. 1 to negotiate new economic partnership agreements or risk losing the preferential market access granted in 2007. Namibia wants safeguards in the food and agriculture industries to ensure that local producers don’t have to compete with “heavily subsidized” goods from Europe, Schlettwein said.
Namibian exports of beef, fish and grapes would lose duty-free access to the EU if the trade deal isn’t renewed by October, Schlettwein said. The nature of the agreement being pushed by Europe would mean Namibia would have to give up the possibility of a free-trade area with 15-nation Southern African Development Community that ranges from South Africa to the Democratic Republic of Congo, he said.
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Getting the export balance right
South Africa and Sweden have long-standing political and development connections, and linking up to find ways to monitor South Africa’s export competitiveness is the latest venture in the nations’ partnership.
Brand South Africa, custodian of South Africa’s image, and Business Sweden discussed designing an export competitive index for South Africa at a networking session held at The Michelangelo in Sandton on 10 February.
At the inaugural Brand South Africa Competitiveness Forum held in 2013, it was established that a Country Performance Tracking Index was needed to enable South Africa to track and respond to key challenges within its economy and society. At the networking meeting this week, economists Mauro Gozzo from Sweden and Chris Hart from South Africa spoke about the state of exports in their respective countries, and how to improve the sector.
Dr Petrus de Kock, the research manager at Brand South Africa, also spoke about how Brand South Africa tried to aid South African exports. Olov Hemstrom, the Swedish trade minister, said: “We from Business Sweden are working a lot to help the export development in South Africa. We have an industrial school in Temba and are working closely with the Department of Trade and Industry as well as Seta.”
sweden1
The panel consisting of Hart, Brand South Africa research manager Dr Petrus De Kock and Swedish economist Mauro Gozzo discussed ways to improve South Africa’s export competitiveness. (Image: Ray Maota)
Exports are crucial
Sweden’s economy is faring better than that of many of its peers: the nation has low public debt and a current account surplus, and since the early 1990s its growth rate has outpaced that of other members of the European Union-15 and the United States, according to the McKinsey Report, produced by the global management consultancy firm. The firm works with its clients to apply its understanding of market and industry forces to develop long-term macroeconomic perspectives.
“Sweden has an export driven economy as 50% of our gross domestic product comes from exports. And of this 50%, about 20 % comes from just three companies,” said Gozzo. He also said that Sweden’s economy had been rising better than that of North America.
“If you have a lot of cyclical exports, your economy will be hard hit at bad times, just like Sweden was in 2009. Our recovery was quick though and by 2011 we were back to normal.” Gozzo said that consumer credit was important in emerging markets.
Sweden’s economic growth mainly reflects productivity gains in the areas most exposed to international competition: manufacturing, and business and financial services, which together account for only about one-third of the nation’s economy. In its two other main components – the public sector and local services – economic growth has been much slower, at a pace comparable to that of the rest of the EU-15.
The EU-15 refers to those member countries of the European Union prior to the accession of 10 candidate countries on 1 May 2004. They are: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom.
“Sweden would never have had such a stable economy had IT and telecoms companies never boosted the Swedish economy,” said Gozzo, talking about major companies such as Ericsson.
South Africa’s weaknesses
Hart said South Africa had not had a great start to the year: the price of petrol had gone up; the rand had declined; interest rates were up; trade unions with political ambitions were fighting employers and not working together with them to find solutions. All of these factors were not good for investors.
“All this does not mean doom and gloom; we are part of the fragile five. These are countries with huge twin deficit markets in emerging markets and include Brazil, India, Turkey, Indonesia and South Africa,” said Hart. South Africa was a triple deficit country as even households had deficit.
“The reason why South Africa is part of the fragile five is the current account deficit because our production has fallen off due to labour unrest.”
The way forward
“Boosting competition and promoting deeper regional trade integration are critical for restarting South Africa’s export engine to bolster growth, which would help create jobs and reduce poverty,” Gozzo explained.
About Brand South Africa’s involvement, De Kock said its job was to give South Africa an endearing image to the rest of the world to boost investments.
Hart added: “South Africa has identified the exports sector as an engine for higher, more inclusive and job-intensive growth with the [National Development Plan], aiming for export volume growth of 6% a year in order to achieve an annual increase in real gross domestic product growth of about 5.5%.”
Source: http://www.mediaclubsouthafrica.com/economy/3700-getting-the-export-balance-right
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Azevêdo highlights role of academics in policymaking of developing countries
Director-General Roberto Azevêdo, in launching the WTO book “Connecting to Global Markets” on 11 February 2014, said: “By demonstrating the contribution that the academic community can make to policymaking, this book makes a powerful case for the WTO Chairs Programme itself. It shows the value of building this academic capacity in developing countries, where it can sometimes be in short supply.” This is what he said:
It’s a pleasure to be here for the launch of Connecting to Global Markets.
I have to tell you that I lost some sleep last night reading through the book, and the different countries and different experiences it brings out.
I would like to congratulate all the WTO Chairs who contributed to the book. In my view it represents a great deal of hard intellectual work – and so I hope it will be read far and wide. I will dedicate further time to it – I’m sure of that.
The aim of the WTO Chairs Programme is to build academic capacity in developing countries in order to improve policymaking on trade – and in particular on WTO issues.
For the last four years it has supported curriculum development, research and outreach activities by universities and research institutions
And so it strikes me that this book is a very fitting conclusion to the first phase of the Programme.
It is based on an important premise – which is that in a more globalized economy, where developing countries have emerged (or remerged) as major trading powers, and where new ways of organizing production have become more widespread, the countries that are able to connect to this new trading system will more quickly and more effectively follow the path to growth and economic development.
The authors – the WTO Chairs – were able to clearly identify some of the major challenges their countries face in trying to achieve this connection.
And what’s interesting is the wide variety of challenges identified, such as:
the diversification of exports,
upgrading in global value chains,
the ability of SMEs to take part in those value chains,
and issues with non-tariff measures.
In this way the book testifies to the diversity of developing countries and their trading interests and capabilities. The “developing country” label only tells you part of the story. By showing this diversity it suggests that the old idea of a north-south divide on trade is increasingly inaccurate – the reality is much more complex: we need to look closer if we want to understand the real picture.
Elsewhere, in contrast, other old ideas are found to be valid – for example, the positive relationship between international economic rules and economic development. A number of the Chair’s country studies show that the rules-based system accelerates the adoption of good trade policies.
The book also shows the importance of initiatives such as Aid-for-trade in seizing the benefits on offer.
But perhaps the clearest message here is just how much academics can contribute to policymaking in developing countries.
Academics are in a position to approach issues with a breadth and depth of analysis which is simply not a practical possibility for many others – such as politicians for example.
Academics have space to consider changes in the global economy so they can identify not only today’s challenges and opportunities, but also those of tomorrow. They are not bound by the silos of specific responsibilities which can exist in government – therefore enabling them to take a broader view of holistic issues like economic welfare.
Freedom from day-to-day policy-making means they are better placed than many to take the long view – an essential virtue for those dealing with economic development, which as we all know is not achieved overnight.
And they can assist policymakers by employing – or creating – more precise methods to measure the impacts of their policies and programmes.
To paraphrase Lord Kelvin, who made valuable contributions to numerous fields of science: “If you cannot measure it, you cannot improve it.”
By demonstrating the contribution that the academic community can make to policymaking, this book makes a powerful case for the WTO Chairs Programme itself. It shows the value of building this academic capacity in developing countries, where it can sometimes be in short supply.
We should thank the current WTO Chairs and the members of the Advisory Board for the success of the Programme since its launch in 2010. And I’m delighted that we will be renewing the Programme for another four years. We look forward to supporting another generation of WTO Chairs – and I have no doubt that we will benefit again from their research and insight, as we are benefitting today.
I think this work is particularly welcome and particularly relevant at this juncture of the WTO’s life.
As you know, in December members were able to conclude a multilateral agreement for the first time since the organization was created in 1995.
The Bali package represents an important boost to trade and development around the world.
At last, we are doing what we should be doing: negotiating serious issues and making new rules, which deliver for the benefit of all.
And so it is vital that all members can play their full role in the debate.
Bali was historic for a number of reasons – but, crucially, it put in check the notion that trade negotiations will inevitably end in a north-south divide. I’m pleased that this is also reflected in the book.
Bali changed the ballgame. Developing countries fought for the results just as hard as anyone. The few voices that expressed reservations about the general balance of the agreement and suggested it should be rejected found no significant echo in the developing world.
But of course the work is not done. With success in Bali we have earned the right to work even harder to tackle bigger issues.
We have two very significant tasks before us.
First and foremost, we need to implement the decisions and agreements reached in Bali.
Second, the Bali Declaration instructs us to prepare a clearly defined work program on the remaining Doha Development Agenda issues by the end of 2014.
What we do now will define the future of the WTO – so it is essential that all members have the capacity and support they need to participate fully in the debate.
As with the negotiations leading up to Bali, I will do everything I can to ensure the process is transparent and inclusive.
The better engagement and integration of developing and least-developed countries into the multilateral trading system is vital for their growth and development – but equally I think it is the defining test of whether the system works.
And I see initiatives such as the Chairs Programme as essential steps towards ensuring that we pass that test.
So thank you again for being here. Congratulations to the WTO Chairs and everyone involved in the Programme. Let’s make sure it goes from strength to strength.
Thank you very much.
Source: http://www.wto.org/english/news_e/spra_e/spra6_e.htm
Download: Connecting to global markets: Full book (236 pages, 5.86 MB)
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New Zealand gov’t blocks scrutiny of controversial TPP trade deal
The New Zealand government has blocked attempts to have the full text of the controversial 12-nation Trans Pacific Partnership (TPP) agreement released to Parliament before it is signed, opposition parties claimed Tuesday.
Main opposition Labour Party leader David Cunliffe said he had called on the government to release the full negotiated TPP text at least two weeks before signing it to ensure full public scrutiny.
“That was blocked by a government that has a record of doing deals behind closed doors,” Cunliffe said in a statement.
“This agreement could impact on New Zealand’s ability to make critical decisions relating to buying medicines and obtaining intellectual property rights,” he said.
“There may be benefits for New Zealand exporters in the agreement but without the release of the full text, we have no way of knowing their extent and nature.”
Public concern about the negotiations, which the negotiators hope to conclude this year, was growing, he said.
The government had to reveal whether multi-national corporations would be given the right to sue the government over matters that affected their profits, such as New Zealand’s proposed legislation requiring plain packaging on tobacco, he said.
Trade Minister Tim Groser told Fairfax NZ News Tuesday that he would not negotiate the agreement “through the media.”
Critics claim that the TPP agreement would curb New Zealand sovereignty on matters such as health and safety and environment regulations.
An academic review rebutted the government’s claim that New Zealand will see an economic gain of 4.5 billion U.S. dollars by 2025 from the TPP as “doubtful.”
The review, commissioned by the Sustainability Council of New Zealand, said the estimate from the U.S.-based Peterson Institute was calculated using methods outside established economic theory.
Source: http://news.xinhuanet.com/english/business/2014-02/11/c_133106690.htm
See TPP Legislators for Transparency: Call made by parliamentarians involved in the negotiation of the Trans-Pacific Partnership for the release of the TPP text to enable scrutiny and debate (11 February 2014)
Download: Economic Gains and Costs from the TPP: Review of Modelled Economic Impacts of the Trans Pacific Partnership (Sustainability Council of New Zealand, February 2014)
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EAC single customs launch postponed to June
Kenya, Uganda and Rwanda have postponed the single customs territory (SCT) roll-out, giving Burundi and Tanzania more time to prepare for the shift.
East Africa Community (EAC) secretariat custom officer Ally Alexander told the committee on Communication, Trade and Investment in Mombasa that the implementation of the model would begin in June.
“We are looking at reducing the costs and number of days to clear the cargo from Mombasa to Kampala to take three days instead of the previous 18 days,” Mr Alexander said.
The SCT was initially planned to begin in January with the three countries moving their revenue staff to common entry and exit points to begin goods clearance.
But Tanzania and Burundi protested their exclusion in the arrangement after Kenya announced in January that it was ready to start accommodating revenue officials from the two landlocked states in Mombasa, prompting the three States to go slow on their plans.
On Monday, Mr Alexander told East African Legislative Assembly that SCT would reduce the cost of doing business and bring efficiency in trade.
He said for exports within the region, a single regional bond for cargo would be issued to cater for goods from the port of Mombasa to different destinations.
An electronic cargo tracking system would also be used to avoid diversion of goods into the transit market.
Under the model, goods will be checked by a single agency on compliance to regional standards and instruments.
“We want to avoid agencies replicating checking on standards, when it is done once this will not be repeated,” he said.
Mr Alexander said goods would be released upon confirmation that taxes have been paid and customs procedures fulfilled.
However goods heading to the Democratic Republic of Congo which is not a member of EAC will be cleared on a transit basis.
The establishment of SCT has raised concerns among stakeholders, key among them the registration of clearing agents and job losses.
Kenya Revenue Authority deputy commissioner customs Nicholas Kinoti said the concerns would be addressed through legislations.
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UAE at centre of multinationals’ shift towards Africa
The UAE is growing in popularity as a base for multinational companies serving the African market.
Strong transport and logistics services combined with its geographic position between the East and West have enhanced the country’s status as a springboard to the continent.
“The UAE has served as a central logistics hub through which to support more and more of our customers across the African continent,” said Peng Xiongji, the UAE general manager of Huawei, the Chinese telecoms infrastructure development company. It opened a logistics facility in Jebel Ali Free Zone last year from which it can quickly ship smartphones and other technology to the GCC and Pakistan, but also to African nations including Kenya and Tanzania.
Huawei hopes the facility will allow it to target greater spending on information communications technology by African governments.
“We can certainly support those projects from the UAE, but to address our customer needs most effectively, we feel there also needs to be investments made in local people and local facilities,” said Mr Xiongji.
The UAE’s links with Africa have swelled in recent years amid rising trade and investments. Trade between Dubai and Africa rose 27 per cent to US$30 billion in 2012 compared with the year before. The Dubai Chamber of Commerce and Industry has been active in encouraging companies in Dubai to boost exports to a continent with a market of more than 1 billion people. It opened a trade office in Ethiopia in 2012 and plans to open others.
As the UAE has built a reputation as a business-friendly destination, some multinationals are even considering relocating their African headquarters to the emirate. While pockets of Africa are still beset with political unrest and terrorism, the UAE has remained a haven of stability.
CBRE, the property consultancy, has experienced a 30 per cent rise in inquiries from businesses considering moving offices from Africa to Dubai.
“The airlines and the pool of talent here are the two critical issues that make people come here,” said Nicholas Maclean, CBRE’s managing director in the Middle East.
“We are seeing a significant increase in companies currently based in Africa which have two difficulties – one is travelling around the continent of Africa and two is staff. Expanding their business to match the growth in GDP is critically difficult and therefore the assumption is that there’s an easier of way of doing that by relocating their business within Dubai.”
Emirates Airline has strengthened its services to Africa in recent years, bringing its total passenger destinations to 26 across the continent. It also serves 15 destinations through its freighter service, SkyCargo. This week the carrier announced the launch from August 1 of a daily linked service between Dubai and the Nigerian cities of Abuja and Kano.
“The country is strategic to Emirates’ global expansion, as is Africa,” said Thierry Antinori, Emirates Airline’s executive vice president and chief commercial officer.
Etihad Airways flies to seven destinations on the continent, as well as to the Seychelles. On Wednesday, the Abu Dhabi-based airline said it was opening a sales office in Johannesburg to serve its newly created Africa sub-Sahara and Indian Ocean region.
In a news release, Peter Baumgartner, Etihad’s chief commercial officer, said: “Africa is quickly developing into the next big investment destination, with business growth on the rise and African economies amongst the fastest growing in the world. We are experiencing strong passenger loads right across the continent.”
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Transparency needed to curb Africa’s loss of $38bn through trade mispricing
There has been a general improvement by several mining companies, as well as some governments and policy makers, concerning transparency in mining deals and taxation in Africa, according to Caroline Kende-Robb, executive director of the Africa Progress Panel.
“If you look at governments, a country like Guinea is now publishing contracts online. They have now 60 contracts online within the last year. Nobody thought that that would happen about a year ago,” Kende-Robb told How we made it in Africa.
A report published by the Africa Progress Panel last year revealed that billions were leaving Africa through illicit deals such as tax avoidance and evasion, unfair pricing practices and secrecy around company ownership and revenue flows.
“Billions and billions of dollars are leaving Africa. We calculated, with the help of Global Financial Integrity, that there was US$38bn leaving Africa every year… [through] trade mispricing, where you undervalue the prices of your imports and exports so you don’t have to pay the appropriate amount of tax,” added Kende-Robb.
Other illicit outflows – such as funds that are illegally earned, transferred or utilised, as well as unrecorded private financial outflows – are estimated to total $25bn. In fact, the report highlights that Africa loses more through illicit outflows than it receives through aid and foreign direct investment.
“And we estimate when we look at the Democratic Republic of the Congo that they undervalued just five deals by $1.4bn… over a matter of two years,” continued Kende-Robb. “And these are massive amounts of money that are flowing out, that people have difficulty tracking, because of the lack of transparency.”
She added that with beneficial ownership and a large portion of companies registering in offshore accounts, it is also difficult to know who owns which companies and where mining goods, tax and financial inflows are actually going.
“But this is now on the agenda so I think we are seeing an alignment of interests where people recognise that there has to be more transparency,” she said, adding that this was one of the central discussion points at the G8 Summit last year.
“This whole issue of tax justice is affecting everybody. It’s affecting the tax base in Africa and it’s affecting the tax base in Europe and these European countries with the financial crisis in their own region… But it’s also companies that are saying we don’t want to trade with people we feel are not acting in a way that is ethical. In Africa there are a lot of companies knocking around the place who are taking a lot of money out of these countries, through a process of undervalued assets.”
Recognising a need for a social licence
The Africa Progress Panel – chaired by former United Nations Secretary-General Kofi Annan – consists of 10 influential members who advocate for shared responsibility between African leaders and their international partners to promote fair and sustainable development for Africa by ensuring that African issues remain prominent in global discussions.
One major issue the panel wants to bring to international attention is how local communities can benefit from the extractive companies operating in their areas.
Kende-Robb said many of the mining companies operating in Africa are now beginning to understand that they need a “social licence” to operate within communities.
“I think that some of the companies are now saying to us that this can’t be a short term relationship between the communities and [themselves]. [They] have to think more long term, and [they] can’t see the communities as a liability… Without the support of the communities the companies will get into very big trouble and that will affect their reputation, which affects their long term investment.”
She added that mining companies should place community development at the top of their agendas, not just for the community’s benefit, but for the sustainability of the company’s operations too.
“It’s about partnering with communities to make sure that they are part of the development process because business should not be seen outside society. Business and society should be joined to add social value thereby increasing the chances of sustainability in the longer term. It’s good for business; it’s good for society,” emphasised Kende-Robb.
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Namibia: 2013 Article IV Consultation – Staff Report
On January 29, 2014, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Namibia without a meeting. In concluding the 2013 Article IV consultation with Namibia, Executive directors endorsed staff’s appraisal, as follows:
Namibia has made impressive strides in economic development since gaining independence in 1990. The positive growth record in recent years has raised overall incomes and delivered good economic outcomes.
However, the solid growth has not led to sufficient job creation and lower inequality. The government remains the largest employer in the economy and TIPEEG is yet to put a significant dent on the high level of structural unemployment.
The 4th National Development Plan (NDP4) serves as the authorities’ blueprint for structural transformation. Staff welcomes a tightly focused NPD4 that emphasizes returning to high and sustained growth, reducing income inequality and enhancing job creation through reforms that lay the foundation for greater private sector development.
The period ahead will require a delicate balancing act in the implementation of macroeconomic policies because of global spillovers and domestic policy developments. The uncertain global environment especially for emerging markets and a possible delay in finalizing negotiations of the EPA with the EU are key risks. In a more adverse global scenario than anticipated, the authorities should allow the automatic stabilizers to work on the revenue side and avoid discretionary fiscal measures to support domestic demand.
Staff recommends that the government pursue a “growth-friendly” medium-term fiscal consolidation strategy. This should aim to rein in current spending (wages and transfers and subsidies to SOEs) while preserving growth-promoting capital. Staff welcomes plans by the department of public servants management to link civil servants’ pay with performance. Staff also commends the measures being put in place by the government to improve domestic revenue generation which bodes well for a balanced fiscal consolidation. Staff advocates for a broadly balanced fiscal position by FY2015/16 to help rebuild the fiscal and reserve buffers.
Staff commends the sense of urgency shown by the government to address the state of finances of the State-owned enterprises (SOEs). Speedy implementation of SOE performance agreements is needed to put them on a financially viable footing.
The government’s emphasis on enhancing greater financial inclusion through its financial sector strategy, while preserving the stability of the financial system, is appropriate. While the level of household indebtedness has stabilized, it remains elevated. In staff’s view, this in itself does not pose imminent risk to macroeconomic and financial stability. Staff commends the authorities for the initiatives taken to strengthen their surveillance of the financial sector.
Achieving sustainable growth would require a set of reform-oriented innovative policies to reinvigorate productivity growth. These include increasing the quality of public spending, improving the business environment, implementing supportive measures to liberalize the service sectors, reducing the domestic regulatory burden on firms and the skill mismatch in the labor market. Staff commends the authorities’ efforts to strengthen public financial management including bringing Namibia’s procurement system in line with international standards.
KEY ISSUES
Setting: Namibia’s positive growth record over the years has raised overall incomes and led to positive economic outcomes. However, growth has not translated into sufficient job creation contributing to persistently high unemployment and income inequality.
Outlook and risks: Real GDP growth is expected to moderate to 4 percent in 2013 from 5 percent in 2012 reflecting weak global demand for exports partially offset by solid growth in domestic demand. The uncertain global environment and a possible delay in finalizing negotiations for the Economic Partnership Agreement (EPA) with the European Union are key risks.
Policy mix: Given the peg to the South African rand, staff urges the authorities to return to fiscal prudence through greater expenditure control. In case of more adverse shifts in the global economic environment than currently anticipated, staff advocates for allowing the automatic stabilizers to operate on the revenue side.
Medium-term: With an uncertain external environment, staff recommends the authorities pursue a “growth-friendly” fiscal consolidation reining in unproductive current spending, while protecting growth-promoting capital spending. Staff welcomes efforts by the government to look into ways to steer a gradual reduction of the wage bill which would improve labor market outcomes. Measures to enhance domestic revenue mobilization would help balance the fiscal consolidation strategy.
Financial stability and inclusion: The government’s emphasis on enhancing financial inclusion, while preserving the stability of the financial system, is appropriate. Although the level of household indebtedness has stabilized, it remains elevated. Thus, staff commends the authorities for initiatives taken to strengthen their surveillance of the financial sector and thereby help minimize the associated vulnerabilities.
Growth and diversification: Achieving higher growth would require a set of efficiency- driven reforms to reinvigorate productivity drivers. Delivering good outcomes on policies for greater diversification would require supportive measures to liberalize the service sectors and reduce the domestic regulatory burden for firms.
Past advice: There is broad agreement between the Fund and the authorities on macroeconomic policy and structural reform priorities. The authorities also view the Fund as a valuable partner for their capacity building efforts.
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China-Africa trade moves up
The nature of what Africa buys from China is slowly beginning to change
While most of China’s imports from Africa continue to be energy products and resources, its exports to the continent are shifting toward high-end products, a trend that will continue, experts say.
“China’s imports from Africa last year did not change much,” says Li Wentao, a researcher with the Institute of African Studies at the China Institutes of Contemporary International Relations.
“That’s because the country’s economic development needs the primary products of energy and resources that accounted for about 70 percent of the continent’s exports. On the other hand, China’s exports to Africa are shifting toward products with higher technology, such as mechanical and electrical products, motorcycles, televisions, cell phones and equipment.”
The trend is becoming clearer and is driven mainly by fast economic growth in the continent, he says.
“Africa’s consumption has improved significantly in recent years. At the same time, Chinese products have had the advantage of being cheap but of good quality. In recent years some Chinese businesses have moved to establish their brands and standards in Africa.”
China’s project contracting businesses in Africa have also increased exports of mechanical and electrical products to the continent, he says.
“The growth in trade between China and Africa will continue to be robust. In addition to increasing in size, the quality is also improving as mechanical and electrical products, rather than shoes and clothes, account for a bigger share of Chinese exports to Africa, a remarkable trend in recent years.”
Bilateral trade was probably worth more than $200 billion last year, he says.
Between January and October last year, bilateral trade between China and Africa was worth $172.83 billion, up 5.5 percent from a year earlier, says Chen Hao from the Department of West Asian and African Affairs of the Chinese Ministry of Commerce.
High value-added and high-tech products accounted for nearly half of China’s exports to Africa, Chen says. African industrial goods such as steel and copper products have also started to go to the Chinese market.
China became Africa’s largest trading partner in 2009. Africa is China’s important import source, second-largest market of overseas project contracting and fourth-largest outward investment destination, according to a Chinese government white paper on China-Africa economic cooperation published last year.
Trade between China and Africa was worth $198.5 billion in 2012, 19 percent more than in 2011, and accounted for about 5 percent of China’s total trade and about 16 percent of Africa’s overall trade. More than 2,000 Chinese businesses had invested more than $20 billion in African non-financial sectors by the end of 2012, the white paper says.
Li Jinzao, vice-minister of commerce, says Africa’s economic integration has provided new scope for bilateral cooperation in broader sectors and at a higher level. Economic cooperation between China and Africa is going through a period of rapid growth and change, he says.
Li Wentao says: “A highlight is that bilateral trade in services has grown rapidly in recent years. More Chinese tourists are visiting Africa, and African aviation and logistic services are going into China. Chinese telecom giants such as Huawei and ZTE are greatly expanding their businesses in Africa.”
However, China and Africa still have the challenge of a trade imbalance, a structural problem that cannot be resolved in the short term, Li says.
“Africa is also looking at China’s transfer of technology and industries into the continent. As China shifts some manufacturing businesses, that will ease overcapacity at home and upgrade African industries.
“In addition to expanding bilateral trade, China will next pay more attention to increasing Chinese investment in Africa, which will create more local employment and benefit the continent more.”
In March last year, Chinese President Xi Jinping chose Africa as a destination in his maiden foreign trip after assuming office. While in Tanzania, he said China would strengthen mutually beneficial cooperation with African countries in fields such as agriculture and manufacturing and help African countries translate their advantages in resources so they could achieve growth that is internally driven and sustainable.
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World needs policies for demand-led recovery from global financial crisis, argues UNCTAD study presented to G-20
Weaker global demand and not new trade barriers or supply-side difficulties are responsible for the slow growth in international trade, an UNCTAD study presented to a G-20 working group on January 21-22 contends. An expansion of trade would come with the recovery of demand and output, the study argues, and not the other way round.
More than five years after the onset of the global financial crisis, the world economy has not recovered a strong, sustainable or balanced growth path explains the UNCTAD study, called “Macroeconomic Strategies and Trade from a Global Perspective”.
The lack of dynamism is most visible in output, employment and investment figures, the study explains, but it is also apparent from the very sluggish growth of international trade.
However, trade facilitation and other supply-side measures cannot reignite trade and growth without a strong expansion of demand – including through income redistribution, particularly in major surplus economies.
Meanwhile, some policy measures, such as spending cuts and wage compression, are counterproductive, the study argues.
The trade facilitation agreement reached by the World Trade Organization in Bali in December 2013, while a welcome sign that multilateralism is still alive, did not address the main constraints on trade, contends the UNCTAD study, which was presented at a meeting in Quebec, Canada, of the G-20 Framework Working Group for Strong, Sustainable and Balanced Growth.
Policy choices aimed at spurring exports, such as “internal devaluations”, including wage reductions, would be self-defeating – especially if followed by several trading partners at the same time – the G-20 meeting heard.
The UNCTAD study also says that in order to be sustainable, demand growth must be based on household spending and supported by rising labour incomes (whose share in the GDP declined in most countries in the last two or three decades).
Rising private consumption, combined with public investment and expenditure in public services, would provide the basis for increased private investment, the study argues. This would be in contrast with the pre-crisis pattern of boosts in private spending based on consumer credit and asset bubbles, which contributed to internal and external imbalances and to the financial crisis.
In an interdependent global economy, the manner in which domestic demand spills across different countries is of paramount importance, according to the UNCTAD study.
One isolated country or group of countries can try to exit the crisis through net exports, even if other components of domestic demand remain anaemic; but if this strategy is followed by many trading partners, it creates a “fallacy of composition” whereby too many goods chase too few consumers.
A wider revival of economic growth and trade could conceivably follow from surging demand in a number of systemically important economies, the UNCTAD report contends.
However, demand must be geographically distributed in a way that is consistent with the reduction of global imbalances. This requires that surplus countries take the lead in expanding domestic demand and make possible an expansionary adjustment – in contrast with the recessionary bias of balance-of-payment adjustments that may put the entire burden on deficit countries.
Since 2010, UNCTAD has participated as an observer in several meetings of the G-20 Framework Working Group on Strong, Sustainable and Balanced Growth and has submitted several technical papers.
UNCTAD’s contributions to the G-20 aim to highlight the issues of interdependence and the need for systemic coherence in international monetary, financial and trade affairs, all of which are of vital interest to all member States of the United Nations.
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TTIP talks ready to accelerate
The U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) talks are ready to resume after a quiet time since the last meeting in mid-December. U.S. Trade Representative (USTR) Michael Froman and EU Trade Commissioner Karel De Gucht will focus on the overall time frame and scope of the agreement at a February 17-18 ministerial level stocktaking session in Washington, DC. The fourth round of full negotiations for the TTIP will take place March 10-14 in Brussels.
The negotiating process received a jolt on January 21 when the EU Commission announced a three month pause on the investment portion of the TTIP talks after the March negotiating session while it conducts a public comment period. Commissioner De Gucht said the public consultation is in response to the wide public interest in the issue and the need to strike a balance between protecting EU investors and upholding governments’ right to regulate in the public interest. Some policy analysts said the action was meant to divert criticism on the investment issue ahead of EU parliamentary elections in May. USTR Froman is not bothered by the pause noting that investment issues are debated in the U.S. and he has ongoing consultations on the issue. Investor-state dispute settlement mechanisms have become an issue recently in other trade agreement negotiations and will be in future negotiations.
The EU Commission also created a special expert group on TTIP representing a wide range of interests to give the Commission ‘high quality,’ but nonbinding advice on TTIP issues. EU chief negotiator Ignacio Garcia Bercero will chair the group and work directly with the experts. The group’s members represent environmental, health, consumer and workers’ interests of various industries. The Commission is sensitive to criticism from interest groups that it does not listen to the general public and non-government organizations and is trying hard to overcome that criticism by increasing channels for input.
The announcement that the U.S. and EU will exchange their initial tariff rate offers for goods on February 10 does not substantially change the situation for U.S. agriculture. The EU’s agriculture tariffs are generally higher than those of the U.S., and the EU’s initial offer on agricultural market access is likely to be less aggressive than the U.S. plan and include some items where tariffs are not immediately free or phased out over 3-7 years. Lower tariffs on products that have regulations that restrict market access are not viewed as progress.
In trying to defend the EU Commission’s position in the talks, Commissioner De Gucht has made statements that raise red flags for U.S. agriculture. He said that the EU would not give up its policies on genetically modified food or restrictions on beef raised with artificial growth hormones. He did acknowledge they will be talking about the present and future barriers between Europe and U.S. related to regulation, but all regulations will not be eliminated. He did not indicate if there is a negotiator’s middle ground between those two statements.
Regardless of the various political needs to adjust messages on more open trade, most of the economic analyses on TTIP show that most of the increase in trade value will come from achieving regulatory convergence. That does not mean more regulations or fewer regulations. The issue is how can two heavily regulated economies put their regulations on common terms so that products produced under one set of regulations can easily be sold under the other set of regulations. That is sometimes referred to as regulatory equivalence. There is no point in talking if that is not the goal.
That is where the issues get worrisome for U.S. agriculture. In a recent speech, Commissioner De Gucht said regulations in the U.S. and the EU often differ for “cultural reasons, beliefs, or societal differences.” That appears to be a reasonable assessment of the situation. With that as a starting point, how do the negotiators move toward regulatory convergence or equivalence?
The starting point for a trade agreement may be to ensure that the two regulatory systems dealing with food safety issues have the full range of information that is available on each side as they continue to set regulatory policies under their current systems. There is some concern now that not all scientific test data is being fully weighed as regulations are developed. Additional procedures that ensure full airing of views during the regulatory process of the other will allow each side to more clearly see where the disconnects exist and how they may be bridged.
Over time, the additional information will lead to more understanding of the issues and some convergence of thinking on how regulatory equivalence could be achieved. That process will take some time because deep-rooted concerns in industries and the general public will not be changed quickly. When the TTIP talks were in their pre-launch stage, some officials on both sides argued that some issues would not be resolved in the talks, but a process could be put in place to work through issues after an overall agreement was reached.
A solution to food safety issues based on science within the TTIP agreement is still the preferred outcome, but that does not appear any more likely now than when the pre-launch talks began a year ago. The stocktaking meeting in February and the full negotiations round in March will likely confirm that situation.
President Obama will be in Europe ten days after the end of the March round of talks. He will attend the U.S.-EU Summit in Brussels and is scheduled to meet one-on-one with European Council President Herman Van Rompuy and EU Commission President Jose Manuel Barroso. This will be an opportunity for the political leaders to discuss the outcome of the talks and the next steps forward.
Despite the increase in activity for the TTIP, the talks will likely continue on a slow track. Legislative authority from Congress for the President to negotiate trade agreements and have them considered by Congress on an expedited timetable, called Trade Promotion Authority or TPA, will likely be delayed until after the Congressional elections later in fall of this year. If approved then, the Trans-Pacific Partnership trade agreement which is almost completed is likely to be taken up first. That would push consideration of the TTIP well into 2015 at the earliest.
Ross Korves is a Trade and Economic Policy Analyst with Truth About Trade & Technology.
Source: http://www.truthabouttrade.org/2014/02/06/ttip-talks-ready-to-accelerate/
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Malawi: IMF Country Report No. 14/37
This paper focuses on Malawi’s Third and Fourth Reviews Under the Extended Credit Facility (ECF) Arrangement. Donors have suspended some aid disbursements to Malawi in response to a scandal involving the theft of public funds. Recovery is under way in many sectors of the economy, facilitated by increased availability of foreign exchange. Performance in relation to quantitative targets for the third ECF review was good, but weakened for the fourth review. There was significant fiscal slippage (excessive domestic borrowing) during July-September 2013. The IMF Staff supports the authorities’ requests for waivers based on corrective actions and policy commitments.
Executive summary
Donors have suspended some aid disbursements to Malawi in response to a scandal involving the theft of public funds. A group of public servants exploited weaknesses in the control environment of the government’s Integrated Financial Management Information System (IFMIS) to make fraudulent payments to several entities that had not provided any goods or services to the government. The authorities are implementing an Action Plan of remedial measures to prevent the recurrence of the fraud. Key elements of the action plan include strengthening security and management of IFMIS, a forensic audit, and identifying and prosecuting the perpetrators of the fraud.
Recovery is underway in many sectors of the economy, facilitated by increased availability of foreign exchange. This reflects the impact of policy reforms, including a strong response to exchange rate adjustment from the tobacco sector and re-established external credit lines. Inflation is falling, although more slowly than programmed.
Performance in relation to quantitative targets for the third ECF review (March test date) was good, but weakened for the fourth review (September test date). There was significant fiscal slippage (excessive domestic borrowing) during July-September 2013. This constrained the room for substituting domestic borrowing for the shortfall in aid flows. There has been progress in implementing structural benchmarks, but at a slower pace than programmed.
Discussions focused on managing the fall-out from the fiscal scandal and policies to reverse the fiscal slippage and lower inflation. A substantial decrease in aid receipts for the remainder of the fiscal year necessitated some reprioritization of spending plans as well as expenditure cuts. Fiscal and monetary policy need to be tightened to lower inflation pressures and safeguard international reserves.
Staff supports the authorities’ requests for waivers based on corrective actions and policy commitments. The authorities are implementing strong corrective actions to address the fraud and fiscal slippage, including several prior actions, and have also strengthened external debt management to ensure that they observe their commitment not to contract nonconcessional external debt. Staff further supports the requests for extension of the arrangement, rephasing of disbursements (including a halving of the disbursements originally associated with the third and fourth reviews and applying the balance to an additional review) and modifications of performance criteria.
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Tourism in Africa is an untapped goldmine: report
The future of tourism in Africa holds great potential, but its expansion and development depends on better transport infrastructure – including airline connections, roads and railways – in addition to open borders, and improved marketing to niche sectors such as adventure and eco-travellers.
The potential of Africa’s tourism is untapped, writes Mthuli Ncube, African Development Bank Group Vice-President and Chief Economist, in the foreword of the inaugural issue of the Africa Tourism Monitor, a joint initiative produced by the African Development Bank in partnership with the Africa Travel Association and Africa House at NYU.
“While Africa accounts for 15% of the world population, it receives only about 3% of world tourism,” writes Ncube. “To maximize Africa’s tourism potential, critical investments are needed in key infrastructure sectors (e.g. transport, energy, water and telecommunications).”
Africa is home to some of the fastest-growing economies, and revenues from tourism in Africa already represent more than double the amount of donor aid. Tremendous opportunities exist to further expand tourism across the African continent, yet challenges remain. The need for solid infrastructure, in the form of good roads and transportation corridors, for better airline connections, and fewer visas to cross African borders are just a few of the reasons Africa’s tourism sector has not taken off.
According to the United Nations World Tourism Association, 63.6 million international tourists arrived in Africa in 2012, compared to 17.4 million visitors in 1990. The top six countries for international tourist receipts in 2012 were, in descending order: Egypt ($9.94 billion), followed by South Africa ($9.994 billion), Morocco ($6.711 billion), Tunisia ($2.183 billion), Tanzania ($1.564 billion) and Mauritius ($1.477 billion).
The economic potential of tourism is remarkable, with direct and indirect impact on employment. In Africa alone, travel and tourism generated 8.2 million direct jobs in 2012. Africa is home to the world’s youngest population, with close to 70% of its population below the age of 25, and youth constituting about 37% of the labour force, but making up approximately 60% of unemployment. For this reason, the AfDB aims to promote tourism through the development of cross-border infrastructure and regional transport corridors, which will facilitated the movement of people and goods on the continent.
Africa’s future looks bright given the huge growth in adventure and eco-tourism, coupled with the continent’s rich cultural heritage and natural beauty. Already, several airlines from the United States, Africa, Europe and the Middle East have plans to expand their routes. Soon those untouched beaches and remote villages will become a thing of the past.
Download: Africa Tourism Monitor 2013 (5.6 MB)
Azevêdo urges members to make 2014 the year to implement Bali and put Doha back on track
At the first meeting of WTO ambassadors after the 9th Ministerial Conference, Director-General Roberto Azevêdo told the Trade Negotiations Committee on 6 February that: “Bali represents not just a huge achievement for all of us – but also a huge opportunity. There is real political momentum and we must build on it.” He said he had asked the chairs of the negotiating groups to “start a dialogue with members on (Doha Round) issues that we may be able to take forward”. Below is an excerpt from his speech.
Good morning everybody.
As this is our first meeting of 2014, I would like to wish you all a happy and successful New Year – I very much hope it is a productive one.
I want to thank you all for the role you played, individually and jointly, in delivering that historic success in Bali.
After an 18 year drought, Bali proved that the WTO can deliver negotiated outcomes.
It delivered significant gains for the global economy and particularly for our developing and least-developed members. And it moved the spotlight back onto us here in Geneva.
But Bali has not finished the job.
We have two very significant tasks before us.
First and foremost, we need to implement the decisions and agreements reached in Bali.
Second, the Bali Declaration instructs us to prepare a clearly defined work program on the remaining Doha Development Agenda issues by the end of 2014.
And we should remember that the Bali Declaration instructs that those areas where decisions were non-binding in nature must be a priority in our post-Bali work. We must keep a relentless focus on these issues.
So the real work starts now.
These two tasks will form the bulk of our work over the course of this year – and so this is what I want to talk about today.
Implementing the Bali Package
First, let’s focus on implementation.
The true significance of the Bali results, and the tangible realization of their benefits, will only be achieved as a result of the actions that you, the members, take over the coming months.
This is an important test for the system – and one which we must pass if we want to move forward and see the benefits of Bali made real.
We must work together to keep up the momentum and the pressure that allowed us to reach a successful outcome in the first place.
The Bali Package consists of ten ministerial decisions, each of which requires different steps to take forward.
A lot of the implementation efforts will fall outside the TNC – but for clarity I think it would be helpful to take a few moments to set out some of the actions needed to implement each of those decisions.
Let’s start with Trade Facilitation, where the work has already started, and where there are important milestones for implementation over the coming months.
The first meeting of the Preparatory Committee was convened by the General Council Chairman on 31 January.
And we already have a chair, as you elected Ambassador Esteban Conejos by acclamation. Let me congratulate Ambassador Conejos, and wish him all the best in his new role.
The Preparatory Committee will swiftly commence the execution of the tasks Ministers gave it in Bali – specifically, to ensure the entry into force of the Trade Facilitation Agreement and prepare for its efficient operation.
The Bali decision on Trade Facilitation also calls on the Committee to carry out three immediate tasks:
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undertaking a legal review of the Agreement;
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drafting a protocol of amendment to include the Trade Facilitation Agreement in Annex IA of the WTO Agreement;
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and receiving notifications of Category A commitments.
Our ability to move the whole of the WTO agenda forward hinges on our ability to fulfil the promises to provide timely and effective technical assistance and capacity building wherever it is demanded by developing and least-developed countries.
To help those countries make full use of the flexibilities set out in Section II, and to facilitate preparations for the Agreement’s entry into force, the Secretariat will continue its needs assessment program. But in addition there is an imperative on developing members to identify what support they need as early as possible.
Donor members and various donor organizations are also getting ready to provide comprehensive support on Trade Facilitation.
I met with them yesterday for an initial conversation about the importance of coordination and transparency in the provision of support to developing countries.
Many donors were present at the meeting – over 25 countries and organisations were there.
In due course, the conversation needs to be broadened out to include beneficiary countries once there is greater clarity on their needs.
The WTO will of course help to facilitate the interaction between the donors and the beneficiaries.
So there is important – and urgent – work ahead.
I must also take this opportunity to thank Ambassador Sperisen-Yurt for his leadership and chairmanship of the Negotiating Group on Trade Facilitation.
Let’s turn now to Agriculture, where there were three decisions in Bali.
For each of these three decisions, Ministerial guidance specifically indicates that the Committee on Agriculture will undertake follow-up activities in terms of monitoring and review.
The Committee on Agriculture met on 29 January and discussed follow-up on these issues.
So let me briefly take each one in turn…
First, export competition. This decision calls for dedicated discussions based on notifications and a questionnaire to be circulated by the Secretariat.
The annex of the Declaration includes elements for enhanced transparency on export competition which will form the basis of the Secretariat’s questionnaire.
The Committee on Agriculture agreed to hold the annual discussion on export competition during its meeting in June this year. This timing could also be appropriate in 2015 as it would provide adequate time between that discussion and the review foreseen at MC10. That’s for you, the members, to follow through in the Committee on Agriculture.
The Secretariat will circulate the questionnaire soon with a view to circulating a summary of the questionnaire results in advance of the June meeting.
Second, with respect to the decision on TRQ administration, the Committee on Agriculture is expected to review and monitor the implementation of the Understanding.
The monitoring to be conducted in the context of the TRQ underfill mechanism will depend on the members’ submissions.
Some members have indicated that they planned to take advantage of this mechanism. Others noted that the Committee on Agriculture could begin applying the monitoring procedures laid out in the Annex of this Decision as soon as submissions were received by the Committee.
That leaves the decision on public stockholding for food security purposes. Here the monitoring activity of the Committee will again depend on how members decide to push this monitoring agenda.
As you will recall, Ministers agreed to establish a work program to be undertaken in the Committee on Agriculture with the aim of making recommendations for a permanent solution on this issue – that’s what the decision says. This work program will take into account members’ existing and future submissions.
Indeed, the conversation on the work program has already started with a discussion at last week’s meeting of the Committee on Agriculture.
I’d like now to turn to the decisions on Development and LDC issues.
The adoption of an LDC package was a key achievement of the Bali Ministerial – representing a very significant step forward towards the better integration of LDCs into the multilateral trading system.
But, here too, Bali represents a beginning, not an end.
A significant amount of effort is needed to convert these decisions into concrete gains for the LDCs.
On the operationalization of the services waiver the LDCs will need to table their collective request as soon as possible. This will kick-start the process, leading towards the high level meeting at which members will indicate if, and in what areas, they are prepared to give preferential access to LDCs.
In parallel, the Council for Trade in Services is convening an informal meeting to discuss the operationalization of the waiver. I encourage all members to actively participate in this process, so that we can bring fruition to this important instrument.
Next, the decision on Duty-Free Quota-Free market access.
Similarly here, members will need to notify their DFQF schemes and any other relevant changes that they may have adopted. In my view the LDCs should be pursuing this issue in the Committee on Trade and Development. Of course all members have a responsibility here, and the Secretariat will be on hand to support the process, but the demandeurs must keep up the pressure.
The same goes for the last decision in the LDC package – which is on preferential rules of origin.
Members have concrete guidelines before them to make further improvements to their LDC preference schemes. I encourage members, whenever possible, to draw on these multilateral guidelines and make a further contribution to help ease market access for LDC products. There will be an opportunity to annually review developments through the Committee on Rules of Origin.
The other important development decision taken at Bali – though not specific to LDCs – was to establish a Monitoring Mechanism on Special and Differential Treatment. Members will take this forward through a Dedicated Session of the Committee on Trade and Development.
I should also mention here those items which were held over from Bali – for example the Cancun 28 proposals and the 6 Agreement-specific proposals. These items are under active consideration in the Special Session of the Committee on Trade and Development and this work will need to be picked up as soon as possible.
The tenth decision of the Bali package relates to Cotton, which of course is sensitive for many members, particularly the Cotton-4.
I understand that informal consultations are underway to call a meeting of the Director-General’s Consultative Mechanism. That meeting would likely be held back-to-back with a dedicated discussion on cotton in a meeting of the Committee on Agriculture in order that we can move this issue forward.
You all worked incredibly hard last year to conclude the negotiations and deliver the Bali package.
So now let’s make it count, by delivering the benefits of the package.