Topics publications: African regional integration
Trade Reports
A legal and economic assessment of South Sudan’s possible accession to the East African Community
South Sudan applied to join the East African Community (EAC) in 2011, when H.E. General Salva Kiir Mayardit, the President of the Republic of South Sudan signed a note verbale. In August 2013, the EAC Council of Ministers passed a resolution, establishing a High-Level Negotiations Team (HLNT) to carry out the accession negotiations with South Sudan. On 13 March 2014, President Mayardit signed a decree, referenced 12/2014, establishing a High-Level Committee to negotiate the Republic of South Sudan’s accession to the EAC. In April 2016, South Sudan was admitted to the EAC, despite concerns over governance and the fragility of the peace.
The ambit of the EAC is wide-ranging with the partner states aiming to ‘strengthen their economic, social, cultural, political, technological and other ties for their fast balanced and sustainable development by the establishment of an East African Community’. Accordingly, the accession process creates and requires the implementation of common rules and standards that govern a wide range of areas. In the area of economic integration this process imposes the obligation to liberalise markets and ensure non-discrimination in achieving the free movement of goods, services, labour, and capital, while also requiring partner states to create uniform legislation with the purpose of establishing a common legal framework. There is scope in the accession process to adjust the pace of implementation and determine the extent of liberalisation, although this flexibility varies widely.
This study provides an assessment of the regulatory and economic aspects of South Sudan joining the EAC, focusing on the economic acquis communautaire. The collapse of the Unity government and the tragedy of the renewed conflict in the country means that many of the opportunities and challenges from accession identified are, at present, largely academic. But when, as so many so dearly hope, this young nation moves towards peace, the need to realise economic opportunities in the regional markets and from regional integration will be pressing.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Services trade in Africa
This working paper examines the African services trade to set a background for assessing the main issues for consideration in the current Continental Free Trade Area (CFTA) negotiations. This is done systematically by firstly looking at the actual trade data in order to see who the main traders are and assess the extent to which South Africa dominates the trade. We then look at some of the issues associated with barriers to services trade and how the CFTA may address these.
Services are a major part of modern economies; services trade is important for many African countries but the data is difficult to obtain, especially for bilateral trade data. The authors find that South Africa is not the dominant service trader on the continent but is dominant in many of the smaller services sectors. Transport and travel are the major traded sectors although these are generally outside a trade negotiation focus.
The current measurements of services trade restrictiveness show large variations between different countries and different sectors. Despite its current difficulties, the Trans-Pacific Partnership Agreement (TPP) represents the benchmark in what can be achieved with services trade liberalisation. Africa sorely needs reforms in services trade frameworks and policy environments; in the absence of specific targets for the usual negotiating reciprocal process with partners, the emphasis reverts back to regulatory reforms with its emphasis on unilateral policy and best-endeavours in trade agreements.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Patterns of Premature Deindustrialisation in Africa
In order for a country to advance from a poor, agrarian state into a modern post-industrial state, experience has taught that it must follow a specific pattern of development, in which industrialisation is a key phase. This pattern was observed in the economies of the developed West, Japan and the ‘Asian Tigers’ of South East Asia. Until recently, it was assumed that the balance of the developing world would follow the same pattern in moving from low to middle to high income nations. However, recent research appears to contradict this assumption and to suggest instead that many developing nations are ‘deindustrialising’ and headed down an unchartered economic path towards potential low-income/low-development traps.
This paper examines the phenomenon of ‘premature deindustrialisation’ from the perspective of Africa’s commodity export specialists, and their complement. There is an emerging dichotomy in the developing world between countries following a path of industrialisation akin to that followed by the developed west, and others that are seemingly off-track. The latter group includes most of the countries of Africa and this paper seeks to explore the nature and causes of this situation. The aim of this paper is therefore to describe the phenomenon of deindustrialisation, present evidence for Africa, and attempt, using regression analysis, to identify the drivers of the process.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Dealing with Technical Barriers to Trade in the Continental Free Trade Area
Africa might be entering a new phase in its pursuit to boost intra-African trade and deepen regional integration. This could happen if the Continental Free Trade Area (CFTA) provides some novel answers to long-standing problems. This paper discusses one of the practical issues now on the agenda: the design of a continental scheme to deal with Technical Barriers to Trade (TBTs).
In order to shape the CFTA as a comprehensive legal framework suitable for meeting 21st century challenges, numerous trade and related issues need to be addressed. These include standard trade arrangement issues around customs procedures, tariffs, non-tariff measures, corruption, trade facilitation, trade remedies, and dispute settlement, as well as innovative answers and reforms for trade in services, finances, transport and corridors, investment, industrialisation, and the movement of capital and persons across borders. The latter includes proper engagement with how TBTs are dealt with and how to improve matters in this field.
The CFTA will hopefully provide for better trade governance on national as well as regional levels. There should be binding legal instruments to ensure effective implementation, the protection of rights, remedies in case of violations of obligations, legal certainty, and institutional oversight. International agreements do not guarantee more trade and a better business climate but a well-designed legal construct which tackles underlying causes is a sine qua non for improving the present situation. For the CFTA to deliver on its promises some bold decisions about sharing national policy space and sovereignty are required.
This publication was supported by the Physikalisch-Technische Bundesanstalt (PTB) as part of their sub-Saharan Africa Working Group project on Upgrading of Quality Infrastructure in Africa.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the author and do not purport to reflect the views of PTB or the Trade Law Centre NPC.
Trade Reports
Looking towards 2017: A Framework for Speculating about the Global Picture
Implications of the election of Donald Trump as the next United States president currently dominate discussions about geopolitical developments and the prospects for international trade, but there are other concerns too. Commentaries and speculations range from warnings that Trump’s election will “mark the beginning of a new and darker global order”, that anti-globalists are on the march, and that right-wingers will win several European elections; to warnings about a trade war between the US and China. Growing inequality is said to have de-legitimized globalism.
African countries are facing specific challenges in today’s global economy; in particular, reacting to new US policies and dealing with the consequences of Brexit. They have the opportunity to change their relationship with the US (and take some degree of ownership of that process) instead of responding only to matters which Mr. Trump’s administration will raise. This can include security cooperation.
Proactive responses are necessary. Securing a certain and predictable trade environment with the UK and the EU should top African leaders’ list. This includes a specific strategy to deal with a protracted interim phase before a new FTA with the UK will be on the cards. For the SACU leaders these challenges are even more urgent. The recently-concluded EU-SADC Economic Partnership Agreement needs long-term certainty and uninterrupted implementation; while Washington may press them for a bilateral trade deal.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The impact of regional integration on Nigeria’s imports: A case of ECOWAS Common External Tariff on agro-processing
There have been several attempts to foster deep integration within West Africa in times past to take advantage of the well-known gains from this regional integration. These gains include trade promotion and economic growth, but the focus of the current study is increased imports into Nigeria and the implications of these imports on trade creation and diversion, tariff revenues and welfare. West Africa has been involved with this regionalisation process, a process that has culminated in the Economic Community of West African States (ECOWAS) customs union that agreed on a Common External Tariff (CET) with Nigeria scheduled to implement it on 11 April 2015.
This study looks particularly at the impact of the ECOWAS regional trade agreement on trade and agro-processing in Nigeria. To complement this, the effect of a possible ECOWAS-European Union (EU) Economic Partnership Agreement (EPA) on trade, revenue and welfare is also examined. The Single Market Partial Equilibrium Modelling Tool (SMART) is used at a disaggregated six-digit level of the harmonised system for the product analysis.
Overall, the results indicate that a regional trade agreement with ECOWAS and the EU increases the imports of agro-processed products by Nigeria. This import growth is mostly driven by trade creation as a result of the lowering and/or the removal of tariffs. Côte d’Ivoire had the largest positive trade diversion effect among the ECOWAS partners and for the European Union (EU) it was the Netherlands. Nigerian consumers benefit from reduced prices, but the influx of new imports may not favour producers in the agro-processing sector. This is because expensive local production is substituted by cheaper imports. Though not analysed in this study, producers within the agro-processing sector may likely witness an impact of diminishing profits because of strong import competition. The analysis also indicates loss of tariff revenue for the Nigerian government but there is welfare gain in total, as expected.
The implementation of a Free Trade Area (FTA) within ECOWAS serves as a meaningful base provided trade policies are well coordinated and harmonised. The government, however, needs to come up with measures to enable producers of less competitive agro-processing sectors to remain relevant. The results show that Nigeria needs an approach to generate revenue to offset the tariff revenue losses caused by the implementation of the CET.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Implementing the WTO Trade Facilitation Agreement in SADC: Promise and Pitfalls
The World Trade Organisation (WTO) considers the Trade Facilitation Agreement (TFA), reached in Bali, Indonesia, in December 2013, to be a considerable achievement. An official research paper published by the WTO at the end of September points out that the TFA, the product of a contentious 10 year process, has ‘been hailed as a breakthrough for global (trade) facilitation reforms’. It promises to cut back needless red tape in international trade and thus, according to calculations performed by economists at the OECD, lower trade transactions costs by up to 15 percent.
Although trade facilitation reforms are on-going, often in a piecemeal fashion, in many countries, the TFA has not entered into force yet, although that may be only a matter of months away. That point will mark the proper test of countries’ commitment to genuine reform. The question is whether the TFA will make a real impact and really spur a dramatic increase in the movement of goods and services across borders?
This Trade Brief provides an overview of the TFA process and the obligations that will be implemented by SADC countries when the TFA becomes operational. It goes on to consider the relationship between the TFA and other trade facilitation processes already underway in the region, identifying the major hurdles to improving trade facilitation and thus to full implementation of the TFA.
Underpinning the discussion is the observation that trade facilitation is not new to SADC. Indeed the 1996 SADC Trade Protocol undertook to ‘eliminate barriers to trade within eight years’ and committed countries to refrain from imposing any new non-tariff barriers (NTBs). Even the most generous observers believe the process has been slow, halting and has a long way to go. It is not unreasonable to ask whether the TFA will make much difference.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Continental Wide Service Liberalization within Africa
Following on from their initial tralac Trade Brief “Service Liberalization within Africa – Trying to Quantify the Potential Impact”, the authors utilize the model, database and methods outlined to model a Continental Wide Service Liberalization within Africa.
Continental Wide Service Liberalization within Africa is difficult to measure/model given the complexity of services trade and its associated foreign direct investment (FDI) of multinational companies (MNC) in host countries. Nevertheless, the authors try to quantify the potential economic impact of continent-wide services liberalization within Africa, where they make some bold assumptions when the lack of data requires them to do so. The results are therefore illustrative and raise more questions than answers regarding the underlying assumptions made.
The authors try to model/analyse the behind the border services trade barriers which often are in the form of restrictive regulations affecting the establishment and operations of domestic and foreign service suppliers. More precisely, the focus of the paper will be on foreign invested firms established in the host countries’ domestic markets and the reduction in discriminatory barriers to these foreign services providers, with a second scenario which also extends liberalization to domestic service providers at the same time. The outcome of the model/analysis is then bench marked against similar modeling/analysis undertaken by the OECD to see if the results are in the “Ball Park” or way out of line.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
An analysis of Kenya’s economic and trade performance that highlights a comparison with East Asian ‘Tiger’ economies
The objective of this paper is to examine the economic performances of the East African Community (EAC) members (Kenya, Tanzania, Uganda, Burundi and Rwanda). Emphasis will be placed on examining Kenya, and the overall question is: ‘Why is Kenya not an East Asian Tiger economy (Hong Kong, Singapore, South Korea, and Taiwan)?’ with respect to the dynamic economic growth of these Asian economies and the role of manufacturing in that growth. We fully recognise that this is a topic that has been intensely studied by many professionals, and that this short note is likely to raise more questions than answers. We at least hope that those some of points offered here are pertinent to the debate.
In summary, we find that although the Kenyan economy has done well by EAC and indeed African standards, it falls short of the stellar trademark performance of the so-called Asian Tiger economies. It is generally accepted that the key to the Asian Tiger economies has been trade, led by industrial exports, and while Kenya (and recently Tanzania) has led the EAC countries in trade as a share of the Gross Domestic Product (GDP) it does not compare with the Tigers. Probably as a consequence of this, EAC GDP growth rates do not compare with those of the Tigers and, in particular, we suggest that the dramatic increases in population in the EAC (and surrounding region) are a factor in the disappointing GDP per capita performance as well. Additionally, the role of governance is generally thought to be a factor in development, and the facts show that EAC members fall in the global bottom third in this measure.
However, our cursory analysis also shows that several Asian countries (notably China and the newer ‘Tiger Cubs’ also rank very low on this index, and we suggest that perhaps governance may be something that follows development as much as contributing to it. Finally, we offer some thoughts for Kenya’s way forward that are consistent with building the stronger foundations that have generally been a major factor in Asian development.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Intra East Africa Community (EAC) trade from a Kenyan perspective, with an emphasis on re-exports
The objective for this paper is to examine intra-EAC trade with a special emphasis on the position of Kenya in this trade and the role of re-exports. The latter has become possible with the publication by the International Trade Commission (ITC) of this re-export data, although we hasten to add that there is not a comprehensive coverage of the EAC in this data. Kenyan data is only available for 2013 in the most recent years, while re-export data is not available for Tanzania. This leaves 2015 re-export data available for Rwanda, Burundi and Uganda only.
We caution that overall there are many problems with African trade data. This includes the availability of direct (as supplied by the country under examination, in this case Kenya) trade data only for 2013 as the most recent year. To compensate for instances where direct is not available the ITC uses what is known as mirror data where the trade data from the relevant partner is used. For instance, Kenyan exports to Tanzania for 2014 and 2015 are reported by the values from Tanzanian imports from Kenya. This is not the first-order preferred situation, but it is the only alternative.
There are also anomalies in the Kenya trade data: for example, in mirror data for 2013 Kenya is reported as exporting around three quarters of a million dollars’ worth of petroleum products to Zambia, with Zambia reporting a similar amount in imports. A similar trade continues to be reported in Kenyan mirror exports for 2014 and 2015, with this representing around 10% of Kenyan exports. However, inquiries to Kenyan officials and experts seems to indicate that this is petroleum in fact trade from a third country that has been brokered by a Kenyan company.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.