Topics publications: African regional integration
Trade Reports
Trade liberalisation in Africa: a GTAP analysis of intra-African agricultural tariffs going to zero
This paper uses the Global Trade Analysis Project (GTAP) computer database and takes the full suite of African agricultural sectors and African countries/regions in order to assess the benefits of intra-African tariff liberalisation in agricultural merchandise across the continent.
We start by examining recent intra-African agricultural trade flows by partners and commodities. We find that South Africa is the main trader and tobacco and sugar are the main commodities traded. However, it must be noted that this data is different from the 2011 data used by the GTAP and we caution about data accuracy in Africa in particular. Before undertaking our simulations we incorporate the EU sugar reforms into the data and assess the benefits of liberalisation as they are measured at the end year of 2025.
As is usually the case, South Africa is the leading beneficiary, with the economy at 2015 being some $1,840 million better off than it would otherwise have been. Kenya is the next largest African gainer, followed by Senegal and Côte d’Ivoire. Zimbabwe is the big loser, and outside of Africa all countries/regions show a loss. For South Africa, the largest contribution ($753 million) is from changes in the capital investment situation as investment is attracted into the country, and this is followed by improved terms of trade (as measured by the model).
The key agricultural sectors are vegetables, fruits and nuts; crops (other); meat of cattle, sheep, goats and horses; vegetable oils and fats; dairy products; refined sugar and associated products; food products not classified elsewhere; and beverages and tobacco. By country, the key ones were South Africa, Kenya, Tanzania, Uganda, Zimbabwe and Cote d’Ivoire. Overall, the largest impact is felt in the vegetable oils and fats sector, with Côte d’Ivoire and Kenya the African gainers.
The more interesting outcome, however, is in the sugar sector, where South African gains through better access into Kenya, which in turn makes significant gains as it reduced its sugar production significantly and transferred resources out of a sector which had been heavily protected but technically inefficient. This is a classic example of how regional integration can benefit a country through efficiency gains. Changes in other sectors are often dominated by South Africa.
We find that Kenya, Tanzania, Zimbabwe and the rest of Africa lose significant tariff revenues that in the real world has to be adjusted for in some way, and that Senegal, Kenya and Côte d’Ivoire all report an enhancement in labour market remuneration of around 0.2% or more. Overall, Zimbabwe is the big loser in Africa from this liberalisation, and only Tanzania has a similarly meaningful loss.
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 SACU Tariff Board: Original Design and Implications of Subsequent Developments
With the signing of a new Southern African Customs Union (SACU) Agreement in 2002, the Member States agreed to a new design for conducting the operations of this Organization. This would have meant a radical departure from SACU’s previous modus operandi and the dominant role of South Africa in administering the Common External Tariff (CET) and determining tariff policy; including the use of the tariff as an industrial development instrument.
The proposed Tariff Board and National Bodies would have allowed for joint decision-making and common policies on the administration of SACU’s CET. The Agreement contained provisions to this effect and a plan for subsequent follow-up action to adopt a common industrial development policy and an annex on the functioning of the Tariff Board. The Agreement also provided for an ad hoc SACU Tribunal.
The contract on these particular aspects was never implemented. This paper discusses the implications of the subsequent developments for the functioning of SACU and for the BLNS States. What could these countries now do in order to deal with their domestic trade governance needs; such as new legislation and new institutions? What considerations should guide their decisions? What should new national legislation provide for and how will future SACU CET operations be conducted?
SACU seems to be in need of a new understanding among the Members on the future of this longstanding CU; which has contributed directly to the existence of a well-integrated regional market for trade in goods and commerce between the Members. SACU is also an excise union and four of the Members belong to the Common Monetary Area. Great care should be taken not to unravel this arrangement and undermine the benefits which all Members enjoy.
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
Consignment Based Conformity Assessment (CBCA) and Pre-Export Verification of Conformity to Standards (PVoC) programmes in SADC countries
The significant increase in imported consumer goods into SADC countries over the last decade has caused several SADC Governments to implement or to consider implementing Consignment Based Conformity Assessment (CBCA) or Pre-Export Verification of Conformity (PVoC) programmes. CBCA/PVoC programmes are generally described as having the following objectives:
-
To protect consumers from dangerous, substandard or counterfeit products.
-
To protect the environment.
-
To protect domestic industry from unfair competition from non-compliant goods.
-
To facilitate trade through the avoidance of consignment testing upon arrival or multiple testing requirements.
CBCA/PVoC programmes could indeed achieve all of these objectives, but they pose challenges to governments in terms of design and execution in order to avoid them being in breach of the provisions of the General Agreement on Trade and Tariffs (GATT), other applicable WTO agreements and certain aspects of regional trade arrangements.
This Trade Brief will look at CBCA/PVoC programmes in the SADC region and will discuss them in a GATT, WTO and SADC context.
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
Intra-regional merchandise trade within West Africa and between West and East Africa
In recent times tralac has published extensively on African trade, with an emphasis on southern and eastern Africa as the Tripartite FTA developed. There has not been a commensurate emphasis on the analysis of trade in the western half of the continent, and the objective for this paper is to remedy that situation and in particular examine the intra-western African trade and the intra East-West African trade.*
There are 23 countries in our definition of west and central Africa (WCA), most of which are members of either or both of the Economic Community of West African States (ECOWAS), the Economic Community of Central African States (ECCAS) and the Community of Sahel-Saharan (CEN SAD).
The European Union (EU) has consistently been the main destination for WCA exports, albeit with fluctuations in the export share. Both the BRICs and Africa as a whole (including intra-WCA trade) have been increasing, while the US share has declined dramatically. During 2014 exports from WCA to Africa accounted for some 17.5% of total WCA exports, while the comparable share for WCA imports from Africa was a lower 12.6%. Within this data for WCA trade with Africa we found that the share of Intra-WCA imports in WCA imports from Africa was 75.82% in 2014. West Africa therefore imported more from within its own region than from other outside regions in Africa.
Examining the profile for WCA exports to the world we found that the share of intra-west African export in West African exports to Africa is 72.7% in 2014. This means that again WCA exported more to African countries from within its regions than to other African countries outside WCA. The importance of these intra-WCA exports are variable but have been in the range of 11% to 15% of total exports in recent years. The leading export is, as expected, mineral fuels with a 69.2% of the total intra-West Africa export, followed by ships and related structures. These mineral fuels are exported mainly by Gabon and Nigeria.
A reconciliation exercise gives a somewhat confusing pattern. For 2013 and 2014 overall imports are only 62% and 60% of the comparable import data. Much of this difference can be found in the mineral fuels data, although the category of ships and related vessels leaves much of the data unexplained.
* This paper was prepared during a tralac ‘Geek Week’ data training workshop during the week of October 5 to 9, 2015.
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.
Books
Africa’s trade relations: Old friends, good friends and new friends
African countries’ trading relationships have been changing in recent years. Trade with their traditional trading partners, the European Union and the United States (their ‘old’ friends) is declining. Trade with ‘new’ friends, such as China and India, is growing. For South Africa in particular, the rest of Africa has become a very important export destination. For South Africa and the other members of the Southern African Customs Union (SACU), these African countries have become ‘good’ friends.
This collection of studies, prepared as part of the ongoing collaboration between the Trade Law Centre (tralac) and the National Agricultural Marketing Council (NAMC), includes special focus on agricultural trade relationships and related issues such as climate change. Previous books have covered trade matters ranging from South Africa’s trade relationship with the Americas, Asia, as well as African countries. This book looks at all South Africa’s trading partners: new friends, old friends and good friends.
New friends: The so-called BRICs (Brazil, Russia, India, China) are new friends, with emphasis on the political dimension of the relationship. In agriculture terms, these countries offer opportunities as well as challenges. China is most competitive in industrial production, Brazil in agriculture and India in services. Although they compete with South Africa economically, diplomatically and politically, they are indeed our ‘new’ friends.
Old friends: Scholars such as Professor Nick Vink have argued that South Africa’s agricultural export product mix has remained the same for over 100 years, dominated by fruits and wines. These scholars further argue that the export destinations have also remained largely similar. These are dominated mostly the European Union (EU) member countries and United States of America (US). In the past two decades, following the removal of sanctions on South Africa, the bilateral agreements as well as the preferential market helped provide access for South African products into these markets under either Trade Development Cooperation Agreement (TDCA) with the EU and the Africa Growth Opportunity Act (AGOA) with US. These are South Africa’s ‘old’ friends.
Good friends: African countries are described as ‘good’ friends. Regional integration is an important policy objective, and African markets are growing in importance for agricultural, industrial and services exports from South Africa. The negotiations to establish a continental free trade area were launched in June 2015, and could offer more opportunities as many African countries are growing at rates much faster than the South African economy.
This book was compiled with the aim of examining the trading relationship between South Africa and its friends. Although agricultural trade is a key focus of the book, the full trading profile is presented.
© 2015 Trade Law Centre and National Agricultural Marketing Council
Publication of this book was made possible by the support of the Trade Law Centre (tralac) and the National Agricultural Marketing Council. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Reports
What future Scenarios for the Southern African Customs Union?
The Southern African Customs Union (SACU) is in an impasse; and has been so for some time now. The Council of Ministers, which is SACU’s “supreme decision making authority”, is not meeting; no common policies are discussed; and no decisions on how to deepen integration among the Member States are taken.
This state of affairs casts a shadow over the future of the region and causes uncertainty. It has, for example, been stated in reports to Portfolio Committee meetings of the South African Parliament that the South African Government wants to re-negotiate the SACU revenue sharing formula, and wishes to alter aspects of the 2002 SACU Agreement which provide for a Tariff Board and an ad hoc Tribunal. How exactly this is envisaged to happen has not been clarified or shared.
We believe this state of affairs merits urgent attention. However, we are not aware of any official initiative to discuss the future of SACU and to address the present challenges. It has been said that SACU’s problems can only be discussed at Heads-of-State level; but exactly how and when this will happen remains unclear. The SACU structures do not provide for such a mechanism. It seems as if SACU is in an impasse about its impasse.
It is against this background that the present paper has been written and is disseminated for comments and responses. It discusses a number of possible scenarios for SACU’s future; which were debated at a recent tralac workshop attended by participants from the SACU Member States.
We believe that SACU’s future should be looked at in terms of the bigger regional picture. This Organization serves the interests of all the Member States and their inhabitants in what is a well-integrated and stable region. Even if certain changes could be justified, SACU’s future as the foundation of a stable region should be secure. The present murky picture undermines this certainty.
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
Trade Remedies as part of the Continental Free Trade Area
This paper discusses the possibilities for including suitable trade remedies provisions as part of the Continental Free Trade Agreement (CFTA), which will be negotiated in order to conclude one of the CFTA pillars, namely a trade in goods agreement. These negotiations have to start in 2016.
The main difficulty with regard to trade remedies as legal disciplines in African Free trade agreements (FTAs) arises from the fact that African Governments (with the exception of two or three) have no experience of implementing WTO compatible trade remedies. They complain that the applicable disciplines are cumbersome and difficult to comply with. They lack the technical capacity and resources to do so and therefore forfeit an import set of mechanisms to protect domestic industries in a rules-based manner.
One of the unfortunate consequences is that some Members take unilateral action which flies in the face of their legal obligations under Regional Economic Community (REC) agreements. Another consequence is that infant industry clauses remain popular. They bring their own complications. The present state of affairs becomes even worse when the absence of binding dispute settlement provisions is considered.
The CFTA should strive to be a proper rules-based trade arrangement. In order to achieve this objective there should be clear rules as to the exceptions allowed and how such measures will be justified. Trade remedies and dispute settlement mechanisms are key to a rules-based trade regime.
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
How the CFTA could advance the Framework of the Abuja Treaty
We believe the Continental Free Trade Area (CFTA) negotiations offer a promising opportunity for concluding an agreement to address trade related challenges in Africa; and to do so a meaningful manner. Whether this will happen depends on how these negotiations are conceptualized and undertaken. If the traditional trade in goods agenda is (again) the dominant theme (with the aim to form a continental customs union in terms of the Abuja Treaty, as some commentators are proposing) it will be an opportunity lost.
The aim of the CFTA negotiations is to bring about, as far as the Abuja Treaty is concerned, the following:
Within the broader framework of the Abuja Treaty Establishing the African Economic Community, the objective of launching negotiations for the CFTA is to achieve a comprehensive and mutually beneficial trade agreement among the Member States of the African Union.
What is the “broader framework of the Abuja Treaty”? The AEC Treaty (the Abuja Treaty) came into force in May 1994. Its aims are broader than trade and economic integration and include social and cultural development, cooperation in all aspects of human activity with a view to raising the standard of life of Africa’s people, maintaining economic stability, and establishing a close and peaceful relationship between the Member States.
The implementation of the Abuja Treaty is a process which has to be undertaken in six stages over 34 years, to be completed by 2028. In the meantime the crucial assignment of boosting intra-African trade and forming an inclusive, comprehensive and modern continental trade arrangement has become too urgent to neglect. The CFTA cannot wait till all RECs have become CUs. Some of them (e.g. SADC) have in any case moved that objective to the backburner of their agendas. There are good reasons why they have done so.
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
What is the Continental FTA Mandate?
The negotiations to establish the Continental Free Trade Area (CFTA) will start by the middle of 2016. The indicative date for completing the first phase is the end of 2017. These negotiations will be about traditional matters as well as new approaches and challenges. It is important that the African Union (AU) and national officials responsible for the preparatory work grasp the essence of those novel aspects inherent in the CFTA initiative; which could make this arrangement a harbinger of true change. To replicate, once again, the old and trusted trade in goods agenda would be to miss a promising opportunity. The CFTA negotiations call for a bolder vision; it has the mandate to do so.
The CFTA negotiations shall cover trade in goods, trade in services, investment, intellectual property rights and competition policy, and shall be conducted in two phases. The first phase shall cover trade in goods and trade in services; for which there shall be two separate legal instruments. The second phase has to produce agreements on the remaining areas.
This is not simply a wish list; and in any case not an exhaustive one. It does recognise that new challenges have to be addressed and that there should be a ‘comprehensive’ new African trade deal. How are these negotiations to be conducted?
This Trade Brief takes a look at what has been agreed as the framework and guidelines for the CFTA negotiations, and unpacks some of the implications. It argues that the opportunity now exists to make a novel and more proper contribution to continental trade, global integration, and economic development plans generally. This requires recognition of the limitations inherent in past practices; which brought only partial results. They are not appropriate as the continental recipe for addressing contemporary needs.
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
Private Sector Interests with regard to the Implementation of the SADC Protocol on Trade
This Trade Brief argues that the private sector has a vital stake in the effective and lawful implementation of regional trade agreements such as the SADC Protocol on Trade. It sets out to explain why this is so and what the consequences of non-implementation are. There is a need for more concerted action on their part to advance efforts for proper rules-based trade arrangements, for the concomitant benefits of due process, transparency and respect for the rule of law. Some ideas are offered on how this could be achieved.
Free Trade Agreements (FTAs) are not an end in themselves. They are based on legal instruments which contain rules on how trade between the State Parties will be liberalized, what the timeframes for implementation of specific obligations are, whether certain exceptions are allowed and under what circumstances, how rights will be protected, and what remedies apply. Trade and regional integration are thus to be governed by law.
The difficulty facing private sector traders, investors, and service providers is the fact that trade agreements are concluded between states; although they are not the real traders. The private sector is not a party to these agreements and cannot directly derive any rights from the legal instruments so concluded. They are, however, often directly affected. Individuals or companies cannot invoke international agreements before domestic courts; unless such agreements are made part of the law of the land. This seldom happens in our part of the world.
The private sector will also not enjoy standing before regional courts or tribunals. The new Protocol on the SADC Tribunal has taken this right away. The net result is that private traders have to rely on the preparedness of their States of nationality to act on their behalf when they need assistance with regard to the unlawful behaviour of other governments. However, African states do not litigate against each other when it comes to trade issues.
The question which arises is whether the rule of law can and should apply within the SADC Free Trade Area and elsewhere. Would new African trade arrangements such as the Tripartite Free Trade Area (TFTA) and the Continental Free Trade Area (CFTA) be different? What could be done to change this unfortunate state of affairs?
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.