Discussions
Review of trade-related developments in 2014
William Mwanza, tralac Researcher, provides a review of key trade-related developments in 2014
What looked like a bleak end to the year 2014 turned into a ray of light moving into 2015, at least in some areas.
At the multilateral level, concerns over the World Trade Organisation (WTO’s) ability to deliver a multilateral agreement were exacerbated by the middle of the year, when negotiators missed the 31 July deadline for adopting the Bali Package. This was as a result of two views that could not be bridged. On one side were countries that held the firm conviction that the Bali Package as agreed on by the Ministerial meeting in Bali could not be changed or amended in any way. On the other side were those that believed that the decisions reached by the Ministers left unresolved concerns that need to be addressed in a way that changes the balance of what was agreed in Bali. An important inclusion in this Package is the Trade Facilitation Agreement (TFA), which aims to expedite the movement, release and clearance of goods. After the failure to adopt the Agreement by the set deadline, efforts towards a consensus on some of the sticking points did continue. In November, a significant breakthrough was reached in bilateral negotiations between the US and India, which added renewed momentum towards conclusion of WTO negotiations on the Bali Package. Resultantly, negotiations were indeed concluded and the General Council of the WTO adopted the amendment to the WTO agreement that inserts the TFA, as well as other decisions on public stockholding for food security purposes and post-Bali work.
At the start of the year, much of the focus of global economic cooperation was on continued recovery from the “Great Recession” that started in 2007. The Eurozone had been showing signs of stabilising, growth in different parts of the globe continued slowly yet steadily, while Japan continued to rebound strongly on the basis of the current government’s structural reform efforts termed ‘Abenomics’. As 2014 draws to a close there have been some renewed fears of Europe returning to a state of recession, which has highlighted the global slowdown in demand. Growth in China similarly slowed, while much focus was on geopolitical tensions in Europe, conflict in the Middle East, and containing the spread of Ebola in West Africa. For some time, global economic challenges seemed to be on the backburner. In the face of new concerns of a further slowdown, however, there has been a significant shift in thinking around how best to confront problems being faced in the global economy. There is now a new consensus that addressing supply side constraints, particularly by tackling global investment and infrastructure shortfalls will be crucial to lifting growth, job creation and productivity. This is one of the central messages that came out of the meeting of the G20 Leaders of major economies, held in Brisbane, Australia, from 15 to 16 November.
Along with this recognition has been the launch of the World Bank’s Global Infrastructure Initiative. This is a multi-year programme that seeks to unlock additional infrastructure financing in the region of US$1 trillion annually for developing countries up to the year 2020. The initiative was endorsed by Heads of Multilateral Development Institutions namely the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the inter-American Development Bank, the Islamic Development Bank, the World Bank Group and the International Monetary Fund. The G20 Summit also endorsed the initiative and established its own Global Infrastructure Hub, which will work with the Global Infrastructure Initiative in some of the key activities.
The 20th session of the Conference of Parties to the United Nations Framework Convention on Climate Change (UNFCCC) took place in Lima, Peru from 1 to 14 December 2014. Prior to this Conference, a major breakthrough was reached when the US and China agreed on a joint climate change agreement in November, which includes unilateral measures by the two countries to significantly reduce their carbon emissions by 2030; jointly push negotiations on a global climate change agreement; and to cooperate on clean energy and environmental protection. Negotiations at the COP 20 meeting were difficult and protracted, going beyond the scheduled closing session on 12 December until the early hours of 14 December when a significant breakthrough was reached. Delegates agreed on a text that confirms their intention to develop and adopt a global climate change agreement by the COP 21 meetings, to be held in Paris, France next year. The text – termed the Lima Call for Climate Action - provides that all member states determine and present their plans for cutting emissions. It also includes the Lima-Paris Action Agenda, which seeks to formally recognise the participation of non-state actors in the predominantly inter-governmental efforts of the UNFCCC. Further, the text recognises previous commitments by developed countries to jointly mobilise US$100 billion annually until 2020 to assist poor countries in meeting their climate-driven needs.
Developments at the continental level proceeded on a positive note throughout 2014. Structural transformation and inclusive and sustainable development have taken centre stage in the national development processes of various countries, and have subsequently formed the basis for the Common African Position (CAP) on the Post-2015 Development Agenda, which was adopted by the 22nd Summit of the African Union (AU) held in Addis Ababa, Ethiopia, from 21 to 31 January. There was also progress on two other important schemes aimed at increasing trade between African countries, namely the Continental Free Trade Area (CFTA) and the Boosting Intra-African Trade (BIAT) initiative, which were adopted in 2012.
Efforts towards establishment of the CFTA significantly gathered pace during the year, with various meetings held that discussed the draft guiding objectives and principles, and planned institutional arrangements. Consultative meetings were also held on the CFTA and BIAT by the African Union Commission (AUC) and the United Nations Economic Commission for Africa (UNECA) in the eight recognised Regional Economic Communities (RECs) of the AU. The various instruments developed will be considered at a High Level African Trade Committee meeting slated for January 2015, and are expected to be endorsed by the AU Summit at the end of that month. Negotiations on the CFTA are expected to commence in mid-2015, and it is expected that the CFTA will be launched by a target date of 2017.
The first US-Africa Leaders’ Summit was held in Washington, U.S.A., from 4 to 6 August, during which trade and investment were confirmed as the main priority in relations between Africa and the US. An important aspect of these relations is the African Growth and Opportunity Act (AGOA). The legislation that governs this preferential market access arrangement is due to expire in September 2015, and the US Congress is currently in the process of considering an extension of the scheme. The renewal of AGOA was a central theme during the August meetings. It remains to be seen how this process will pan out over the next few months. Suffice to state that it will be of particular pertinence for South Africa, in view of the longstanding anti-dumping measures that it imposes on poultry imports from the US. There is now increasing focus on these measures, which the South African government has been urged to remove if it is to continue benefiting from AGOA preferences.
At the regional level, the slow progress on negotiations under Phase I of the roadmap towards establishment of the Tripartite Free Trade Area (T-FTA) continued. This phase covers trade in goods and movement of business persons, and was supposed to be completed by June. This deadline was missed, in part due to a lack of funding and consensus on a number of substantive issues such as rules of origin, trade remedies, customs cooperation, documentation procedures and transit instruments. The T-FTA was expected to be launched at the Third Tripartite Summit initially scheduled for 19 to 20 December. The Summit has, however, been postponed to February 2015. It is expected that the status on various pertinent aspects of the process will become clearer at that point.
In the Southern African Development Community (SADC), the review of the Regional Indicative Strategic Development Plan (RISDP) remained ongoing. The 34th SADC Summit was held in Victoria Falls, Zimbabwe, from 17 to 18 August. The Summit directed that the RISDP review be finalised and that an implementation plan be developed. It adopted the new Protocol on the SADC Tribunal, which revives the Tribunal albeit with its jurisdiction limited to disputes between Partner States. It also adopted Protocols on Environmental Management for Sustainable Development; and Employment and Labour, as well as a Declaration on Regional Infrastructure Development. The Summit directed that industrialisation take centre stage in SADC’s regional integration agenda and called for the development of a strategy and roadmap for industrialisation in the region. Prior to the Summit, negotiations on the comprehensive Economic Partnership Agreement (EPA) between six SADC countries and the European Union were concluded and the Agreement initialled on 15 July. It then underwent “legal scrubbing” in preparation for signing.
It has been ten years since the new Southern African Customs Union (SACU) Agreement entered into force on 15 July, 2004. Although there have been some important achievements over the years, it is noted that some of the original ambitions of the agreement have not been met. Concerns have been raised over the revenue sharing arrangement by South Africa, and the BLNS countries have also raised some concerns that their industrial development processes are undermined by some dominant South African firms. A meeting to discuss some of these salient issues had been planned for February. This meeting was, however, not held throughout the year. The status of SACU and prospects going forward remain unclear at this stage.
The East African Community (EAC’s) regional integration process continued on its vibrant course during the year. An important development was the conclusion of negotiations on a comprehensive EPA with the EU after long and arduous negotiations. This agreement was initialled on 16 October, two weeks after EAC members lost their interim EPA access to the EU on 1 October. As the only developing country in the grouping, Kenya was the most affected. It is currently exporting under the general arrangement of the Generalised System of Preferences (GSP) scheme of the EU, and is expected to start accessing the EU market on the basis of the text of the full EPA in January 2015. Progress in the area of infrastructure was epitomised by the endorsement of a proposed 10 year investment strategy for priority regional projects by the 3rd EAC Heads of State retreat on infrastructure development and financing, held in Nairobi, Kenya on 29 November. There was some progress on efforts towards establishment of a political federation. The Council of Ministers meeting held from 15 to 20 September noted reports by the Secretariat on broad milestones and activities that would initiate the process of developing the federal constitution; and a proposed road map. The reports were expected to be tabled for adoption by the EAC Summit initially scheduled for 30 November. This Summit was, however, postponed due to the inability of Tanzanian President Jakaya Kikwete to attend due to health reasons. It is in the process of being rescheduled.
The 17th Summit of the Common Market for Eastern and Southern Africa (COMESA) was held in Kinshasa, Democratic Republic of Congo (DRC) on 27 February. It noted progress in a number of areas including on improvement of peace and security in the region; implementation of COMESA obligations; transformation of national economies through investment in natural resources and infrastructure development; facilitation of investment and greater participation of the private sector; and commitment by the DRC, Ethiopia and Uganda to deposit their instruments of accession to the COMESA Free Trade Area by the end of the year. Some important directives issued included the drafting of a common industrialization policy and a comprehensive paper on financing regional integration. The Partner States were also called upon to consider adopting a common trade facilitation programme drawing on COMESA trade facilitation instruments, so as to effectively implement the WTO Trade Facilitation Agreement. COMESA celebrated 20 years since its establishment on 8 December. On the same day, the 33rd Council of Ministers made a special call to address non-tariff barriers which are inhibiting intra-COMESA trade, currently at a very low 7%.
Finally in the Economic Community of West African States (ECOWAS), preparation for the start of implementing the ECOWAS common external tariff (CET) gathered pace. The CET was officially adopted by the Summit of Heads of State and Government of ECOWAS in Dakar, Senegal on 25 October 2013, where it was agreed that it will come into effect on 1 January 2015. A number of meetings were held at expert and ministerial level during the year, and national sensitization workshops were also held in Partner States. As at end October, 90% of the activities in the road map had been completed, thereby paving way for the launch of the CET on the designated date. Meanwhile, ECOWAS Partner States along with Mauritania also concluded negotiations on a comprehensive EPA with the EU. The agreement was initialled on 30 June and is now awaiting signing. The latest Ebola epidemic in Liberia, Sierra Leone and Guinea has negatively affected the region. It is reported that trade has been affected, especially due to a ban on vessels from the Ebola-stricken countries. It has also affected progress on some of the ECOWAS region’s activities, such as committee meetings in some areas, including on the CET.
As could be expected, the experiences at the global, continental and regional levels have been varied. As business winds down for the year, it is clear that 2015 will be highly important. Progress that will be attained on the different fronts will be crucial for the trade and development prospects of African countries in the short, medium and long term.