Building capacity to help Africa trade better

Review of trade and trade-related issues in 2015


Review of trade and trade-related issues in 2015

William Mwanza, tralac Researcher, provides a review of key trade-related developments in 2015

The past year has seen a number of important developments in trade and trade-related issues globally and on the African continent.

Risks in the global economy

The year started with a number of notable risks in the global economy. Although the EU had been seen to be stabilising from the ramifications of the “Great Recession” that started in 2007, Europe’s integration process faced unprecedented challenges as Greece’s sovereign debt crisis intensified by the middle of the year. Although the situation raised concerns of a Greek exit from the Eurozone with fears of contagion in some quarters, intense negotiations and domestic electoral and legislative processes eventually led to Greece being granted further bailout packages that worked to stabilise the overall situation during the second half of the year. Europe’s challenges in this second half were more geopolitical, including the migrant crisis, and terror attacks in Paris and continued threats in other countries on the continent. These geopolitical challenges persist into 2016. On the economic front, renewed questions for Europe’s integration process are expected as the United Kingdom seeks to renegotiate its membership to the EU. Another risk at the start of 2015 was a noted slowdown of China’s economy. By the middle of the year, its financial markets experienced significant volatility. The Chinese Government has since then introduced different measures to try and arrest losses of trillions of dollars on account of rapidly declining share prices. Turbulence in its financial markets returned in the first week of 2016, with limited clarity on how best the situation will be managed. The challenges in China and continued overproduction of oil saw its price fall over 2015 to record lows of about US$30 per barrel at the start of 2016. Mineral prices have also been dropping, combining to cause balance of payment difficulties and macroeconomic pressures in countries dependent on exports of these such as Nigeria, South Africa, Angola, and Zambia. These low prices will continue to present a significant challenge for resource-based growth in these and other African countries.

In the past year, another potential cause for weakened currencies and resultant increases in debt levels in some African countries and other emerging economies was an interest rate hike by the US Federal Reserve. The first interest rate hike in a decade was effected in December 2015, with a few more increases expected during 2016. Drought conditions were experienced in most parts of the continent towards the end of 2015 and are likely to threaten the food security and balance of payment positions in other countries reliant on primary agricultural production and export. Along with intensifying conflict in the Middle East, these different aspects combined to create an uneasy state in global affairs during 2015 and into 2016.

Multilateral developments

In spite of the evolution of these risks during the past year, there were some positive developments registered in global economic cooperation. The 3rd International Conference on Financing for Development was held in Addis Ababa in July. The conference adopted the Addis Ababa Action Agenda to guide global financing efforts in the post-2015 era with commitments made on domestic public resources; domestic and international private business and finance; international development cooperation; international trade as an engine for development; debt and debt sustainability; addressing systemic issues; and science, technology, innovation and capacity building.

In September, the post-2015 development agenda was embarked on with the adoption of the United Nations Sustainable Development Goals (SDGs) at the 70th General Assembly of the UN held in New York. Encompassing 17 goals with 169 targets, the SDGs replaced the Millennium Development Goals (MDGs) and will guide global economic cooperation until 2030. They balance economic, social and environmental dimensions and represent an expression of determination by all countries to take bold and transformative steps that are urgently required to shift the world onto a more sustainable and resilient path.

Illustrating this urgency, the momentum garnered at the beginning of the year successfully resulted in the adoption of the first-ever universal and legally binding agreement on climate change at the United Nations Framework Convention on Climate Change (UNFCCC) COP21 meeting, held in Paris in December. The agreement sets out a global plan of action to limit global warming to below 2 degrees Celsius through intended nationally determined contributions to reduce carbon emissions; implementation of a robust transparency and accountability system; cooperation to minimise loss and damage; and support for reduction of emissions and building of resilience to climate change impacts in developing countries. African countries have submitted ambitious national plans of action on reduction of carbon emissions. Access to UNFCCC and other financing arrangements, as well as institutional initiatives such as the African Initiative on Adaptation and Loss and Damage and the African Renewable Energy Initiative could serve as important platforms through which to make early progress.

In terms of multilateral trade, the 10th Ministerial Conference of the World Trade Organization (WTO) was held in Nairobi, in December, for the first time on the African continent. Although progress in negotiations was quite limited during the year in Geneva, the Ministerial delivered some successful outcomes. Most significant among these was the elimination of export subsidies on agricultural exports. Other decisions in agriculture were on access to a special safeguard mechanism, other export competition issues, food aid, public stockholding, and cotton. An important step forward in easing the participation of least developed countries (LDCs) in global trade was marked by the adoption of binding provisions on preferential rules of origin for LDCs and the extension of the services waiver until 2030. Another substantive achievement was the conclusion of plurilateral talks among 53 WTO members to expand product coverage of the Information Technology Agreement. This was lauded as the first tariff-cutting deal since the WTO’s inception with product coverage worth US$1.3 trillion annually. The tariff-cuts agreed will be extended to the entire membership of the WTO, resulting in a view that this plurilateral approach may be used more as an approach to multilateral negotiations in the WTO. Meanwhile, 65 WTO members had ratified the Trade Facilitation Agreement at the close of the year. Although there was notable progress, some challenges still remain. Apart from non-agreement on some areas such as trade remedies, fisheries and special and differential treatment, members did not agree on the reaffirmation of the Doha Development Round. Though commitment was made to continue negotiating on Doha issues, other members propagated for the inclusion of new issues into the negotiations to make it responsive to the evolution of the global economy. Resolution of this difference in views on the negotiating function of the WTO will likely take centre stage this year, as members seek to take negotiations forward. Consideration will also be given to ensuring that regional agreements are compliments and not substitutes to the multilateral system. This is particularly in view of the high proliferation of regional trade agreements in recent years, epitomised by “mega-regionals” currently being negotiated by some WTO members such as the Trans-Pacific Partnership (TPP) between the US and countries in the Pacific region and the Transatlantic Trade and Investment Partnership (TTIP) between the US and the EU. Negotiations on the TPP were concluded during the year and the agreement is now undergoing the process of ratification. Meanwhile, it is expected that the TTIP negotiations will be concluded in 2016.

Continental and regional developments

During the year, Africa embarked on its most ambitious regional integration project – the Continental Free Trade Area (CFTA). Negotiations towards the CFTA were launched at the 25th Extraordinary Summit of the African Union, held in Johannesburg in June. The Summit endorsed the negotiating principles, institutional arrangements, and indicative roadmap for the CFTA negotiations as well as the terms of reference for the CFTA negotiating forum. Trade in goods and services will be negotiated concurrently in the first phase of negotiations. Preparations for commencement of these negotiations continued in the second half of the year, including consultations by the African Union Secretariat with partners in different regions on the continent. The first meeting of the negotiating forum was initially scheduled to be held in December 2015 but will now be held in February 2016. Negotiations are planned to be completed in October 2017, followed by the launch of the Agreement in December 2017.

Prior to the launch of the CFTA, the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) Agreement was officially launched at a Summit held in Sharm el Sheik, Egypt, also in June 2015. The declaration launching the TFTA was signed by all member states, although only 16 signed the actual agreement at the time. The signed agreement includes provisions for the functioning of an FTA on trade in goods including non-discrimination, tariff liberalization, rules of origin, non-tariff barriers, trade remedies, standards, exceptions, dispute settlement, institutional aspects, infant industries, SPS and TBT issues and customs cooperation. Technical details relating to the nature and scope of the obligations are further provided for in Annexes to the Agreement. While some annexes had been concluded at the time of the signing of the agreement, other important ones such as those on tariffs, rules of origin and trade remedies had not. The declaration launching the TFTA directed that these outstanding issues be concluded so as to operationalise the agreement. It also directed that a second phase of negotiations covering trade in services, cooperation in trade and development, competition policy, intellectual property rights and cross border investment should commence; work on industrial development and infrastructure pillars should be accelerated; and negotiations on movement of business persons should continue on their separate track. Negotiations on the Protocol on the movement of business persons were subsequently concluded in August, followed by preparation of a report to Ministers and Heads of State. The negotiations on outstanding issues in the first phase had not been concluded at the close of the year, and phase two negotiations were yet to commence.

The year 2015 saw industrialisation being set as the main priority in respective regional economic communities (RECs) on the continent. In the Southern African Development Community (SADC), the Revised Regional Indicative Strategic Development Plan (RISDP) and SADC Industrialisation Strategy and Roadmap were adopted at an Extraordinary Summit held in Harare in April. During the year, the Project Preparation Development Fund (PPDF) for regional infrastructure was operationalised. Negotiations in trade in services continued, and it is expected that schedules of commitments in priority sectors will be completed in 2016.

In the Common Market for Eastern and Southern Africa (COMESA), a regional Industrialization Policy was also endorsed for adoption by its 18th Summit held in Addis Ababa in March. Within this context, the role of non-tariff barriers in lowering intra-COMESA trade was given particular attention during the year. Following on from its landmark ruling in 2013, the COMESA Court of Justice delivered another important ruling with positive implications on the progressive development of community law in the region.

In the East African Community, the Summit meeting held in February focused on institutional issues related to its legal framework, particularly the implementation of outstanding decisions, delays in ratification of protocols and some bills enacted by the East African Legislative Assembly that were yet to be assented to. In line with its theme, the Summit noted progress towards the drafting of a constitution for its formation of a political federation. Progress on national consultations on a model structure, road map and action plan is expected to be reported at its next Summit in 2016.

With respect to trade relations between respective RECs and partners outside the continent, the legal scrubbing process of the full Economic Partnership Agreement (EPA) texts initialled in 2014 was completed for the EPAs between the EU and the EAC and SADC respectively. These regions are now moving towards signing and ratification of the agreements. This process will have to be completed and notified by 1 August 2016, if the different regions are to continue trading on the basis of the full EPA texts by a deadline of 1 October 2016.

In June, the African Growth and Opportunity Act (AGOA) was renewed by the US for a period of 10 years. South Africa has faced possible suspension from AGOA benefits on account of measures that it imposes on imports of meat and chicken from the US. Reports indicate that negotiations were successfully concluded at the start of the year, with South Africa now having until 15 March to implement agreed upon requirements or risk suspension on that date.


2015 was a busy year on a number of fronts. Substantial risks in the global economy evolved during the year and are a prominent feature at the start of 2016. The landscape of global economic cooperation also evolved significantly during the year, and with regard to multilateral trade is expected to continue doing so in the coming year. In line with multilateral developments and those in other regions of the world, the year 2016 promises to be definitive for Africa’s integration and industrialisation agenda and hence its trade and sustainable development prospects going forward.



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