tralac in Addis Ababa, Ethiopia – 16-20 May 2016
Workshop on trade related matters: African Trade Policy Centre
During the week of 16-20 May, the African Trade Policy Centre (ATPC) and partners held a week-long workshop on trade-related matters. tralac was represented by Associates Hans Grinsted Jensen and Ron Sandrey to further develop their special interest in services trade data and computer modelling of services trade liberalisation in Africa. Monday and Tuesday was fully devoted to services trade data and the modelling of this trade, and this same theme continued on as one of the two concurrent sessions on the Wednesday morning and later group sessions. Hans made a special presentation of the tralac research to date on African services trade liberalisation.
The meeting was attended by several of the top international experts on this issue, and grew out of a proposal for tralac to have a bilateral meeting with the ATPC. The meeting was opened with a brief introductory welcome from David Luke, ATPC Coordinator of the Economic Commission for Africa, after which several presentations were made:
Maximiliano Mendez-Parra from the British Overseas Development Institute (ODI) team presented on the work that he and others have been doing on economic transformation and the role of the value-added component of this, along with the issue of market size in enhancing profitability.
Professor Emmanuel Ogunkola from Nigeria gave a summary of the relevant chapter on the role of services in structural transformation in the UNECA’s Economic Report on Africa 2015. He agreed that the development model of transferring resources from agriculture to services may well be more appropriate for Africa.
Emmanuel Chinyama from ECA spoke on their research on the investment agreement landscape in Africa (the bilateral investment treaties or BITs). There had been a surge of FDI into Africa but with the recent commodity price declines this had flattened somewhat; most of this FDI was into the extractive sector, infrastructural development and energy-related investments.
William Davis from the ATPC/ECA discussed the state of play on regional African trade in services regulations and the potential benefits of further liberalisation/harmonisation. He emphasised that Africa has a far from liberal trading regime, and in fact many countries ranked very low in the World Bank Restrictiveness Index. Overall Africa has a significant services trade deficit.
Day two concentrated upon the trade data availability and the data gaps in Africa.
David Primack from Canada’s International Lawyers and Economists against Poverty (ILEAP) introduced the session with a discussion on what we do know about services data, what the best practice approach was, examined some recent studies and pondered on where to. He then spoke on the difficulties of getting data on services trade and especially the services data problem – to disentangle the amount of services ‘embedded’ in the manufacture and related activities generally associated with goods trade. The definitions are very subjective and uncertain, and the manufacturing/service ‘blurring’ is associated with the modern emphasis to understand the concept of Value-added (VA) in goods trade. Assembling quality trade in services data is a real challenge for developed countries, and for many LDCs it is simply impossible.
Basiel Bogaerts and Yared Befecadu from the International Trade Centre (ITC) gave two presentations. The first session was a comprehensive outline of the ITC data and the new features that they are building into this data. The new services data that has been introduced included re-export data for several countries, although unfortunately several of these were non-African countries. Services trade data is becoming more and more available, and some 49 economies now have bilateral services data on the site. New data relating to the linkages between goods and services with respect to ‘goods for processing’ is changing the nature of trade reporting.
The second ITC presentation focused on an analysis of the Trans-Pacific Partnership (TPP) Agreement, concentrating on market access issues and in particular tariff reductions and preferential margins and their erosions. For Africa they found that in percentage terms, Lesotho was the biggest loser, with both Kenya and Egypt also featuring. Having written a paper the previous week looking at Lesotho’s clothing exports to the US, Ron Sandrey was able to support their conclusions with a very short addition on the actual tariff margins in the clothing sectors and the real threat from Viet Nam from both preference erosion and rules of origin advantages.
Hans Grinsted Jensen provided a very comprehensive presentation on the tralac services trade modelling. This was especially important, as it was this draft paper that spurred the week-long workshop into being! Hans went through his preliminary paper, while stressing that it was very much an initial step into modelling African services trade liberalisation. He set the scene for the detailed discussion sessions later in the week that were involved with specifically addressing the challenging issues on the way forward from where we were at.
Simon Mevel from ATPC/ECA spoke on the latest research that they are involved with in modelling the emergence of the mega-regionals (the TPP and the proposed US-EU agreement) and the more detailed analysis of their impacts on Africa. This moved to an analysis of the possible merging of the TPP and the African Continent FTA (CFTA).
Mohamed Chemingui, ESCWA, spoke on their latest report, the second edition of Assessing Arab Economic Integration. An emphasis was given to the services trade issues associated with integration in the Arab countries. As with Africa, intra-trade in goods in this region is low, and hence much of the focus shifts to issues such as services trade, FDI and remittances. Of special interest was the issue of the Value-added services content in manufacturing, and similarly this is also low in much of the Arab world.
Emmanuel Ngokp from the ACS/ECA spoke on their ongoing efforts to improve data on services and investment in Africa. Countries were the main data sources, while a secondary source was International Institutions. The main emphasis was on investments and capital formation and the revenues from foreign investments. Their forward-looking goal was to study the trade in value-added trade in the global chains, and while this was data intensive they were cooperating with International Institutions such as the OECD.
The way forward
Wednesday morning continued the session on Africa’s industrialisation and engagement with emerging markets, with the presentations based upon ATPC/ECA work or forthcoming work. Much of this focused on the need to evaluate trade at a disaggregated level when using trade models and the attempts to assess areas where Africa may have a comparative advantage. Central to this are the well-known measures such as reducing or eliminating tariff levels on imported inputs into local manufacturing and paying closer attention to domestic NTBs. Clearly the future emphasis must be closer cooperation with emerging enterprises and the need to integrate into regional and global value-added production chains. Case studies were planned to assess the current trade profile and performance and tariff barriers for African exports to China, India, Turkey and Brazil from a possible FTA relationship with these partners.
From mid-morning Wednesday the workshop split into two groups. One concentrated upon trade and gender issues, the other a general discussion on what was the focus of tralac’s interest – what data was available, who was undertaking data analysis (both within the group and outside), and what was technically feasible and, perhaps more importantly, practical to do in the short to medium term. It was agreed that the working note that tralac presented to the meeting for initial discussion would be refined into a full working paper by Ron and Hans in the short term.
Simon Mevel summarised the workshop progress to assist in discussions by briefly recapping progress made on issues surrounding modelling of trade in services and investment. Participants were left with some major questions to answer from Hans’s presentation:
- Which Model to use?
- Which Data?
- How to shock the model (i.e. scenarios)?
From subsequent discussions the following points (on which we must reflect) were made:
- The modelling exercise should probably not only look at services Mode 3 but also Mode 4;
- Once the type of shock has been decided, the magnitude of the shock should be clearly justified;
- It is necessary to investigate the STRI (i.e. what has been put into it; methodology);
- Should all services be considered in the liberalization exercise or only a sub-set of them?
The final agreement from the trends on the above is summarised in this report.
On Thursday 19 May, Hans Grinsted Jensen and Ron Sandrey met with the development team at the Swedish Embassy to liaise with one of tralac’s leading financial sponsors. They explained their presence in Addis Ababa and the close cooperation with the ECA modelling team, and how tralac’s original two day meeting had grown into a full week-long workshop whereby the ECA brought several international experts along to examine and continue the tralac work (and especially so since tralac did not have the full resources that the ECA and others had). They were very interested in tralac’s results, which we emphasised were ‘baby steps’ in the analysis of services liberalisation but that this early research showed that infrastructural development (a component of services trade) was more restrictive than tariffs on goods to intra-African trade and the ECA were extremely interested in continuing tralac’s early work.
Later in the day, Hans and Ron held a bilateral meeting with Dr. Adama Coulibaly, Chief Economist in the Food Security, Agriculture and Land Section of the ECA. The main purpose of the meeting, beyond a courtesy call, was to discuss the book that tralac, in association with the South African National Agricultural Marketing Council (NAMC), is in the process of undertaking, on the general topic of agriculture, Africa and the WTO.
Dr. Coulibaly outlined how he considered that from an African perspective the WTO had yet to deliver on its expectation on the development agenda, but that it was still essential for Africa to remain a part of the Institution. Hans and Ron agreed that perhaps the direct gains for African agriculture may be limited, but for the wider issues relating to what could be considered new agenda areas such as food security, climate change and trade facilitation, the WTO remained important. He considered that internal reforms in Africa were perhaps the key to reforms and development for Africa, and that in general the WTO may have a longer-term role to play in facilitating countries to make these domestic reforms.