Topics publications: Global trade governance
Trade Reports
The AGOA Saga in a Trade Governance Context
The facts pertaining to the recent difficulties between the United States and South Africa about the latter’s continued enjoyment of the trade preferences of the African Growth and Opportunity Act (AGOA) were well covered in the media. The trade governance context, on the other hand, has received less attention.
The legal principles that apply to this matter and how South Africa’s continued participation under AGOA will be made conditional on prior changes to South African trade measures affecting American exports, have, for example, not been explained. Why were political stakeholders and lobby groups so actively involved? And why has it been so difficult to resolve this issue?
This paper takes a look at these issues within a broader trade perspective. It discusses the “governance” context of the AGOA regime as it now pertains to South Africa. We also look at possible lessons to be learned from the AGOA renewal debate, the conditions set for South Africa’s continued participation, and how the agreement reached will be implemented. These developments raise questions about future trade relationships between these two countries and how to manage them.
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
African export performance under AGOA: a country analysis of Kenya
This trade brief looks at the export performance of Kenya’s trade with the United States of America (US) and, more specifically, it concentrates on the preferential trade accorded to Kenya by the US. With an estimated real Gross Domestic Product (GDP) of US$61 billion in 2014, and a real GDP growth averaging around 5% over the past three years, Kenya is considered the economic and transport hub of East Africa. The economy is mainly driven by agriculture which contributes about 25% to GDP and also sustains 80% of Kenyans who work at least part-time in this sector. The country, however, still has high levels of unemployment (40%) and poverty despite the positive economic growth. Corruption, reliance on primary low-value commodities and infrastructure constraints are attributed to the current state of affairs in the country although its government has prioritised infrastructure development to ensure that Kenya remains on a growth and development trajectory.
The rest of the paper briefly addresses the African Growth Opportunity Act (AGOA) and recent developments since the extension of the AGOA. Eligibility criteria are also briefly discussed to provide a background to AGOA. Following this we look at the trade profile of AGOA-eligible countries focusing on their exports to the US (with or without preferences). We then narrow down the focus to Kenya’s trade with the US, also focusing on imports by the US from Kenya (Kenya’s exports). Here the analysis splits the trade under different regimes to ascertain whether the bulk of trade is benefiting from AGOA or not. We also look at the main competitors for goods exported by Kenya to the US under two regimes, AGOA (without the Generalised System of Preferences – GSP) and under the GSP (extended programme). This is then followed by a conclusion.
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
African export performance under AGOA: a country analysis of Lesotho
This trade brief looks at the export performance of Lesotho’s trade with the United States of America (US) and more specifically it concentrates on the preferential trade accorded to Lesotho by the US. The country had a Gross Domestic Product (GDP) (Purchasing Power Parity) (PPP) of $5.282 billion and a real growth rate of 2.2% in 2014 and it relies on South Africa for much of its economic activity. For example, Lesotho imports 90% of its consumption goods from South Africa, including most agricultural inputs. Remittances from South Africa are a major income source for households from family members working in South Africa, in mines, on farms and as domestic workers.
The economy continues to face numerous challenges. These include ‘a lower degree of diversification, low domestic savings leading to over-dependence on foreign capital inflows, high unemployment, widening inequality and poverty, as well as spatial exclusion. Added to this is the burden of HIV/AIDS, particularly on the young generation. Together with high inequality (Gini Index of 0.52) these have implications on social spending to protect the vulnerable population’. Despite political challenges, the economy has remained resilient and is expected to grow by an average rate of 4.9% in 2015 and 2016.
The rest of the paper briefly addresses the African Growth Opportunity Act (AGOA) and developments after the extension of the AGOA. Eligibility criteria are also briefly discussed to provide a background on AGOA. Following this we look at the trade profile of AGOA eligible countries focusing on their exports to the US (with or without preferences). We then narrow the focus on Lesotho’s trade with the US, also focusing on imports by the US from Lesotho (Lesotho’s exports). Here the analysis splits the trade under different regimes to ascertain whether the bulk of trade is benefiting from AGOA or not. We also look at the main competitors for goods exported by Lesotho to the US under two regimes, AGOA (without the Generalised System of Preferences – GSP) and under the GSP (extended programme). This is then followed by a conclusion.
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
Where are the Singapore Issues?
The World Trade Organisation (WTO) Members decided at the 1996 Singapore Ministerial Conference to set up three new working groups on trade and investment, competition policy, and transparency in government procurement. They also instructed the WTO Council for Trade in Goods to look at possible ways of simplifying trade procedures, or, as it became known as, ‘trade facilitation’. These four issues collectively became known as ‘the Singapore Issues’. They were subsequently included on the Doha Development Agenda (DDA), with negotiations to start after the 2003 Cancun Ministerial Conference, ‘on the basis of a decision to be taken, by explicit consensus at that session on modalities of negotiations’.
The basic problem for the WTO was that these negotiations would only proceed following a clear consensus decision to do so, and this was especially crucial for competition policies and investment as the WTO already had an Agreement on Government Procurement. Were Singapore Issues a bridge too far? Yes they were, and the outcome from Cancun was that talks collapsed with the three Singapore Issues of investment, competition policies and procurement shouldering a significant and possibly unfair portion of the blame. Trade facilitation did however find common ground.
In some respects, for Africa the international conflict of Cancun continues. Even though the arena has shifted the developing countries still see these issues through the prism of exporting countries that are trying to force open markets of the poorer importing countries, thus attempting to ensure economic development in their nations at the expense of the developing countries’ policy space. The extent to which ‘ex-Singapore issues’ are being introduced into the African and other regions through bilateral and regional agreements negotiated with the EU and the US as the dominant economies becomes an important one, and in general the EU seems to be pursuing them with some vigour and rigour while the US is adopting a more benign approach.
This paper focuses on the Trans-Pacific Partnership (TPP) for developments in investment, competition policy and procurement, because we believe it is both the most advanced of the mega-regionals in its negotiations (because of the economic and development status diversity of its members) and because its potential outcome holds the most interest and important lessons for South Africa and its regional negotiations. Developments in the WTO trade facilitation package negotiations and the implications for Africa are also considered.
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
Review of trade-related developments in 2014
In some respects the end of 2014 brought some light to a quiet year on the trade front. This Trade Brief reviews some of the trade-related developments of the past year at the global, continental, and regional levels.
As could be expected, the experiences at the global, continental and regional levels were quite varied. There have been concerns in recent years that the multilateral trading system has been heading to a stale-mate. The Doha Development Round of the World Trade Organisation (WTO), which started in 2001, had been progressing at a considerably slow pace. Meanwhile, bilateral and regional trade agreements continued to be on the rise, epitomised by negotiations towards two mega agreements involving the United States namely the Transatlantic Trade and Investment Partnership with the EU, and the Trans-Pacific Partnership (TPP) with the Asia-Pacific region.
In November, a significant breakthrough was reached in bilateral negotiations between the US and India which brought momentum towards conclusion of WTO negotiations on the Trade Facilitation Agreement (TFA), adopted in Bali in December 2013 with the aim of ‘expediting the movement, release and clearance of goods, including goods in transit’. Resultantly, negotiations were effectively 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.
The breakthrough in negotiations between the US and India was achieved just before the G20 Summit. The previous month, there was another significant development namely the launch of the World Bank’s Global Infrastructure Initiative (GII). 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 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 growing focus on the importance of investing in infrastructure to address supply-side constraints has not only been at the global level, but at the continental level in Africa as well. There has also been a growing recognition of the importance of home-grown solutions, with structural transformation increasingly being at the core of national growth and development plans developed as such. This recognition is now at the centre of developmental efforts and has informed the Common African Position (CAP) on the Post-2015 Development Agenda, adopted by the 22nd Summit of African Union Heads of State and Government held in Addis Ababa, Ethiopia, from 21 to 31 January 2014.
Efforts towards establishment of the CFTA significantly gathered pace. A series of meetings were held throughout the year, culminating in the 9th Conference of African Union Ministers of Trade, held in Addis Ababa, Ethiopia, from 1 to 5 December, 2014. There is now considerable momentum towards the commencement of negotiations towards establishment of Africa’s own mega FTA. The robustness of the institutional framework that will be set up by the end of January 2015 following a High Level African Trade Committee (HATC) meeting will be critical for the effective development of the CFTA within the indicative timeline of 2017 that was set at the beginning of the process.
As 2014 drew to a close, it became evident that 2015 will be a highly important year. 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.
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
BRICS: South Africa’s Way Ahead?
The accession of South Africa into the ‘BRICS’ formation has attracted wide attention internationally. Some welcomed the step while others questioned it. A closer look at BRICS reveals that these countries share some fundamental features while they differ in other respects.
The BRIC acronym was coined by Jim O’Neill of Goldman Sachs in 2001. The founding members of this political formation are Brazil, Russia, India and China. The formation of the BRIC was motivated by global economic developments and changes in geopolitical configurations. South Africa joined the group in 2011, thus opening the possibility of putting Africa on the BRICS’ agenda. South Africa’s admission to the group was motivated by China and supported by Russia. Its accession to the BRICS generated much discussion about the country’s suitability to be part of the formation.
One of the real issues raised is that South Africa does not measure up to the other BRIC economies in terms of population, trade levels and performance, and growth rates. A formation such as the BRICS is of value to South Africa only if the country’s strategic development interests (relating, for example, to agriculture) are to be on the agenda. South Africa faces particular challenges related to market access into the BRIC countries.
Agricultural issues amongst the BRICS are discussed under the Standing Expert Working Group on Agriculture and Agrarian Development. The issues that are prioritised include:
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The development of a general strategy for access to food (this is where market access needs to be tabled), which is tasked to Brazil;
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Impact of climate change on food security, which is allocated to South Africa;
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The enhancement of agricultural technology, cooperation and innovation that is allocated to India; and
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Creation of an information base of BRICS countries that is allocated to China.
In 2012, at the annual conference of the Agricultural Economics Association of South Africa, the National Agricultural Marketing Council (NAMC) co-hosted a workshop aimed at establishing a dialogue on how agriculture can benefit from South Africa’s membership of the BRICS. It emerged clearly from the workshop that agriculture needs to be better positioned to benefit from the BRICS formation. One important issue that was noted was that market access for South African agricultural produce into the BRICS countries could be improved.
In this regard, an honest question was raised whether, as the country’s agriculture stakeholders, we fold our arms and do nothing since this is a political formation (while market access is an economic issue), or whether we use this political formation to address our socioeconomic issues as they relate to these countries. Market access is one of the issues of interest to South Africa’s agriculture industry within the BRICS formation, together with issues such as the diffusion of technologies and collaborations.
The research that is presented in this book addresses a range of important issues related to the trade and investment relations among the BRICS countries, in particular the performance of their agricultural sectors. There is also a focus on the relationship between BRICS and Africa, and what this means for South Africa’s trade relations with other African countries.
© 2013 Trade Law Centre, National Agricultural Marketing Council, Royal Danish Embassy, and Swedish Embassy, Nairobi
Publication of this book was made possible by the support of the Trade Law Centre (tralac), National Agricultural Marketing Council (NAMC), the Royal Danish Embassy, and the Swedish Embassy, Nairobi. 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
Trade negotiations for a Free Trade Agreement: a guide to general principles and requirements
Why do countries seek trade agreements? Despite numerous and vocal critics, virtually every World Trade Organisation (WTO) member is involved in at least one (and often numerous) FTA or preferential trade agreement (PTA). Sometimes it is for no other reason than being left behind, as a competitor has trade preferences in your markets. Sometimes, as in the case of the smaller open economies such as Chile and New Zealand, it is a desire to complement their unilateral domestic reforms, while at other times it is the desire of a large economy to force a smaller country into granting trade concessions.
There are dangers and pitfalls in trade negotiations to be aware of. One of these is policy space, which should be an ongoing concern for many developing countries as negotiated concessions restrict future government policy options. Associated with policy space is the particular concern that some developed countries are insisting upon a clause that entitles them to automatically have any future concession negotiated with a third party to be granted to them as well (analogous to the WTO Most Favoured Nation (MFN) clause). Another danger is trade creation versus trade diversion. Only by a careful analysis of these overall effects can an indication be made as to whether or not an FTA will be unambiguously positive for a country.
The objective of this paper is to outline the process of a trade negotiation and, in particular, a pathway to follow. This paper runs a parallel pathway to a companion paper assessing the China-New Zealand Free Trade Agreement (FTA), and both heavily rely upon the New Zealand Ministry of Foreign Affairs and Trade publications for background data and information. It also references extensively the 2005 paper on regional and bilateral FTAs by Martin Khor, the Director of the Third World Network, and refers to the Chilean examples as, along with New Zealand, this South American country leads the world in ‘genuine FTA relationships’. And the term ‘genuine FTA relationships’ is emphasised as many so-called FTAs are in reality less rigorous preferential trade agreements (PTAs), with a genuine and comprehensive FTA being a PTA ‘on steroids’ (note in particular the term ‘comprehensive’).
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
Overview of AGOA’s apparel provisions in the context of US-Africa trade
The African Growth and Opportunity Act (AGOA) forms a part of United States trade legislation that provides non-reciprocal preferential market access to the US market for qualifying exports made in African beneficiary countries. The legislation was enacted under former President Bill Clinton in 2000, and extended (and to some extent broadened) by President George Bush during his term in office. Under President Obama, important extensions were recently passed while the current US Administration’s recently released Africa policy undertakes to promote an extension of AGOA beyond its current expiry date in 2015.
While AGOA is largely focused on enhanced US market access (in support of trade flows) for African countries by removing US import tariffs and other restrictions, the legislation goes well beyond this aspect and is in effect a policy framework covering trade-capacity building, general development assistance, bilateral political and business engagement (for example, through the annual AGOA Forum), healthcare assistance, investment support and financing, and security-related cooperation. Regional trade hubs located in Gaborone, Nairobi, Accra and Dakar provide and implement some of the support measures envisaged (and required) by the AGOA legislation.
Although AGOA is very generous it also has numerous shortcomings, many of which lie in the fact that it represents US trade legislation, rather than a bilateral trade agreement. As a result, preferences are neither permanent nor necessarily predictable; recent experience and uncertainty around the extension of AGOA’s apparel provisions in as far as they relate to the third-country fabric provision are a case in point, as are substantial gaps and other restrictions relating to the legislations’ product coverage.
The objective of this policy brief is to provide an overview of AGOA’s wearing apparel provisions given their recent legislative extension, but also to place Africa’s apparel exports to the US into broad context with regard to (a) trade flows trends since AGOA’s inception, (b) Sub-Saharan African apparel exports five years prior to AGOA’s inception compared to today, and (c) AGOA apparel exports in the context of global apparel imports into the US market.
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 EU Generalised System of Preferences: An overview of proposed reforms
European countries through the European Commission (EC) have embarked on a reform process that aims to focus the non-reciprocal trade preferences offered under the European Union (EU) Generalised System of Preferences (GSP) on fewer countries. The proposed reforms can be placed within a much broader context, not only of lower EU import tariffs and dwindling preference margins, but also of the EU’s reassessment more generally of its provision of relatively generous nonreciprocal market access preferences to a large number of countries.
The proposed GSP programme changes follow recent reforms of the GSP Rules of Origin (RoO) that were implemented at the start of 2011, and which in turn also included a number of measures that simplify the applicable origin requirements and reduce the number of product-specific rules. The amended RoO also contain a number of provisions that apply only to Least Developed Countries (LDCs).
The main beneficiaries of the proposed GSP scheme will be LDCs, not so much through changes to their preferences (they already receive almost full duty- and quota-free market access) but rather through the higher concentration of preferences and perhaps reduced competition in the EU market. LDCs’ benefits under the proposed scheme are therefore primarily through gains in relative preference margins.
The new scheme would also be open-ended, which means that traders both in the EU and GSP beneficiary countries will enjoy greater economic certainty with respect to their trading relationship. Up until now, the GSP was subject to 10-year cycles with periodic renewals mostly in three year intervals. The current legislative period covers the 2009-2011 period with roll-over legislation already adopted which extends the current scheme to the end of 2013 at the latest (or to any such earlier date when the revised GSP is finalised and implemented). The proposed legislation for a new GSP still needs to be debated in the European Parliament and Council.
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.