News Archive 2013

Trade Facilitation from an African Perspective

The proposed agreement on trade facilitation is one of the key issues on the negotiators’ table in the run-up to the World Trade Organisation Ministerial Conference, to be held in Bali, Indonesia, from 3 to 6 December 2013. In this context, this paper provides a thorough analysis of key trade facilitation issues from an African perspective, highlighting what is at stake for the continent, thereby contributing to inform the opinions of African negotiators at a critical juncture.

The premise of this analysis is that there is a consensus in the empirical literature, regardless of the methodology utilized, on the positive and significant impact trade facilitation could have for Africa’s trade performance. Against this background, the paper is admittedly not intended to assess the proposed agreement from a tactical negotiating perspective, nor does it address issues related to the “overall balance” of the deliverables that could be achieved in Bali. Taking some distance from the negotiations as such, it rather takes a technical stance and focuses on the four key aspects related to trade facilitation, as outlined below.

First, by analyzing relevant indicators from the World Bank Doing Business database, the paper compares red tapes and transaction costs (for what pertains to international trade) within Africa, as well as with the rest of the world. In light of the disproportionate magnitude of transaction costs by international standards, the analysis confirms how critical trade facilitation is for Africa. In addition, the reviewed evidence highlights the different incidence of transaction costs distinguishing between exports and imports flows, and underscores sub-regional and cross-country variability (with special reference to landlocked countries).

Secondly, the paper investigates the pattern of imports of African countries, focusing in particular on intermediate inputs. This analysis permits grasping the extent to which trade facilitation could boost exports not only by directly cutting transaction costs, but also indirectly through providing cheaper access to production inputs to be transformed domestically and then possibly re-exported.

Though currently this indirect effect appears to play a rather limited role, in view of Africa’s persistent dependence on primary commodities, it is certainly far from negligible. Moreover, such an indirect effect is set to gradually become more relevant, in so far as economic diversification advances and African firms successfully connect to regional and global value chains.

Third, the paper reviews the precise instruments covered by the draft negotiating text tabled at the World Trade Organisation, and compares them with the instruments already agreed within Africa at the level of Regional Economic Communities, as well as with legal provisions at the national level. This enables an assessment of the consistency of the multilateral agenda with Africa’s regional integration agenda and national policies, while also identifying areas of potential synergies and complementarities between the three. The paper also assesses the potential synergies and complementarities between the World Trade Organisation proposal and related multilateral conventions such as the Revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures and the Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR Convention).

Finally, the paper sheds some light on the costs underlying trade facilitation activities. Adequately “costing the trade facilitation agenda” is not only crucial in relation to Africa’s need for development finance, but also in view of the fact that the modalities of the proposed trade facilitation agreement introduced a unique feature: the implementation of certain commitments (the so-called category C) is conditioned upon the delivery of technical and financial assistance.

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Trade Facilitation from an African Perspective

28 Nov 2013
The proposed agreement on trade facilitation is one of the key issues on the negotiators’ table in the run-up to the World Trade Organisation Ministerial Conference, to be held in Bali, Indonesia, from 3 to 6 December 2013. In...
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Warsaw climate talks set 2015 target for plans to curb emissions

Overnight agreement gives countries until first quarter of 2015 to publish plans for cutting greenhouse gases from 2020

Governments around the world have just over a year in which to set out their targets on curbing greenhouse gas emissions from 2020, after marathon overnight climate change talks in Warsaw produced a partial deal.

Under the agreement, settled in the early hours of Sunday morning after more than 36 hours of non-stop negotiations, countries have until the first quarter of 2015 to publish their plans. This process is seen as essential to achieving a new global deal on emissions at a crunch conference in Paris in late 2015, for which the fortnight-long Warsaw conference was supposed to lay the groundwork.

“Warsaw has set a pathway for governments to work on a draft text of a new universal climate agreement, an essential step to reach a final agreement in Paris, in 2015,” said Marcin Korolec, the Polish host of the conference, who was demoted from environment minister to climate envoy during the talks.

The talks were characterised by discord and acrimony, and by the emergence of a new and highly vocal negotiating bloc among developing countries that forced through the watering down of key aspects of the deal.

Christiana Figueres, the UN’s leading climate official, said: “We have seen essential progress. But let us again be clear that we are witnessing ever more frequent, extreme weather events, and the poor and vulnerable are already paying the price. Now governments, and especially developed nations, must go back to do their homework so they can put their plans on the table ahead of the Paris conference.”

The conference began with an impassioned plea by the Philippines representative, Yeb Sano, for a strong agreement after the devastation of typhoon Haiyan. Sano remained fasting throughout the talks, and afterwards expressed frustration that there had not been a “meaningful” outcome.

The emissions goals, to come into force from 2020, will be set at a national level, but after they are published there will be a chance for other countries to scrutinise them and assess whether they are fair and sufficiently ambitious. At the insistence of a small group of developing countries, they will take the form of “contributions” rather than the stronger “commitments” that most other countries wanted.

These were the self-styled “like-minded developing countries”, a group that comprises several oil-rich nations, including Venezuela, Saudi Arabia, Bolivia and Malaysia. Several have large coal deposits and are heavily dependent on fossil fuels, such as China and India, and some countries with strong links to some of the others, including Cuba, Nicaragua, Ecuador and Thailand.

The “like-minded developing countries” group takes the view that the strict separation of nations into “developed” and “developing”, which was set at the first international climate talks in 1992, and enshrined in the 1997 Kyoto protocol – in which developed countries were obliged to cut emissions but developing countries had no obligations – must remain as the bedrock of any future agreement. They argue that the “historical responsibilities” for climate change lie with the first nations to industrialise.

That view is firmly rejected by the US and the EU, both of which have agreed to take a lead in cutting emissions, but have also repeatedly pointed out that the tables have turned on historic responsibilities. Emissions from rapidly emerging economies such as China and India are growing so fast that by 2020, the date when any new agreement will come into force, the cumulative emissions from developing countries will overtake those of rich nations.

Martin Kaiser, the head of the Greenpeace delegation, said: “China is making big strides domestically, but not yet translating it into a willingness to lead at a global level. Historical responsibility “¦ [is] no excuse for anyone to ditch their responsibilities over their current and future emissions.”

Loss and damage was one of the key rows in the early stages of the meeting, as some developing countries demanded “compensation” from rich countries for the damage they suffered from extreme weather. A compromise was reached with a new “Warsaw international mechanism” by which the victims of disaster will receive aid, but it will not be linked to any liability from developed countries.

Another success at the conference was the completion of a new mechanism to keep the world’s remaining forests standing. Called REDD+, for reducing emissions from deforestation and degradation, this has been in the works for most of the last decade.

But all countries admitted that most of the preparation work for Paris still remains to be done. Politically, the battle between the like-minded group – which is separate from, but claims to lie within, the broader G77 group of the majority of developing nations – and the US and the EU will be key. For both sides, gaining support from the rest of the unaligned developing nations – some of which are highly vulnerable to climate change and are desperate for a deal, but others who are courting economic investment from China – will be crucial.

The fragile truce reached after the marathon talks in Warsaw may not even last as long as the delegates’ flights home.

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Boosting trade in Africa: Why women are the key

In many countries in Africa, the majority of small farmers are women. They produce crops such as maize, cassava, cotton, and rice that have enormous potential for increased trade between African countries and with the global market.

Women are also involved in providing services across borders, such as education, health, and professional services like accountancy and law.

“Every day in Africa, hundreds of thousands of women cross borders to deliver goods and services from areas where they are relatively cheap to areas in which they are in shorter supply,” says Paul Brenton, Africa Trade Practice Leader for the World Bank.

However, Africa’s trade potential is undermined by constraints that women face. The contribution of women to trade is much less than it could be because of non-tariff barriers that impinge particularly heavily on the trade activities of women and women-owned enterprises.

These barriers often push women traders and producers into the informal economy where a lack of access to finance, information, and networks jeopardizes their capacity to grow and develop businesses.

Women and Trade in Africa: Realizing the Potential, a new report from the World Bank Group’s Africa Trade Practice, demonstrates how women play a key role in trade in Africa and will be essential to the continent’s success in exploiting its trade potential.

The report calls for African governments to recognize the role that women play in trade and ensure this is communicated to officials at all levels. It asks governments to ensure that the rules and regulations governing trade are clear, transparent and widely available at borders, and encourages policy makers to simplify documents and regulatory requirements where possible. 

“Removing the obstacles to regional trade integration in Africa would be particularly beneficial for poor women, as they literally carry most of the small-scale, cross-border commerce that happens within the Region,” says Marcelo M. Giugale, Director of the Department of Economic Policy and Poverty Reduction Programs in the World Bank’s Africa Region.

“The potential benefits are huge and obvious: better food security, faster job creation, more poverty reduction, and less gender discrimination. This is a win-win-win-win reform agenda that is ready for action.”

Women and Trade in Africa highlights the need to design interventions that develop trade in ways that benefit women. According to the report, governments and donors are making concerted efforts to facilitate trade, increase productivity in export-oriented sectors, and improve competitiveness, but these need to be better targeted to ensure that not only men benefit.

Finally, it calls for governments to help women – who are generally more risk-averse than men-to more effectively address risks like physical harassment at the border and confiscation of goods, lack of access to stable trade networks and buyer relationships, risks to business arising from the need to provide family care, and constraints on access to finance which limited capacity to diversify.

“The aim of this book is to make available to a wide audience new analysis on the participation of women in trade in Africa,” said Brenton. “In addition to raising the profile of this public policy issue, we also hope that it will encourage more research and analysis over a wider range of African countries to extend the knowledge base.”

According to Brenton, policy makers typically overlook women’s contribution to trade and the challenges they face. This neglect reflects, in part, the lack of data and information on women and trade in Africa and also the underrepresentation of small traders and rural producers in trade and trade policy discussions.

“African countries have enormous potential for trade with the global market and for more intensive trade among themselves,” Brenton said. “Regional trade in Africa can play a vital role in diversifying economies and reducing dependence on the export of a few mineral products, in delivering food and energy security, in generating jobs for the increasing numbers of young people, and in alleviating poverty and promoting a shared prosperity.”

This publication was edited by Paul Brenton, Elisa Gamberoni and Catherine Sear.

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Boosting trade in Africa: Why women are the key

21 Nov 2013
In many countries in Africa, the majority of small farmers are women. They produce crops such as maize, cassava, cotton, and rice that have enormous potential for increased trade between...
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Africa climate adaptation costs could soar to USD $350 billion annually by 2070 if warming hits 3.5-4°C – UN Report

Africa faces huge financial challenges in adapting to climate change, according to a new report by the UN Environment Programme (UNEP) that spells out the costs faced by the continent if governments fail to close the “emissions gap” to keep warming below 2°C.

Adaptation costs for Africa could reach approximately USD $350 billion annually by 2070 should the two-degree target be significantly exceeded, while the cost would be around USD $150 billion lower per year if the target was to be met.

Africa’s Adaptation Gap, released today and endorsed by the African Ministerial Conference on the Environment (AMCEN) whose secretariat is hosted by UNEP, confirms the World Bank’s Turn Down the Heat Reports that there is a 40 per cent chance that we will inhabit a 3.5-4°C World’ if mitigation efforts are not stepped up from current levels.

  • Africa is already facing adaptation costs in the range of US $7-15 billion per year by 2020.

  • These costs will rise rapidly after 2020, since higher levels of warming will result in higher impacts.

  • Combining adaptation costs with “residual” damages, the total costs can reach 4 per cent of Africa’s Gross Domestic Product (GDP) by 2100, under a 3.5-4°C scenario.

  • If no adaptation measures are taken, damages are expected to cost 7 per cent of African GDP by 2100 in a ‘3.5-4°C World’, according to the Africa Gap report.

The report further cautions that, even if the world does manage to get on track to keep warming below 2°C, Africa’s adaptation costs will still hover around USD $35 billion per year by the 2040s and USD $200 billion per year by the 2070s – with total costs reaching 1 per cent of the continent’s GDP by 2100. 

“Missing the 2°C window will not only cost governments billions of dollars but will risk the lives and livelihoods of hundreds of millions of people on the African continent and elsewhere,” said UN Under-Secretary General and UNEP Executive Director, Achim Steiner. 

“Even with a warming scenario of under 2°C by 2050, Africa’s undernourished would increase 25-90 per cent. Crop production will be reduced across much of the continent as optimal growing temperatures are exceeded. The capacity of African communities to cope with the impacts of climate change will be significantly challenged.”

“I would like to welcome the decision by AMCEN to endorse the recommendations of the Africa Gap report; an important step towards strengthening political will and building resilient national policies.”

“Additional adaptation funding and technical know-how are imperative if Africa is to move towards a climate-resilient green future path. There is for example a need to develop drought-resistant crops, build early warning systems, invest in renewable energy sources and ensure that the catastrophic impacts of climate change are controlled or, better still, avoided,” he added.

UNEP’s Emissions Gap Report – launched days ahead of the UN Climate Conference in Warsaw – analyzes in much more detail and confirms that current pledges by individual countries to limit emissions by 2020 would lead to a global temperature increase of about 3.5-4°C warming by 2100 – unless emissions are reduced now and substantially reduced afterwards.

Even if nations meet their current climate pledges, greenhouse gas emissions in 2020 are likely to be 8 to 12 gigatonnes of CO2 (GtCO2e) above the level that would provide a likely chance of remaining on the least-cost pathway consistent with holding warming below 2°C.

“Africa cannot risk failure of implementing serious adaptation measures, especially with Africa’s predicted population rise of 2 billion by 2050 and the current ecosystem degradation trajectory,” said President of AMCEN and Minister of State for the Environment, United Republic of Tanzania, Dr. Terezya L. Huvisa.

Africa Warming

In a ‘3.5-4°C World’, Africa’s coastline is expected to undergo sea-level rise 10 per cent higher than the rest of the world, with several countries particularly hard hit.

In Guinea-Bissau, Mozambique, and The Gambia, up to 10 per cent of the entire population would risk flooding risks annually by 2100.

Arid areas in Africa, which already represent about half of the continent’s land area, are expected to increase by 4 per cent.

If we enter a ‘3°C World’, effectively all of the present maize, millet, and sorghum cropping areas across Africa would become unsustainable for current strains.

In a ‘4°C World’, southern Africa will likely see decreases of up to 30 per cent in rainfall each year.

At the same time, north, west, and southern Africa will also see declines of 50-70 per cent in groundwater recharge, according to the study.

The study further details how agriculture, fisheries and water access – among other sectors – will be impacted.

The degree to which these sectors will be impacted will depend on whether commitments are kept and whether better adaptation practices can be implemented.

The study points to a high risk of biodiversity loss, as species may be unable to migrate to suitable climates.

Up to 97 per cent of the 5,000 plant species studied could undergo range size reductions or shifts, while up to 40 per cent could experience total range elimination by 2085 in a ‘2°C World’ scenario.

At the same time, a ‘3.5-4°C’ scenario projects fish declines in freshwater lakes across places such as Chilwa, Kariba, Malawi, Tanganyika and Victoria, which would jeopardize the source of more than 60 per cent of the protein needs of the surrounding communities.

Perhaps the most drastic example of the effects of climate change in Africa is that coral reefs-which are essential support systems for marine fisheries, tourism, and coastal protection against sea-level rise and storm surges-are projected to be entirely extinct before we even enter a ‘4°C World’.

Adaptation Funding: Opportunities and Challenges

How well Africa deals with these climate impacts, now and in the future, will be co-determined by the funding it receives.

Adaptation measures such as early warning systems and coastal zone management to counter sea-level rise offer a possibility of minimizing these impacts, but Africa’s capacity to adapt depends critically on access to funding.

Traceable funding disbursed in Africa for climate change adaptation through bilateral and multilateral channels for the years 2010 and 2011 amounted to USD $743 and $454 million, respectively, although this figure does not fully account for the funding channeled through Development Finance Institutions, for example the World Bank, or national development banks.

To meet the adaptation costs estimated in the report for Africa by the 2020s, funds disbursed annually would need to grow at an average rate of 10-20 per cent a year from 2011 to the 2020s.

There is currently no clear, agreed pathway to provide these resources.

The UN Framework Convention on Climate Change’s developed country Parties have committed to provide funds rising to USD $ 100 billion annually by 2020 through the “Green Climate Fund”-established by the 2010 Cancun Agreements-from public and private sources, for both adaptation and mitigation actions in across all developing countries by 2020.

However, rules drawing up the allocation of funding for adaptation have yet to be defined and await negotiation.

At this stage, there is no clear sense of how much of these funds would benefit countries in the African region, nor of the likely allocation between adaptation and mitigation funding.

Until these issues are resolved it is not possible to assign a share of the USD $100 billion annual commitment by 2020 to Africa.

Assuming funding for adaptation efforts in Africa reached adequate levels by 2020 and assuming the world gets on track to limit warming to below 2°C, annual funding for adaptation efforts in Africa still needs to rise a further 7 per cent a year from the 2020s onwards to keep pace with continuing sea-level rise and warming peaking below 2°C after the 2050s.

This is considerably less than the funding challenge if the current mitigation efforts were not increased, and warming reached 3.5-4°C by 2100.

In this case, the scaling up of annual funds would need to be 10 per cent every year after the 2020s.

Challenged Capacity

In all scenarios, the capacity of African communities to cope with the effects of climate change on different economic sectors and human activities is expected to be significantly challenged, and potentially overwhelmed, by the magnitude and rapid onset of climate change impacts.

To reduce the magnitude of the impacts and their repercussions for African livelihoods, adaptation measures at different levels, from households to national and regional levels, are being planned and implemented and need to be further supported and strengthened.

These measures include:

  • The development of early-warning systems for floods, droughts or fires to help populations anticipate and prepare for the occurrence of extreme events;

  • Irrigation, improvement in water storage capacity, reforestation to protect surface water systems, sustainable use of groundwater resources, desalinization of seawater, and rainwater catchments and storage to maintain sufficient and reliable access to freshwater for human and agricultural needs;

  • City infrastructure protection measures such as seawalls, dykes, wave breakers and other elements of coastal zone management, as well as city-level food storage capacity and urban agriculture to enhance food security;

  • Improving design and drainage technology of sanitation facilities to reduce the risk of water-borne diseases in the aftermath of extreme weather events.

The majority of these and other adaptation measures require an anticipatory and planned approach, as well as large investments. The need for planned capital-intensive adaptation is greater at high than low warming levels.

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What we know and don’t know about trade with Africa

A new report could shed light on whether efforts to develop African economies are doing any good.

On September 30, United States Trade Representative Michael Froman wrote a letter to Irving Williamson, chairman of the International Trade Commission, regarding the African Growth and Opportunity Act. In the letter, Froman requested that the International Trade Commission conduct four investigations and provide four reports related to AGOA and our [United States’] trade relationship with Africa.

The results will likely bring sanity to our approach to trade with Africa, and it may very well force changes in how we develop future trade agreements and policy with the second largest land mass on our planet, not to mention with more than a quarter of the world’s countries.

To understand the significance of the letter, one has to understand AGOA, legislation passed by the U.S. Congress in 2000 that was designed to allow African economies far greater access to the United States market, seemingly duty-free. At the time, some likened AGOA to the North American Free Trade Agreement passed during the Clinton administration. It wasn’t close to NAFTA in its terms, but since it was the first major legislation ever adopted by the U.S. Congress on behalf of its relations with the African continent, there was understandable euphoria about its passage and hyperbole about its likelihood to significantly affect the economic and political development of Africa.

To the African lobby in Washington, AGOA became a point of pride and accomplishment. Very quickly, it became politically incorrect to question the benefits of AGOA without being attacked as anti-Africa or worse. Later, under President Bush, AGOA legislation was further strengthened, with the intent to increase exports from Africa to the United States. Objective critique became even more difficult given clear bipartisan support. Groupthink became the rule in Washington.

Now, 13 years later, there are few if any who would say that AGOA has been an unqualified success. The apparel industry in Africa has been a primary beneficiary of AGOA, as has South Africa, which has exported car parts and textiles to the United States duty-free. Some might argue that China has also been a major beneficiary of AGOA, since it owns many of the textile and apparel plants in Africa that are shipping duty-free products to the United States.

However, beyond that there has been little benefit for most countries who are qualified as AGOA-certified. The reason for that is less the legislation but the fact that most African countries do not have the infrastructure or the capacity, including trained workforces, to use AGOA effectively. Furthermore, many African nations have been slow to reform their economic sectors, inhibiting more private sector development and limiting the possibility for investment.

This is hardly a secret, and is discussed openly everywhere but in the halls of Congress. In fact, a recent British study noted that AGOA has largely not affected African development, and stated unequivocally that except for the apparel industry, very few economic sectors in Africa benefited from AGOA.

Yet, here we are again, advocating for the extension of AGOA for another 10 years or longer, arguing that Africa only needs time to develop in order to use it effectively. This argument has a certain logic to it. Eventually Africa will develop and it will be able to use AGOA.

There are also those that argue for the extension of AGOA because, well, we really have nothing better to replace it with, and to have a new overreaching agreement that might work better will probably not be feasible in such a contentious Washington political environment. To abandon AGOA is to be seen as abandoning Africa.

Indeed, it would be difficult to say we weren’t abandoning Africa if we scotched the only significant trade agreement we ever had with the continent. The symbolism and reality of that would be very difficult to bear for the African lobby in Washington. The argument to extend AGOA is an emotional one as much as it is a rational one.

Enter the Froman letter. The first investigation that Froman asks ITC to complete within six months is a report that includes a review of all literature on the AGOA preference program, particularly “in terms of expanding and diversifying the exports of AGOA beneficiary countries to the United States, compared to preference programs offered by third parties such as the EU.” He also asks ITC to give an accurate report on the sectors that have increased the most in exports to the U.S., excluding petroleum sectors. He asks ITC to explain why these increases are so, as well as to identify factors that affect competiveness in AGOA-beneficiary countries.

The reason that petroleum products are excluded in the analysis is that USTR and others count petroleum products in the AGOA total, and petroleum makes up 93 percent of this total. However, some believe that petroleum should not be counted, as it was nearly tariff free before AGOA, and has been effected very little by being placed under AGOA. The purpose of AGOA was to increase and broaden economic benefits beyond petroleum. Froman’s request to ITC takes out a misleading figure and focuses on the real intent of AGOA: the development of other economic sectors throughout Africa.

Froman also asks that in the first investigation, ITC identify the effects AGOA has had on the business climates in AGOA-beneficiary countries (not all African countries qualify under AGOA but that is another issue), and finally, he asks for a comparison of trade agreements to AGOA between sub-Saharan African countries and other countries, including areas that are likely to affect U.S. trade with Africa. Noteworthy is that Froman asks that this report will be available to the public in its entirety. There will be one hymnal from which all can sing.

The report should go a long way in giving an objective analysis of AGOA, both its benefits and shortcomings, and it should then allow Congress, the USTR and others to develop a more effective trade policy towards sub-Saharan Africa, filled with more substance and objectivity and far less emotion and bias. Any new trade policy on Africa, whether it be called AGOA or any other name, should address the causes that prevent greater trade and economic investment in development.

Stephen Hayes is president and CEO of the Corporate Council on Africa.

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