News Archive 2017

tralac’s Daily News Selection

Featured infographic, @TradeNewsCentre: Which 70 members have formed e-commerce group at WTO? Related: Too early to regulate e-commerce: Jack Ma

Project Syndicate commentary by UNIDO’s Li Yong: Africa’s must-do decade

Recommendations from the 2nd EA Business and Entrepreneurship Conference (EABC)

Arising issues from the deliberations include: (i) Lack of viable strategies, policies and systems of coherent laws and regulations to stir up industrialization; (ii) Failure to fully implement the EAC Customs Union and Common Market Protocols, (iii) Different investment incentives across the region leading to competition instead of cooperation; (iv) Lack of a regional local content policy. Highlighted recommendations (pdf): Creating an enabling environment for business to foster industrialization, innovation and investment in the EAC: (i) Diversifying the manufacturing base and raising local value add from existing rate of below 10% to at least 40%. This can be achieved through promoting the development and investment in strategic regional industries with sectors in which EAC has potential comparative advantage, (ii) Partner States should accelerate promotion of cross border investment and double their efforts to encourage East Africans to take advantage of regional opportunities to grow their businesses instead of over-depending on FDI outside the region, (iii) Create a credible, rules-based regional investment regime that enhance predictability for investment policies and laws with mechanism to resolve trade disputes and enhance awareness about and promotion the EAC region as a single investment destination, (iv) Transforming micro, small and medium enterprises capable of contributing up to 50% of manufacturing GDP from 20%. Towards a single EAC investment destination: (i) Implement fully the EAC Customs and Common Market Protocols, (ii) formulate an EAC Investment Policy and Strategy.

Namibia: Third Quarter Trade Statistics Bulletin (pdf, NSA)

Chart 1 depicts that from q4-2012 to q3-2017, the country experienced continuous trade deficits that averaged N$6,857m. The highest deficit of N$12,084m was recorded in q2-2015, while the lowest of N$1,002m was registered in q1-2016. The chart also shows an unsteady growth trend with the most significant growth of 773.8% recorded in q2-2016. On average, over a period of 20 quarters, the trade deficit grew by 54.6%. The persistent deficits are mostly driven by Namibia’s high demand for high-valued manufactured commodities and machinery from the rest of the world as opposed to exporting mainly primary commodities that are of low value. Namibia’s exports [in Q3] were mostly absorbed by African regional groupings and the EU, with SACU absorbing 43.8%, the EU with 18.7%, EFTA with 13.4%, and SADC-Non-SACU with 8.9% and BRIC with 7.9%. Equally, imports were also sourced from the same economic regions with SACU accounting for the largest share of 60.3% of total imports, EU with 22%, BRIC with 9.4%, COMESA with 4.2% and SADC-Non-SACU with 3.9%. .

South Africa Economic Overview: recent developments in the global and South African economies (IDC)

The Low Road scenario for the South African economy outlined in this report brings to the fore some of the potential consequences if politico-economic developments result in a more unfavourable growth trajectory than that presented in the IDC’s baseline forecasts. All sectors of the economy would face increased strain in such an adverse scenario. Many business enterprises would likely face serious financial difficulties, which could compromise their sustainability and employment. [Related: SARB Q3 Bulletin and tables; TIPS Real Economy Bulletin: Third Quarter 2017]

South Africa: Measuring shadow banking activities and exploring its interconnectedness with banks in South Africa (SARB)

Shadow banking entities or activities and its interconnectedness with financial intermediaries raise important policy concerns. However, research in this area in South Africa remains limited. Accordingly this paper maps the financial landscape in South Africa, focusing on non-bank financial intermediaries as well as the narrower ‘shadow banking’ measure for South Africa, measured in line with guidance provided by the Financial Stability Board. The interconnectedness between financial intermediaries in South Africa is also explored and key financial stability risks in the South African financial system are highlighted. One of the most notable risks currently is the lack of data. Whilst the shadow banking system in South Africa remains relatively small when compared to global peers, its assets under management are growing at a faster pace than those of banks. Furthermore, banks in South Africa obtain a relatively large portion of their funding from non-bank financial intermediaries and generally interconnectedness among financial intermediaries in South Africa is relatively high.

China-Africa Industrial Capacity Cooperation Exhibition: updates

(i) Kenya to China: Open your markets for our goods. Kenya has asked China to open up its market for Kenyan commodities in order to mitigate the widening trade imbalance in favor of the second largest economy in the world. Speaking while opening the three day China-Africa Expo on Wednesday at the Kenyatta International Conference Centre, Industry Trade and Cooperatives Cabinet Secretary Adan Mohamed welcomed Chinese investors to visit the country and sample Kenyan products needed in their markets. “China is a leading economic partner to Kenya, financing and overseeing landmark infrastructural transformation in the country. We have created a conducive investment environment for Chinese investors in the country and we hope that China will reciprocate and open its over 1.3 billion people market for Kenyan products,” said Mohamed. He asked Chinese firms to explore opportunities and invest in President Uhuru Kenyatta’s big four economic areas of food security, affordable housing, health and manufacturing. [China-Africa Development Fund, ITC, CCPIT roundtable: Africa eyes enhanced China ties to boost industrial growth]

(ii) Kenyan special economic zone to launch Chinese industrial park. A Kenyan special economic zone Tatu City is set to launch a Chinese industrial park to accommodate firms from the Asian nation, officials said Wednesday. Nick Langford, Country Head of Tatu City, told Xinhua that the city, located 15 km northeast of Nairobi, has so far attracted three Chinese firms into its industrial park. “Due to increasing interest by Chinese investors, we are seeking to set aside 50 acres out of the 900 acres of industrial park to Chinese firms,” Langford said. Tatu city is a 5,000-acre mixed-use city that will house over 150,000 residents when fully developed. [Chinese battery firm, Ritar Power and Kenya’s Chloride Exide sign MoU to promote renewable energy in East Africa]

At MC11, new research shows convergence on rules of origin is happening (UNCTAD)

Although deliberations on rules of origin weren’t on the agenda at MC11, the WTO has been dealing with the issue since the General Agreement on Tariffs and Trade was signed in 1947. “Despite multilateral attempts within the WCO, UNCTAD and, most recently, the WTO, it has proven impossible to reach consensus on a multilateral discipline on rules of origin for the last half a century,” Mr Inama said. Although progress towards convergence hasn’t been possible though formal negotiations at the WTO, the study shows that for some products it has “naturally” happened between the rules of origin contained in different free trade agreements. “We have to take this information to the public – that such progress exists and that we can build upon it. We have to break the kind of ‘curse’ that exists on rules of origin.” [Download: Rules of origin as non-tariff measures: towards greater regulatory convergence]

Global e-commerce policy work to continue despite no deal at WTO’s MC11 meeting (UNCTAD)

“The lack of progress on the digital economy negotiation at the WTO has been disappointing but we must not give up,” Sweden’s trade minister Ann Linde said. With the world on the cusp of a new digital economy in which e-commerce and automation will transform production, trade, investment patterns – as well as helping meet the Sustainable Development Goals – the need for new policies to be adopted is clear. “The gains of digitalization are not automatic and there will be major challenges for countries, enterprises and people to adapt, but we must start somewhere,” UNCTAD Secretary-General Mukhisa Kituyi said. “UNCTAD’seTrade for All offers an important platform to support policymaking in developing countries and to champion successful initiatives,” said Torbjörn Fredriksson, chief of UNCTAD’s Information and Communication Technology Analysis Section. “Increasingly, the contribution of digitalization to sustainable development will require a concerted, holistic, cross-sectoral and multi-stakeholder approach,” he said.

The global costs of protectionism (World Bank)

This paper quantifies the wide-ranging costs of potential increases in worldwide barriers to trade in two scenarios. First, a coordinated global withdrawal of tariff commitments from all existing bilateral/regional trade agreements, as well as from unilateral preferential schemes coupled with an increase in the cost of traded services, is estimated to result in annual worldwide real income losses of 0.3%, or $211bn, relative to the baseline after three years. An important share of these losses is likely to be concentrated in regions such as East Asia and Pacific and Latin America and the Caribbean which together account for close to one-third of the global decline in welfare. Highlighting the importance of preferences, the impact on global trade is estimated to be more pronounced, with an annual decline of 2.1%, or more than $606bn, relative to the baseline if these barriers stay in place for three years. Second, a worldwide increase in tariffs up to legally allowed bound rates coupled with an increase in the cost of traded services would translate into annual global real income losses of 0.8%, or more than $634bn, relative to the baseline after three years. The distortion to the global trading system would be significant and result in an annual decline of global trade of 9%, or more than $2.6 trillion, relative to the baseline in 2020.

ECOWAS Commission President pleads for prompt payment of community levy

Making the appeal on Wednesday at the opening of the 79th Ordinary Session of the ECOWAS Council of Ministers in Abuja, Mr de Souza indicated that the non-payment or delay of the Community Levy by member states remains a major challenge. He urged the Ministers to continue to plead with their respective governments to respect their primary obligation for the survival of ECOWAS. Marcel de Souza also provided update on the institutional reform in ECOWAS, noting that the collective commitment and resolve of the entire Commission would be required to successfully complete the reform within the shortest possible time, despite the opposition and challenges encountered at various stages of its implementation. [ECOWAS to delay discussion of Morocco’s admission until early 2018 at extraordinary summit]

Africa 2017 Forum sets strong development agenda (African Business)

Intra-African trade was on the agenda in almost every session at Africa 2017. A continent-wide trading zone has the potential to enhance export competitiveness, create employment, contribute to economic diversification and reduce vulnerability to global shocks. China-Africa discussions also featured heavily throughout the forum. With other Asian players entering the African market, it is clear China-Africa relations are changing and African nations and businesses are querying how to get the most out of Chinese investment and the One Belt One Road initiative. [African presidents draw strong consensus for inclusive growth at Africa 2017]

Egypt launches its first locally-built smartphone with China’s help

Last week, in a lavish ceremony President Abdel Fattah El Sisi was handed the first locally made smartphone called Nile X, which is designed for the Egyptian consumer. In his push for investment in the technology sector, Sisi’s administration has supported an Egyptian Silicon Valley in Assiut, deep in the country’s impoverished southern region, to jump start local manufacturing. SICO, the Egyptian firm behind the 4G enabled smartphone, has been eyeing a growing consumer base of tech savvy Egyptians. With a population of over 95 million, mobile phone subscriptions topped 99 million. Only 32% of Egyptians though have smartphone making it a burgeoning market that the firm would like capitalize on through affordable handsets. SICO is looking to expand in Africa with plans to build an East African regional hub in Nairobi and to expand to Mozambique, Nigeria and South Africa.

Mozambique: IMF Completes 2017 Article IV Mission

On the structural front, the mission urges the authorities to take decisive steps to strengthen the business environment and to restructure financially-weak SOEs that pose significant fiscal and financial sector risks. The mission commends the authorities for submitting to Parliament the SOE law and for approving a decree providing a regulatory framework to the issuance of public debt and guarantees. In this context, the mission encourages the authorities to continue developing their action plan to strengthen governance, transparency, and accountability. Regarding the follow up to the audit of Ematum, Proindicus and MAM companies, the mission reiterates the need to fill the information gaps in the audit report and takes note of the Government’s recommendation to wait for the outcome of the ongoing investigations by the Prosecutor General Office.

International commodity prices and domestic bank lending in developing countries (IMF)

We study the role of the bank-lending channel in propagating fluctuations in commodity prices to credit aggregates and economic activity in developing countries. We use data on more than 1,600 banks from 78 developing countries to analyze the transmission of changes in international commodity prices to domestic bank lending. Our results also show that there is no significant difference in the behavior of foreign and domestic banks in the transmission process, reflecting the regional footprint of foreign banks in developing countries.

Today’s Quick Links:

Could dropping of visas boost intra-continental trade?

Egypt-Mercosur free trade agreement meeting kicks off in Argentina

Domestic IPO by African issuers rises 19.5%, to $1.4b in 2017

Food trade and investment in South Africa: improving coherence between economic policy, nutrition and food security

Mombasa’s Green Port policy: ships to switch off diesel engines

Three reasons why maritime transport must act on climate change

Pathways to resilience in pastoralist areas: a synthesis of research in the Horn of Africa

Strengthening post-Ebola health systems: from response to resilience in Guinea, Liberia, Sierra Leone

Please note: This is the final Daily News Selection for 2017. Updates will resume in early 2018. Wishing our readers a wonderful festive season and a Happy New Year.

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At MC11, new research shows convergence on rules of origin is happening

A new study presented at the World Trade Organisation’s (WTO) 11th Ministerial says countries’ rules for determining a product’s origin are increasingly similar, which is good news for the global trading system.

The thousands of rules of origin used by countries and trade blocs to determine if an imported product is eligible for preferential treatment or subject to a trade restriction have in the past been widely divergent. But a new study by UNCTAD and the European University Institute researchers shows a growing trend toward convergence.

Such a finding may breathe fresh air into multilateral negotiations on rules of origin, which have been sidelined by the perceived inability to find common ground.

UNCTAD economist Stefano Inama, one of the authors, presented the study, titled Rules of Origin as Non-Tariff Measures: Towards Greater Regulatory Convergence, at an event held in Buenos Aires on the sidelines of the World Trade Organization’s Eleventh Ministerial Conference (MC11).

Although deliberations on rules of origin weren’t on the agenda at MC11, the WTO has been dealing with the issue since the General Agreement on Tariffs and Trade was signed in 1947.

“Despite multilateral attempts within the World Customs Organization, UNCTAD and, most recently, the WTO, it has proven impossible to reach consensus on a multilateral discipline on rules of origin for the last half a century,” Mr. Inama said.

Although progress towards convergence hasn’t been possible though formal negotiations at the WTO, the study shows that for some products it has “naturally” happened between the rules of origin contained in different free trade agreements.

“We have to take this information to the public – that such progress exists and that we can build upon it,” Mr. Inama said.

“We have to break the kind of ‘curse’ that exists on rules of origin.”

200 free trade agreements

In a completely open global trading system, in which all goods are treated equally, rules of origin would be unnecessary, Mr. Inama said. But the reality is that countries treat products differently based on where they are made.

Governments may use discriminatory trade policies to favour products from the same region, for example, or to promote certain sectors in specific economies, such as manufacturing in the 47 structurally disadvantaged least developed countries (LDCs).

A government may also wish to enforce trade “remedies” to sanction products from a country it believes is playing unfairly. Such remedies often take the form of anti-dumping custom duties.

“The problem is that there are more than 200 free trade agreements, each with its own rules. And this has a cost for businesses that must try to comply with tens of thousands of different rules,” Mr. Inama said.

60 pages of technical codes

When goods are mostly produced in one country, determining where they come from is easy, Mr. Inama said. But in today’s global production systems, which often cross many borders and seas, most of what we buy is built from components that are first made in various countries around the globe.

“Take the iPhone for example,” Mr. Inama said. “It may say made in China on the cover because that’s where the final product is assembled. But it was designed in California, the camera was made somewhere else, maybe India, and the glass screen was probably manufactured in South Korea.”

“This is why rules of origin have become more complex over the years,” he said. “The average set of rules of origin for a trade agreement is about 60 pages of technical codes.”

There are different ways to determine whether a product “originates” in a specific country. But often the requirement is that a certain percentage of the good’s final value is added in that nation, or that the good has undergone a change of customs classification, or a new manufacturing method or process before leaving the country.

“Everyone is negotiating their own rules of origin, but when you look more in detail across the various texts you see that though the rules are not identical they are similar,” Mr. Inama said.

A compromise between two models

The study by UNCTAD and the European University Institute examined five specific rules of origin: the WTO’s draft harmonized non-preferential rules of origin and those included in the Trans-Pacific-Partnership, the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the EU-South Korea free trade agreement, and the US-South Korea free trade agreement.

“The WTO’s draft harmonized non-preferential rules of origin was selected because it’s the only multilateral draft that exists on the issue,” Mr. Inama said.

The Trans-Pacific-Partnership was included because of its size, even if its entry into force as originally envisaged is unlikely following the withdrawal of the United States of America. And researchers decided to examine the free trade deal between Canada and the European Union because it’s the first agreement that brings together the North American and European models for rules of origin.

“The negotiated rules of origin can be seen as a kind of compromised text between the two models,” Mr. Inama said.

Finally, the US-South Korea and EU-South Korea agreements were chosen because they are two of the latest free trade area agreements signed by the US and the European Union with the same country, with which both have substantial trade flows across different sectors.

A ray of light

The preliminary results of the study show that there is indeed convergence in “non-sensitive” sectors such as chemicals, though the rules continue to diverge in sectors that countries consider to be strategic, such as textiles and clothing for the US, and fisheries for the EU.

“How to build on these similarities remains to be seen, but the important thing is that we have identified convergence,” Mr. Inama said. “That’s because people are starting to give up, as if negotiations on rules of origin are doomed to fail.”

“The message has to go out that there is convergence; there is a ray of light,” he said.

Based on the ongoing research, UNCTAD and the European University Institute plan to publish next year a model protocol on rules of origin to show at a product-specific level where there is convergence or divergence, and to provide options for drafting the rules.

This “pinnacle” of best practices, Mr. Inama said, could be useful during international negotiations, or serve as a guide for governments and businesses during their rules of origin talks when establishing new free trade agreements.

“The overall objective is to build on the convergence and provide guidance in the unchartered territories of rules of origin,” Mr. Inama said. “Such an analysis and tool has so far been lacking as an input into the multilateral deliberations at the WTO and World Customs Organization.”


Download: Rules of Origin as Non-Tariff Measures: Towards Greater Regulatory Convergence

2nd EA Business and Entrepreneurship Conference calls for promotion of cross-border investments

East Africans urged to take advantage of regional opportunities to grow their businesses

The second edition of East African Business and Entrepreneurship Conference & Exhibition themed Accelerating Industrialization, Innovation and Investment in the EAC was held from 14th-16th November 2017 at Serena Hotel in Dar es Salaam, Tanzania. The conference looked at Creating an Enabling Environment for Businesses to Foster Industrialization, Innovation and Investment in the EAC and Towards a Single EAC Investment Destination as cross cutting issues.

Her Excellency Samia Suluhu Hassan, Vice President of the United Republic of Tanzania, graced the 2nd East African Business and Entrepreneurship Conference & Exhibition during the official opening ceremony on the 14th of November 2017. The conference attracted participation of more than 330 high-level government and private sector decision makers from the EAC Partner States as well as business leaders, East African Diaspora, Entrepreneurs & investors from the region and abroad.

“More raw materials for East African industries should be sourced from within the EAC Partner States and there is need for employment creation for the growing youth population in the region,” said H.E Samia Suluhu Hassan, Vice President of United Republic of Tanzania.

Amb. Dr. Augustine Mahiga, Minister of Foreign Affairs and East African Cooperation, United Republic of Tanzania and Amb. Liberat Mfumukeko Secretary General, East African Community, Dr. Detlef Waechter Ambassador of the Federal Republic of Germany to the United Republic of Tanzania and to the East African Community; Mr. Vijay Pillai Adviser to Vice President for Africa, World Bank; Mr. Dennis Karera, Managing Director, Kigali Heights, Rwanda; Dr. Samuel Nyantahe, Chairman, Confederation of Tanzania Industries (CTI), Tanzania; Mr. Olivier Lambert, Lead Operations Officer, Multilateral Investment Guarantee Agency, Worldbank Group and Mr. Felix Mosha, Managing Director IBM Holdings, Tanzania set the stage for discussions on the current policies and missing links in bid to accelerating industrialization, innovation and investment in the EAC.

The second day of the conference was marked by the launch of “Creating Perspectives: Business for Development” project that aims to improve economic perspectives for Small and Medium Enterprises (SMEs) in East Africa through scaling up of production and thus growth of businesses.

Hon Christophe Bazivamo, EAC Deputy Secretary General Productive and Social Sector EAC alongside with Mr. Jim Kabeho, Chairman, East African Business Council (EABC), Mr. Ernst Hustaedt, Country Director, GIZ, Tanzania and Mr. Matthias Wachter Head of Department Security, Raw Materials and Africa Federation of German Industries (BDI), Germany officially launched the new project.

“A lot of companies in Africa are SMEs facing challenges in enhancing competitiveness and growth,” said Mr. Matthias Wachter. “SMEs in Germany would like to know the processes of investing in Africa.”

“We are happy to be spearhead this new project that will support the growth of SMEs in the region,” said Mr. Jim Kabeho, EABC Chairman.

Also, the East African Business Council signed an affiliation agreement with the World SME Forum to support and enhance African SMEs’ integration to global markets so as to contribute to economic development, job creation and inclusive growth in EAC countries. The agreement was signed by Ms. Lilian Awinja, Executive Director of the EABC and Dr. Tunc Uyanik, President of the World SME Forum.

This conference offered an opportunity for the region to dialogue critically on how to encourage entrepreneurship and attract more foreign & cross border investments. It played a key role to inspire entrepreneurship spirit among East Africans with aim to support start-ups to set up businesses, small enterprises to grow, the medium to scale up and the large enterprises to outsource to small ones.

The simultaneous exhibition offered a platform for the EAC Investment Authorities to showcase investment opportunities in the region and firms and entrepreneurs show cased their products and services and shared bankable project proposals ready for investment not only from foreign but also local investors.

Key industry experts and relevant public decision makers led deliberations on the current policies and missing links in the conference sectors sessions namely: Information Communication Technology (ICT), Agri-Business, Urbanization, Cotton and Textile, Patents and Copyrights in the Creative Industry, Trade and Gender, Health, Banking and Finance, e-Commerce and Start-Ups.

Arising issues from the deliberations include:

  1. Lack of viable strategies, policies and systems of coherent laws and regulations to stir up industrialization

  2. Failure to fully implement the EAC Customs Union and Common Market Protocols

  3. Different investment incentives across the region leading to competition instead of cooperation

  4. Lack of a Regional Local Content Policy

Indeed, the conference allowed for exchange of ideas, expertise, B2B (Business to Business) and B2G (Government to Business) networking and offered a platform to learn about latest developments in the region. Below are key recommendations that arose from the conference in bid to trigger more cross border investments and enhance the business environment.

Creating an Enabling Environment for Business to Foster Industrialization, Innovation and Investment in the EAC

  1. Diversifying the manufacturing base and raising local value add from existing rate of below 10% to at least 40%. This can be achieved through promoting the development and investment in strategic regional industries with sectors in which EAC has potential comparative advantage

  2. Partner States should accelerate promotion of cross boarder investment (CBI) and double their efforts to encourage East Africans to take advantage of regional opportunities to grow their businesses instead of over-depending on FDI outside the region.

  3. Create a credible, rules based regional investment regime that enhance predictability for investment policies and laws with mechanism to resolve trade disputes and enhance awareness about and promotion the EAC region as a single investment destination

  4. Transforming Micro Small and Medium Enterprises capable of contributing up to 50% of manufacturing GDP from 20%

Towards a Single EAC Investment Destination

  1. Implement fully the EAC Customs and Common Market Protocols

  2. Formulate an EAC Investment Policy & Strategy

Amb. Celestine Mushy, Director of Multilateral in the Ministry of Foreign Affairs and East African Cooperation, United Republic of Tanzania, urged the business community to collectively champion free trade as well as movement of capital and people during the official closing ceremony of the 2nd East African Business and Entrepreneurship Conference & Exhibition.

“We will read your views expressed during your discussions keenly with the aim of identifying what more we can do to strengthen business activities in the region and to speed up wealth creation for our people,” said Amb. Mushy who noted the recommendations of the conference.

EABC through our Observer Status with the East African Community (EAC), we are committed to follow closely the implementation of the recommendations in order to amplify investments in to the region.

EABC appreciates the support received form all key players in organizing the 2nd East African Business and Entrepreneurship Conference & Exhibition in particular, Tanzania Investment Center, Burundi Investment Promotion Agency (API), Kenya Investment Authority (KenInvest), Rwanda Development Board (RDB) and Uganda Investment Authority as well as EABC members, National Focal Points (NFPs) and sector associations for their continued support and commitment to the regional agenda, namely Tanzania Private Sector Foundation, Federal Chamber of Commerce Industries Burundi, Kenya Private Sector Alliance, Rwanda Private Sector Federation, Private Sector Foundation Uganda, Confederation of Tanzania Industries, Association of Burundi Industries, Kenya Association of Manufacturers, Rwanda Association of Manufacturers and Uganda Manufacturers Association. Our sincere gratitude goes to SBC Pepsi, DEG, HEVA Fund, Oxford Business Group, ALAF Ltd Tanzania, Kenya Commercial Bank – Tanzania, JC Decaux, Zoom Tanzania and Strathmore Business School our knowledge partner and Jumia Travel our Travel partner.

Much appreciation to development partners German Development Cooperation (GIZ), Federation of German Industries (BDI), and the EAC-German Cooperation particularly the GIZ-EAC integration Programme was expressed.

Global e-commerce policy work to continue despite no deal at WTO’s MC11 meeting

UNCTAD Secretary-General Mukhisa Kituyi says talk of inclusive e-commerce and development must go beyond words if developing countries are to reap the benefits.

Hopes that World Trade Organization members would fix an all-party deal on e-commerce during its Eleventh Ministerial Conference (MC11) in Buenos Aires, Argentina, were dashed as the meeting closed on Wednesday, but trade envoys said work to find agreements in other ways would continue.

“The lack of progress on the digital economy negotiation at the WTO has been disappointing but we must not give up,” Sweden’s trade minister Ann Linde said.

With the world on the cusp of a new digital economy in which e-commerce and automation will transform production, trade, investment patterns – as well as helping meet the Sustainable Development Goals (SDGs) – the need for new policies to be adopted is clear.

“The gains of digitalization are not automatic and there will be major challenges for countries, enterprises and people to adapt, but we must start somewhere,” UNCTAD Secretary-General Mukhisa Kituyi said.

“Absence from electronic visibility means absence from the trading market – which is not good for developing countries and least developed countries,” he said.

For developing countries, digitalization is creating new ways for small businesses and women entrepreneurs to reach new markets and connect with domestic as well as global value chains.

Nigeria’s chief trade negotiator, Ambassador Chiedu Osakwe, said: “We must put in place policy systems that enable and reward innovation; economic systems that allow raw materials, components and finished goods to flow across borders; financial systems that secure investments and payments; regulatory and legal systems protecting workers and consumers.”

The stakes are high – to honour commitments to the 2030 Agenda for Sustainable Development, innovation and partnerships must be forged in unprecedented ways.

“We must ensure that the talk of inclusive e-commerce and inclusive development goes beyond words. This will require much more collaboration and scaled-up resources,” Dr. Kituyi said.

The speed at which digitalization is unfolding, and the significant gaps that exist in terms of the ability and readiness of countries, enterprises and individuals to engage in it, underline the urgency of scaling up global support to developing countries, particularly the least developed countries (LDCs).

In these 47 most disadvantaged countries, from Afghanistan to Zambia, only one in six people have internet access. And although the number of online shoppers in the world surged from 600 million in 2010 to 1.2 billion in 2016, more than 98% of people in the LDCs are not buying any goods and services online.

But policy solutions are on hand: automating customs declarations has been shown to bring clearance times down and to reduce the period that goods stay in transit.

Access to platforms and devices enables a seller in a developing country to reach more potential customers in domestic as well as foreign markets, in a more targeted way, and often at lower cost than through traditional channels.

Suppliers that increase their reliance on e-commerce can see reduced delivery costs, especially for electronically-provided content. This has an impact on global value chains, as more of the things businesses and consumers need to boost economic activity can be digitally delivered, which in turn helps manage fragmented production networks.

Against this backdrop, UNCTAD is helping policymakers to face the complex task of addressing multiple policy domains in parallel in order to realize the benefits of e-commerce.

“UNCTAD’s work on the digital economy should be taken at the regional and national levels to support developing countries and LDCs prepare for the transformation,” Mr. Osakwe said.

This work includes eTrade for All, a unique partnership that connects the dots among partner organizations, donors and business owners to bolster more inclusive development.

“UNCTAD’s eTrade for All offers an important platform to support policymaking in developing countries and to champion successful initiatives,” said Torbjörn Fredriksson, chief of UNCTAD's Information and Communication Technology Analysis Section.

“Increasingly, the contribution of digitalization to sustainable development will require a concerted, holistic, cross-sectoral and multi-stakeholder approach,” he said.

Digital transformation will be further explored at UNCTAD’s E-commerce Week held in Geneva, Switzerland, on 16-20 April 2018, which this year looks at the development dimension of digital platforms.