News Archive May 2018
U.S. trade and investment with sub-Saharan Africa in certain sectors has grown and continues to have potential, says USITC
Rising per capita income, growing urbanization, the need for improved infrastructure, and expanding healthcare contributed to growth in U.S. exports in some sectors to sub-Saharan Africa (SSA) between 2010 and 2016, reports the United States International Trade Commission (USITC) in its publication U.S. Trade and Investment with Sub-Saharan Africa: Recent Developments.
The USITC, an independent, non-partisan, fact-finding federal agency, conducted the investigation at the request of the U.S. Trade Representative (USTR).
In requesting the study, the USTR noted that: “As the Administration works to encourage fair and reciprocal trade with our African trading partners, it is important to have factual information on where we are succeeding in African markets, where we have the greatest prospects for increased trade and investment, and the factors that could impede that progress.”
The USTR also asked for similar information on SSA’s trade performance and on future prospects for its exports to the United States, including those under the African Growth and Opportunity Act (AGOA).
The USITC held a public hearing in connection with the investigation on January 23, 2018. Selected testimonies are available to download here.
As requested by the USTR, the USITC report:
provides an overview of U.S. exports to and imports from SSA of goods and services, as well as U.S. foreign direct investment (FDI) in SSA countries over the 2010-2016 period;
discusses exports of goods and services from U.S. small and medium-sized enterprises (SMEs) to SSA, as well as challenges faced by them exporting to the region;
performs a qualitative and, to the extent possible, quantitative assessment of the non-crude petroleum sectors and SSA markets that present the greatest potential for growth in U.S. exports and imports of goods and services, as well as FDI flows;
profiles seven SSA economies; and
summarizes recent developments in regional integration efforts in SSA, as well as strategies by AGOA countries to increase trade with the United States.
Highlights of the report include:
Among the fastest growing U.S. exports of goods to SSA during 2010 to 2016 were aircraft; floating oil platforms; natural gas and components; power generating equipment; and pharmaceuticals. Other sectors with the potential for increased U.S. exports to SSA include motor vehicles, ethyl alcohol, poultry, and refined petroleum products. U.S. exports of financial services, insurance services, and information and communication technology services show potential for growth.
The fastest growing U.S. imports of goods from SSA between 2010 and 2016 were cocoa, chocolate, and confectionery; apparel; refined copper; catalytic converters; and edible nuts. Growth in these sectors was due to the long-term renewal of AGOA to 2025, the increased presence of FDI in these sectors, SSA production cost advantages relative to other global suppliers, and expanding manufacturing capacity in SSA. Apparel, edible nuts, footwear, and raw cane sugar show potential for growth in U.S. imports from SSA under AGOA.
In 2015, the latest year for which data are available, merchandise exports to SSA by U.S. SMEs were approximately $5.8 billion, a decrease from 2010. Over 40 percent of the 2015 exports were concentrated in South Africa and Nigeria. Some challenges faced by SMEs are high tariffs and poor protection of intellectual property rights.
The stock of U.S. FDI in SSA declined from 2010 to 2016, with mining, including crude petroleum, being the largest destination sector. Sectors with the greatest potential for U.S. FDI in SSA are professional and business services, financial services, textiles and apparel, renewable energy, and mining. The three largest destinations for U.S. FDI in SSA in 2016 were Mauritius ($7.0 billion), South Africa ($5.1 billion), and Nigeria ($3.8 billion).
- To date, 15 out of 38 AGOA beneficiary countries have prepared specific strategies to identify sectors that have the potential to increase exports to the United States under AGOA. Many SSA countries are also a part of Regional Economic Communities working to lessen trade barriers that hamper AGOA utilization, with negotiations ongoing for a continental FTA.
About USITC investigations
USITC general factfinding investigations cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission’s objective findings and independent analyses on the subjects investigated.
The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.
AfroChampions Initiative and African Union undertake sensitization program on the African Continental Free Trade Area
AfCFTA awareness-raising campaign: West African tour
The AfroChampions Initiative and the African Union Commission began their first roadshow to raise local entrepreneurs’ awareness on the African Continental Free Trade Area (AfCFTA) on 28 May 2018 with a meeting in Accra, organized in partnership with the Association of Ghana Industries (AGI).
Attendees included mostly Ghanaian entrepreneurs, operating in the manufacturing sector which should be boosted by the free movement of goods, services and people expected to result from the implementation of the AfCFTA Agreement.
“We are very pleased with these discussions with the Ghanaian business community,” said His Excellency Albert Muchanga, AU’s Commissioner for Trade and Industry.
“While we were able to present the opportunities offered by free movement of goods and services on the continent and the end of tariff and non-tariff barriers, we also received many questions and comments on the best schedule of actions to implement AfCFTA’s protocols, challenges relating to the simplification of customs procedures or logistical infrastructures. This will inform our future reflections during the implementation phase of the AfCFTA agreement and we thank AGI for its support,” he added.
Dr. Yaw Adu-Gyam fi, President of the AGI, was pleased that “the roadshow started in Ghana, which, is, along with Kenya, the first country that deposited instruments to ratify the AfCFTA agreement”.
For him, “it is very important that the African Union can receive suggestions from the private sector to ensure that the future AfCFTA is one that is aligned with the realities of the companies already involved in cross-border trade. We are happy to contribute to this dialogue between public decision-makers and economic players, which is a fairly new approach on our continent.”
Speaking on behalf of the AfroChampions Initiative, which designed and financed this awareness-raising roadshow, Mr Kuseni Dlamini, Chairman of Massmart and member of the AfroChampions Club, highlighted “the structuring role of intra-African trade for the development of the continent” and presented the AfroChampions Charter for African economic integration.
Abidjan welcomes the AfroChampions Initiative and the AU for the second stop
The second stop of the West African roadshow was in Abidjan. Organized in collaboration with the Côte d’Ivoire Chamber of Commerce and Industry, the meeting brought together Ivorian economic operators, particularly from the sectors of agriculture, logistics and transport, as well as representatives from the subsidiaries of major international groups established in Côte d’Ivoire.
Many strategic issues were addressed, such as non-tariff barriers, the situation of cross-border workers and traders, and the monitoring and traceability of products exported from Côte d’Ivoire to the rest of the sub-region.
For His Excellency Mr. Albert Muchanga, AU’s Commissioner in charge of Trade and Industry of the African Union, “it is essential that strategic markets, such as Côte d’Ivoire, which are regional hubs, drive the implementation of the AfCFTA. This is really our goal with this dialogue that we have initiated and that we hope to continue in partnership with the Chamber of Commerce and Industry of Côte d’Ivoire which we thank for its support.
“Here we have a perfect reflection of Africa’s economic diversity, with local, sub regional, and international actors, each facing different issues and whose feedback is very useful to prepare for the AfCFTA implementation phase.”
The President of the Chamber of Commerce and Industry of Côte d’Ivoire, Mr. Faman Touré, considered that the dialogue and consultation launched by the AfroChampions Initiative and the African Union as a pioneering approach.
“The AfCFTA Agreement is a strategic development for Africa, but it is true that entrepreneurs need to be better informed. This is an unprecedented opportunity; when we know that intra-African trade accounts for only 16% of the continent’s trade, there is definitely scope for improvement! Economic actors must prepare, inform themselves, put in place the right teams. At the CCI-CI, we want to play our role and support them on all these aspects.”
“In Abidjan too, the AfroChampions Charter for Economic Integration has been well received and we hope to gather many signatories soon,” added Jean-Louis Billon, Former Minister for Trade, Crafts and SMEs in Côte d’Ivoire, Chairman of SIFCA, and Vice-president of the AfroChampions Club for Western Africa who is the first signatory of the Charter on behalf of SIFCA.
Third stop in Dakar for the Senegalese business community
Dakar was selected as the third stop of the AfCFTA awareness roadshow. In partnership with Sy Investments and ADS group, both members of the AfroChampions Club, a meeting was organized with several local business federations and agencies, including the National Confederation of Senegalese Employers (CNES), the ASEPEX (Senegalese Agency to Promote Exports), the UNACOIS (Senegalese Industry and Trade Federation), the COSEC (National Council of Chargers of Senegal) and CNP (Senegalese Employers Union).
Keynote speakers also included Ms Assome Aminata Diatta, Director for External Trade at the Ministry for Trade, Informal Sector, Consumption, promotion of local products and SME, and Mr Muhammad M. Jagana, Chairman of the Gambia Chamber of Commerce and Industry. The meeting focused on strategic issues, such as the elimination of non-tariff barriers, as well as other complimentary measures necessary for the success of the AfCFTA.
“Senegal is the second largest economy in Francophone West-Africa, and therefore represents a strategic market. We must convince local economic actors that the AfCFTA is a true opportunity for their activity,” said His Excellency Mr. Albert Muchanga, Commissioner in charge of Trade and Industry of the African Union.
“Senegal will play a pivotal role, particularly because of its relationship with North Africa and its efforts to deploy strategic infrastructures, and we need to help it become a driving force in the future AfCFTA,” he added.
As managing Director of Sy Investments and Advisor to the AfroChampions Executive Committee, Alpha Sy explained how he had organized the meeting with the business community: “It was very important for us to bring together a broad range of business federations to propose to the African Union a 360° viewpoint on issues confronting Senegalese economic actors in relation to the AfCFTA.
“The participants were happy to be able to ask their questions directly to the AU Commission and, following the initial sensitization meetings in Accra and Abidjan, to learn more about the reactions and projects proposed in west African countries about the AfCFTA.”
As co-founder of the AfroChampions Initiative and Special Adviser to its Executive Committee, Samba Bathily, Founder and CEO of ADS Group, commented later on the event and the presence of the Gambian Chamber of Commerce and Industry at the meeting which allowed “for a better appreciation of the specific challenges resulting from economic integration both for major African markets and for those of smaller size, but also the synergies that can be identified while the AfCFTA is implemented. Everyone needs to win, both the economic actors and the African states, and this is the philosophy behind the AfroChampions Charter for African Economic Integration presented by the AfroChampions Initiative.”
After Ghana, Côte d’Ivoire, and Senegal, the AfCFTA roadshow continued in the Republic of Guinea on May 31, 2018. More tours are planned throughout this year in other regions of the continent, to mobilize local entrepreneurs but also to accompany the AfCFTA ratification process.
Creating a better global trade system
Recent news on global trade has tended to focus on protectionist measures and diplomatic tensions. These challenges have raised concerns over growth and jobs across the world.
Yet what is often lost in the current discussions is that we are entering a new era of trade – an era in which data flows are becoming more important than physical trade.
The new era
Think about it: between 1986-2008, global trade in goods and services grew at more than twice the rate of the global economy. In recent years, however, growth in this more traditional type of trade has barely exceeded global GDP growth.
At the same time, digital flows have been booming. According to Cisco, the amount of cross-border bandwidth used grew 90-fold between 2005 and 2016, and is expected to grow an additional 13-fold by 2023.
This is not just about video streaming, Skype calls, and social media posts. It is about the role of data in boosting other flows, especially by making services more tradable – from engineering, to communications, to transportation.
So in many ways, the future of trade is the future of data.
This is a huge opportunity for policymakers to build new economic bridges between countries, and to create a better global trade system.
Let me highlight 4 building blocks of better trade:
1. More trade in services
The good news is that global trade in services has been growing relatively fast. It now accounts for one-fifth of global exports. And according to some estimates, half of the global trade in services is already driven by digital technology.
But this is an area where trade barriers are still extremely high, equivalent to tariffs of some 30 to 50 percent.
I believe that by reducing these barriers and making trade more digital, services could become the main driver of global trade. Who would benefit most?
Advanced economies, because they are globally competitive in many service sectors, especially financial, legal, and consulting.
Developing economies such as Colombia, Ghana, and the Philippines, because they are promoting growth in tradable services, such as communications and business services.
Millions of small businesses and individuals who can use digital tools to leverage their expertise in the global marketplace.
But that is just the beginning. I believe that we can build the Wealth of Nations in the 21st-century on trade in services.
2. More productive
We can achieve this goal by making trade more productive. How? By encouraging a further shift in the composition of trade flows – from “physical” to more data-driven trade.
For example, increasing automation is making it easier for companies to repatriate, or “reshore”, some of their operations – effectively, reversing some of the “outsourcing” of the past two decades.
This could help rejuvenate manufacturing industries in many advanced economies, holding out the promise of more domestically-based factories with higher-paying jobs.
3-D printing could also prompt companies to move production closer to their customers. One large shoe brand, for instance, is bringing bespoke shoemaking to the mass-market by printing customized soles in their high-street shops.
If these trends were to continue, many supply chains would become shorter, more productive, and less carbon-intensive.
At the same time, digitalization will intensify competition in global trade, pushing companies to boost their investment in new technologies and more efficient business practices.
New IMF analysis shows that greater competition accelerates the diffusion of technology across countries and even the rate of innovation itself.
This, in turn, helps lower prices for companies and consumers. It is estimated that the poorest 10 percent of consumers gain almost two thirds of their purchasing power from trade.
3. More inclusive
Gains like that show the enormous benefits of building economic bridges between countries. And yet, too many people have continued to live in the shadow of these bridges.
The digital revolution in trade will bring its own challenges, putting further pressure on those workers who are less well-equipped to compete.
That is why we need greater inclusiveness. Consider the benefits of scaling up investment in training and social safety nets, so that workers can upgrade their skills and transition to higher-quality jobs.
For instance, experiences in Canada and Sweden show that on-the-job training is more effective than classroom learning.
In these and many other areas, the IMF is helping countries gear up for the new era of trade.
At the global level, we analyze exchange rates and monitor global economic imbalances.
At the country-level, we work with all our 189 members on policies to help remove trade and investment barriers, encouraging more open economies where the private sector can thrive and create jobs.
In short, we believe that for trade to improve, it needs to be more services-based, more productive, and more inclusive – so that everyone can benefit.
To achieve these objectives, trade also needs to be more internationally cooperative.
4. More international cooperation
Over the past 70 years, countries have worked together to create a multilateral trade system that has lifted hundreds of millions of people out of poverty, while boosting incomes and living standards in all countries.
But this system needs improvement as it adapts to the new era of trade.
For example, many governments are struggling with major issues that do not fall squarely within WTO rules. These include various state subsidies, restrictions on data flows, and the protection of intellectual property.
To address these issues, we could use “plurilateral” trade agreements – that is, deals among like-minded countries that agree to work within the WTO framework. There is also room to negotiate new WTO agreements on e-commerce and digital services.
On these issues, one can take encouragement from the new Trans-Pacific Partnership, or TPP-11. For the first time in a broader trade agreement, TPP-11 countries will guarantee the free flow of data across borders for service suppliers and investors.
Now is the time to push for further trade reforms in a multilateral setting where rules are respected, where countries work in partnership, and where everyone is committed to fairness.
I believe that by building new economic bridges, by shaping a new era of trade, we can foster more prosperous and more peaceful communities across the world.
Christine Lagarde is the Managing Director of the International Monetary Fund.
tralac’s Daily News Selection
AfCFTA presentations by ATPC’s David Luke to recent Canada-Africa Chamber of Business events (Toronto, Ottawa)
Rationale for consolidating Africa: Africa’s economic structure is broadly similar to India’s. Population: India, 1.3bn, Africa, 1.2bn; GDP: India, 2.6tn, Africa, 2.5tn; Tax revenue to GDP: India, 20.4%, Africa, 20%. India is a single consolidated market (7th biggest in the world): allows scale economies and competitive businesses; Africa is fragmented over 54 countries and 107 unique land borders: businesses face average tariffs of 6.9% and non-tariff barriers
Trade policy coherence: The AfCFTA is expected to go beyond a traditional free trade area and in doing so will serve as a basis for continental trade policy coherence. Rather than a patchwork of individual agreements, a consolidated Africa would ensure that all African countries are brought along together in a manner that better suits regional value chains and trade integration. In looking forward to trade negotiations with the EU, the US post-AGOA plans, and potentially emerging markets like India and China, this will give Africa a stronger negotiating footing.
AfCFTA timeline: next steps to bring the agreement into effect: Entry into force after 22nd instrument of ratification deposited with the AUC; Implementation Roadmap (target Jan 2019): prepare schedules of concessions for trade in goods, prepare schedules of concessions for trade in services, conclude specific list rules of origin; Conference of State Parties meet to adopt structure of AfCFTA Secretariat, staff rules and regulations, and budget – as well as establish the host country; AfCFTA committees convene to begin facilitating implementation
(ii) The AfCFTA and its implications for Canada (pdf). Draw from Canadian expertise: A services trade and investment focus should be emphasized; Canada can leverage its expertise in tertiary education, clean energy development, technological cooperation on climate change, and agricultural productivity services; Canada’s cooperation model with mining companies for improved corporate social responsibility provides lessons for deeper engagement in Africa: lessons learned – both good and bad – can help develop new bilateral trade and investment relationships; But also a change in perspective: need to good beyond traditional investment and trade opportunities.
(i) @AUTradeIndustry: The African Union, in partnership with the @AfroChampions, started, Monday, the 1st AfCFTA sensitization tour in West Africa. The first step was Accra where they discussed with Association of Ghana Industries under the theme, A win-win approach to successfully implement the AfCFTA. “We rely on the investments and the entrepreneurial spirit of the private sector to make the AfCFTA deliver tangible benefits to African people through employment & supply of quality & affordable goods & services” stated Amb. Albert Muchanga, AU Commissioner for Trade & Industry.
(ii) @TradeOfficeNG: South-South Zone unanimously adopts Calabar Communique, strongly endorsing the AFCFTA. Cross River State Executive Governor, Prof Ayade, accepts role of AFCFTA Champion, bestowed by Forum Stakeholders
Starting today, in Harare: African finance leaders to debate China’s yuan as a reserve currency (Xinhua)
Central bankers and officials from 14 African nations will discuss the viability of using China’s yuan as a reserve currency for the region, the official Xinhua news agency said on Tuesday. Seventeen top central bankers and officials from the region will meet at a forum in Harare to consider the possibility of using the yuan in national reserves, Xinhua said, citing a statement from the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI). The forum, to take place on Tuesday and Wednesday, will be attended by deputy permanent secretaries and deputy central bank governors, as well as officials from the African Development Bank, Xinhua reported. “Most countries in the MEFMI region have loans or grants from China and it would only make economic sense to repay in renminbi (Chinese yuan),” said MEFMI spokesperson Gladys Siwela-Jadagu. MEFMI statement:
The theme for the 2018 Forum is Trends in sovereign reserve management (pdf) and is driven by the lingering concerns of the weakening external positions that are faced by the region following the aftermath of the global economy slowdown. As at the end of 2017, for most of the countries in the MEFMI region, official reserves stood barely at or below the traditional three months of import cover benchmark. There has also been an increasing pattern of foreign portfolio investment flows in the domestic debt markets, which are volatile in nature and susceptible to reversals. All these point to increasing external vulnerabilities and the need for the region to act swiftly to implement much needed policy adjustments to ensure macroeconomic stability and strengthening of external buffers.
Ghana: Govt calls the bluff of freight forwarders on UNIPASS (GhanaWeb)
The government has insisted that it will not be liable for any judgment debt with the introduction of the UNIPASS system at the country’s ports. The Ministry of Trade and Industry which signed on behalf of the government maintains that the new system is crucial for the blocking of all revenue leakages at the ports. The UNIPASS is expected to replace all trade facilitation roles involving the clearing of goods and tracking of revenue at the ports, currently being carried out by GCNet and WestBlue. The freight forwarders have complained of the distortions to their operations. But a Deputy Trade and Industry Minister, Carlos Ahenkorah tells Citi Business News they will not back down on their decision.
Liberia: Weah’s tariff cut ultimatum backfires (Daily Observer)
Today, May 29, is the deadline for LRA Commissioner General Elfreda Stewart-Tamba to make a report in compliance with the 72-hour ultimatum. The LRA is expected to present a new schedule, to ensure immediate tariff reduction on a wide range of basic commodities and other consumables imported into the country. The president’s decision has triggered a bipartisan response from members of the 54th Legislature, with Nimba County District #8 Representative Larry Younquoi arguing that the 1986 Constitution gives the authority to the Legislature, to review and approve treaties and financial instruments, including tariffs. The House Chairman on the Committee on Good Governance & Government Reform, Rep. Larry Younquoi, told the Daily Observer in an exclusive interview that the ECOWAS CET Tariff was adopted by Liberia as part of the Protocol or Treaty as member of ECOWAS. Representative Younquoi said the House of Representatives and the Liberian Senate approved the ECOWAS CET Tariff, attested by former President Ellen Johnson-Sirleaf and in accordance with the Constitution; therefore the reduction of the ECOWAS CET Tariff must be done by the Legislature.
Nigeria: Lack of scanners at ports, Customs checkpoints hurting investors (Business Day)
The Organised Private Sector says poor state of equipment at the Nigerian ports and multiplicity of checkpoints by the Nigerian Customs Service are major issues affecting manufacturers and importers, discouraging investors from further pumping money into key sectors of the economy. “The current state of some equipment in use by some operators at the ports is worrisome,” said Iyalode Alaba Lawson, national president, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture at a press briefing in Lagos on Monday. According to her, this was confirmed during a recent on-the-spot visit to sea and border posts in South West by NACCIMA as a member of the National Trade Facilitation Committee. She stressed the need for Nigeria to embrace modern technology at the ports to speed clearance processes and provide confidence to investors.
Rwanda: African nations are fed up with the West’s hand-me-downs – but it’s tough to keep them out (Washington Post)
This week, Rwanda faces the suspension of some of its duty-free trading privileges pertaining to clothing under the African Growth and Opportunity Act. Its efforts to foster a domestic clothing industry, meanwhile, have yielded few results. And Rwandans who work in the used-clothing business are complaining that they are suffering. The deadlock between the world’s economic giant and one of Africa’s fastest-growing economies doesn’t exactly qualify as a trade war — it’s more like a scuffle. Rwanda’s total used-clothing imports were less than 7% of all of East Africa’s in 2016, according to government statistics. And its clothing exports to the United States were a minuscule $2 million. But it reflects the difficulties that even a low-wage country like Rwanda can have developing an industry in an intensely competitive global market. [The authors: Max Bearak, David J. Lynch] [Related: African Cotton, Textiles & Apparel Monitor – #11]
Kenya: Lovers of imported goods to pay more in bid to shield local firms (Business Daily)
We, the delegates, gathered at Le Meridien, Pointe aux Piments, launch the following appeal (extracts): to create a Working Group on Digital Platforms aimed at identifying, analysing and proposing a balanced approach, exchanging best practices and helping in developing regulatory framework and policies to create a level playing field for tourism service suppliers; to ensure compliance with the General Data Protection Regulation of the European Union, the Travel and Tourism Industry shall take proper steps in collecting consumers’ data with their explicit consent and protecting same during any transfer from Europe to any countries; to acquire adequate and coordinated support from tourism operators to keep policy-makers and regulators aligned on recent developments thereby narrowing the gap between innovation and regulation; to establish an Indian Ocean Agency on “Climate Change and protection and conservation of the biodiversity”
Malawi: pdf Public Service Management Policy 2018-2022 (447 KB) (GoM)
The Public Service Management Policy fills a gap that has existed for many years. Government is aware that the Malawi Public Service did not have a unified policy to effectively support management and delivery of public services in a multi-party dispensation which among other things, calls for greater transparency, accountability and citizen participation in the management and delivery of public services. This policy underscores the importance that government places on the Public Service as the engine for development and comes at an opportune time when Government is about to launch the MGDS III. [ pdf Annex 1: Implementation Plan (281 KB) ]
Today’s Quick Links:
Anzetse Were: Risks to manage in the African Free Trade Area (Business Daily)
Imports of sugar into SA were accidentally duty free for seven weeks – even as the sugar-tax debate raged
President Buhari’s Democracy Day 2018 speech: full text
UK moves to expand export finance in West Africa
Kerry Logistics swoops on South African forwarder
Mauritius hosts 9th SADC Regional UN Public Administration Network workshop: impact of 4th Industrial Revolution