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Trade barriers hurting Uganda’s competitiveness in EAC market
Trade minister Amelia Kyambadde has said non-tariff barriers (NTBs) are greatly affecting Uganda’s competitiveness in the East African market.
Speaking at the commissioning of the NTB reporting system in Kampala yesterday, the minister said the government is trying to hold talks with its Rwandan counterparts to lift some NTBs on Ugandan traders.
“The government is engaging in talks with Rwanda to sign a Memorandum of Understanding to eliminate NTBs,” she said.
NTBs like police roadblocks, weigh bridges, poor transport infrastructure and high levels of taxes imposed on the Uganda traders in the past, have greatly affected the country’s trade sector.
“In 2005, the East African Community (EAC) member states signed a customs union protocol to ease trade within the countries and in 2012, a common market was created. But despite all these developments, NTBs still exist” said the minister.
“In 2012, we experienced a gain in trade earnings after some NTBs were lifted in the region from Shs4.5 billion to Shs5.5 billion,” Ms Kyambadde added.
She said trade in the East African region contributes 13 per cent against the 87 per cent of the total trade volume from the rest of the world.
The minister also credited Kenya for allowing sugar from Uganda to be sold in its market.
“Kenya promised to give us a licence to allow our sugar into their country,” she said.
Trademark East Africa (TMEA), a partnering organisation with the Ministry of Trade in the elimination of NTBs applauded the EAC trade member’s response to the elimination of NTBs. TMEA country director Allen Asiimwe applauded Kenya for the removal of the 1.6 per cent levy that had been placed on Ugandan goods passing through the region as well as removal of police road blocks along the trade routes.
“In 2012, Trademark East Africa signed a $1.4 million contract with the Ministry of Trade to facilitate in the elimination of NTBs and am glad to see the success of our efforts,” she said.
NTB REPORTING TOOL AND WHAT IT IS MEANT TO ACHIEVE
The non-tarrif barriers (NTB) reporting tool is a result of the 2008 directive from the Trade ministry to put in place a tool for reporting NTBS in the East African region. The reporting system is designed to be used by anyone trading within EAC by use of a mobile phone through the internet and message phone services.
The service will be available for mobile phone users connected to MTN, UTL, Airtel and Orange telecommunications networks. The NTBS reporting tool is meant to eliminate NTBS, harmonising of weigh bridges between Uganda and Kenya, ensuring quality standards and putting in place a one-stop customs programme in the region.
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Agoa: Calls for SA to graduate out of the US trade programme
In addition to SA’s relatively advanced development, the US disapproves of the country for its ‘antagonism’, focus on Brics, and Middle East position.
As African leaders descend on Washington this week for the United States-Africa Leaders Summit, their trade ministers will, on the sidelines, be pushing hard for the extension of the African Growth and Opportunity Act (Agoa).
Despite South African government’s publicly stated expectations that US President Barack Obama will support a 15-year extension of the programme, experts believe achieving this will be no easy feat.
South Africa’s push in particular, is expected to receive a “tenuous” audience in Washington, as it faces calls for its graduation from the programme.
South Africa’s position as one of the most developed nations on the continent is the “spoken reason” for graduating it from Agoa, according to Catherine Grant Makokera, head of the economic diplomacy programme at the South African Institute of International Affairs (Saiia).
There are however other issues at play, she said, including the leverage that calls for graduation could have in getting greater reciprocity for the US, in trade relations with South Africa.
The trade programme is governed by US legislation, rather than a trade treaty, and offers a range of African countries free access to US markets without reciprocal requirements. Operating since 2000, it has been renewed a number of times but its current term ends in 2015.
Qualifying countries must however agree to move towards opening their economies and building free markets, as well as follow the rule of law and encourage democracy.
Most recently, Swaziland, under the rule of King Mswati III, has fallen foul of these conditions, which have seen it stripped of its Agoa status.
SA’s substantial gains
South Africa has gained substantially from the programme. Unlike the leading African exporters to US under Agoa, namely Nigeria and Angola, mineral resources do not dominate the trade between the US and South Africa.
Manufactured goods, particularly motor cars, account for the lion’s share of local exports to the US. According to Saiia data, in 2013 South Africa was the top non-energy exporter to the US under Agoa, with exports worth over $3.5-billion. The programme helps support an estimated 62 395 local jobs.
According to Eckart Naumann, an economist and associate at the Trade Law Centre, South Africa’s push for a seamless, long-term extension of Agoa “is probably the most tenuous in terms of having an audience in Washington”.
Among some factions within the US Congress, there are strong calls for South Africa’s graduation out of Agoa, if not now then within a defined time period, said Naumann.
These same factions, as well as the US state department and officials in the office of the US Trade Representative, believe South Africa “has not always covered itself in glory with respect to its trade relationship with the US and is perhaps considered somewhat of an uncomfortable partner and bedfellow”, said Naumann.
Problems include its “rather antagonistic attitudes” toward the West, support of certain factions in the Middle East conflict, and perceived obstruction in some UN matters and decisions, Naumann pointed out.
Its open focus on the East and Brazil, Russia, India, China, and South Africa, as well as investment-related domestic policies such as the recent private security Bill and the cancellation of a number of bilateral investment treaties in favour of a new promotion and protection of investment Bill have not gone unnoticed.
Economic setbacks against other nations
South Africa’s trade policies, such as the anti-dumping duties it has placed on poultry imports, are also likely to weigh on US lawmakers’ minds, argued Naumann.
Finally, the recent economic partnership agreement signed between the European Union and the Southern African Development Community has been watched very closely by the US, which has been emphasising greater reciprocity and market access for its own goods.
Despite these concerns it is unlikely that South Africa will be graduated from Agoa.
“The US also recognises that graduating South Afica out of Agoa comes with many pitfalls and it may be self-defeating to some extent,” said Naumann.
It would hamper regional integration, he noted, and remove a valuable provider of inputs for other Agoa beneficiary countries, harming both South Africa and other countries using South African inputs to process into export goods.
Crucially, 90% of Agoa exports consist of oil, while South Africa makes up 70% of all non-oil exports under Agoa.
“Take South Africa out, you really shoot down Agoa as anything meaningful in terms of Africa-US trade,” said Naumann. This would be a massive economic and political setback against other nations interested in fostering closes ties with the continent, particularly China and Europe, he added.
Renewal will be ‘a marathon, not a sprint’
While imminent exclusion from Agoa might not loom, Naumann believes a revised Agoa, or whatever programme replaces it, “may be more specific on plotting a path towards a more reciprocal trading relationship with South Africa”.
This might include a review of certain trade policies and protectionism and commitment to tackle the question of more reciprocal trade relations.
“Many of the concessions may however initially happen at the political level and may not immediately translate into an entirely different economic relationship,” he said.
Whatever the outcome, it is unlikely to be finalised immediately.
The fact that Agoa is a piece of US legislation, rather than a negotiated agreement, is one of the key factors likely to stymie a rapid 15-year extension, argued Makokera. “We know American legislatures like to tie their hands on matters like this and Agoa’s traditionally been renewed only for five years.”
According to a Saiia policy briefing by Eric Tamarkin, an independent researcher, and former counsel to the US House of Representatives and the US Senate, the process of renewing Agoa will be “a marathon rather than a sprint”.
The US Congress – made up of the Senate and the house – plays a more central role to the timing and content of the legislation, which is currently fraught with difficulties, according to Tamarkin. “Washington, DC is currently mired in a partisan stalemate: the Democratic Party controls the White House and the Senate, while the Republican Party controls the House. As a result, Congress often waits until the last minute to consider expiring laws and sometimes fails to act before expiration.”
Favourable business climate
In addition, the summit and the Agoa forum take place during a congressional recess when most legislators will be away. On its return, Congress heads into elections in November, meaning most members will be campaigning in their states or districts according to Tamarkin.
The influence of strong US lobby groups is another factor. Ordinarily these groups wait for legislation to appear before Congress, before they mount a campaign to support or defeat it, noted Tamarkin.
However, in the case of Agoa, a range of food and agricultural organisations have already written to congress to oppose a long-term extension to Agoa, he said.
Similarly the US Chamber of Commerce has called for Agoa eligibility to be contingent on whether African countries provide a favourable business climate for American companies and fostered greater two-way trade, according to Tamarkin.
Nevertheless, he pointed out, for now Agoa does enjoy bipartisan support in Congress. Late last year this sparked a request for an investigation by the Government Accountability Office – the investigative arm of Congress – into ways to increase Agoa’s effectiveness.
The requestors wanted recommendations on “enhancing economic development in sub-Saharan Africa, the ability of African businesses to utilise the full range of opportunities available under Agoa, and the efficacy of Agoa in increasing two-way US-sub-Saharan African trade”.
Once the investigation is complete, said Tamarkin, the results will help inform the current bipartisan drafting process.
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US-Africa relations: Southern Africa Position Paper
Executive summary
In view of the upcoming U.S.-Africa Summit in August 5-6, 2014, the position paper conducts an assessment of the US-Africa relations with a specific focus on the Southern Africa Region. The paper aims to provide a concise analysis of the state, evolution, challenges, opportunities and possibilities for mutually beneficial U.S.-Southern Africa relations. More importantly, the position paper identifies key issues to guide policy in fostering sustainable growth enhancing strategic partnerships between the US and Southern Africa and highlights the requisite capacity development priorities that should be integral in the partnership models sought. In line with the scope of analysis as outlined by the African Capacity Building Foundation (ACBF), the recommendations are based on an evidence based assessment of key aspects relating to peace and security; economic (trade, investment, aid, remittances); socio-cultural and governance. The key economic challenges in the region are highlighted with emphasis for an inclusive partnership approach that turns the current challenges in the region into opportunities for strategic developmental partnerships.
The analysis demonstrates that the US has been a major contributor to the economic, social and human progress with development assistance on various fronts in Southern Africa through contributing among others, to education, health and infrastructure development. Countries in the region have significantly benefitted from the aid assistance in the maintenance of peace and security, addressing conflict in their economies and making progress on democracy, governance and accountability. However, although notable progress has been achieved with assistance from the US, sustainable development in the Southern African region given the still prevalent challenges on some sectors such as health, education, agriculture, power and energy, water and the manufacturing sectors requires partnerships between the two regions that would spearhead foreign direct investment flows into these sectors to stimulate direct involvement in the production process and value chain development to create competitive industries in the region.
A major finding in the Southern African region is that the role of the US on trade and investment, considered critical for creating sustainable industrial development and growth remains limited. Partnerships between the Southern Africa region and the U.S. should thus, aim to expand trade with investments into potential export sectors such as manufacturing, services, tourism, textile, agriculture to broaden the export and industrial sector. There is a potential for export expansion in Southern African countries which can also boost regional export performance among regional economic communities of SADC with the US as a potential market. Southern Africa should seek strategic partnerships with the US that will expand trade between the two regions, boost export diversity and enhance industrial development. A number of opportunities exist in Southern Africa in the agricultural, manufacturing, health, education and services sectors where the US can venture into export processing zones and diversify the export base beyond primary exports.
The eminent expiry of AGOA which has contributed to textile sector in the region and major avenue for trade between the US and African countries should be extended and broadened for the US market to offer more market opportunities to other sectors of the region. It is also the position in this paper that the Southern African region should seek a revision of AGOA to ensure more inclusiveness, accessibility and permanence, so that the benefits extend beyond a few countries and products.
Progress on the exploitation of trade benefits by Southern Africa still remains limited despite current support initiatives from the US and other development partners. This is clear from the limited export and trade profile among Southern Africa countries and other trading partners. Capacity constraints and technical expertise have been a major constraint to countries in the region to fully benefit from AGOA and other trade agreements. Trade capacity development should thus be given prominence in US-Southern Africa partnerships and future trade initiatives and form a priority for consideration and continued support in the region. Trade capacity building and technical assistance designed to help the member countries of Southern African Countries in regional economic communities such as SADC, SACU is key to take full advantage of benefits not only under AGOA so that they can effectively participate in the global trading system and the World Trade Organization (WTO).
Overlapping memberships in the region requires capacity building for regional countries. Capacity is requisite in, trade negotiations, implementing commitments and taking advantage of new trade opportunities. Linked closely is the need to increase and facilitate trade in the region. Expanding international exports and intra-regional trade is seen as a key component of increasing sustainable economic growth and reducing poverty in the region.
Trade expansion and investment initiatives which take advantage of current regional integration dimensions are quite critical to foster regional integration in the region. Therefore, more focus should be in partnerships that reinforce the current regional integration objectives of regional economic communities such as SADC in the Southern African region. A number of challenges in the region require a regional approach in policies for example the social, political, democracy and accountability to attain peace and security in the region. Trade and investment policies will be effective if they take a regional approach to broaden the growth and development process in the region especially in addressing the high poverty and unemployment rates among Southern Africa countries.
Further, although the US is a major investor worldwide, investment inflows from the US into the region remains low. Investment inflows in the Southern region from the US also remain limited compared to other investors such as Brazil, Russia, India, China, and South Africa (BRICS). Recommendation is therefore for investment partnerships particularly in major sectors to stimulate further industrial development. This is important for sectors which constrain Southern Africa’s development process where major investments are required. The strategic partnerships between the US and Southern Africa should specifically be focused on infrastructure development, water, sustainable energy generation and power supply. Specific partnerships should also focus on information communication technology (ICT) development, its availability and access to enhance efficiency, productivity and competitiveness which also plays a significant role in creating conducive business environments. ICT features among the major constraints to foreign direct inflows and production efficiency in the region.
Trade and investment are avenues that more mutually beneficial partnerships with the US can be modeled upon to attain sustainable growth in the region. Their expansion is central to addressing current challenges facing many African regions including Southern Africa particularly those of high unemployment, poverty rates and inequality. They also serve as a vehicle for transforming the competitiveness of Southern African countries particularly through gains from productivity. Strategically, trade and investment are pathways to the attainment regional integration objectives, sustainable development and attainment of long term goals such as those of the Millennium Development Goals (MDGs)
The overriding position for the Southern African region partnerships (at various levels, sectors and industries trade and investment, capacity development) emphasises a shift from aid dependence as a mode of developmental intervention to more beneficial sustainable development partnerships as requisite. The existing economic, social and institutional challenges present opportunities for investment partnerships and strategic sector and industry development approaches that can enhance the growth process in the region while also benefitting the US economy with potential returns to investments. The other pertinent partnerships should focus on capacity for institutions and human capital development to support the growth process as well as on infrastructure development which is fundamental to support the investment, trade and business environment which is a limiting factor to private sector development and the competiveness climate in the region.
Capacity to strengthen the local actors and institutions that are ultimately responsible for transforming the Southern Africa region is key. This calls for capacity building partnerships and support in the context of Southern Africa to create stable economic and political environment which is required for investment in the region. Partnerships and supportive initiatives should aim to strengthen state institutions and improving their capacity to provide security and development, based on principles of good governance and the rule of law to entrench lasting peace and improve living standards of citizens. This is an area that requires capacity building support for institutions in Southern Africa and this should be emphasised in partnerships for institutional capacity building for good governance, democracy and accountability.
Partnerships should be inclusive to address current economic, social and institutional capacity development gaps which constrain the development process in the Southern African region. An inclusive approach to successfully attain broad based growth and transformation in the region should integrate and embrace job creation, poverty reduction, human skills, rural development, institutional capacity development as imperatives. Consideration of existing challenges and turning them into opportunities for investment and other partnerships provides for an inclusive approach to unlocking the growth potential in Southern Africa which would be beneficial to the US as well.
Partnerships for investment and industrial development should embrace employment creation elements to address the current challenges of high and persistent unemployment, poverty, inequality in the region. The development of the private sector, entrepreneurship and the SMME sector are key in job creation and should be given prominence among priority potential opportunities which can directly contribute to addressing poverty, inequality and rural development. Other capacity building support should be focused on capacity building of institutions to promoting business environment and competitiveness which offer the supportive environment for investment and trade strategies.
Background
Emanating from the Addis validation workshop on regional Position papers on US-Africa relations
Recognized as the fastest growing region in the world with enormous natural resource potential, Africa offers vast opportunities in terms of new technologies, investments, access to potential markets, and new types of consumers. This explains the growing interest of countries such as China, India, Malaysia, Turkey, Brazil, etc. which have recently increased their presence and investments in the continent. The U.S has been relatively slower to react to the potentialities and new developments happening in Africa. However, recently, there has been a change in the dynamics: Africa now plays an increasingly significant role in supplying energy, preventing the spread of terrorism, etc. and is recognized as a strategic partner. The Africa Growth Opportunity Act (AGOA) and the various Bilateral Investment Treaties (BIT) are a witness of the growing interest and willingness to partner with Africa.
The US-Africa Leaders’ Summit will offer Africa’s leadership an opportunity to engage with President Obama, his Cabinet, and other key leaders, including business executives from across the U.S., members of Congress, and members of civil society. For a beneficial, effective and well-thought engagement, African leaders need to have up-to-date information and sound knowledge on the state of the relationship, the priority areas that need special attention and the way forward for mutually beneficial US-Africa relations.
It is in recognition of the strategic importance of the Summit and the potentialities offered by a mutually beneficial US-Africa relation Africa relation that the African Capacity Building Foundation collaborated with six of its supported think tanks to draft position papers on US-Africa relations. The main rationale for the position papers was to interrogate US-Africa relations from a regional perspective in order to provide a nuanced analysis of the state, evolution, challenges, opportunities and possibilities of US-Africa relations in Francophone West Africa (French); Anglophone West Africa; East Africa and the Horn; Southern Africa; North Africa (French); and Central Africa (French). Click here to download the regional Position Papers.
Download the Southern Africa Position Paper and the Framework for a Common African Position below.
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Analysis: Ten reasons for saying ‘no’ to the north over trade
India’s decisive stand last week not to adopt the protocol of amendment of the trade facilitation agreement (TFA) unless credible rules were in place for the development issues of the South was met with “astonishment” and “dismay” by trade diplomats from the North, who described New Delhi’s as “hostage-taking” and “suicidal”.
It obviously came as something of a shock for representatives of Northern interests that any party should have the brass neck to place the interests of its constituents on the negotiating table.
After all, why should such banal issues as food security and poverty get in the way of a trade agenda heavily weighted in favour of the industrialised countries?
In fact, it was India’s firm stand for permanent guarantees for public stockholding programmes for food security that turned this trade agenda upside down at the World Trade Organization (WTO) last week, putting paid to the adoption of the protocol of amendment for implementation of the contested TFA for the time being.
India and the United States failed Thursday at the WTO to reach agreement on construction of a legally binding decision on a “permanent peace clause” that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.
The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.
For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.
The failure to reach agreement came during a closed-door meeting between India and the United States organised by WTO Director-General Roberto Azevedo in an attempt to break the impasse between the world’s two largest democracies.
New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North.
Trade diplomats from several developing and poorest countries in Africa, South America, and Asia say India’s “uncompromising” stance will force countries of the North to return to the negotiating table to address the neglected issues in the Bali package concerning agriculture and development.
These issues are at the heart of unfinished business in the Doha Development Agenda (DDA) negotiations, the current round of trade negotiations aimed at further liberalising trade.
“It is important to keep the battle alive and India has ensured that the big boys cannot simply walk away with the trade facilitation agreement (TFA) without addressing the concerns on food security and other major issues,” one African official said.
The industrialised countries and some rising economic tigers in the developing world are unhappy that they cannot now take home the TFA without addressing the problem raised by India and other developmental issues in the Doha Development Agenda negotiations.
Many developing and poor countries in Africa and elsewhere were opposed to the TFA but they were “arm-twisted” and “muzzled” by the leading super powers over the last three months. African countries, for example, were forced to change their stand after pressure from the United States, the European Union and other countries.
The TFA was sold on false promises that it would add anywhere up 1 trillion dollars to the world economy. During the Bali meeting last year, the Economist of London, for example, gave two different estimates – 64 billion dollars and 400 billion dollars – as gains from the TFA, while the International Chamber of Commerce gave an astronomical figure of 1 trillion dollars without any rational basis.
“Those predicted gains [from TFA] evaporate when one looks at the assumptions behind them, such as the assumption that all countries in the world would gain the same amount of income from a given increase in exports,” said Timothy A. Wise and Jeronim Capaldo, two academics from the Global Environment and Development Institute at the U.S. Tufts University.
At one go, the TFA will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, e-Bay, Hyundai, Huawei and Lenova to multiply their exports to the poorest countries.
It would drive away scarce resources for addressing bread-and-butter issues in the poor countries and direct them towards creating costly trade-related infrastructure for the sake of exporters in the industrialised world.
Here are ten reasons why trade diplomats from the developing and poorest countries say India’s stand will bolster their development agenda:
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India’s stand on food security brings agriculture, particularly unfinished business in the DDA negotiations, back to centre-stage.
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The Doha trade negotiations were to have been concluded by 2005 but remain stalled because a major industrialised country put too many spanners in the negotiating wheel.
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Major industrialised countries have been cherry-picking issues from the DDA which are of interest to them while giving short shrift to core “developmental” issues.
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Issues agreed in the Doha negotiations, such as the ”July package” agreed on August 1, 2004, the Hong Kong Ministerial Declaration of December 2005 and the un-bracketed understandings of the December 2008 Fourth Revised Draft Modalities for Agriculture, have all been pushed to the back burner because one major country does not want to live up to them.
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he Fourth Revised Draft Modalities for Agriculture provided an explicit footnote to enable the developing countries to continue with their public stockholding programmes for food security. That footnote was the result of sustained negotiations and a compromise solution among key WTO members such as the United States, the European Union, India, Brazil, Australia and China, but the United States refused to accept the footnote because of opposition from its powerful farm lobbies.
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Trade-distorting practices in cotton which are harming producers in Benin, Burkina Faso, Mali and Chad are supposed to be addressed “ambitiously”, “expeditiously” and “specifically” by the distorting countries in the North. But cotton is now being swept under carpet because a major industrialised country does not want to address the issue because of its farm programme.
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Trade facilitation was one of the Doha issues but not the main item of the agenda at all. It was actually dropped from the Doha agenda in Cancun, Mexico, in 2003 and was brought back in 2004 due to pressure from the United States and the European Union. The core issues of the Doha agenda were agriculture, services and developmental flexibilities.
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A major industrialised country which pocketed several gains during the negotiations refuses to engage in “give-and-take” negotiations based on the above mandates and has turned the Doha Round upside down.
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Industrialised countries along with some developing countries have formed a coalition of countries willing to pursue what are called “plurilateral” negotiations, only to undermine the DDA negotiations which are multilateral and based on what is called a “single undertaking” (that is, nothing is agreed until everything is agreed). Currently, these countries are negotiating among themselves on services, expansion of information technology products and environmental goods even though these issues are being negotiated in the Doha Round.
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Delay in the adoption of protocol will pave way for a healthy debate to reinvigorate the multilateral trading system which is being undermined by those who created it in 1948. The developing and poor countries want credible and balanced multilateral trading rules to replace what was agreed over 25 years ago in order to continue their “developmental” programmes with a human face.
Herein lies the crux of the issue – are the major powers of the North prepared to go along with a global trading system that puts the interests of the majority of the world’s people before their own interests?
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Swazi products no longer given tax-free access
Swaziland’s agricultural sector and not just the country’s garment industry stands to suffer as Swazi products are no longer given tax-free access to the US market under the African Growth and Opportunities Act (AGOA).
The citrus growers of the Lubombo Region hope to export to America, and have already filed an application with the US Government to start the process.
“Swaziland does not have access to the USA and so no fruit is sent there at the moment. South Africa only has access from the Northern and Western Cape,” said Justin Chadwick, CEO of the Citrus Growers Association (CGA) in Durban.
The CGA markets citrus grown in South Africa, Swaziland and Zimbabwe, finding new markets and conducting research on transportation and trade laws. Citrus growers pay a fee to CGA and are assisted to expand their business. At present, the CGA is lobbying Washington to extend AGOA beyond the year 2015 when the trade pact must either be renewed or end. Swaziland was de-listed from countries that are eligible for participation in AGOA in May.
“Expulsion was a setback,” Chadwick admitted.
“Both Swaziland and the rest of South Africa that are no longer shipping to the US have sent in market access applications (to Washington),” said Chadwick. Southern African citrus is sold worldwide. The main markets are Europe, the Middle East and Russia. Because citrus is harvested in winter – June and July are the peak shipping months for Swazi citrus – this means Swazi citrus can fill the gap when it is summer in the US. Currently, the US imports most of its fresh citrus from South America, where like Swaziland it is winter when it is summer in America.
Approval
Swaziland’s citrus growers may get approval to sell citrus in the US. However, they will have to pay import duties. AGOA allowed Swazi products to be imported duty-free. Because these costs are passed on to the buyer of the citrus, Swazi citrus will be more expensive and lose a price advantage it had under AGOA.
Swazi growers had intended to expand operations once they can sell to America. Now they will reassess those plans. It is not known how much the agriculture sector stands to lose, or the exact number of jobs that will not be created. This comes at a time when Swaziland’s citrus industry is facing declining productivity and sales.
In its most recent annual report, the Central Bank of Swaziland noted that the size of areas devoted to citrus cultivation declined “significantly,” from 1 770.6 hectares in 2011 to 1 402.2 hectares in 2012, resulting in citrus production ‘plunging’ one third from 78 418 tonnes in 2011 to 53 013 in 2012. Not even a cheaper lilangeni which makes Swazi exports less expensive to buy overseas helped sales much. Export volumes dropped by one-fifth to 28 741 tonnes in 2012, which the bank describes as a ‘massive fall.’ Export revenues dropped from E103.5 million in 2011 to E87.7 million in 2012.
“We were pinning our hopes on the US market to boost sales. The loss of AGOA does not mean we cannot sell Swazi citrus to the US but we don’t have the price advantage anymore,” said one grower.
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Statement by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane, on international developments, 01 August 2014
Ladies and Gentlemen,
Our briefing this morning will focus on the upcoming United States-Africa Leaders’ Summit, which is scheduled to take place in Washington DC, United States of America, on the 5th and 6th August 2014.
His Excellency President Jacob Zuma will lead the South African delegation to the United States-Africa Leaders’ Summit convened under the theme: “Investing in the Next Generation.”
President Zuma’s delegation will include the Ministers of International Relations and Cooperation, Trade and Industry as well as Transport.
The US-Africa Leaders’ Summit (USALS) is one of the outcomes of the visit by the President of the United States, His Excellency Barack Obama to Africa in June-July 2013.
During his visit to three African countries, which included Senegal, South Africa and Tanzania, President Obama made an undertaking to African leaders that the US would host a US-Africa Leaders’ Summit to discuss issues of mutual interest.
The Summit will include, amongst other things, a Congressional Reception, the AGOA Ministerial Meeting, CEO Dinners and a Business Forum, culminating in the Heads of State Meeting on the 6th of August.
Preceding the US-Africa Summit, was the Young African Leaders Initiative (YALI) Summit, which also took place in Washington DC, at which Summit President Obama honoured the late former President Nelson Mandela by renaming this initiative the “Mandela Washington Fellowship for Young Leaders”.
The theme of the Leaders’ Summit, which is “Investing in the Next Generation”, is intended to generate debate on how the USA and Africa can together sustain and advance Africa’s transformation. The Summit will therefore focus on Trade and Investment, the promotion of sustainable development, peace and security issues, the sustenance of good governance and the advancement of human development.
The main outcomes envisaged from the Summit are:
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Renewal of the Africa Growth and Opportunity Act (AGOA) for another 15 years;
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Increased support and capacity building for Africa’s Defence Architecture at regional and continental levels;
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The establishment of US-Africa Infrastructure Development Fund of $100 Billion with a 50/50 contribution from Africa and the US in support of regional integration and Africa’s industrialisation;
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Increased support for Africa’s energy projects to overcome the energy deficit in Africa;
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Consultative process with African countries in the selection of participants in the newly launched “Mandela Washington Fellowship” to reflect the Human Resource needs of the Continent and the spirit of Mandela; and
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Continued development support for HIV, food security, and to ensure continued momentum for sustainable development goals.
Relations between South Africa and the United States have been very positive during the administrations of President Zuma and President Obama.
These relations were strengthened following the successful Official Visit by President Obama to South Africa in 2013, at the invitation of President Zuma.
The two Presidents held bilateral talks in Pretoria and discussed, amongst others, the status of bilateral relations; health; education; energy; safety and security cooperation; development assistance; as well as peace, security and development cooperation in Africa.
South Africa is looking to establish win-win partnerships which will help build the country skills base; transfer technology; create decent jobs; help create value-added exports; address inequalities in the country; promote inclusive growth and promotes regional integration.
We consider our bilateral relationship with the US as one such win-win partnership. Over the years, this partnership has been rapidly growing towards what we can regard as a strategic partnership.
The Obama Administration has expressed its willingness to partner with South Africa both domestically and regionally - and to support Africa-led initiatives.
In this regard, South Africa has impressed upon the United States the fact that successful economies have done so on the back of industrialisation. In our case, our economy needs to industrialise in order for us to achieve the goals that we have set for ourselves as outlined in the National Development Plan. The industrialisation of the economy is one of the priorities of the current term of government, with a focus on the following:
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Attracting investments in labour-absorbing manufacturing, which is central to our export strategy based on value-added and job-creation potential. South Africa is open and ready to do business with the US.
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Infrastructure development by leveraging our National Infrastructure Plan. Our investment in infrastructure development is continuing under the leadership of the Presidential Infrastructure Coordinating Commission chaired by the President.
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Energy: the regulatory framework for investments in renewable energy has been improved in line with the Integrated Resource Plan for Energy to attract investments in solar, wind and biomass. In addition, nuclear energy and shale gas exploration will be fast-tracked. In this regard, South Africa welcomes the investments by entities such as Solar Reserve in the Northern Cape. In return, we have also invested heavily in the US through the SASOL Gas-To-Liquids plan that we are putting up in Lake Charles, Louisiana.
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Mining and agriculture are key job-drivers for South Africa. In the period ahead South Africa will increasingly focus on value-added agricultural exports, which will also provide opportunities for entrepreneurship.
The industrialisation of the South African economy is therefore a major strategic element of our overall policy thrust to re-set the trajectory of the economy on a higher plane: one which attracts investments of the sort which will transfer skills, create quality jobs, stimulate local manufacturing and increase value-added exports.
On the trade side, we continue to advocate for the speedy re-authorisation of the Africa Growth and Opportunity Act (AGOA). The AGOA framework is a central plank in both South Africa and Africa’s industrialisation strategies.
AGOA’s renewal for a period of 10-15 years will provide Africa with the necessary stability, predictability and market access that is so crucial for our industries and small businesses to become competitive and sustainable.
South Africa’s graduation from AGOA would serve to undermine not only our domestic efforts at re-basing our economy to become a manufacturing and export hub in the sub-region, but also impede Africa’s broader regional integration strategies aimed at stimulating inter-Africa trade.
Africa is a Continent on the march towards realising economic development and prosperity for its citizens. The USA can help to fast-track this process by supporting Africa’s development plans and strategies which are coordinated through the African Union (AU) and its goals as outlined in our Agenda 2063 vision.
One component of the AU’s regional integration strategy, for example, is the Tripartite Free Trade Area (FTA) which will combine the three major regional economic communities of SADC, the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC), comprising 600 million people and a combined GDP of USD$1 trillion.
As I conclude, I would like to reiterate that South Africa welcomes the holding of the first USA-Africa Leaders’ Summit. African nations and the USA have much to offer each other and all are striving for a more peaceful and democratic world in which justice and equity prevail and where poverty and underdevelopment are tackled in a substantial and results-oriented manner.
I thank you.
ISSUED BY THE DEPARTMENT OF INTERNATIONAL RELATIONS AND COOPERATION
OR Tambo Building
460 Soutpansberg Road
Rietondale
Pretoria
0084
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G20 to add extra 2% growth
South Africa and the other members of the Group of 20 (G20) global forum will submit plans to the forum’s summit in November on how to grow their combined economies by 2 percent above current trajectories over the next five years.
Dr Heather Smith, Australia’s G20 “Sherpa” (organiser) said at a seminar in Pretoria last week that an extra 2 percent growth would boost the collective G20 economy by over $2 trillion (R21 trillion) and create millions of new jobs.
Australia is the G20 president this year and will host the 2014 summit in Perth.
“This kind of goal is a first for the G20, and it helps drive our ambitions,” she said at the seminar organised by Unisa and the Institute for Global Dialogue.
“It builds in accountability in a very political way into the G20.
“We will deliver on this growth ambition through a combination of measures on trade, investment and employment, captured in growth strategies, which each country is preparing and that collectively aim to achieve our goal.”
Smith said the world economy was recovering “sluggishly” from the 2008 global financial crisis. The International Monetary Fund (IMF) expected it to grow by only 3.6 percent this year, “and the forecasts are likely to go down”, – compared with an average of almost 5 percent per year over the five years prior to the financial crisis.
The International Labour Organisation had estimated last year that the crisis cost the world 62 million jobs.
“The WTO (World Trade Organisation) predicts a growth rate of 4.7 percent in global trade for 2014, still below the pre-crisis average of 6 percent per annum from 1980 to 2007.”
The slow recovery was having a serious social impact, raising inequality, within countries even more than between them, Smith said.
Despite Africa’s impressive recent economic achievements, boosting its middle class to 350 million people, the numbers of Africans living in poverty had also increased, from 376 million in 1999 to 413 million in 2010.
“While some causes of inequality are matters of domestic politics, the G20 can have an impact through its strategies to improve growth and implementing measures to ensure good business conduct,” Smith said.
“When the pie is not growing, and people’s living standards are not rising, achieving better outcomes for the world’s most vulnerable people becomes all the more difficult – it has a direct impact on our ability to lift people from poverty, and provide the welfare and employment services that they need.
“This is why Australia has prioritised growth rather than seeking to address a multitude of worthy issues. It’s critical we stay focused so we can deliver real economic outcomes.”
The G20 was the right forum to tackle sluggish growth and rising unemployment and inequality because it had the right mix of advanced and developing countries, representing over two thirds of the world’s population – including two thirds of its poor – and producing about 85 percent of global gross domestic product (GDP) and three quarters of world trade.
The G20 had proven itself by containing the global financial crisis and resisting the push for trade protectionism. It now faced a bigger challenge in some ways – how to enable sustainable growth.
And so Australia was focusing the G20 agenda around three key areas:
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Promoting strong economic growth and employment by empowering the private sector.
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Making the global economy more resilient to future shocks.
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Strengthening global institutions and ensuring their continuing relevance to the global economy of the 21st century.
The role of the private sector would be crucial to the success of the G20’s plans.
“At the same time as we create an environment that enables businesses to invest and employ people, we need to ensure that business is doing its share as a good corporate citizen. That is why support from both business and governments to improve the stability of the global financial system is so important, as well as proposed measures on tax and transparency reform.”
Smith said the reforms that the G20 was pursuing to reach the collective 2 percent extra growth target over five years would focus on trade, employment and infrastructure.
The G20 was re-thinking trade measures in a complex new environment.
“In an era when goods and components often crossed national borders many times before ending up in the hands of the final consumer as a result of global value chains, the traditional calculus of trade negotiations changes; the ability to import becomes as important as the ability to export.
“Goods are no longer produced in one country and sold in another – goods are ‘made in the world’.
Between 30 percent and 60 percent of G20 exports consist of imported inputs or are used as inputs by other countries.”
And so the G20 was discussing ways of improving global value/supply chains to drive growth.
Smith said it was vital for individual G20 countries to streamline trade and free up services, to give businesses, especially smaller ones, access to regional and global markets.
The G20 trade ministers had just met when they agreed that it was important to implement the Trade Facilitation Agreement, which had been adopted at the WTO Bali ministerial conference last December.
Robert Milliner, the Sherpa for the B20 group of business people supporting the G20, said reducing supply chain barriers could increase global GDP by $2.2 trillion – more than removing all existing tariffs on trade in goods, which would increase global GDP by $360 billion.
Removing trade barriers and delays at borders could also increase food security in developing countries by reducing food wastage and lowering costs to consumers.
Milliner agreed, saying about 30 percent of traded food was lost “between farm and fork” through wastage, including through poor transport infrastructure.
Higher growth was the best way to create employment, Smith said, but the G20 was also focusing on measures to increase the employment of youth and women, including by improving their skills.
Fuller participation of women in the economy would boost global growth substantially.
Smith said the G20 members were also working to address the estimated 2030 global infrastructure gap of $70 trillion as another key measure to boost economic growth.
The best way to achieve this was by removing impediments to private sector investment in infrastructure and to make better use of multilateral development bank resources – especially for developing countries.
She said just as the G20 should help money come in, it also needed to ensure it was shared around, including through better domestic taxation, to ensure the sustainability of the system.
It was working to reform the outdated international tax system to ensure that multinationals paid tax in the countries where they made their profits instead of elsewhere.
It was also working to boost the revenues that countries received through remittances by reducing the costs of moving this money. While the average cost of sending remittances to and from G20 countries was above 8 percent, the costs in sub-Saharan Africa were the highest in the world at over 11.5 percent.
She said global remittances totalled $400bn in 2012 and were expected to rise to $700bn by 2016.
G20 countries were also making good progress in implementing primary financial regulatory reforms to prevent another financial crisis.
This included building resilient financial institutions, ending “too-big-to-fail” institutions, addressing risks associated with the shadow banking sector and making derivatives markets safer.
She noted, though, that the G20’s important decision to reform the IMF by giving emerging and developing countries a greater say had still not been implemented because of opposition in the US Congress.
It was up to the US to remove that obstacle, but she did not think it would happen this year.
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Africa in China: New knowledge-sharing effort kick-starts collaboration in agricultural productivity
Stories about “China in Africa” abound, and regularly make headlines. Now, thanks to a new push, an “Africa in China” narrative has begun to take root with a group of 40 African farmers, equipment producers, policymakers, scientists and researchers visiting China. Their objective: see first-hand that nation’s legendary successes in transforming its agriculture sector, including attaining food self-sufficiency, for adaptation back home in Africa.
The numbers are compelling, and speak both to the severity of the challenge facing the agriculture sector in Sub-Saharan Africa (SSA) as well as the opportunity for transformational change.
Currently, because of low technology, lack of irrigation and power, African farmers are able to provide only five percent of all cereals consumed on the continent. Yields on African farms are one-third those achieved by Asian and Latin American farmers. Thailand exports more food products than all SSA countries combined. In comparison, China is a remarkable success story: it feeds over 20 percent of the world’s population using only seven percent of the arable area. To unlock the untapped potential of African agriculture, greater Africa-China cooperation is vital.
The knowledge exchange, billed as a “South-South” sharing of experiences, brought the African visitors to the Chinese Academy of Agricultural Sciences (CAAS), China’s pre-eminent agricultural research and development agency.
“We came to see, to listen and to learn from China’s remarkable success story in meeting the food needs of its people,” said Francis Wachira, Deputy Executive Director, Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA). “What became clear to me and my fellow visitors is that China’s achievement did not come from a single intervention or overnight results. Rather, it is the result of decades-long commitment to bringing the benefits of modern science to the rural economy and clear recognition at the highest levels of government about the potential of agriculture to alleviate poverty and improve people’s lives.”
China’s dramatic experience in scaling up agricultural technologies along the value chain – with a focus on rice, wheat, maize, vegetable production as well as conservation agriculture technologies – and the associated use of small scale mechanization is a remarkable achievement. The African visitors were impressed by the rapid evolution of the agriculture sector in China which experienced a profound transformation in less than 30 years due to strong and sustained political commitment, significant investments in capacity building and technology generation, and land tenure reform.
The tour featured visit to research fields, in-depth discussions with CAAS scientists and researchers, many of whom are grappling with the same set of issues as the African visitors. All the visitors are involved in implementing the three regional agricultural productivity programs financed by the World Bank – WAAPP, EAAPP and APPSA – which support agricultural research and technology dissemination across 19 African countries.
Toward Transformational Change
The study trip grew out of a series of discussions on possible Africa–China partnerships. An earlier visit to China in 2013 by Makhtar Diop, Africa Region Vice President led to discussions between the Bank, sub-regional African agriculture R&D organizations and project counterparts about possible areas of collaboration. Chinese and African partners thought China’s experience in technology development and adaptation within smallholder agricultural systems would be particularly well suited for sharing lessons of experience.
Following the signing of agreements between the Chinese Academy of Agricultural Sciences and ASARECA, Center for the Coordination of Agricultural Research and Development in Southern Africa (CCARDESA) and West and Central African Council for Agricultural Research and Development (known by its French acronym, CORAF) – the three sub-regional organizations that facilitate implementation of the regional Bank projects – the first 10 day South-South learning and knowledge-sharing sharing event was launched.
“We are taking a continental approach to achieving transformational change in Africa’s agriculture sector,” said Severin L. Kodderitzsch, Practice Manager for Southern Africa in the new Agriculture Global Practice. “We were delighted that representatives from the three sub-regional organizations leading the agriculture-for-development charge in Sub-Saharan Africa took part in the study visit which will be helpful for a new push to disseminate knowledge and ideas gleaned on the trip.”
Participants identified a large stock of technologies which can be adapted and transferred to Africa and discussed the way forward for collaboration with China. In his closing remarks, Professor Zhang Lubiao, Director of the Department of International Cooperation of CAAS commented on China’s strong interest in seeing this collaboration continue through different ways. He said that, as one example, a concrete next step would be to implement a capacity-building program to train young African scientists in agronomy at the Graduate School of CAAS.
“The study visit turned out to be a two-way exchange benefiting both parties,” said Abdoulaye Toure, Lead Agriculture Economist, Agriculture Global Practice and Task Team Leader of the West Africa Agricultural Productivity Program. “It helped Africa to learn from China and for China to learn from Africa.”
The visit concluded on June 13, 2014.
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The African Dream
The dream that the twenty-first century will be the “African Century” is powerful and intoxicating. It is also becoming reality. As African officials gather in Washington, DC, on August 4-6 for the first US-Africa Leaders Summit, it is worth considering the basis – and the limits – of the continent’s progress.
While conflict and poverty remain serious problems in many African regions, our continent is not only more stable than ever before; it is also experiencing some of the highest economic growth rates anywhere on the planet. Over the past decade, tens of millions of people across Africa have joined the middle class; our cities are expanding rapidly; and our population is the most youthful in the world.
But Africans must not take it for granted that their time has come. Words are cheap, and, despite the continent’s positive momentum, we know that history is littered with squandered dreams – nowhere more so than in Africa.
So there is much that we in Africa must do to seize our opportunity. Building bigger, more integrated sub-regional markets that are deeply embedded in the global economy is one of the most urgent tasks that we are facing. After all, from the European Union to the Association of Southeast Asian Nations to the North American Free Trade Agreement, we see how geographic regions can create conditions for shared growth and prosperity by removing barriers to commerce, harmonizing regulatory norms, opening labor markets, and developing common infrastructure.
That is precisely the vision that we are working to realize in our own part of Africa, under the banner of the Northern Corridor Integration Projects. In the past 18 months, Kenya, Rwanda, and Uganda, joined by South Sudan and more recently Ethiopia, have launched 14 joint projects that will integrate East Africa more closely and make our region a better, easier place to do business.
There are already concrete results. We have put in place a single tourist visa valid in all three countries. We have established a single customs territory, slashing red tape and removing non-tariff trade barriers. A standard-gauge railway from Mombasa to Kigali and Juba via Kampala is being designed, and financing for the first segment has been secured from Chinese partners.
Taking these steps has required going against decades of entrenched practice. Unfortunately, across Africa, national borders have tended to be chokepoints rather than enablers of intra-continental cooperation on trade, security, labor, and environmental issues. Too often, Africa’s economies exchange goods and coordinate policy among themselves less than they do with countries outside of the continent.
We are determined to change this. Under the Northern Corridor initiative, for example, each of our governments has accepted responsibility for shepherding key projects.
Uganda is securing investors for a new oil refinery and is spearheading the development of regional infrastructure for information and communications technology, which will lead to the elimination of cellular roaming charges among our countries.
Kenya is tasked with developing a regional commodity exchange, improving human resources through education and consultancy services, and building both crude and refined oil pipelines. Kenya is also exploring ways to expand regionally focused power generation and transmission.
Rwanda is charged with aligning immigration laws and promoting freedom of movement for both citizens and visitors. Other coordination duties include regional security (through the East African Standby Force), coordinated airspace management, as well as joint tourism marketing.
We know what success will look like for our region’s citizens. And we know what needs to be done. Progress will be achieved not by building monuments for politicians or holding summits, but by lowering the costs of doing business and raising the incomes of our people.
Bureaucracies move slowly, sometimes because they are institutionally programmed to subvert change. The framework of the Northern Corridor Integration Projects is designed to generate and sustain the political will necessary to get the project done.
The United States has always been an important partner for our countries, but the path to solving our problems is not through handouts from American taxpayers. Only we, together with our business sector, can do the job. As we do so, we look forward to a deeper and more “normal” relationship with the US, focused on what we can do together rather than on what Americans can do for us.
Africa has always had what it takes to rise. Together, we can make it happen.
The writers are Presidents of Rwanda, Uganda and Kenya respectively.
AfDB seeks strategic partnership with Angola
The President of the African Development Bank (AfDB), Donald Kaberuka, was received Monday, July 28 by the President of the Republic of Angola, José Eduardo dos Santos, at the Palácio da Cidade Alta in Luanda, where discussions focused on expanding cooperation between the AfDB and the Angolan Government.
In statements to the press at the end of the audience, Kaberuka said it was his third visit to Angola since he became Bank President and underscored the Bank’s interest in strengthening its “strategic relationship” with Angola given the growing role and importance of the country on the African continent. During his meeting with the Angolan leader, Kaberuka discussed economic reform and development programs in Angola, with a particular focus on the country’s strategy to combat poverty.
The President of the AfDB indicated that, thanks to the deep macroeconomic reforms undertaken in Angola, the country is today one of the three strongest economies of the region, after Nigeria and South Africa, and has made significant achievements in the fight against poverty. Kaberuka said the AfDB is watching and wants to play an active part in this process.
“During the meeting we addressed very specific issues that have to do with job creation, poverty reduction, women’s empowerment and diversification of the economy, but [the focus] was very much in reducing poverty,” the Bank chairman said, noting that the Government of Angola has made a remarkable achievement that cannot be ignored, by reducing the poverty levels in the country from 60 to 38 percent.
The Angolan Government is making progress in economic reforms and infrastructure, with a view to developing industry, diversify the economy, reduce dependence on oil revenues and enhance the well-being and quality of life for the people.
“When we talk about development of infrastructures, we are talking about energy, transport and other vital sectors of an economy. We congratulate the Angolan Government’s efforts in these areas, because they are common problems in most African countries,” Kaberuka said.
Kaberuka visited the Presidential Palace in the Cidade Alta accompanied by Finance Minister Armando Manuel. The two had met hours earlier, having signed an agreement that will make it possible to inject about one billion dollars in the State budget for projects in the fields of energy.
“Today I signed a one billion-dollar agreement to support the reforms of the energy sector so that, in future, Angola can produce efficiently and comprehensively. We will work with the Ministry of Finance to support the financial and institutional reforms,” Kaberuka said. The Minister announced the first disbursement would be in the amount of $600 million.
AfDB supports reforms in Angola and the construction of infrastructure, particularly in the energy sector, acknowledging that a rapidly growing economy such as Angola’s needs reliable energy. The country aims to make reforms in the energy sector to ensure sufficient energy is available to the entire population.
The AfDB President observed that whenever he visits Angola he notes “major transformations” and he welcomed the efforts being made. “The journey is still long. On the macroeconomic front, it is important to remain vigilant to ensure that gains are sustained and there is no slippage, but it’s a good start,” said Kaberuka, who spoke of macroeconomic and fiscal reforms in the oil sector: “Angola still has many challenges, like other African countries, but we can work together to find solutions.”
Indeed, four areas of particular focus include: reducing poverty levels; addressing inequalities and accelerating human development; diversifying the economy to create more jobs; and effective management of the petroleum sector so as to maximize the benefits.
Kaberuka praised Angolan authorities and underscored the Bank’s commitment to a closer relationship and support for further projects in Angola, particularly in the power sector. One clear goal on this issue was to make the energy sector more efficient and more attractive to investment.
“Angola, as other African countries that rely heavily on oil, must step up its pace of reforms,” said the AfDB President. “The wealth of a nation is not necessarily what’s underneath the soil or sub-soil, but rather it is in the knowledge of men and women, children and youth,” he said.
During in visit in Luanda, Kaberuka paid a courtesy call to the Vice-President of the Republic, Manuel Domingos Vicente, and also met the chairman of Fundo Soberano de Angola, José Filomeno Dos Santos, with whom he discussed the Bank’s Africa50 Fund.
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How sugar soured trade ties between Uganda and Kenya
Uganda and Kenya have agreed to lift a ban on cross-border sugar trade, ending a two-year standoff that has threatened to sour bilateral commercial ties. Uganda Revenue Authority Customs Commissioner Richard Kamajugo said last week that sugar dealers could now apply for licences and start exporting to Kenya.
“We have agreed that partner states should stop importing sugar from outside East Africa,” Kamajugo said at a meeting at Serena hotel, attended by officials from Kenya Revenue Authority, Kenya Sugar Board, URA, Uganda Sugar Manufacturers Association (USMA), and Rwanda Revenue Authority.
It all started in 2011, when Uganda was experiencing an acute sugar shortage. Kampala was then allowed to import duty-free sugar to cover up the gulf. Kenyans say Uganda took the chance with two hands, importing more than it needed. A few months later, Ugandans repackaged that sugar to export it to Kenya duty-free, citing the 2010 East African common market protocol, which allows free movement of goods and labour within the region.
Kenya blocked the sugar, saying it should attract a 100 per cent levy. At the meeting last week, Kenyan authorities told Uganda bluntly that they did not trust sugar from here. Beatrice Memo, the KRA commissioner for Customs, told reporters that they wanted to be sure that sugar exported to Kenya was genuinely from Uganda.
“Maybe [there is] mistrust. A lot of sugar comes from outside the region to Uganda and you export that sugar again,” Memo said.
She wondered why, at a time when Uganda was facing a sugar deficit, some Ugandans sought to export sugar. Today in Uganda, sugar producers are reeling with limited market because of the Kenya ban and the conflict in South Sudan.
Surplus production
Annually, Uganda produces 462,500 tonnes yet the country can only consume 300,000 tonnes, according to Jim Kabeho, the USMA chairperson. Sugar prices here have fallen sharply due to surplus production. A kilo now goes for as low as Shs 2300, compared to as much as Shs 6,000 at the peak of the shortage.
An official from Kinyara Sugar told the meeting that his company alone had about 50,000 tonnes in the store with no market. Sugar trade between Uganda and Kenya has for long been a thorny issue in the relations between the two East African Community members.
Kenya says because sugar from Uganda goes there cheaply, it imposes undue competition on the local producers.
“At one moment you say you have a deficit. But soon after you start exporting; we have the reason to question and satisfy ourselves,” said Rosemary Mkok, CEO of the Kenya Sugar Board (KSB).
Uganda, she said, needed a body like KSB, which would issue exporters certificates showing that it’s really sugar from Ugandan factories at Kakira, Kinyara, or Lugazi entering Kenya. Otherwise, it will be hard for Kenya to believe Ugandan traders.
But can this meeting’s resolutions hold?
Kassim Omar, the vice chairperson of the National Monitoring Committee for the Non-Tariff Barriers, told The Observer that there was more to the problem than was being publicly discussed.
“The formation of cartels by very big corporations supported by their governments has had a big impact on the sugar industry,” Omar said. “Kenya’s allegations are based on wrong information. It’s a question of syndicates within the business community to block the other party from trading.”
Nairobi refutes Omar’s claim, with officials insistent on the lack of sector regulator as the major problem. Kenya produces more sugar than Uganda – 600,000 tonnes annually – but not enough for its market. It has been importing sugar from Comesa countries.
“If someone decides to get sugar from somewhere else at a cost two times more than they would have used in Uganda, know there is something sinister,” said Omar, who also heads the Uganda Freight Forwarders Association.
Not new
Such trade wrangles between Uganda and Kenya are not unprecedented. In 2012, more than 1,200 bags of sugar belonging to Minister Kahinda Otafiire were destroyed at Mombasa port. Kenya accused him of using packages of a local producer there in a cover-up to dump sugar in their country.
Earlier in 2008, Kenya blocked imports of Ugandan day-old chicks and chicken products claiming they were not up to their standards. Uganda responded by refusing to lift the ban on the importation of beef, bull semen and other associated products from Kenya.
Some observers argue that such trade disputes are bound to happen anywhere in cross-border trade. Isaac Shinyekwa, a research fellow on Integration at the Makerere-based Economic Policy Research Centre (EPRC), cited the European Union, a fairly-developed common market. There are still disagreements. He is optimistic Uganda and Kenya will finally find a way out.
For now, sheer mistrust, unnecessary regulations, and efforts to protect their own among the EAC partner states will continue to marsh down the sugar sector and sour trade ties.
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The African Growth and Opportunity Act at 14: The road ahead
Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on the African Growth and Opportunity Act (AGOA)
July 30, 2014
Washington D.C.
As delivered
Thanks very much Chairman Wyden, Ranking Member Hatch, Members of the Committee, and thank you for inviting me here to today to testify about AGOA.
AGOA, as you’ve noted, has been the cornerstone of America’s economic engagement with sub-Saharan Africa for the past fourteen years. And it has had some very important successes. U.S. imports from AGOA countries have grown from $8.2 billion in 2001 to $26.8 billion in 2013, a threefold increase. Non-oil AGOA trade has increased almost fourfold during the same period from $1.4 billion to almost $5 billion.
U.S. direct foreign investment (FDI) stock in sub-Saharan Africa has also increased from approximately $9 billion to $35 billion. And according to the African Coalition on Trade, AGOA-related investment has resulted in the creation of some 300,000 jobs in sub-Saharan Africa and almost 120,000 jobs here in the United States.
But there clearly is more work to be done. Utilization of AGOA is low and uneven. The bulk of U.S. imports under AGOA come from a handful of countries. And although we are beginning to see increasing diversification, exports under the program are still concentrated in a few sectors. And finally, while the growth in exports has been impressive over the life of AGOA, in absolute terms the level of exports is quite low. We can and must do better.
And to that end, last August I launched a comprehensive review of AGOA to examine both its successes over the last 14 years, as well as areas where it might be improved. And as we undertook this exercise, we were mindful too that the Africa of 2000 is not the Africa of 2014. Six of the ten fastest growing economies in the world are in Africa. And African countries are increasingly moving away from unilateral preference programs and entering into reciprocal trading relationships, including with the European Union. As we think about AGOA’s future, we need to consider how the U.S.-Africa trade relationship should evolve over time as well.
We draw three main conclusions from our review:
First, while tariff preferences are important, they are not sufficient. African countries face constraints to trade that range from inadequate and high cost infrastructure, particularly in the energy and transportation sectors; burdensome customs procedures and other border barriers impacting Africa’s regional and global trade; difficulties complying with agricultural, safety and marketing standards (including sanitary and phytosanitary requirements); limited skilled labor; and low productivity and competitiveness in non-oil, value-added products. And, despite growing business interest in Africa, AGOA countries also continue to face difficulties finding partners in the United States.
For AGOA to reach its full potential, it must be situated at the core of a comprehensive trade and investment strategy, an AGOA compact that targets the full range of the supply-side constraints to trade in Africa that creates new markets for African products, harnesses growing private sector interest in trade and investment, and promotes regional integration and value-added production. Now this also includes moving forward with implementation of the WTO Trade Facilitation Agreement concluded in Bali last year, which, by OECD estimates, could lower trade costs for developing countries in trade by up to 15 percent if fully implemented.
Second, there are some areas in which the AGOA program itself can be updated and improved. This, of course, is the province of Congress, but the findings of our review may be helpful as you consider these issues. For example:
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The Length of Extension. Our research suggests that it is important to extend the program for a sufficient period of time to encourage investment in critical industries in Africa.
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Product coverage: As you said Mr. Chairman, most AGOA beneficiaries enjoy duty-free treatment for virtually all of their products. (97.5 percent of the tariff lines are covered). However, there are still 316 tariff lines that continue to lie outside the program, and we believe Congress should consider whether any new products can now be added to the program keeping in mind domestic sensitivities.
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Rules of Origin: AGOA has some of the most flexible rules of origin of any preference program. There are, however, areas of the program where flexibility has been constrained. For example, there are limits on the “cumulation” of labor costs across AGOA countries and a cap on the use of U.S. inputs in meeting the requisite “regional value content” rules. Elimination of these limits could encourage greater integration into regional and U.S.-Africa value chains.
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Eligibility Criteria: AGOA’s eligibility criteria have played an important role in raising standards and improving rule of law throughout the continent. However, they have not been updated since AGOA was first established. Updating these criteria for example to include provisions relating to eliminating unwarranted SPS barriers and employment discrimination could be an important way to modernize the program.
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Eligibility Review Processes: AGOA’s mechanism for ensuring countries meet eligibility criteria currently is all-or-nothing. An approach that allows for partial and more immediate withdrawal may allow the Administration to take a more tailored and nimble approach to drive positive changes in beneficiary countries.
We look forward to working with you as you explore these and other issues in the process of moving forward with renewal.
Third, and finally, while the administration remains firmly committed to securing AGOA renewal, we need to begin working with our African partners to develop a vision of a trade relationship that goes beyond one-way preferences in the mid- to long-term. As I said, today’s world is different from the one when AGOA was first enacted, both in Africa and in its relations with major trading partners. Against this backdrop, we need to consider the way ahead and how different tools – from unilateral preference program, to reciprocal trade agreements – might evolve to be used with different partners to help us achieve our goals of broad-based economic growth and prosperity.
With that, let me thank you again with the invitation to testify, and I am happy to take your questions.
Download the Member Statements from the Hearing below:
Wyden Hearing Statement on the African Growth and Opportunity Act
Hatch Statement at Finance Hearing on the African Growth and Opportunity Act
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India’s demands block $1 trillion WTO deal on customs rules
The World Trade Organization failed on Thursday to reach a deal to standardise customs rules, which would have been the first global trade reform in two decades but was blocked by India’s demands for concessions on agricultural stockpiling.
“We have not been able to find a solution that would allow us to bridge that gap,” WTO Director-General Roberto Azevêdo told trade diplomats in Geneva just two hours before the final deadline for a deal (click here to read the speech).
“Of course it is true that everything remains in play until midnight, but at present there is no workable solution on the table, and I have no indication that one will be forthcoming.”
The deadline passed without a breakthrough. WTO ministers had already agreed the global reform of customs procedures known as “trade facilitation” last December, but it needed to be put into the WTO rule book by July 31.
Most diplomats saw that as rubber-stamping a unique success in the WTO’s 19 year history, which according to some estimates would add $1 trillion and 21 million jobs to the world economy, so they were shocked when India unveiled its veto.
Trade experts say Thursday’s failure is likely to end the era of trying to cobble together global trade agreements and to accelerate efforts by smaller groups of like-minded nations to liberalise trade among themselves. India has been vocal in opposing such moves, making its veto even more surprising.
“Today’s developments suggest that there is little hope for truly global trade talks to take place,” said Jake Colvin at the National Foreign Trade Council, a leading U.S. business group.
“The vast majority of countries who understand the importance of modernizing trade rules and keeping their promises will have to pick up the pieces and figure out how to move forward.”
Some nations have already discussed a plan to exclude India from the agreement and push ahead regardless, and the International Chamber of Commerce urged officials to “make it happen.”
“Our message is clear. Get back to the table, save this deal and get the multilateral trade agenda back on the road to completion sooner rather than later,” ICC Secretary General John Danilovich said.
U.S. Secretary of State John Kerry, on a visit to New Delhi, had earlier said he was hopeful that differences between India and much of the rest of the world could be resolved.
But after Azevêdo’s speech, U.S. Ambassador to the WTO Michael Punke was downbeat.
“We’re obviously sad and disappointed that a very small handful of countries were unwilling to keep their commitments from the December conference in Bali, and we agree with the Director-General that that action has put this institution on very uncertain new ground,” Punke told reporters.
India had insisted that, in exchange for signing the trade facilitation agreement, it must see more progress on a parallel pact giving it more freedom to subsidise and stockpile food grains than is allowed by WTO rules. It got support from Cuba, Venezuela and Bolivia.
India’s new nationalist government has insisted that a permanent agreement on its subsidised food stockpiling must be in place at the same time as the trade facilitation deal, well ahead of a 2017 target set last December in Bali.
Kerry, whose visit to India was aimed at revitalising bilateral ties but was overshadowed by the standoff, said the United States understood India’s position that it needs to provide food security for its poor but India would lose out if it refused to maintained its veto.
DEAL WITHOUT INDIA?
Diplomats say India could technically attract a trade dispute if it caused the deal to collapse, although nobody wanted to threaten legal action at this stage. The summer break will give diplomats time to mull options, including moving ahead without India.
Technical details would still have to be ironed out, but there was a “credible core group” that would be ready to start talking about a such a deal in September, a source involved in the discussions said.
“What began as a murmur has become a much more active discussion in Geneva and I think that there are a lot of members in town right now that have reached the reluctant conclusion that that may be the only way to go,” he said.
An Australian trade official with knowledge of the talks said a group of countries including the United States, European Union, Australia, Japan, Canada and Norway began discussing the possibility in Geneva on Wednesday afternoon.
New Delhi cannot be deliberately excluded, since that would mean other countries slowing down containers destined for India, but if it becomes a “free-rider” it will add another nail in the coffin of attempts to hammer out global trade reform.
Trade diplomats had previously said they were reluctant to consider the idea of the all-but-India option, but momentum behind the trade facilitation pace means it may be hard to stop.
Many countries, including China and Brazil, have already notified the WTO of steps they plan to take to implement the customs accord immediately.
Other nations have begun bringing the rules into domestic law, and the WTO has set up a funding mechanism to assist. But WTO head Azevêdo said he feared that while major economies had options open to them, the poorest would be left behind.
“If the system fails to function properly then the smallest nations will be the biggest losers,” he said. “It would be a tragic outcome for those economies – and therefore a tragic outcome for us all.”
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COMESA approves $1billion mergers
Common Market for Southern and Eastern Africa (COMESA) has approved over US$1 billion in mergers in nine member states last year.
COMESA competition commission (CCC) chief executive officer George Lipimile said the regional body was fulfilling its role as a one-stop shop for the assessment of cross-border transactions, thereby reducing the burden and cost of doing business in the economic bloc.
“Therefore, such transactions no longer need to be examined in each member state. Currently, the number of mergers notified with the commission stands at 13, with nine of them having already been approved by the Committee of Initial Determination. The estimated values of these transactions are well over US$1 billion,” he said.
Mr Lipimile said the CCC addresses the challenges posed by the globalisation of businesses and economies that have led to continuous rise in the number of multi-jurisdiction merger filings.
“This led the member states to call for the establishment of a framework for merger review and co-operation among interested agencies,” he said.
Among the key mergers approved in 2013 include one between Koninklijke Philips Electronics NV and Funai Electric Company Limited involving Egypt, Ethiopia, Kenya, Libya, Madagascar, Mauritius, Seychelles, Uganda and Zambia.
Another notable transaction was the takeover of Cipla Medpro, a South African pharmaceutical company by Cipla India involving all the 19 COMESA member states.
The commission is the first regional competition authority in Africa and the second in the world, after the European Competition Authority.
Mr Lipimile said the transactions no longer need to be examined in each member state, hence it has reduced on the burden of doing business.
It also provides the only and most extensive network of national competition authorities in Africa as it plays advocacy role in handling complaints relating to anti-competition business practices.
“In response to requests or where public comments are sought, the Commission has issued advocacy letters, comments and amicus briefs. Further to promote transparency and encourage compliance with law, it has issued guidelines, and also fast-track platform to deal with day-to-day complaints,” he said.
Meanwhile, business communities in COMESA member states have continued to respond positively to the advocacy work carried out by the CCC.
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Statement by regional leaders on LAPSSET
Statement by the Heads of State of Kenya, Uganda, Ethiopia and South Sudan on the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor Project
Today [31 July 2014], we held a Summit of Heads of State and Government at State House, Nairobi to explore joint financing options for the Lamu Port Southern Sudan-Ethiopia Transport (LAPSSET) Corridor Project. I was joined by H.E. Yoweri Kaguta Museveni, President of the Republic of Uganda; H.E. Hailemariam Desalegn, Prime Minister of the Federal Democratic Republic of Ethiopia; and H.E. Salva Kiir Mayardit, President of the Republic of South Sudan.
Our meeting was the latest chapter in a deepening integration agenda that is focused on opening up the region to trade and investment and ensuring that its enterprises are globally competitive. LAPSSET is an integrated and transformative infrastructure project that will provide regional economic integration and interconnectivity that generates the investment and trade flows that are so crucial to ensuring that the region is able to deliver the shared prosperity that is the key to decent livelihoods and sustained peace and security.
The seven project components of the project require an estimated budget of $24.5 Billion (Kshs. 2 Trillion). Lamu Port alone with its 32 projected berths alone will cost $3.1 Billion.
With the large sums involved, it was clear to us that a joint approach that is innovative will be required for implementation. At length, we explored the complexities of shortening the period between project conceptualization and the realization of a sustainable financial model that will deliver implementation. We sought to learn from the African Development Bank’s Africa50 Infrastructure Fund approach, and how our joint efforts can help make a compelling business case to private sector players.
Our discussion was especially informed by the upcoming Africa-USA Summit on 4-7 August 2014 that will allow the leaders a chance to engage with American investors on this project. This being a continuation of similar engagements that are being held with investors from across the Middle East and the Indian Ocean Rim.
We briefly dwelt on the critical necessity of regional peace and security to provide the conditions in which this and other projects will deliver the full benefits of growth and equity to a region hungry for progress.
Thank you.
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Mozambique and Japan meet in Tokyo in 2015 to study investments
Businesspeople from Mozambique and Japan have agreed, at meetings in Maputo, to meet again in 2015 in Tokyo to continue to study increased Japanese investments in Mozambique, according to Lourenço Sambo, the director-general of Mozambique’s director-general of the Centre for Investment Promotion (CPI).
The Japanese government and business delegation, headed up by the deputy Foreign Affairs minister, Norio Mitsuya during meeting with members of the Mozambican government, companies and businesspeople said that Mozambique was the African country that was of most interest to Japanese investors, but noted that development of relations was affected by a lack of infrastructure in the country.
Japan’s interest in the Mozambican economy is currently focused on exploration of natural resources, but Mozambique is also a significant export destination for Japan, mainly for vehicles.
In 2012-2013 trade between the two countries totalled around US$1 billion, according to Mozambique’s Minister for Industry and Trade, Armando Inroga,.
Japan’s biggest investment in Mozambique was made by Nippon Steel & Sumitomo Metal Corporation, which mines coal in Tete province at the Minas de Revobué project.
Documents from the Mozambique-Japan Investment Forum, held on 12 January 2014, may be downloaded here.
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At UN-backed meeting, world’s least developed countries urge partnerships to boost productive capacity
With the kick-off of the United Nations post-2015 sustainable development agenda fast approaching, ministers and senior Government officials from across the globe have gathered in Cotonou, Benin, today to discuss how to strengthen the world’s 48 least developed countries to produce more goods and trade in international markets more efficiently.
“The conference is an invaluable opportunity for Governments, the United Nations, private sector and civil society to come together to strengthen and expand multi-stakeholder efforts towards significant and robust partnerships,” said UN High Representative for Least Developed Countries (LDCs), Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS).
In a press release from his Office, Gyan Chandra Acharya added that traditional development partners, emerging countries in the global South, and the LDCs themselves have a shared responsibility to do more to ensure that partnerships are transformative.
The four-day Ministerial Conference on New Partnerships for Productive Capacity Building in the Least Developed Countries, will identify innovative methods to improve the productive capacity of LDCs – a key priority of the 2011 Istanbul Programme of Action, which charts out the international community’s vision and strategy for the sustainable development of LDCs for the next decade.
Focusing on policy framework and institutions, the development of value chains, infrastructure and access to energy and international support measures, the Benin meeting will also focus on appropriate means of implementation including through addressing cross-cutting issues namely gender and women empowerment, employment and sustainable development.
Increasing productive capacities in the LDCs is a defining challenge and an opportunity to eradicate poverty and achieve and sustainable development in the decade to come.
“Development partners should be encouraged to do more by channelling aid to support productive capacity building in the LDCs, leveraging aid to encourage investment flows and facilitating trade and promoting technology transfer in a coherent manner,” Mr. Acharya said.
In addition to focusing on development partners, the meeting will make policy recommendations on official development assistance (ODA), South-South cooperation, remittance earnings, and domestic resource mobilization. These suggestions are expected to contribute to discussions on the proposed sustainable development goals (SDGs).
As it stands, the majority of LDCs will not meet most of the Millennium Development Goals by 201, according to a UN-OHRLLS report published last September. The survey cautioned that most of those countries continued to face structural challenges, as well as the destructive impact of climate change. The report did have some good news, however, namely that after years of economic stagnation, the LDCs are now achieving progress with some signs of structural transformation.
Also speaking ahead of the meeting, the Director of the Regional Bureau for Africa of the UN Development Programme (UNDP), Abdoulaye Mar Dieye, called for sustained, inclusive and people-centred development in the LDCs.
The key for LDCs is to “diversify into new, sustainable, job-rich, productive sectors so as to transform the structure of their economies, while building an environment in which development gains are broadly shared,” he said.
Read the Statement by the Chairperson of the African Union Commission, H.E Dr. Nkosazana Dlamini Zuma to the Ministerial Conference on New Partnerships for the Development of Productive Capacities in Least Developed Countries (LDCs) - 28 July 2014, Cotonou, Benin.
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Growing the development dividend: U.S. trade policy and global development in the 21st century
Remarks by Ambassador Michael Froman at the Brookings Institution, 29 July 2014
A Shared History
Martin Luther King Jr. once said, “Human progress is neither automatic nor inevitable.”
And nowhere is that more clear than in the world of development. We need to work at it. That’s why, for the last 70 years, the United States has consciously opened up its market – even at times asymmetrically – to help war-torn countries rebuild and poor nations develop. We have done this not only because it is consistent with our values, but also because we have an interest in the stability that comes with poverty alleviation and the new markets that come from the emergence of a global middle class.
But much has changed over this period, and we face a host of consequential choices about the future of U.S. trade policy and global development, including updating and renewing preference programs such as the African Growth and Opportunity Act and the Generalized System of Preferences.
With stakes this high, the time is right to reexamine the relationship between trade and development and recommit to a U.S. trade policy that will drive broad-based global growth in the 21st century.
And no time is more appropriate than now – as we prepare to host 50 African heads of state and government for the first-ever U.S.-Africa Leaders Summit – to discuss how we can work together to boost growth and prosperity on both our continents.
And as we seek to move beyond the barriers that divide our nations, it is worth remembering that trade is part of a history that we all share. According to anthropologists, the ability to trade across long distances is one of the traits that separate us from other species. From the laying of the Silk Road to the rise of great trading states like the Ghana Empire to the discovery of the New World, trade has always been central to development.
An Era of Unprecedented Progress: Trade and Development since WWII
Now the link between trade and development has never been stronger than during our most recent chapter of world history. Since World War II, the United States has been one of the principal architects of a global trading system founded on the principles of openness, fairness and freedom. Through that system, we’ve seen time and again how trade advances global development by promoting growth and alleviating poverty.
Here are a few of the more recent milestones from what has been an era of unprecedented progress: Between 1991 and 2011, developing countries’ share of world trade doubled, rising from 16% to 32%. During the same period, nearly 1 billion people were lifted out of poverty. In the mid-1990’s, foreign direct investment flows to developing countries grew to surpass official aid flows. And last year ushered in another first: the value of trade between developing countries exceeded that between developing and developed countries.
Looking at the historical record, it is clear that while trade alone cannot solve every development challenge, it is a necessary part of any successful and sustainable development strategy.
And the literature on this is clear:
Trade fuels faster growth, facilitates investment, and reduces poverty in developing countries, which translates into more jobs and increased incomes for the poor.
Trade allows countries to import cutting-edge technologies and inputs at lower prices, it drives domestic firms to become more competitive, and encourages efficient resource allocation and specialization.
For small countries with no trade, there is very little scope for large-scale capital investment and limited prospects for specialization. Without export markets, the production of many goods are economically unviable, but with trade, these countries have broader possibilities.
Higher growth, more employment and higher incomes also create more resources with which to finance investments in anti-poverty programs and provide citizens with better access to public services. This virtuous cycle depends on a number of other factors such as institutions, rule of law, investment in infrastructure and education, but it breaks down when trade is not part of the equation.
Take Singapore’s remarkable rise. When it became independent in 1965, Singapore had a small domestic market, little or no natural resources, and a GDP per capita of $516. Today, Singapore is consistently ranked among the least-corrupt, most-open, and most business-friendly economies in the world. And contrast this path with the choices of Venezuela, which in 1965 had a GDP per capita more than twice that of Singapore, but is now one of the least-open economies in the world. Last year, Singapore’s GDP per capita was around $55,000, a roughly 100-fold increase since 1965, while Venezuela’s was less than $13,000, notwithstanding its abundant resources. Now there are a lot of factors that go into this but open trade is certainly among them.
Moreover, as Chile’s experience demonstrates, openness to trade makes firms more competitive by encouraging efficient resource allocation both within firms and within the greater economy. During the late 1970’s and early 1980’s, Chile opened its economy to trade and, as a result, Chile’s export and import-competing sectors increased their aggregate productivity by roughly 20% and 25% more than the non-traded goods sectors over a period of seven years. Between 1980 and today, Chile has reduced its poverty rate by 75% and raised its life expectancy at birth by a decade.
In recent years, of course, the biggest development story of all has been China. After China began opening to international commerce, its annual GDP growth increased from 4% between 1949 and 1978 to an average of nearly 10% since 1979. This sustained growth lifted 680 million people out poverty between 1981 and 2010, roughly three quarters of the world’s total poverty alleviation during that period. We welcome the rise of a stable, peaceful and prosperous China that upholds the rules-based trading system, not only because human welfare rises with it, but also because as China’s domestic demand grows and as it continues to open its economy to fair competition, American workers, farmers, ranchers and businesses will find more customers among China’s 1.3 billion population and burgeoning middle class.
Take the first class of graduates from the GSP Program: South Korea, Hong Kong, Singapore, Israel and Mexico. Despite their differences, each of these nations chose trade as a key part of their economic strategies. A few decades later, all are development success stories, they’re all significant markets and close partners of the United States. Their citizens enjoy higher standards of living, their industries are more competitive, and they are better able to contribute as responsible members of the international community.
Indeed, witness the distinction between Asia and much of the Middle East. One region has seen an explosion of trade and integration – and significant achievements on virtually all indices of development. Over the same period of time, the other remained one of the most autarchic, least economically integrated regions of the world and has seen much less pronounced progress on the various dimensions of development.
Of course, in seeking development, it is not enough to push just for increased growth. We must seek development that is broad-based and inclusive. We must seek development that is sustainable. And that’s why raising standards is a key objective of our trade policy. Our preference programs are conditioned on the beneficiaries having the rule of law, fundamental protections for workers and basic good governance principles in place. And our efforts to negotiate high-standard agreements with Asia Pacific and European partners are focused on securing the strongest labor and environmental provisions of any agreements ever signed.
Examples like the garment sector in Bangladesh are a cautionary tale, reminding us that trade works for development when its benefits are broadly shared. If workers have no voice and toil in desperate and unsafe conditions, whether in Dhaka or Phnom Penh, the promise of trade will remain unfulfilled.
A World in Flux: Rising Economies, New Trade Dynamics
Clearly, more must be done. Extreme poverty persists for more than 1.2 billion people. Inequality has increased within developing countries even as average incomes have increased. And population growth threatens to outpace the ability of some governments to provide basic services and of some economies to provide sufficient opportunities for its people, particularly for its young.
Moreover, any path forward must account for three changes that are reshaping the world we share and revising the relationship between trade and development.
The first of these changes is the rise of emerging economies. They have benefitted enormously from the openness and predictability of the global rules-based trading system, and as their role in that system increases, it is only appropriate that their responsibilities for maintaining it do as well. With the increasing importance of South-South trade and global investment flows, not only are these countries better able to provide for their own citizens, but they also have an increased role to play in contributing to the development of their poorer neighbors as well.
Second, as it has throughout history, technological change is presenting new challenges and opportunities for global trade and development. Even excluding China, developing-country Internet usage has risen by over a billion users since 2000, and mobile-telephone use has grown even faster. In a world of increased connectivity, farmers and small businesses in remote areas are more able to access market information and reach foreign customers than ever before. And this creates new opportunities to expand trade, promote inclusive growth and address major development challenges.
The third and related change is the importance of looking broadly at all the factors that impact trade. During 1990-2010, through multilateral and plurilateral tariff negotiations and as a result of the WTO accession process, average MFN applied tariff rates decreased by roughly two-thirds. Add to that the development of preference programs and the proliferation of FTA’s that eliminate tariffs, and it’s clear that non-tariff barriers to trade and supply-side constraints on competitiveness play an increasingly important role in determining whether and how trade will contribute to development and poverty alleviation.
When held up against the long arc of history, it is clear that change is occurring at an unprecedented pace. Yet the potential for trade to drive global development remains as strong as ever. To better realize that potential, we need to update our approach to trade and development as well.
The Next Chapter: Beyond Market Access
President Obama’s trade agenda brings traditional policy tools into the 21st century and offers a more comprehensive look at development. This agenda is informed by a hard-headed, honest assessment of trade’s potential to contribute to development as well as its limits.
To begin with, we’re working with Congress to reauthorize GSP and to update and extend AGOA, which has been the cornerstone of our trade policy with sub-Saharan Africa since 2000. Under AGOA, total exports from sub-Saharan Africa to the United States have tripled and, as AGOA countries improved their business and investment climates, the stock of U.S. FDI has almost quadrupled. AGOA has also supported the diversification of Sub-Saharan African economies; since 2001, non-oil, non-mineral exports under AGOA to the United States have increased almost four-fold, but at only $5 billion, there is much room for growth.
Twenty-three hundred years ago, Aristotle observed that “there is always something new coming out of Africa.” And over the last 14 years, thanks in part to AGOA, we’ve seen a lot that’s new coming out of Africa. To name just a few: Between 1999 and June 2011, Lesotho expanded its manufacturing jobs almost threefold. Between 2011 and 2013, Ethiopian shoe exports under AGOA increased more than thirtyfold. And last year, South Africa exported more than $2.2 billion in AGOA motor vehicles and parts.
AGOA has been good for America, as well. Since 2000, U.S. goods exports to sub-Saharan Africa increased fourfold, from $6 billion to $24 billion. Last year, U.S. exports to sub-Saharan Africa supported nearly 120,000 jobs here in the United States. Given that Africa is home to the world’s fastest-growing middle class and six out of the top ten fastest-growing economies in 2014, it’s easy to see why global companies like GE, Caterpillar, and Procter & Gamble increasing view engaging with Africa not as a choice, but as a necessity.
Behind the growing commercial ties between America and Africa are real people – countless families and communities who have benefited from AGOA. There is the story of fashionABLE – a Nashville-based company that employs vulnerable women in Ethiopia, many of them former sex workers, to produce high-quality scarves and leather products.
According to Barrett Ward, the company’s founder, “[t]he solutions to poverty do not lie in developing a business model that gives 10 percent of its profits to charity – the solutions are in developing businesses that do trade with Africa, tying them into the worldwide economy and giving them manufacturing opportunities.”
FashionABLE has relied on AGOA to reduce the costs of selling its products in the United States, in the highly-competitive fashion industry. And for the remarkable women behind these products – who are able to support themselves and their loved ones in a life of dignity – AGOA is much more than trade policy.
There’s Randa Filfili from Senegal, who has expanded her family’s company, Zena Exotic Fruits, to sell processed fruit to over 200 wholesale companies to serve markets in Europe and the United States. Ms. Filfili takes pride in producing a competitive product while giving her 40 employees, 90% of whom are women, a safe and non-discriminatory workplace.
Ms. Filfili’s story – and the numerous others like hers – are to be celebrated. But there is much more work to be done. For too many African businesses, regulatory complexity, weak infrastructure, and other capacity challenges have kept the prospect of exporting under AGOA out of reach.
That’s why we have been involved in a comprehensive review of AGOA, and why I have traveled to Africa four times over the last two years. We have been talking with African and U.S. leaders, ministers, large and small businesses, academics, think-tanks and NGOs to determine what’s worked well and what needs to be changed. As a result of this review, we believe there may be ways to upgrade AGOA, including:
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renewing AGOA and its third country fabric provisions for a sufficient period of time to encourage meaningful investment and sourcing;
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expanding AGOA’s coverage while taking into account sensitivities here at home;
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simplifying the rules of origin to make it easier for African firms to export to the United States while promoting further production in Africa; and
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updating AGOA’s eligibility criteria and review processes to ensure that we are raising standards in Africa and have greater flexibility to enforce those standards.
The specific parameters of AGOA are, of course, are ultimately a prerogative of Congress, and we look forward to working with them to put in place a program that reflects the reality of Africa’s rise.
But perhaps the clearest lesson from AGOA over the past 14 years is that market access – while important for spurring trade and development – simply isn’t enough. For sub-Saharan Africa to deliver on the promise of being an emerging economy, we must deal with the supply-side constraints that infringe on Africa’s ability to compete and integrate successfully in the global trading system. Here too the academic literature is clear: Tariff preferences are not enough; we must address the impact of surrounding constraints.
For the United States, this requires a comprehensive, whole-of-government trade and investment strategy with a renewed AGOA at its core and the support of both the public and private sectors on both continents – an “AGOA Compact” that brings together our collective resources and puts us on a common course to trade-led growth and development.
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It requires hard infrastructure: roads, ports and very importantly, access to affordable, reliable electricity. USAID, MCC, OPIC, Ex-Im and TDA are active in this area, including by driving Power Africa.
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It requires trade capacity building: technical assistance to implement critical standards, including by training local laboratories and inspectors to meet SPS standards, so that African farmers can export more of their product to global markets.
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It means providing training and support for young entrepreneurs, such as the participants in the Young African Leaders Program and the African Women’s Entrepreneurship Program, and for small businesses through enhanced Trade Hubs so that they can take better advantage of market opportunities.
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It requires soft infrastructure, or trade facilitation: single border crossings, consistent customs procedures, IT systems that allow customs organizations to share information so that when a shipment is cleared in Mombasa or Dar es Salaam, it doesn’t have to be re-cleared by the customs officials of each country in the East Africa Community whose territory it traverses.
Unfortunately, a couple countries now appear to be revisiting their commitment to implement the WTO Trade Facilitation Agreement later this week. The first fully multilateral trade agreement in WTO history, the TFA would make border procedures more efficient, and in doing so, cut trade costs by almost 14.5 percent for developing countries and 10 percent for developed countries.
We are hopeful about achieving a consensus, because alongside the economic stakes, the credibility of the WTO as an institution rests on the swift implementation of the Trade Facilitation Agreement. Bali breathed new life into the multilateral trading system; it would be short-sighted – especially for a couple developing countries – to block the implementation of the Trade Facilitation Agreement this week, putting at risk again the continued viability of the multilateral system and undermining the development efforts of so many countries reliant on that system.
Addressing Africa’s supply-side constraints is critical, but there is more that can be done to create demand and build markets as well. Creating market demand at scale by deepening regional integration is important, and our support for those efforts, including through our work with the East African Community to develop a regional investment arrangement, is key. Demand can also be promoted through the type of public-private partnerships we’ve developed in the context of Power Africa and the New Alliance for Food Security and Nutrition.
Of course, we are not operating in a static world. As Africa enters into reciprocal trade arrangements with the EU, for example, trading relationships begin to change. European companies have preferential access to Africa’s markets while we are giving African firms preferential access to the U.S. market. In addition, the EU and Canada have each revised their GSP program to adjust to the rise of emerging markets. We need to take these developments into account as we consider our approach going forward.
Indeed, as we look to the next chapter of U.S. trade and investment relations with Africa, and as Africa itself furthers its efforts to deepen its integration – first as regional economic communities and ultimately in the context of a continent-wide free trade area – we need to think through how our trade relationship with Africa might evolve from one built around a unilateral preference program to a more reciprocal set of arrangements over the medium and long-term.
This isn’t every country’s approach to trade and development. Some go into developing countries more focused on taking resources out of those countries than on investing in human resources in them. It’s important that we remain fully engaged and deliver on this comprehensive trade and investment strategy to demonstrate that there is a better way.
As President Obama said in Africa last year, we seek “a new kind of relationship – a partnership rooted in equality and shared interests.” Next week, when the President gathers 50 heads of state and government for an historic U.S.-Africa Leaders Summit, defining the next generation of trade and investment relations will be at the center of their discussion. It’s an important moment – for Africa, for the United States, and for our continuing efforts to further development through trade and investment.
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Is a monetary union necessary for East Africa?
It is credible to claim that among initiatives for economic integration in sub-Saharan Africa, the East African Community (EAC) is the finest example.
Not only does it have the most developed institutions, but it may also be the most ambitious in terms of the degree of social and political integration envisaged by its founding treaty.
For countries at the development level of the EAC member states, it is expected that the negotiations required for completion of the Customs Union and the Common Market will be politically risky and prone to stalemates and reversals.
Indeed, this has been the experience of the EAC since 2005, when big decisions on the Customs Union were first made.
Presidents of the EAC member states at the end of November last year signed a protocol to establish monetary union (download below). At the time, the major preoccupation was the degree to which Tanzania was committed to the EAC.
Much less attention was dedicated to asking about prudence and the pragmatic requirements for the establishment of a common central bank and a single currency. It is not self-evident that the process towards establishing monetary union comprised of common monetary policy, a single currency and one central bank is justifiable for individual members of the EAC at all.
LEARNING FROM GREECE
The first point of contention comes from the implementation status of the common market and the customs union. Any observer who is sufficiently separated from the exuberance would ask whether the sequence is correct. This is because the progress towards a monetary union and a single currency presumes a far higher degree of institutional development and integration than is the case in the EAC today.
Members of the EAC have been working at making the customs union a reality for nearly a decade, and are not yet there. In other words, they have lots of work to do in ensuring that the customs union and common market are real before going to the more complicated task of working out a single currency.
Second, the advisory documents that formed the basis for the design of EAC’s monetary union were based on the European Union (EU). Given the recent history of the effects that a currency union has had on countries that needed currency flexibility such as Greece, it’s prudent to ask what insurance individual member states retain.
Conversations at the national level should be informed by the reality that autonomy in exchange rates policy would not be available. Considering the tendency for governments in this region to assert sovereignty in economic policy, the decision to surrender a degree of autonomy will have both economic and political consequences.
For Kenya, this is a decision that ought not to conclude without broader discourse with informed public participation. To the extent that I can tell, this has not happened. Monetary union should not be concluded by stealth.
The stated objective of the protocol is “to maintain monetary and financial stability aimed at facilitating economic integration to attain sustainable growth and development.” While it is difficult to disagree with the long-winded objective, it does not follow that a monetary union is a superior policy choice for attaining stable and sustainable growth.
NO CLEAR LEADER
Important policy changes that could bring that stable and sustained growth include unilateral liberalization by Kenya. This would inspire the confidence of its partners that the logic of integration is not just to advance national interests or secure economic domination.
That does not require establishing complex institutions, and would do far more for growth and economic efficiency than a monetary union today. That this has not been done is clear evidence that the EAC spaceship is trying to move at warp speed when the ingredients are not in place.
An advantage of the region is that though its members may all be classified as poor countries, they are also diverse in terms of structure of the economy. Kenya may have a decent industrial base compared with its partners, but no partner in the EAC has a sufficiently diversified economy to act as the anchor economy.
No EAC country is a clear leader, with a dominant economy to act as the buffer in the event of a financial crisis such as that faced by the EU recently.
Further, in spite of the commitments to ensure a strict adherence to a target of inflation of eight per cent and a fiscal deficit of three per cent of Gross Domestic Product, no country is sufficiently dominant to enforce compliance with these ambitious targets.
While the advantages of the monetary union are overstated, its real risks are being downplayed.
Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi.
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FG resolves to boost domestic trade
The federal government has re-affirmed its commitment towards facilitating the growth and development of domestic trade across the country.
The Minister of Industry, Trade and Investment, Mr. Olusegun Aganga, gave the assurance during a Town Hall Meeting with Traders in the South-west geo-political region, in Lagos.
The meeting was attended by traders and representatives of market associations from Lagos, Ogun, Oyo, Osun, Ondo and Ekiti States, as well representatives of the Nigeria Customs Service, Immigration and the Police.
The minister explained that the meeting was necessitated by the Federal Government’s recognition of the importance of domestic trade in achieving its inclusive and sustainable economic growth and development in line with President Jonathan’s Transformation Agenda.
The minister said: “This is the first ever town hall meeting and also the first in the series that the Ministry of Industry, Trade and Investment will be organising as part of our deliberate strategy to develop and grow domestic trade across the country. As part of our domestic trade strategy, the federal government wants to bring policy formulation and implementation down to the grassroots and ensure that traders are carried along.
“Statistics have shown that domestic trade have a strategic role to play in achieving inclusive and sustainable growth and development in the country. After the rebasing of the country’s Gross Domestic Product, agriculture contributes about 22 per cent to the GDP; industrial sector contributes about 26 per cent, while services sector accounts for about 52 per cent. When you look at the services sector’s contribution, retail and wholesale trade is about one third of that 52 per cent.”
The minister added that the federal government would partner traders and other regional organisations to provide the conducive environment for the development of domestic trade.
He said: “Nigerians are very enterprising and hardworking people. All they need is the enabling environment. Our job as a government is to provide them with the conducive environment to do their businesses so that they can create jobs and drive inclusive and sustainable economic growth and development. In order to achieve this, we are working both with state governments and ECOWAS to tackle the bottlenecks inhibiting free movement of goods across the country and the sub-region.”
Speaking during the meeting, the National Coordinator, Traders’ Rights Protection Initiative, Mr. Christopher Okpala, commended the federal government for organising the interactive town hall meeting, adding that there was an urgent need for the government to come up with a legislation to protect local traders.
He said:”This meeting has given us a sense of belonging by involving us in government policies and implementation. However, there is the need to for the Ministry of Industry, Trade and Investment through the collaboration with other relevant agencies and traders, as well as the National Assembly to come up with legislation that would protect traders in their local markets and daily transactions anywhere in Nigeria.”
He added: “There is the need for the ministry and all relevant government parastatals and agencies with the active involvement of foreign missions to develop a template that will ensue that Nigerian traders are protected abroad. In addition to this, we want the government to whittle down the excesses of law enforcement agencies against the average trader”.