tralac’s Daily News Selection
Posted: The Little Green Data Book 2017 (based on World Development Indicators 2017 and its online database)
Underway, in New York: ECOSOC High-Level Political Forum review of 2030 Agenda for Sustainable Development
Launching today: Global Value Chain Development Report 2017 (WTO). Profiled chapter: From domestic to regional to global – Factory Africa and Factory Latin America?
Worryingly, the evidence suggests that new free trade agreements that overlap with existing arrangements may not improve regional trade, especially if they are not broad in their liberalization and facilitation policies. It is perhaps no coincidence that in Sub-Saharan Africa and Latin America, with significant shares of small and medium-size firms and relatively low regional integration, overlapping agreements create a spaghetti bowl – adding barriers that many firms are ill equipped to deal with. In this respect, the more comprehensive multilateral agreements such as the Common Market for Eastern and Southern Africa-East African Community-Southern African Development Community Tripartite Free Trade Area, with 26 African countries and 58% of the continent’s GDP, bode well. Similar arguments could be made for Asia, but the starting point here differs. Integration has been facilitated by significant FDI flows, drawn in part by lower unit labor costs, and significant poles of higher income, with multinationals better equipped to handle the multiple layers of free trade agreements.
Improving regional integration may also help address competitiveness gaps that exacerbate those caused by geography (and indeed costs related to poor infrastructure). This is especially important since entry to GVCs through cheap labor alone does not seem to be enough. What appears to matter is the combination of labor and productivity, in other words unit labor costs. Despite, for example, the recent rise in China’s labor costs, its unit labor costs appear to have remained competitive with those of Sub-Saharan Africa and Latin America. It is important, therefore, to make inroads in improving productivity, particularly through FDI, bringing much needed capital, technology, and know-how. But FDI has to be coupled with policies that can extract maximum spillovers through robust domestic supply chains, including a more robust entrepreneurial environment. [The authors: Nadim Ahmad, Annalisa Primi][ Download: Full report]
Table of contents:
Chapter 6: Services trade and global value chains
Related: A David Dollar commentary Global value chains shed new light on trade
Shanta Devarajan: Why is regional integration so elusive? (Brookings)
There is no shortage of books and papers on the benefits of regional integration between countries. Yet, in practice, intra-regional integration has not received great traction, especially in South Asia, sub-Saharan Africa, and the Middle East and North Africa. (These are also the three regions of which I have been the World Bank’s chief economist. At different times, and using different indicators, each has claimed to be the “least integrated region in the world.”) Why then has even infrastructure integration been so elusive? I would suggest three reasons [The 800-pound gorilla problem, Geopolitics, Domestic politics], each of which can be turned into an opportunity for greater integration.
The main focus of the two public dialogues – South Africa’s corporate expansion in Southern Africa, and, Powerful trade unions: South African drivers of regional economic growth? – interrogated the political economy of Southern Africa and discussed the role of South Africa’s regional corporate expansion, as well as the role of trade unions in Southern Africa; with a view to promoting socio-economic benefits through industrialisation, effecting regional trade, and boosting infrastructural development. In both dialogues, the role of the state in becoming a modern industrial democracy was considered critical for promoting intra-regional trade, and for building regional industrialisation that can improve labour in Southern Africa. The following ten key Policy Recommendations emerged from the two public dialogues:
Kenya Trade Week: “Transforming Kenya into a competitive export-led and efficient economy”
(i) President Uhuru Kenyatta’s opening speech (pdf, GoK). Further, we have witnessed a double digit growth in exports by 11% between 2013 and 2016 as a result of the duty free market access that the Government has secured through trade agreements as well as preferential trade arrangements with over 50 countries having a combined population of over 1.4billion people in the following regional blocks: EAC, COMESA, EU and the USA. These markets hold a great promise for Kenya’s exports going by revealed trade potential in the products that Kenya is already exporting or has potential to export to these markets. A traditional market like the EU, going by recent statistics of agro-processed products that Kenya has been trading with this bloc, has a potential of over Euro44 billion. Similar story holds in the regional and the USA market where Kenya has opportunity to increase her share of these markets imports from the rest of the world. The Government is fully engaged, in a bid to broaden Kenya’s market horizon in Africa for exports and imports on preferential tariffs, in the Tripartite Free Trade Area (TFTA) that collapses EAC, COMESA and SADC market into one big market of 26 countries; and in the Continental Free Trade Area, which embraces free trade across the entire continent of Africa.
(ii) Kenya launches national trade policy to boost forex earnings (Xinhua/KBC). “The new trade policy articulates provisions that are geared toward promoting efficiency in the growth of domestic trade through transformational measures that address the constraints impeding against the development of the wholesale, retail and informal sectors,” said National Treasury Cabinet Secretary Henry Rotich. Speaking during the opening of the Kenya Trade Week, Rotich said currently most of foreign exchange earnings are from foreign direct investments. ”The national trade policy will help to increase volume of exports so that we increase foreign exchange earnings,” he said. Besides the policy, the Kenyan government also launched the Buy Kenya Build Kenya Strategy; Guidelines for Kenya’s Trade and Investment Missions; the National Export Development and Promotion Strategy for Kenya 2017-2022; the National E-Trade portal; The National Trade Facilitation Committee (NTFC); and The State Department for Trade Website.
(iii) New trade policy puts dominant supermarkets under microscope (Daily Nation). Dominant supermarket chains will face closer State scrutiny to protect suppliers from exploitation, Trade Principal Secretary Chris Kiptoo has said. The National Trade Policy launched yesterday aims at introducing regulations to police the retail sector, including giving guidelines on access to trade information and unfair competition. Mr Kiptoo said during the policy launch yesterday that dominance has created an unfair playing filed for smaller suppliers and worsened the debt burden for major retailers such as Nakumatt and Uchumi whose financial woes now spread wide as many traders are affected. The policy document also aims at supporting smaller retailers who have suffered under the dominance by larger players who give price advantages and undercut them especially in small towns.
(iv) Kenya to enact anti-dumping law to protect local industries (New Times). Cabinet Secretary in the Ministry of Industry, Trade and Cooperatives Adan Mohammed told a media briefing in Nairobi that parliament has already endorsed the Kenya Trade Remedies bill and should receive presidential assent before the end of the year. ”The law will protect the domestic market and industries from unfair trade practices and threats arising from dumping and subsidies from other countries,” Mohamed said during the launch of the National Trade Week. Once the law is operational, the government will impose - stiff penalties on traders who import subsidized goods that provide unfair competition to locally made goods.
(v) Kenya’s clout wanes as China and India fight for control of EAC trade (The Standard). China and India - not Uganda, Tanzania, Rwanda and Burundi - are responsible for Kenya’s trade decline in the region. China’s entry into Kenya has been even tectonic, with the Asian country taking up 34%of Kenya’s import bill while India accounting for 18%, bring their total to 52%. This compared to 2000 when imports from both China and India together took up only 8.3%. If anything, Kenya is far ahead of her EAC peers in terms of industrialisation, and it will be long before manufacturers in these countries give their Kenyan counterparts a run for their money, according to economist, Dr Scholastica Odhiambo.
Anabel Gonzalez: Five actions that matter to the future of Aid for Trade (World Bank)
We know that Aid for Trade plays a vital role in ensuring that the gains from more and cheaper cross-border trade reach everyone, everywhere. But, as we look back over the 10 years since the first global review of Aid for Trade, it is important to take stock of the lessons we’ve learned and to identify some priorities for the future. Here are the five key areas of focus as I see them:
Today’s Quick Links:
Kenya - Arab Development Partners roundtable: statement by Mr Henry Rotich
SADC Parliamentary Forum: address by President Faure
India’s pharma trade with Africa: Dr Reddy’s, Lupin, others mull expanding Africa operations
OECD-FAO Agricultural Outlook 2017-2026: slower growth in demand will keep world food prices low
Women Entrepreneurs Finance Initiative: launch update