Building capacity to help Africa trade better

tralac’s Daily News Selection


tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: DanChurchAid

tralac’s Weekly e-newsletter is posted. Highlights include: Prof Gerard Erasmus asking if the court ruling on the Kenyan elections in Kenya is a precedent for inter-state disputes and an EOI request for a mid-term evaluation of Sweden’s support to the Trade Law Centre.

UNCTAD’s Trade and Development Report 2017

The Trade and Development Report 2017 (pdf) argues that now is the ideal time to crowd in private investment with the help of a concerted fiscal push – a global new deal – to get the growth engines revving again, and at the same time help rebalance economies and societies that, after three decades of hyper globalization, are seriously out of kilter. However, in today’s world of mobile finance and liberalized economic policies, no country can do this on its own without risking capital flight, a currency collapse and the threat of a deflationary spiral. What is needed, therefore, is a globally coordinated strategy of expansion led by increased public expenditures, with all countries being offered the opportunity of benefiting from a simultaneous boost to their domestic and external markets. Table of contents (all pdf):

Chapter I: Current trends and challenges in the world economy; Chapter II: Inclusive growth: issues at stake; Chapter III: Robots, industrialization and inclusive growth; Chapter IV: The gender dynamics of inclusion and exclusion; Chapter V: Inequality and financial instability; Chapter VI: Market power and inequality; Chapter VI: Annex; Chapter VII: Towards a global new deal

CFTA set to kick-off next year (Daily News)

Head of Trade Division in the AUC, Mr Nadir Merah, said during the BIAT workshop that the initiative focuses at improving Africa’s competitiveness in the global economy. “We need to fast track free trade areas as soon as possible. Towards end of January next year, we will present to the heads of the states the final paper on the initiative,” he said adding that the workshop seeks to discuss ways to improve communications and information systems on business and finance. Tanzania is effectively represented in the technical group which is discussing intensively the areas of harmonisation for increasing flow of goods and services in the continent. “We want to connect Africa businesses by collecting and analysing data on trade and finance before disseminating them to the business people to boost intra African trade,” he noted. Statistics show that Tanzania’s trade with other African countries remains very low at 3%, thus failing to harness the huge potentials of increasing volume of business in the continent.

Uganda: High Level Economic Growth Forum (UNECA)

According to Mr Andrew Mold, acting Director of UN Economic Commission for Africa in Eastern Africa, one of the main reasons for Uganda’s non-inclusive growth is that its economy has been driven by the service sector at the expense of industry and manufacturing sectors. “Around 59% of Uganda’s workforce operates in the informal economy and job creation in the formal sector has not kept up with a rapidly expanding workforce.” Mr Mold also told the Kampala Forum that ECA has been promoting the idea that Africa needs to achieve a higher level of industrialization. “The lack of manufacturing capacities in Eastern Africa causes fundamental weaknesses in the economic performance of the region” he argued. ECA’s recent study An ABC of industrialisation in Uganda: achievements, bottlenecks and challenges argues that disappointingly the manufacturing sector has played no role in accelerating structural transformation of the economy, due to its declining share in total employment, from 6.5% in 2002 to 5.7% in 2013. Extracts from Chapter 4: Changing geographic trading patterns and their implications for industrial development (pdf):

4.1 Introduction: a burgeoning regional market, but also growing competition. On the other hand, these trends also imply a much more intensified competitive environment for Ugandan manufactures. For the EAC as a block, Chinese and Indian imports now account for 44% of all imports, subjecting the region to significant competitive pressures, particularly in labour-intensive manufactured goods. Econometric evidence is increasingly lending support to this hypothesis. Giovannet and Sanfilippo (2009) found econometric support for the proposition that, with the intensification of economic relations, China has not only started flooding African markets with its low cost manufactures - often at the expense of local producers - but has also begun to crowd-out cheap African manufactures in the region’s traditional foreign markets (principally in Europe). The fact that the analysis of Giovannet and Sanfilippo was carried out on data that is now ten years old suggests the impact is now probably far more significant. A more recent study by Jeanneney and Hua (2015) also finds that manufactured goods imports from both China and other countries had an adverse effect on African industrialisation. This dimension to the challenges of industrialisation in the region clearly merits greater attention.

4.2 The EAC-EU Economic Partnership Agreement: a facilitator or impediment to industrialisation? Our simulations suggest that Ugandan imports from the EU would increase significantly by 11%. However, this would be the result of a diversion of imports from elsewhere – mainly from Asia – since total imports actually register a small decline (-0.3%). In contrast, exports from Uganda to the EU only increase marginally (0.2%). There is also a slight deterioration of the terms of trade for all countries in the EAC. With regard to GDP, the simulation suggests that the EPA reduces GDP by 0.2 to 0.5% across the four EAC countries considered in the exercise, with Uganda losing -0.2% (Table 4). Absolute changes are shown in Table 5. It is worth noting that imports from all other regions decline - the trade diversion effect. Perhaps more importantly, intra-EAC imports decline by $42m – mainly in manufacturing – while tariff revenues accruing from imports would decline by $20m in Uganda. These simulation results contrast with the results presented by the EU in a study published in February 2017:

4.3 AGOA an opportunity missed? Compared to the other 3 major EAC countries, Uganda has the highest share of used clothing imports. About 58% of clothing imports into Uganda, valued at around $23m, are classified as used clothing (COMTRADE, 2016). The rest consists of cheap clothing, mostly from China. In 2015, $1.1m of used clothing from the US entered the Ugandan clothing market (USITC, 2016). Uganda hopes that the used clothing ban would provide local garment manufactures an opportunity to increase their market share and continue to develop their product on capacities. In 2013, in anticipation of a possible revision of AGOA, UNECA prepared a report to measure the possible impact on AGOA eligible countries if AGOA was discontinued:

Phyllis Wakiaga: Why we need to strengthen trade ties in the EAC (Capital FM)

A study released by the Kenya Association of Manufacturers last month stated that Africa continues to be Kenya’s leading export destination accounting for 40.6% of our exports, with the EAC community taking up 21.1% of total exports in 2016. This means that our exports to the EAC accounted for slightly more than half of the total exports in Africa. However, our total export earnings last year decreased by 4.0% and this could be explained by a decrease to exports in Uganda and Rwanda by 9.3 and 2.5% respectively. In the past five years, we have witnessed the growth of our EAC neighbours through their efforts to industrialize and grow their economies. Kenya which has always been a trailblazer in this regard in the region, has now, at best stagnated and at worst, as I have mentioned above, lost its footing in some areas. This is a sign that we need to act fast if we want to remain a beacon and a notable investment hub in Africa. There is an urgent need to start channelling our focus towards diversifying and growing our exports in order to secure our markets. [The author is CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya]

Dar, Kampala oil, gas firms join forces (Daily News)

The Association of Tanzania Oil and Gas Service Providers and their Ugandan counterparts, Association of Uganda Oil and Gas Service Providers, have signed an agreement that will see the two working together in the Hoima-Tanga pipeline project. The agreement will see Tanzanian and Ugandan service providers in the oil and gas industry do joint biddings for tenders in different areas of the pipeline project, including transportation of materials. [Note: the 3rd Uganda International Oil & Gas Summit will take place on 27-28 September]

Julius Musyoki: Integrated customs system game-changer in clearance of goods (Business Daily)

Customs agencies, globally, are facing the emerging dilemma of balancing demands to improve trade facilitation while at the same time meeting increasing needs for compliance. They are under pressure to deliver customer-focused services, collect accurate revenues and prevent illegal trade within the constraints of limited resources. This calls for modernisation of customs administration to deliver agility, accuracy, security, and transparency using systems that are empowering rather than restrictive. It is for this reason that the Kenya Revenue Authority (KRA) is implementing the Integrated Customs Management System (iCMS). This system consolidates all the existing customs systems into one modern, robust and more efficient system built on the latest technology with capability of seamlessly interfacing with other internal and external systems as need arises. [The author is Commissioner for Customs and Border Control at Kenya Revenue Authority] [Note: The 12th PICARD Conference will be hosted by the Tunisian Customs Administration, 26-28 September]

Mozambique and Malawi sign landmark transport corridor agreement today (Club of Mozambique)

The Mozambican and Malawian governments will sign an agreement in Maputo today to expand the Nacala Development Corridor, a 900-kilometre railroad that crosses both countries and runs to the Indian Ocean. The agreement will enable the corridor to evolve, “as well as fostering economic growth through the promotion and coordination of economically viable businesses in the transportation, agriculture, commerce, mining and tourism sectors”, the Mozambican government has announced.

Leveraging the services sector for inclusive value chains in developing countries (ICTSD)

In this paper, Judith Fessehaie presents a conceptual framework of the contribution of services to value chains, examines the involvement of services within value chains at the macro, meso, and micro levels, and discusses the sustainable development implications of services in value chains. The author further provides readers with a number of key conclusions and general policy implications.

Export quality in advanced and developing economies: evidence from a new data set (World Bank)

This paper develops new estimates of export quality, based on bilateral data, which are far more extensive than previous efforts. The data cover 166 countries and hundreds of products over 1962-2014. The analysis finds that quality upgrading is particularly rapid during the early stages of development. There is significant cross-country heterogeneity in the growth rate of quality. Within any given product line, quality converges over time to the world frontier. Institutional quality, liberal trade policies, foreign direct investment inflows, and human capital all promote quality upgrading, although their impacts vary across sectors. The results suggest that reducing barriers to entry into new sectors can allow economies to benefit from rapid quality convergence over time.

Financial globalization: a glass half empty? (World Bank)

Since the 1970s, the world has embarked on a new financial globalization era. Although the literature predicted large gains from financial globalization (such as additional funding, broad diversification, and deeper financial systems), the positive effects have been more limited. In developed and developing countries, financial globalization has manifested in increasing gross capital flows (inflows and outflows) rather than larger net flows. Capital markets are segmented and only a few large firms access international markets. International institutional investors do not seem to have played a stabilizing role, helping to exacerbate and transmit crises across countries. Although financial globalization has brought several beneficial changes, its net effects and spillovers to the overall economies participating in it have yet to be understood.

South Africa: Seifsa calls for stakeholder collaboration to reverse contraction in metals sector (Business Report)

The Steel and Engineering Industries Federation of Southern Africa said on Thursday that the contraction in the metals and engineering sector was a concern not only for the manufacturing industry, but for the whole of South African economy. Seifsa chief executive Kaizer Nyatsumba called on government, business and labour to collaborate in efforts address the challenges currently facing the manufacturing sector in general, and the metals and engineering sector in particular. Nyatsumba said challenges facing the sector include unfair competition from highly-subsidised countries, weak.

South Africa’s bulk exports decline 7.2% in August (Business Day)

SA’s bulk export volumes fell 7.2% year on year in August to 11.7-million tonnes, after surging by 34.5% in July to 15.6-million tonnes, according to Transnet National Ports Authority. This brought the increase for the first eight months of 2017 to 6.8% year on year.

Today’s Quick Links:

Tunisia’s trade deficit widens 22%, Jan-Aug

The path to longer and healthier lives for all Africans by 2030: the Lancet Commission on the future of health in sub-Saharan Africa

UN Day for South-South Cooperation: Download the report of the Secretary-General (pdf)

Brazil eyes Namibian port as trade gateway to southern Africa

Noah Smith: China isn’t the only reason to question free trade


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