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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Abbie Trayler-Smith | Oxfam International

15 Jun 2018

AfCFTA Ratification Barometer: Number 4 - Niger; Number 5 - Mali; Number 6 - Swaziland

AfCFTA agreement too narrow and hasty: Yao Graham (Graphic)

The co-ordinator of the Third World Network (TWN-Africa), Dr Yao Graham, has criticised the Continental Free Trade Agreement for Africa, in its current form, describing it as “hasty, too narrowly focused to trade liberalisation without recourse to the other pillars of trade development”. He said the agreement was also “too exclusive” and cautioned that an African trade integration should avoid the mistakes of how trade liberalisation had been done in other contexts. Dr Graham pointed out that any trade integration should be consciously developmental and aligned with other steps which would strengthen the production capacity of the continent.

The other trade war: The US and Rwanda on second-hand clothing (pdf, Afreximbank Research)

Despite being a non-reciprocal US trade assistance programme, interest groups in the United States (such as SMART) have seen AGOA as an opportunity to seek concessions or reciprocity. In this context the 2015 AGOA Act potentially creates a system of structural attrition between the US and AGOA beneficiary countries by leveraging non-reciprocal preferential access into the US to gain increased access into African markets and potentially undermine industrialization ambitions. In terms of the new legislation, the USTR is geared towards supporting US lobbyists and other groups that seek to advance their economic interests in such markets if these US-based lobbies are aggrieved by some economic policies (trade or investment measures, such as IP or local content, environment, labour) adopted by an AGOA beneficiary country or a trade agreement that the beneficiary country has signed with a third country. Such an aggrieved party can petition the President to act against such a country by threatening to withdraw or suspend AGOA benefits or remove the country altogether from AGOA. Thus the new AGOA Act threatens to create increased tension in bilateral relations rather than deepening cooperation, and with the US increasingly recognizing the potential of the African consumer market for US exports it could have serious implications for industrial policy autonomy and diversification efforts in African countries.

This challenge faced by the region on the industrial development path is exacerbated by the inability of African countries to strengthen their bargaining power in international trade negotiations both at the regional and continental level, especially as the region contemplates the transition towards the Continental Free Trade Area. Although the decision to hike import duties on worn clothes and eventually phase out imports of such goods was a collective move by member countries of the EAC, leading countries backed down in the face of threats to suspend the benefits extended under AGOA, exposing the large and growing regional market to continued dumping and in the process undermining the burgeoning domestic textile and apparel industry.

EAC states budget 2018/2019 highlights: a quick overview

(i) pdf Kenya Budget Statement 2018-2019 (5.77 MB) . Customs measures: During the EAC Pre-Budget Consultations meetings, we agreed on Customs duties aimed at promoting industrialization, encouraging local investments, and creating incentives in the agricultural and manufacturing sectors. The measures are also intended to make our products more competitive while at the same time protecting local industries from unfair competition. Details of the Customs measures will be communicated through the EAC Gazette and implemented from 1 July this year. I will highlight a few of them. Our iron and steel industry is facing stiff competition from imported cheap and subsidized iron and steel products. In order to protect the local iron and steel industries, I have increased the rate of import duty from 25% to 35% in a wide range of steel and iron products which are available in the region.

Kenya has sufficient capacity to produce some paper and paper products which require protection. To protect manufacturers of these products, I have increased the rate of import duty from 25% to 35% on some paper and paper board produced in the region. Our textile and footwear sector are closing down due to increased unfair competition from cheap imported textiles and footwear as well as second hand clothing and footwear. In order to encourage local production and create jobs for our youth in the sector, I have introduced a specific rate of import duty of USD 5 per unit or 35% whichever is higher. This should guard against undervaluation.

To protect the timber and furniture industry from proliferation of cheap timber products and to enhance the local production, I have introduced a specific rate of duty of USD 110/MT on particle board, USD 120/MT on medium density fiber board, USD 230/M3 on plywood and USD 200/MT on block boards, or an advalorem duty of 35% whichever is higher. Our local manufacturers have adequate capacity to manufacture vegetable oils to meet regional demand. To protect our local manufacturers from imported cheap vegetable oils, I have introduced a specific rate of USD 500/MT of 35% whichever is higher.

(ii) pdf Uganda Budget Speech 2018-2019 (910 KB) . International trade: Export earnings rose by 9.6% to $3.93bn in the period July 2017 to March 2018 from $3.59bn a year earlier. This increase was mainly on account of a rise in the export volumes of beans, coffee, tea and maize. Over the same period, exports to the rest of the EAC grew from $792.3m to $943.5m; while exports to Europe grew from $415.8m to $466.1m. On the other hand imports increased by 16.4% valued at $5.7bn in the period July 2017 to March 2018 from $4.9bn over the same period the previous year. This was attributed to the increase in the prices of oil imports and the increased inflow of capital goods to support domestic investment, particularly in oil and gas, electricity and roads.

(iii) pdf Tanzania Budget Speech 2018-2019 (1.41 MB) . The Government debt has been increasing. Nevertheless, this debt is still sustainable and its growth is aligned with economic growth. The Debt Sustainability Analysis which was conducted in November, 2017 revealed that the debt is sustainable in medium and long term. The ratio of present value of public debt to GDP was 34.4% against the threshold of 56%; the present value of external public debt to export was 81.8% against the threshold of 150%; the present value of external public debt to domestic revenue was 117.1% compared to the threshold of 250%; the debt services to export was 9.3% compared to the threshold of 20%; and external debt service to domestic revenue was 13.3% compared to threshold of 20%. Let me again emphasize that it is not a sin if the country borrows prudently. The most important issue is to ensure that loans are utilized to increase productive capacity and, in turn, that the economy be able to repay loans in accordance with the ability of the economy to sustain the debt burden.

(iv) pdf Mauritius Budget Speech 2018-2019 (951 KB) . The headway we are making on our Africa Strategy will enable new cross-border investment opportunities for our entrepreneurs. Such realisations take time. But our ambition is becoming reality. It is now crucial that we build momentum into the process. (i) I am therefore introducing a 5-year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund for the development of infrastructure in the Special Economic Zones. The tax holiday will cover investments in SEZ infrastructure development and will benefit two eligible categories of firms: project developers and project financing institutions; (ii) We are working with EU on the setting up of a loan guarantee facility to support cross border investment within our Africa Strategy; and (iii) SBM and Mauritius Africa Fund have set up an Africa Infrastructure and Industrialisation Fund to assist Mauritian investors to execute projects in the SEZs on the African continent. [Related budget documents: pdf Supplement to the Budget 2018-2019 (1.20 MB) ; pdf Three Year Strategic Plan 2018-2021 (3.87 MB) ]

Downloads from this week’s Southern Africa Stakeholder Forum: Private sector and regional integration – opportunities for investment and growth


Global Forum on Inclusive Trade for Least Developed Countries highlights ‘inclusive trade’ for world’s poorest countries

Speaking at the opening plenary of the 13-14 June event, UNCTAD Secretary-General Mukhisa Kituyi said that LDCs faced falling behind the rest of the world. “We have seen, during the last eight years alone, LDCs’ share of global trade decline from 1% to 0.8%.” But, he said, “it has been demonstrated beyond any doubt that, properly used, trade can be a great enabler for development.” In looking for new routes to inclusive trade, LDCs must prepare to exploit e-commerce and the digital economy, Dr. Kituyi said. “UNCTAD is helping least developed countries fashion their laws and regulations so that they can get on the fast-moving train of electronic commerce.”

The Secretary-General also said that it would be a mistake to leave out the contribution of women in any inclusive analysis of how to boost trade between LDCs. “Most regional traders are women, but most regional integration efforts in least developed countries are structured by men for urban men,” Dr. Kituyi said. “If men are moving containers across borders it’s called regional free trade, if a woman is moving 10 kilos of grain, she’s called a smuggler! So identifying the vulnerabilities and ambiguities in practice and roles is an important area for unlocking potential of women traders, who are going to be major players in this.” [Trade among Least Developed Countries set to be boosted following historic WTO collaboration (Commonwealth Secretariat)]

Moving for prosperity: global migration and labor markets (World Bank)

Helping the losers by taxing the winners (extract): Once the issue becomes adjustment assistance to those who are affected by immigration, we are immediately confronted with the question of financing. The natural answer is that the beneficiaries of immigration should, at least partially, be responsible for the cost. Currently, legal immigration is practically regulated using quotas, that is, restrictions on the number of immigrants of a certain education/occupation/sector category allowed to enter and work in a country. The imposition of quotas by the destination country government causes, as in international trade, several specific problems.

First, bureaucrats, instead of employers or markets, make the assessment of how many immigrants should be allowed to enter the labor market. Generally, little evidence exists about what type of immigration - by skill, occupation, sector, or experience - most benefits a destination country, especially in the long run. And the needs of the labor market change over time. Second, as is well documented in the literature, quota-based systems are subject to rent-seeking and corruption as firms try to sway government officials to issue quota permits to themselves or to their industries. Finally, and this speaks to the issue of finance, quotas do not generate revenue for the government. Instead, they benefit only those firms (that is, the quota permit holders) lucky enough to hire an immigrant by, for example, obtaining an employment visa, or the intermediary firm who does the recruitment. A possible solution, and our next policy recommendation, is that governments should start to replace quota regimes with tax regimes to regulate immigration flows. This might take the form of an additional income tax, a visa fee, or even a visa auction system as proposed by many prominent economists going back to Gary Becker. [Overview, pdf]

OECD: 2018 report on the DAC untying recommendation (pdf)

India and China were the non-DAC countries with the highest successful bids as shown in Table 9 Most represented countries in contract awards, 2008-2016). They also account for 40% of total contract value awarded to developing countries (including LDCs and HIPCs) between 2008 and 2016. Yearly fluctuations aside, they also seem to win an increasing share of DAC Members aid projects.

Today’s Quick Links:

Chinese delegation in SA in response to Cyril Ramaphosa’s call for $100bn investment

African governments are relaxing visa requirements for Chinese nationals: update

On topics pertinent to firms in Sub-Saharan Africa: downloads from the fifth Annual Bank Conference on Africa, finishing today

Comoros Poverty Assessment: Inequalities persist despite declining poverty levels

Ghana engages South African Airways to commence a new flight to London

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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to recipients across Africa and internationally, serving in the AU, RECs, national government trade departments and research and development agencies.

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