A Tripartite Consultative Workshop starts tomorrow in Arusha, ending on 17 July.

China’s trade policy review started yesterday at the WTO: the reports submitted by the WTO secretariat and from Beijing can be downloaded here. From the review: US says China’s trade policies are ‘too big for WTO to tackle’

African Trade Report 2018: Boosting intra-African trade – implications of the African Continental Free Trade Area Agreement (Afreximbank)

The report is organized in eight chapters. After this Introduction and Executive Summary, Chapter 2 covers the thematic research on “Boosting intra-African Trade: Implications of the African Continental Free Trade Area Agreement”. Chapter 3 reviews global and African economic and financial developments, while Chapter 4 discusses trade and the trading environment pertaining to both the global and African space. Chapter 5 reviews the dynamics of commodity markets. Chapter 6 discusses intra-African trade while Chapter 7 provides a comprehensive analysis of the potential implications of the AfCFTA for intra-African trade. The concluding chapter 8 reviews the prospects for global and African economic and trade developments in the near term. pdf Lengthy pertinent extracts (3.81 MB) :

2.2 Africa’s export structure and the AfCFTA. The export concentration index, estimated by the Herfindahl-Hirschmann Index, for each country in Africa for selected years shows considerable heterogeneity in the export concentration of individual countries (Table 2.1). Many countries have reduced their export concentration indices in recent years. Examples are Egypt (0.23 in 2005 to 0.15 in 2016), Lesotho (0.39 to 0.28) and South Africa (0.14 to 0.12). Yet, many countries, especially highly commodity and natural resource-dependent economies still had very high export concentrations in 2016. These include Botswana (0.88), Guinea-Bissau (0.88), Gabon (0.76), Angola (0.93) and Nigeria (0.73). These high export concentrations make these countries extremely vulnerable to adverse external economic shocks.

Examination of the similarity in the sectoral structure of exports across African countries, estimated by the Export Similarity Index (ESI), reveals the dynamics of the shares of each sector in the total exports of a given country and enables comparing them with those of partner countries. The index measures the similarity between exports of any two countries or country groups to a third country’s import market. At the aggregate level, the export structure of African countries is generally dissimilar, as evidenced by the relatively low ESI—below 12.5% percent across all the countries under review (Figure 2.1). All the same, export similarity gradually increased from 1995 (with an average similarity index of 11.3%) to 2016 (12.3%), although it declined in 2010 (11.5%).

There is a wide variation in the ESI at the country level, ranging from 1.8% for Sudan to 23.2% for South Africa (Table 2.2). The list of countries that dominate the ESI remains fairly stable over time, with South Africa, Kenya, Côte d’Ivoire, Tanzania and Cameroon in the top five positions much of the time. These countries appear to be driving intra-African exports. Countries that appear mostly in the lower ESI rankings include Sudan, Comoros, Equatorial Guinea, DRC, Algeria and, surprisingly, Nigeria. The relatively low average ESI values in Africa support the view that there is ample scope for expanding intra-African trade within the context of the AfCFTA framework. Generally, cross-country variations in export structure tend to be a manifestation of mutually beneficial exchange of products in line with country-specific comparative advantages.

2.3 Economic impact of the AfCFTA. Table 2.3 summarizes the economic impact for African countries under the four policy scenarios for the AfCFTA. Under Policy Scenario 1 (complete removal of all tariffs), total welfare gains amount to $3.58bn, GDP increases by 0.65% and per capita household utility by 0.41%. The volume of exports grows by 2.94%, imports increase by 3.13% and terms of trade improve by 0.39%. Under Scenario 2 (complete removal of tariffs on all agricultural trade), all these economic gains are considerably lower, an indication of the sensitivity of agricultural goods to tariffs in African trade. The economic gains under Policy Scenario 3 (complete tariff removal on all trade and a reduction in NTBs, or iceberg cost, based on a 10% positive improvement shock) consist of a welfare gain of $17.95bn, 3.15% growth in GDP, 1.94% increase in per capita household utility, export growth of 5.25% and import volume growth of 6.59%, in addition to a terms of trade improvement of 1.35%. That these gains are higher than in Policy Scenarios 1 and 2 can be attributed largely to the technological effect of reducing the cost of NTBs. The economic gains under Policy Scenario 4 (complete tariff removal on all trade and a lesser reduction in NTBs based on a 5% positive improvement shock) reflect similar trends as that of Scenario 3 but with smaller gains. The distribution of GDP and per capita household utility effects for the four policy scenarios are shown in Table 2.5.

6.1 Intra-African trade champions. The champions of intra-African trade remained largely the same in 2017 as in 2016, with South Africa, Namibia and Nigeria contributing over 35% of intra-African trade. This compares with ten other countries - Zambia, Côte d’Ivoire, Swaziland, Botswana, Zimbabwe, DRC, Mozambique and Kenya, Morocco and Ghana - which also account for 35% of intra-African trade (Figure 6.2). South Africa remains by far the leading intra-African trade nation and its trade with the rest of the continent rose 8.6% to $31.92bn, accounting for over 24.9% of intra-African trade. Oil continues to account for the largest share of South Africa’s trade account with Africa - despite the shutdown of some refineries for maintenance, which reduced crude oil imports in 2017 - with Nigeria and Angola being the top two suppliers (Figure 6.3). The second largest import item from the rest of Africa into South Africa was textiles - mainly from Swaziland, Mauritius, Madagascar and Lesotho. Prepared foodstuffs accounted for 6.6% percent of total imports, indicating a market opportunity for other food exporters in Africa. Zambia, Côte d’Ivoire and Swaziland all grew their share of intra-African trade, collectively accounting for almost 14% of intra-African trade in 2017, from around 13% in 2016.

Nigeria and the AfCFTA: Cautious Nigeria agrees to sign African continental free-trade agreement

2018 AGOA Forum: opening statements by USTR Robert Lighthizer

One-way tariff preferences can only do so much to drive trade and investment. When corporations decide where to invest and do business, much more goes into the equation. US companies value clear rules of the road and a sound business environment. With the renewal of AGOA until 2025, we have a unique opportunity to use the next several years to build on and go beyond this one program. To be clear, the United States is not abandoning AGOA for either the short term or the long term. But there are compelling reasons to pursue a comprehensive and more permanent trade and investment framework to govern trade between the United States and Africa. I hope this Forum and my discussions with many of you will help inform our approach. Our current thinking is based on three core objectives: (1) pursue a bilateral agreement with a willing partner; (2) ensure that this agreement is crafted so that it can serve as a model that can be rolled out to other willing partners in sub-Saharan Africa in the future; and (3) ensure that the model agreement will reinforce regional and continental integration in Africa. [Enterprise Florida plans trade mission to Africa]

AfDB’s Africa Energy Marketplace: update

Energy sector stakeholders from Côte d’Ivoire, Egypt, Ethiopia, Nigeria, and Zambia met (5-6 July Abidjan) for the inaugural meeting of the Africa Energy Marketplace. The scope of their discussions targeted up to 200 projects at various completion stages, with an estimated total investment value exceeding $50bn. The heart of Ethiopia’s action plan includes capital mobilization for capacity building and reforms in its Ministry of Water, Irrigation, and Electricity; developing off-grid energy solutions, and measures to mitigate currency risks. Ethiopia is also looking to ratify the New York Arbitration Convention to fulfill international lender’s bankability requirements. For Côte d’Ivoire, key recommendations proposed for the next two to three years include tax holidays and tariff rebates for solar equipment makers and importers. The country is also looking at establishing a phased program of environmental impact assessments and collaborating with development partners to strengthen the financial viability of the power sector. Nigeria will assess its gas-to-power value chain and develop robust franchising regulations for mini-grid systems in under-served areas as part of its nation-wide integrated multi-modal electricity generation and distribution system. Zambia plans to create an off-grid working group to improve stakeholder communications and coordination in the domestic off-grid market.

Related energy research reports:

1. Hogan Lovells report on Africa and renewables: wholesale change or short term surge?

2. KAPSARC report on identifying the roadblocks for energy access: a case study for Eastern Africa’s gas (pdf)

3. SAIIA research paper on Tanzania’s energy dilemmas

Tanzania receives $400m boost for SGR, natural gas projects (IPPMedia)

The Trade and Development Bank, formerly PTA Bank, will give Tanzania $400 million (900 billion/-) to help finance the ongoing standard gauge railway project and a liquefied natural gas project in Kilwa, Lindi Region.

Tax evasion in Africa and Latin America: the role of distortionary infrastructures and policies (World Bank)

This paper examines the impact of the quality of the business environment as well as the monitoring capacity of the tax agency on firms’ tax evasion and production decisions. First, the paper uses firm-level data for 30 African and Latin American countries to show that tax evasion and distortions stemming from the business environment are positively and significantly correlated, while sales not reported for tax purposes and institutional quality are negatively and significantly correlated. Second, the paper develops a general equilibrium model where heterogeneous firms make tax evasion decisions based on their assessment of the quality of their business environment as well as the monitoring capacity of the tax agency.