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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: Joseph Maynard

14 Dec 2018

Ahead of Monday’s IMF conference, The future of work in sub-Saharan Africa, in Accra, Ghana: a podcast with Axel Schimmelpfennig

AfCFTA updates from this past week’s AMOT ministerial:

  1. African trade ministers issue ‘Cairo Package’. Egypt’s Minister of Trade and Industry Amr Nassar said that the meetings of the 14th Negotiations Forum for the AfCFTA, the 7th Senior Officials’ Meeting, and the meeting of African Trade Ministers all witnessed a positive atmosphere. Nassar clarified that the meetings resulted in a consensus on a large number of outstanding topics, especially regarding mechanisms of trade liberalization in the African continent and opening African markets to the exports of member states. The results of the meetings were all included in an integration package under the name of “Cairo Package”. Nassar referred that these were the first African negotiations on the liberalization of trade in services, where liberalization is set to be implemented on five priority sectors, including tourism, transport, telecommunications, financial services and business services. Nassar pointed out that the negotiations on the liberalization of trade in services are very important for Egyptian service sectors, which are more advanced than those in the countries of the continent, especially the banking, telecommunications and information technology sectors. Nassar said that a joint ministerial declaration was adopted, urging African countries to prepare a common vision to activate the role of the WTO in supporting African countries to ensure that African countries affirm their entitlement to integration into the international trading system. [Related: Egypt’s plan for Africa]

  2. Francis Mangeni: Fast-tracking implementation of the African Free Trade Area. It has been agreed that 7% of product lines will be sensitive products, with much longer transition periods, and 3% will be totally excluded from the AfCFTA. These products should not exceed 10% of the values of imported products. The very good news though is that the 90% of product lines will be subject to straightforward linear reductions over the transition periods, namely, 5 years for developing countries, 10 to 13 years for least developed countries and possibly 15 years for a small group other countries. An immediate step is to produce the tariff reduction schedules according to these transition periods. The reductions can then start in 2019 when the Continental FTA Agreement enters force. In conclusion then, remarkable progress has been made towards ratification of the African Free Trade Area, which should enter into force next year 2019. As the priority shifts towards fast tracking its implementation, capacity building including targeted practical training of users in the public and private sectors, and building on existing regional free trade areas will assist the process. [Dr Mangeni is Director of Trade and Customs at the COMESA Secretariat] [Related: WTO lists benefits of AfCFTA for Nigeria, others; Paul Kagame: Regional integration is about give and take, not just taking]

  3. @mihretum (Chief Trade Negotiator, Office of the Prime Minister, Ethiopia). “The progress is real and the vision of an integrated Africa is close to becoming a reality. AfCFTA can be as weak or strong as its members wants it to be. Ethiopia will play a progressive and constructive role befitting its unrivaled history of championing African causes.”

Future of Africa e-commerce looks bright as Nairobi event ends (UNCTAD)

Africa’s next steps on the path to engaging in and benefitting from e-commerce were outlined on 14 December by UNCTAD in its Nairobi Manifesto on the Digital Economy and Inclusive Development in Africa, issued at the conclusion of the first Africa eCommerce Week in Nairobi, Kenya. “The digital economy, including e-commerce, is proliferating in Africa, creating new opportunities for entrepreneurs and businesses to expand their market access and join value chains,” the manifesto states. “Jobs are being created and new business models are emerging.” [Download pdf Nairobi Manifesto on the Digital Economy and Inclusive Development in Africa (340 KB) ]

Africa’s rising debt (GEG Africa)

This paper draws on comparative debt management strategies across the region, highlighting both challenges and best practices, specifically Nigeria and Morocco. Fiscal authorities in both countries and beyond employ key strategies, such as issuing bonds on the longer end of the spectrum in, to finance long-term projects that have the capacity to generate adequate revenue. In addition, borrowing is skewed towards external debt and a variety of debt instruments are being issued to mitigate the crowding out of the private sector and capturing a wider set of creditors. In addition, other non-conventional methods are being deployed to reduce the size of debt. Several countries are increasingly mobilising domestic resources through voluntary tax compliance schemes and efforts to formalise their economies, while improving the efficiency of public expenditure. However, challenges such as the quality of cost–risk analysis, viable and independent debt management offices and data inefficiencies still exist. [The authors: Adedeji Adeniran, Mma Amara Ekeruche, Olalekan Samuel, Bodunrin, Abdelaaziz Ait Ali, Badr Mandri, Ghazi Tayeb]

The Trump Administration’s New Africa Strategy:

  1. Remarks by National Security Advisor Ambassador John Bolton. Under our new Africa strategy, we will target US funding toward key countries and particular strategic objectives. All US aid on the continent will advance US interests, and help African nations move toward self-reliance. Our first priority, enhancing US economic ties with the region, is not only essential to improving opportunities for American workers and businesses; it is also vital to safeguarding the economic independence of African states and protecting US national security interests. Great power competitors, namely China and Russia, are rapidly expanding their financial and political influence across Africa. They are deliberately and aggressively targeting their investments in the region to gain a competitive advantage over the United States.

    Here are some of the specific, bold actions we will take under our new strategy to address the three priority areas I have just highlighted. To expand our economic relationships in the region, we are developing a new initiative called “Prosper Africa,” which will support US investment across the continent, grow Africa’s middle class, and improve the overall business climate in the region. In addition, we will encourage African leaders to choose high-quality, transparent, inclusive, and sustainable foreign investment projects, including those from the United States. We will leverage our expanded and modernized development tools to support access to financing and provide strong alternatives to external state-directed initiatives.

    In the coming years and months, we also intend to pursue modern, comprehensive trade agreements on the continent that ensure fair and reciprocal exchange between the United States and the nations of Africa. We will begin these negotiations on a bilateral basis, and focus on creating mutually beneficial partnerships. Our new economic initiatives in Africa will help support American jobs and expand market access for US exports, while promoting sustainable growth in African countries. We will focus our economic efforts on African governments that act with us as strategic partners, and, which are striving toward improved governance and transparent business practices.

  2. A response by @CohenOnAfrica. “Most important point in John Bolton’s statement on US-Africa policy: US wants equal trade benefits. This marks the beginning of the end of AGOA in its current form, which gives Africa the right to export duty-free to the US while maintaining tariff barriers against US exports.”


East African bloc agrees to make trade cheaper, faster and simpler (UNCTAD)

Burundi, Kenya, Rwanda, the United Republic of Tanzania, and Uganda agreed on 13 December to make trade between them and with other countries cheaper, faster and more straightforward in a significant boost for economic integration in East Africa and continental trade facilitation. Meeting in Nairobi, representatives of the nations – who are members of the EAC customs union and common market – said they would implement trade facilitation reforms including reducing “non-tariff barriers” such as burdensome and incompatible product regulations. UNCTAD Secretary-General Mukhisa Kituyi – a Kenyan former trade minister – moderated the ministerial meeting, which took place in parallel with the first UNCTAD Africa eCommerce Week taking place in Nairobi from 10-14 December. Meanwhile, UNCTAD and TMEA also renewed their cooperation agreement for 2019-2021. They decided to continue to work on trade facilitation, trade portals, enquiry points, trade and gender issues, and to explore working in other fields such as transport.

Regional value chains in North Africa: a new ECA analysis

The report studies opportunities and challenges (pdf) related to the creation of regional value chains in 10 sectors selected in accordance with their importance for the sub-region’s economies and their potential for development. These sectors include: aeronautics, the car industry, textiles and clothing, phosphates, oil and natural gas, renewable energies, fruits, vegetables and derived products, essential oils and derived products, fisheries and finally cereals and sugar. “North Africa is currently among the least integrated sub-regions on the continent. This situation does not reflect how close North African countries are on the geographic, cultural and linguistic levels,” said Lilia Hachem Naas, Director of the ECA Office for North Africa.

Ethiopia: Task force emerges to revamp tax regime (Addis Fortune)

The task force started operations two weeks ago and is studying and reviewing prior assessments and studies prepared for the taxation system in Ethiopia. The new body is tasked to reform the tax system in the country and will focus on revising investment incentives. Led by Eyob Tekalign, state minister of finance in charge of budget, the task force was formed with the recommendation of the macroeconomic committee, chaired by Prime Minister Abiy Ahmed. It has been a long-standing issue but has been pushed to the front with the goal of increasing domestic revenue mobilisation,” said a source close to the case. In the current fiscal year, the Ministry of Revenues plans to cover 68% of the total budget of the nation, 346.9 billion Br, from tax revenue, of which 213.9 billion Br is expected to be generated from domestic tax revenue sources. The plan, despite the performance history of the Ministry in the past fiscal year that fell 50 billion Br short of the targeted tax revenues, is one-third of the target.

Nigeria: Merchandise trade rose significantly in Q3, 2018 (Proshare)

Nigeria’s external trade totaled N9,025.97bn during the third quarter of 2018. Compared to the value of N6,903.7bn recorded against the second quarter, a rise of N 2,122.28bn, or 30.7%, was indicated. The total export component recorded N4,853.6bn, representing an increase of 7.8% over Q2, 2018 - and 35.7% over Q3, 2017. The import component stood at N4,172.3bn in Q3,2018 showing 73.8 % higher than Q2,2018. This was due to importation of submersible drilling platforms in August. Nigeria consumed goods mainly from China, Netherlands, Belgium, and United States which, respectively, accounted for N591.4bn (14.17%), N483.2bn (11.58%), N291.7bn (6.99%) and N224.2bn (5.37%). China moved from its position as the top importing partner for Nigeria during this quarter because of the submersible drilling platform imported from South Korea. Import trade from African countries stood at N138.7bn, or 3.3%, while imports from ECOWAS amounted to N16.9bn. However, within Africa, Nigeria exported goods valued at N341.1bn to ECOWAS member states - which represents 47.69 % of the total export trade to Africa. [CBN’s Emefiele outlines policy thrust for 2019; woos foreign investors]

2018 Asia-Pacific Trade and Investment Report: Easing US-China trade tensions could save millions of jobs (UN)

The 2018 Asia-Pacific Trade and Investment Report, issued by ESCAP, suggests that an escalating “tariff war” and resulting drop in confidence next year, could cut nearly $400bn from the global gross domestic product, drive regional GDP down by $117bn. The report also noted trade tensions have already had had a major impact, resulting in disruptions to existing supply chains and dampening investment. Trade growth slowed after the first half of 2018, and FDI flows to the region are also expected to continue on a downward trend next year, following a 4% drop overall this year.

Keeping track of global trade in real time (pdf, OECD)

The contribution of this paper is to test the usefulness of a small-scale Dynamic Factor Model (DFM), which accounts for mixed frequencies and deals with asynchronous data publication, for predicting international trade cycles in real time. In contrast with most of the existing literature, the model accounts for both goods and services trade. Predicting services trade is becoming increasingly important because of its growing share in world trade across countries. The main results are the following. First, the WTI explains more than 92% of the variance of world trade growth of goods and services, pointing to a high explanatory power of this small-scale dynamic factor model for world trade growth. Second, the pseudo realtime analysis shows that this DFM clearly outperforms univariate forecasts, especially when forecasting the next unavailable figure of trade growth. [The authors: Jaime Martinez-Martin, Elena Rusticelli]

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