tralac’s Daily News Selection
Small African economies in a more uncertain global trade environment: the potential impact of post-AGOA scenarios for Lesotho (World Bank)
This paper provides a forward-looking view of trade and its relevance for Lesotho’s medium- and long-term development. It does this through CGE analysis of potential impacts based on specific trade-related scenarios. The scenarios include the potential loss of AGOA preferences and preference erosion against competitors through, for example, a US–Vietnam FTA. An immediate loss of AGOA preferences would have a significant economic impact that far exceeds that of a potential future US–Vietnam FTA. If these preferences were suspended in 2018, Lesotho would face a loss of 1% in income by 2020, relative to the baseline, and exports of textiles and apparel would drop by 16%. The CGE simulations stress the need to strengthen efforts to support structural transformation leading to diversification of export products and markets, improving backward and forward linkages, and lowering trade costs. The simulations also indicate that trade facilitation measures leading to an average decrease in trade costs of 2%per year would eliminate the negative consequences of the loss of AGOA preferences in terms of the loss of income. The changing external environment is likely to offer new opportunities to Lesotho's export industries in the medium term, including through regional integration under the African Continental Free Trade Area. Extracts (pdf): These findings emphasize the need for a new approach to trade and trade policy that can provide export-driven growth that is more sustainable and inclusive. Policy recommendations moving forward include:
Improve access to imported material inputs and technology by pursuing tariff reductions within SACU and ensuring that the duty drawback system functions more efficiently and effectively; A sustained focus on increasing productivity in AGOA beneficiary sectors, most notably textiles and apparel, and aiming to increase spillovers and linkages from these sectors; Enhance export promotion activities, including improving market information on export opportunities to South Africa, European and other markets, as well as for products other than apparel to the United States; Since a reduction in trade costs could substantially offset any risks from losing AGOA preferences, there would be substantial gains to a coordinated approach to trade regulatory requirements and coordinated border management and exploring cross-border coordination mechanisms with the South African authorities, among others; Undertake a comprehensive analysis of service-sector performance in Lesotho and its implications for export-driven growth, identifying the most urgent regulatory issues that need to be addressed; Develop a comprehensive trade and investment strategy linked to the NSDP II, focusing on how to retain and increase investment once AGOA margins have been eroded, determine progress in the implementation of actions recommended in the 2012 DTIS Update and supporting industrialization through participation in regional and global value chains. [The authors: Maryla Maliszewska, Jakob Engel, Guillermo Arenas, Barbara Kotschwar]
The escalating China-US trade dispute: Economic and geopolitical implications for Sub-Saharan Africa (Policy Center for the New South)
In summary, this brief review of the structure of SSA’s trade suggests that the main effect of international trade disputes on the region will operate through the macroeconomic channel, i.e. the effect on global economic growth and commodity prices, rather than directly though trade restrictions. The effect of the trade tensions on growth in Europe is especially important for Africa. [The author: Uri Dadush]
The economic outlook for Africa remains challenging (pdf). While growth is estimated to pick up, the region faces difficulties in embarking on a robust and sustained growth trajectory, amid a global slowdown, tepid commodity prices and protracted fragilities in many commodity exporters. Aggregate GDP growth is projected at 3.2% in 2019 (see figure XII) and 3.7% in 2020, after an estimated expansion of only 2.7% in 2018. The risks to the outlook are tilted to the downside. They include weather-related shocks, political uncertainty and security concerns on the domestic front; and lower-than-expected commodity prices and an escalation of trade tensions on the external one. The recent upsurge in external sovereign bond issuances has also raised debt sustainability concerns in several economies.
Manufacturers in East African Community members have lost at least 40% of the market to counterfeit goods which are mostly imported from the rest of the globe. Speaking in Dar es Salaam during their joint meeting, Kenya Anti -Counterfeit Agency and the country’s Fair Competition Commission Chairpersons, Flora Mutahi and Professor Humphrey Moshi, said they have launched a crackdown against the copycats which deny governments revenue, endanger consumers and threaten growth of industries in the region. The ACA delegation’s head called upon strengthening cross-border collaboration between the two countries and other EAC members because counterfeits don’t respect borders. ACA’s Mutahi said collaboration among nations is the only weapon that can realize a successful fight against counterfeits in the EAC region. Prof Moshi said that fair competition should prevail in the EA region by ensuring that counterfeits are denied entry or being manufactured locally.
Kenya and Tanzania have secured 100 million shillings from the WHO and the German Cooperation, GIZ, to support long term contingent strategy for disease outbreaks which EAC senior livestock officer, Dr David Balikowa, says will help determine the two countries’ disease preparedness capacity, challenges and how to address them. The grant will support frequent simulation exercises in which the experts will be carrying out fictitious disease outbreak management exercise across the region.
George Asante: Financial market reform is vital for Africa to become an economic powerhouse (Business Day)
To accelerate financial market reforms, African countries should prioritise policy initiatives that make it easy for investors to participate in the markets. For example, African countries need to pay more attention to the trading and settlement infrastructure to spur liquidity, while ensuring timeliness and transparency of market data. This will improve the competitiveness of Africa’s capital markets and better position Africa to attract its fair share of available global capital. The fruits of opening up financial markets are undoubted. It is the main reason GDP per head south of the Sahara is two-fifths higher than it was in 2000. And while much of the world retreats into protectionism, it is heartening to see Africa attempt to open up its markets. This approach must continue, starting with ambitious financial market structural reforms. [The author is Absa head of markets ex SA]
Leónce Ndikumana: Why an overhaul of the international tax system is so important (Business Day)
After years of silence, the OECD has recently admitted the need to question the system that allows companies to declare their profits wherever they wish, in order to benefit from very low or even zero tax rates in tax havens — and this in a totally legal way. This is a requirement that we, the Independent Commission for the Reform of International Corporate Taxation, have been pursuing for years. Rich countries are now under pressure from the International Monetary Fund and the UN, which in recent months have called for a major overhaul of international taxation. This is a first step in the right direction, but there is an urgent need for developing countries to participate actively in the drafting of new tax standards.
(i) ECOWAS Commission meets with permanent Representatives on Peace, Security, Trade and other integration matters. ECOWAS met with the Permanent Representatives Committee, made up of Ambassadors accredited to ECOWAS, on 21 May in Abuja, to discuss recent peace and security developments as well as other issues relating to the regional integration process. The president of the ECOWAS Commission Jean-Claude Kassi Brou refocused attention on the all-important matter of regional security and inter-community issues. The ECOWAS Commission President also made a passionate plea for concerted efforts on the implementation the ECOWAS Trade Liberalisation Scheme noting that the cooperation of the ambassadors is needed also in regards to the conduct of officials of their national agencies, seeing that much else, including the implementation of a single currency for the region, depends on free movement of persons, goods and services. There were also briefings on the latest regional integration agenda, free movement as well as cooperation with the African Union, the retreat of the PRC, construction of the new ECOWAS headquarters building, statutory meetings as well as an update on the institutional Reforms. [ECOWAS marks a decade of the operationalisation of the Conflict Prevention Framework]
(ii) Model Drug Law for West Africa presented to ministers of health. The West Africa Commission on Drugs, UNAIDS and the Global Commission on Drug Policy today presented the Model Drug Law for West Africa (pdf) to ECOWAS ministers of health. Drug laws in western Africa are not having the intended effect. Neither drug use nor drug trafficking have been effectively reduced. Drug trafficking in western Africa has reached such an extent that the drug trade threatens stability in the region. The model drug law provides concrete templates that countries can adapt to reform their drug laws—legal provisions and how they relate to international legal obligations—as well as useful commentary that explains different options and reasons for choosing the proposed legal solution. The model drug law offers a measured way for decriminalizing drug use and possession for personal use by introducing thresholds, thereby allowing people who use drugs to access health services and seek support.
(iii) ECOWAS set to implement harmonised roaming tariff for mobile networks. ECOWAS is working towards the implementation of a regulation to define a harmonised legal and tariff framework for roaming on public mobile communication networks among member states by June 2019. Mr Zouli Bonkoungou, ECOWAS Commissioner, Telecommunications and Information Technologies said this during an interactive session with members of the ECOWAS Parliament at its ongoing ordinary session in Abuja on Wednesday. Bonkoungou said that the harmonised tariff regime for roaming was expected to take off in June 2018, but the action plan was not implemented by member states. Burkina Faso, Cape Verde, The Gambia, Nigeria and Senegal have since been elected as members of a new facilitation group to assist member states with the technical implementation of the regulation.
(i) Nigeria recorded $3bn trade surplus with US in 2018. Goods imported from the US in the year under review totalled $2.7bn, while goods exported to the US was $5.6bn.
(ii) Congo Republic's IMF bailout at risk over debt deals. Advisers to Congo Republic’s government have warned it that there is a “major risk” the IMF will reject its bid for a long-sought bailout, according to a letter obtained by Reuters. An IMF spokesperson: “This information does not represent the views of the IMF. The IMF team continues to be in discussions with the authorities regarding the next steps needed to be able to present this agreement to the IMF Executive Board for discussion.”
(iii) Tanzania's China-backed $10bn port plan stalls over terms. “The conditions that they have given us are commercially unviable. We said no, let’s meet halfway,” Deusdedit Kakoko, director general of the state-run Tanzania Ports Authority (TPA) told Reuters. China Merchants, in an e-mailed statement; “This project is a purely commercial, investment project and China Merchants Port has in its overseas investments always followed the principles of commercial feasibility and win-win cooperation.”
(iv) Inclusive and sustainable industrial development and why gender matters (pdf). This UNIDO brief, based on a working paper (pdf), outlines the advancement of the twin policy agenda of ISID and gender equality by providing a conceptual framework and empirical base from which to understand the inter-linkages between gender equality and industrial development.
(v) AfDB EOI: Review and analysis of national and regional agricultural policies and their impact in Africa. The service will involve the review, assessment, analysis, synthesis of various sectoral and macroeconomic policies, laws and regulation impacting the agricultural sector in Uganda, Mauritania, Mozambique, Guinee Conakry, Tanzania, Zambia, Ghana, DRC.
(vi) Related, from the AfDB: Review of Tanzania's land tenure systems (to support the creation of an enabling environment for agricultural transformation)