Diarise:

1. tralac’s Certificate Course on International Trade Law and Policy for Africa’s Development (starting 23 September): Applications close on 9 August

2. East African Business Council’s 20th Annual General Meeting (8 August, Nairobi) on the theme: Repositioning the private sector in the EAC regional integration agenda

3. Third Global Logistics Convention in East Africa (29-30 August, Kigali). Delegates will deliberate on the NTBs that traders encounter on the Northern and Central corridors, e-commerce, and the implementation of the AfCFTA.

USITC hearing on US Trade and Investment with Sub-Saharan Africa: recent trends and new developments

1. Post-hearing submission by the Embassy of the Republic of South Africa. South Africa would like to submit its response to some of the issues raised during the public heading, in particular relating to the Copyright Amendment Bill and the Performers Protection Amendment Bill.

2. Submission by NAAMSA and NAACAM: The importance of AGOA for the SA automotive industry. The US was the South African automotive industry’s fifth largest trading partner, fifth largest export destination for vehicles and fifth largest country of origin for total automotive imports in 2018 (SA vehicle exports to US 47 627 units in 2016 in US market of 17,9 million). Up to 2017 SA enjoyed an automotive trade surplus with the US but in 2018 this turned into a deficit due to the same BMW and Mercedes Benz models now being manufactured in the US and not exported to the US from SA anymore. Continuity of AGOA up to 2025 will strengthen further trade relations between southern Africa and the United States and will improve the scope of employment creation, industrial growth and development in the southern African region. The SA automotive industry is increasingly involved in regional integration and the building of capacity in other African countries. Both the US and countries involved under AGOA have the potential of generating significant economic benefits from trade as AGOA countries continue to develop, modernize and industrialize. Ultimately, AGOA builds goodwill between the US and Africa. [Related: NAAMSA, NAACAM joint statement (pdf)]

3. Submission by Professor Katrin Kuhlmann (President and founder, New Markets Lab). All of the issues covered in the investigation and my testimony are key priorities for the AfCFTA and U.S. engagement with the African continent. All will contribute to market development, investment growth and diversification, and rule of law. Going forward, US trade policy should focus on an active partnership with sub-Saharan Africa designed to unlock this potential, build well-functioning and inclusive legal and regulatory systems, and support the historic harmonization efforts that are already underway. I would like to conclude with a few brief final observations and suggestions for further dialogue:

4. Selected other submissions to the USITC hearing, previously posted on the tralac website, can be accessed here.

IATA analysis: Reforms needed to maximize aviation benefits in South Africa

The International Air Transport Association presented its latest study on the economic value of air transport and tourism to South Africa, and identified opportunities for significant expansion over the next 20 years if key policy reforms are made. In 2017, 20.9 million passenger journeys were made to, from and within South Africa, with aviation and tourism representing $9.4bn in gross value added. It accounts for 3.2% of South Africa’s GDP and supports 472,000 jobs. Over the next 20 years the South African market could more than double in size, resulting in 23.8 million additional passenger journeys, over 372,000 more jobs, and a total of $20.2bn in GDP by 2037. IATA identified three areas where government action can enable aviation to continue its growth trajectory and generate even more value in South Africa: Reform harmful policies on immigration; Reduce taxes and charges that are increasing the cost of doing business in the country; Undertake a harmonized strategic approach to policy-making with transport and aviation central to economic planning.

Chad and the IMF: two updates

1. 2019 Article IV Consultation: The current account deficit is projected to substantially widen in 2019 due to lower oil prices and sustained oil production-related imports. The current account deficit is expected to widen to 6.5% of GDP in 2019 with a modest improvement in 2020-21. Despite higher export volumes, the higher current account deficit in 2019 is largely due to a lower oil price assumption. Several oil investment projects are expected to increase both imports of capital goods and concomitant FDI over the medium term. The large FDI inflows and a recovery of capital grants should underwrite most of the current account decline in 2019, likely allowing net foreign assets to improve to CFA -94 billion. The external position is expected to improve gradually over the medium term. Oil production is expected to rise through 2025, supplemented by an expansion in cotton exports. Imports are expected to rise moderately, reflecting higher domestic demand and planned increases in oil capital expenditures. At the same time FDI is expected to increase and external debt amortization to fall. With a lower current account deficit and strong financing, Chad’s NFA position at the BEAC is estimated to turn positive around 2020. The outlook is subject to a number of risks (Table 9):

2. Selected Issues: Non-oil growth impediments – crisis legacies and structural weaknesses. The challenging environment for non-oil private sector has translated into a low level of diversification, leaving the government far too dependent on oil revenues and the economy vulnerable to oil price volatility (Figures 10 and 11). Chad’s export diversification index is low, with exports largely dominated by oil (around 94%) and with very small shares in cotton, livestock, and other agri-products. Low diversification and dependence on oil revenues have made the budget very vulnerable to oil price volatility. For instance, during the 2014/15 oil price shock, the drop in oil revenues forced Chad into a sharp and brutal expenditure based fiscal consolidation, with dramatic effects on growth and social outcomes. In addition, with low diversification, Chad’s GDP growth volatility is one of the highest in Sub-Saharan Africa. The private sector in Chad operates in a rather difficult climate. In this regard, areas to improve include streamlining procedures for the creation of small and medium size enterprises, facilitating access to financing for exporting companies to foster trade, modernizing tax administration to reduce non-compliance, widening the tax base, and reforming regulation to facilitate investment in the electricity sector to increase access to reliable and affordable power supply needed to improve Chad’s competitiveness.

Somalia and the IMF: two updates

1. IMF Executive Board Concludes 2019 Article IV Consultation. Directors encouraged continued progress on addressing governance weaknesses and the risk of corruption. They emphasized that passage of key legislation - including on revenue, PFM, audit, petroleum, statistics, and anti‑corruption - would promote better governance and transparency. Directors encouraged further efforts to strengthen statistical institutions and address data gaps. They noted that intensive capacity development support will need to be sustained to bolster ongoing reforms. Directors concurred that Somalia’s external debt is unsustainable, and supported the authorities’ continued efforts to make progress toward the Heavily Indebted Poor Country initiative decision point.

2. 2019 Article IV Consultation. Per capita incomes remain very low. An updated household survey shows per capita consumption is significantly lower than originally estimated, resulting in a 37% downward revision to the level of GDP to $4.7bn in 2018. Per capita income is estimated at around $332, one of the lowest in the world. A large trade deficit is financed by stable external flows (see Tables 7–9). The current account deficit narrowed slightly during 2018, as agricultural exports (mainly livestock) recovered from the 2017 drought. Nonetheless, the trade deficit remains high at 73% of GDP, which continues to be financed by large inflows of remittance and grants (Figure 1). External debt reached about $4.7bn or nearly 100% of GDP in 2018, with 96% ($4.5bn in arrears, of which $1.8bn or 39% reflects late interest and charges).

Jobs in global value chains: new evidence for four African countries in international perspective (World Bank)

What is the potential for job growth in Africa under participation in GVCs? In this study the concept of GVC jobs is introduced which tracks the number of jobs associated with GVC production of goods. A novel decomposition approach is used to account for GVC jobs by three proximate sources: global demand for final goods, a country’s GVC competitiveness (measured as the country’s share in serving global demand) and technology (workers needed per unit of output). Based on newly assembled data, it is shown how GVC jobs and incomes have changed over the period 2000-14 in Ethiopia, Kenya, Senegal and South Africa, compared to developments in some other low- and middle-income countries in the world. The four African countries stand out in terms of a low share of GVC jobs in the (formal) manufacturing sector, and a relatively high share in agriculture due to strong backward linkages, especially in the case of food production. All countries benefitted highly from growing global demand for final goods. At the same time it appears that technical change in GVCs is biased against the use of labour, greatly diminishing the potential for job growth through GVC participation.

WTO launches trade in services dataset by sector and mode of supply

The WTO has launched a new dataset covering the services exports and imports of 200 economies from 2005 to 2017. The economies covered by the dataset includes all WTO members and observers. The experimental dataset, which uses both official figures and estimates for missing data, provides for each economy and sector estimates of how much services is traded through the four modes of supply. As defined in the General Agreement on Trade in Services , the four modes of trading services are through cross-border supply such as through the internet, consumption abroad such as tourism, commercial presence of an enterprise such as establishing an affiliate in a foreign country to serve the local market, and individuals travelling from their own country to supply services in another such as consultants. [Note: Various downloads are available]

Statistical coverage of trade finance: fintechs and supply chain financing (IMF)

Trade finance is the backbone of international trade for entities ranging from a small businesses to multi-national corporations. An estimated 80% of world trade relies on this form of finance. Despite its systemic importance and rapid growth, data availability is only partial. During the 2008 financial crisis, policy makers, notably the G20 recognized that the absence of comprehensive trade finance data posed a significant hurdle for policy-makers to make informed, timely decisions. This paper proposes a stand-alone dataset to reflect the scope, dynamic and recent innovations of the trade finance market to support macroeconomic policy analysis.

IGC call for papers: Conference of the Private Sector Development Research Network (12-13 December, Geneva). “The event focuses primarily on the actions and behaviors of private firms, investors and markets rather than on government policy. It is differentiated from other conferences because of the markets it aims to focus (low and lower-middle income countries), but also the institutions it aims to engage in dialogue (DFIs, think tanks and universities with an active and applied research agenda on private sector development). However, insights for policy and regulation of markets and firms are within scope.”