tralac’s Daily News Selection
Underway in Geneva: UNCTAD’s NTMs Week
Sessions will cover topics such as the costs and benefits associated with NTMs from a sustainable development perspective, trade tensions beyond trade wars and e-commerce. The event will look at ways of reporting and eliminating ‘ugly’ NTMs, promoting transparency in trade regulations and replicating lessons being learned from the African Continental Free Trade Area’s mechanism for reporting, monitoring and eliminating non-tariff barriers. [Download: Draft agenda]
Financial Times Africa Summit 2019: keynote address by President Cyril Ramaphosa (The Presidency)
The new generation of leaders of Ahmed Abiy’s ilk are bold, courageous and are focused on creating an Africa that is at peace with itself and growing the economies of African countries through innovation, infrastructure development and trade. Their interest extends beyond the borders of their countries to promoting greater economic development within the respective economic regions on the continent. As we pursue economic integration, these regions are taking on a greater significance.
The borders drawn up in the palaces of Europe will gradually become less significant than the infrastructure matrix that will link African economies together. The AfCFTA will also have a broader international impact as Africa will be able to deal with other trade blocs from a position of greater strength, able to demonstrate economies of scale. As the incoming chair of the African Union next year, South Africa will put great emphasis on giving effect to the agreement on the Continental Free Trade Area. There is much work that needs to be done and many obstacles that need to be overcome, but we are determined that Africa should seize this moment. The convergence of economies and the integration of markets under the AfCFTA will make the case for investing in the African continent even stronger.
I call on the investor community to harness the climate of reform that is sweeping the continent and take advantage of its momentum. There has never been a better time to invest in Africa. As the continent grows and develops, the benefits will continue to be reaped in years and decades to come. As African nations, there has never been a better time to deepen our collaboration to ensure the African Continental Free Trade Area, our most ambitious collective venture yet, is a success. As Kwame Nkrumah famously said: “Divided we are weak; united, Africa could become one of the greatest forces for good in the world.”
The LDC Group has circulated two reports to the WTO’s Committee on Rules of Origin:
(i) Further evidence from utilization rates: utilisation by LDCs of China’s preference rates. The following submission, dated 7 October 2019, is being circulated at the request of the delegation of Tanzania on behalf of the LDC Group:
Figure 1 reports the full distribution of tariff lines over the utilization rates with covered imports from LDCs above $10,000. Chinese utilization rates appear to be relatively polarized around zero and (to a significant lower extent) around 100%. More specifically, in 2016, 70% (880 out of 1,250) of the tariff lines were reported to have zero utilization rate. This percentage remains unchanged (69%) when we consider a preference margin above 5%. This proportion increases to 74.4% when considering utilization rates between 0 and 5% (930 out of 1,250). In contrast, 157 tariff lines (12.5% of the tariff lines) present a utilization rate between 95% and 100%. This frequency of high utilization rate is bigger than those of intermediate values of utilization rates between 5% and 95%, with frequency ranging between 2 and 23 tariff lines (see lower part of Figure 1. However, it is still far from the 74% (930 tariff line) at the lower level of the utilization rate distribution, with utilization rates between 0 and 5%. Therefore, the polarization exists and is heavily biased towards zero.
Strong variations of utilization rates are observed between LDCs. Figure 2 depicts utilization rates and imports from LDCs covered by preferential treatment with a value above $50m. While some LDCs exhibit high utilization rates, it is remarkable to observe that the five biggest LDC exporters to China - trade values between $626m and $2bn - all face difficulties to benefit from DFQF preferential treatment. Indeed, four of these five LDCs (Zambia, DRC, Cambodia, Myanmar) report an utilization rate of zero. Bangladesh, the third biggest exporter to China in terms of covered imports only reaches 45%.
(ii) Direct consignment rules and low utilization of trade preferences. The following submission, dated 7 October 2019, is being circulated at the request of the delegation of Tanzania on behalf of the LDC Group:
The LDC Group believe that the non-alteration principle provision introduced by the EU or similar arrangements such those adopted Australia and New Zealand may constitute a best practice that should be progressively adopted by other preference-giving Members. The LDC Group calls to the other preference-giving Members to start considering the move to a similar approach abandoning requirements for a through bill of lading and certificate of the non-manipulation that do not adhere to business realities and trade facilitation practices. The LDC Group will enter into consultations with the EU to share the experience gained from the adoption of the non-alteration principle and the advantages to be gained in adopting similar best practices. The results from such consultations will be shared in the forthcoming CRO meetings to accelerate adoption of best practices in line with trade facilitation objectives and simple and transparent rules of origin for LDCs.
WTO’s Deputy Director-General Alan Wolff: “There should be a WTO 2.0. The level of ambition needs to be raised.”
SheTrades: Promoting SME competitiveness in Nigeria (ITC)
Women’s participation in Nigeria’s labour force is low and hasn’t evolved much over the past 20 years. In 2018, only 50% of all women in Nigeria participated in the labour force – a mere 3% increase since 1990. Yet, recent shifts to a services-based economy and the prestige associated with women’s entrepreneurship are opening up opportunities for Nigerian women to play a more active role in business. However, according to a new ITC report, Nigerian women will only be able to seize these opportunities with the right support systems in place. The publication is based on results from the ITC Small and Medium-sized Enterprise Competitiveness Survey of about 400 women-owned or led businesses in Nigeria. More than half of the women-owned or led firms surveyed were not registered with a local or national authority, and about half of all surveyed firms reported poor access to information on domestic standards certification. Certification bodies received a poor rating by 42% of respondents. These are both impediments to growth, as registering a business and attaining certifications are often required to reach international markets. To encourage women to register their businesses, the ITC report recommends that trade and investment support institutions build awareness among women entrepreneurs about Nigeria’s Corporate Affairs Commission, which is in charge of registering businesses. The report also highlights that sector associations, TISIs and Nigeria’s Standards Organisation are well placed to help firms of all sizes become compliant with international standards by building awareness of certification options and their benefits.
The DRC: Joint World Bank-IMF Debt Sustainability Analysis (September 2019)
According to the updated Low-Income Country Debt Sustainability Framework, the DRC’s debt-carrying capacity was assessed as weak. DRC remains at a moderate risk of external and overall debt distress, with limited space to absorb shocks. The debt coverage has been improved since the last DSA, especially on domestic debt. The external nominal debt ratios are lower than at the time of the 2015 debt sustainability analysis, however the country shows vulnerability in debt repayment capacity, even under the baseline, due to weak revenue mobilization. Most external debt thresholds are breached under the stress tests, highlighting the country’s vulnerability to external shocks. Given limited buffers, prudent borrowing policies are essential by prioritizing concessional loans and strengthening debt management policies
The [DRC] authorities broadly agreed with the overall assessment of the country’s debt sustainability (pdf). The new government supported increased transparency and full disclosure of public debt. The authorities committed to further broaden debt coverage, especially for SOEs, and to audit the rest of the legacy arrears. While committed to prioritize concessional borrowing, they also noticed the scarcity of it. They agreed with the need to prepare a medium-term strategy to help frame the debt policy and strengthen debt management capacity.
The impact of remittances on rural transformation in Africa: from commitments to action (AU)
Recent estimates showed that remittances sent by the over 30 million African migrant workers reached more than $85bn in 2018, supporting over 200 million family members living back home. Estimates including unregistered flows double this figure. Against this backdrop, the AU hosted the first event of the Global Forum on Migration and Development, in partnership with the African Institute for Remittances and the International Fund for Agricultural Development under the theme: The impact of remittances on rural transformation in Africa: from commitments to action (pdf). During the meeting (11 October, Addis Ababa) participants discussing the following sessions: The remittance market in Africa: leveraging inclusive remittance business models and innovation towards cost reduction and increased financial inclusion; Concrete responses to the international commitments on reducing the costs of remittance transfers and maximizing their impact to development. The outcome of the forum will directly contribute to build the discussions on one of the thematic priorities (i.e. harnessing migration for rural transformation and development) of the upcoming 12th GFMD Summit, which will be held from 18-22 November 2019 in Quito, Ecuador.
Comparative perspectives on growth, trade and regional integration:
(i) Trade integration as a pathway to development? (World Bank’s Chief Economist Office for Latin America and the Caribbean)
The Latin America and Caribbean (LAC) region has entered a new phase of weak economic performance, but increased integration in international trade and global value chains could reinvigorate economic growth. Steps toward greater trade integration include the United States Mexico Canada (USMCA) and the EU-Mercosur agreements signed in the last year. Both could have substantial positive effects on growth, but environmental impacts and the potential for negative effects in some areas must be addressed, according to Trade Integration as a Pathway to Development?, the latest semi-annual report from the World Bank’s Chief Economist Office for Latin America and the Caribbean. “After rapid economic growth due to high commodity prices during the first decade of the 21st Century, the region is in a new phase of lackluster performance,” said Martín Rama, World Bank Chief Economist for Latin America and the Caribbean. “The years of high commodity prices are now clearly behind us, and we need to focus on areas like trade integration to boost the region’s productivity.”
GDP in the Latin America and Caribbean region (excluding Venezuela) is expected to grow 0.8% in 2019 and 1.8% in 2020, according to the report. Countries in the Pacific subregion, as well as in Central America and the Caribbean will continue to experience faster economic growth, on average, than countries on the Atlantic. The largest economies in the region have faced recession, macroeconomic turbulence or growth deceleration. The short and medium-term outlook is not particularly encouraging. Export performance has been relatively weak and limited fiscal space leaves little room to stimulate domestic demand. The Argentinian recession will become deeper before the economy starts recovering and Mexico’s deceleration is expected to continue. In addition, a global downturn could cause the outlook to deteriorate further.
(ii) Weathering growing risks: World Bank’s East Asia and Pacific Economic Update
Growth in developing East Asian and Pacific economies is expected to slow from 6.3% in 2018 to 5.8% in 2019 and to 5.7% and 5.6% in 2020 and 2021, respectively, reflecting a broad-based decline in export growth and manufacturing activity. Weakening global demand, including from China, and heightened uncertainty around ongoing US-China trade tensions has led to a decline in exports and investment growth, testing the resilience of the region, according to Weathering Growing Risks (pdf), the October 2019 edition of the World Bank’s East Asia and Pacific Economic Update, released today. In the region excluding China, consumption growth remained steady, though slightly lower than the same period last year, supported by monetary and fiscal policies. Growth in the smaller economies of the region, however, remained robust, reflecting country-specific circumstances including steady growth in the tourism, real estate, and extractive sectors. The report makes clear that increasing trade tensions pose a long-term threat to regional growth. While some countries have hoped to benefit from a reconfiguration of the global trade landscape, the inflexibility of global value chains limits the upside for countries in the region in the near term.
(iii) Asia-Pacific Trade and Investment Report 2019: Navigating non-tariff measures towards sustainable development (UNCTAD)
While applied tariffs in the Asia-Pacific region have halved over the past two decades, the number of non-tariff measures – policy regulations other than tariffs affecting international trade - has risen significantly, according to a new report launched on 14th October by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and UNCTAD. The Asia-Pacific Trade and Investment Report 2019 (APTIR) finds that NTMs are now affecting around 58% of trade in Asia and the Pacific. One reason for the rise of NTMs is their growing popularity as weapons of trade policy in regional and global trade tensions. This can include government procurement limitations, subsidies to export and import restrictions as well as import and export bans through unilateral or multilateral sanctions. Meeting these complex and often opaque rules can require significant resources, affecting in particular SMEs. However, the report also notes that NTMs as policy instruments can often be legitimate. Most of the NTMs are technical regulations, such as sanitary and phytosanitary requirements on food. The average cost of these measures alone amounts to 1.6% of gross domestic product, roughly $1.4 trillion globally. But they also serve important purposes such as protection of human health or the environment; and can even boost trade under certain conditions.
NTMs are often very different between countries, making it difficult for firms to move goods from one country to another. Regulatory cooperation at the regional and multilateral level and the use of international standards when designing or updating NTMs is therefore important in overcoming challenges related to the heterogeneity of regulations. Looking ahead, the report also highlights that trade costs of NTMs can be significantly reduced by moving to paperless trade and cross-border electronic exchange of information. This could lower costs by 25% on average in the region, generating savings for both governments and traders of over $600bn annually.