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tralac’s Daily News Selection

tralac’s Daily News Selection
Photo credit: AZRainman | Flickr

11 Feb 2020

Posted in Addis: The 2020 AU Handbook

US revokes WTO subsidy preferences for South Africa and some other countries (Bloomberg, Fin24)

The Trump administration is changing a key exemption to America’s trade-remedy laws to make it easier to penalise about two dozen so-called developing countries including China, India and South Africa. The US on Monday narrowed its internal list of developing and least-developed countries in order to reduce the threshold for triggering a US investigation into whether nations are harming US industries with unfairly subsidised exports, according to a US Trade Representative notice. In doing so, the US eliminated its special preferences for a list of self-declared developing countries that includes: Albania; Argentina; Armenia; Brazil; Bulgaria; China; Colombia; Costa Rica; Georgia; Hong Kong; India; Indonesia; Kazakhstan; the Kyrgyz Republic; Malaysia; Moldova; Montenegro; North Macedonia; Romania; Singapore; South Africa; South Korea; Thailand; Ukraine; and Vietnam.

USTR updates list of developing and least-developed countries under US countervailing duty (CVD) law

The US Trade Representative developed the list of members eligible for the 2% de minimis standard based on the following criteria: per capita GNI; share of world trade; other factors such as OECD membership or application for membership, EU membership, and G20 membership. For purposes of US CVD law, the US Trade Representative therefore considers (pdf) countries with a share of 0.5% or more of world trade to be developed countries. Thus, Brazil, India, Indonesia, Malaysia, Thailand, and Viet Nam are ineligible for the 2% de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI below $12,375. Given the global economic significance of the G20, and the collective economic weight of its membership (which accounts for large shares of global economic output and trade), G20 membership indicates that a country is developed. Thus, Argentina, Brazil, India, Indonesia, and South Africa are ineligible for the 2% de minimis standard, notwithstanding that, based on the most recent World Bank data, each country has a per capita GNI below $12,375.

USTR seeks comments for 2020 Special 301 Review: The review identifies countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to US persons who rely on IP protection. [MSF India demands review of USTR Special 301 report on trade barriers]

DDG Wolff affirms WTO’s commitment to support Africa’s economic integration (WTO)

I am here, on my first visit to Addis, to be with the WTO Accessions Division which has organized a Regional Dialogue on WTO Accessions for Africa, bringing together all acceding governments from the African Continent. This year’s theme for the Regional Dialogue is “Deepening Economic Integration in Africa through WTO membership and AfCFTA Implementation”. The meetings here this week are part of the WTO’s broader efforts to build a stronger bridge between the WTO and Africa. What can Ethiopia expect from the process of WTO accession?

Looking at the results of WTO accessions completed to date – 36 of them, including China, Saudi Arabia, and the Russian Federation – we see that they have benefitted enormously from the process of economic reforms required to join the WTO. Ethiopia aspires to become one of the leading economies in Africa by 2030, through pursuing WTO accession aggressively. The WTO accession process will support regulatory and administrative changes while improving the quality of economic management institutions. Through its accession to the WTO and its domestic reform agenda, the government of Ethiopia hopes to raise the standard of living of its people and contribute to peace. And it is intent on finding ways of achieving its objectives in a more sustainable way. Support for Ethiopia’s accession and the fulfilment of the promise of the AfCFTA must be, and I am sure will be, high priorities for the WTO. [Note: This speech was delivered today at Addis Ababa University]

A snapshot of cross-border trade along the Abidjan-Lagos Corridor (UNECA) 

In this context, the African Export-Import Bank and the ATPC recently embarked on a new pilot project to collect data in the ECOWAS region using the Abidjan-Lagos Corridor. The AUC and ECOWAS serve as key project partners and the Eastern Africa Grain Council has been identified as the lead project implementation partner. The project will collect ICBT data on a pilot basis along the Abidjan-Lagos corridor in the ECOWAS region for a period of four months from September 2019. The data collected will also be gender disaggregated, which will help to provide a better picture on the gendered dimensions of ICBT, which is typically female dominated. The final project outputs (pdf) will include a comprehensive report detailing the scale, characteristics and challenges of ICBT along the Abidjan-Lagos corridor, and a harmonized manual for ICBT data collection for the ECOWAS region. Following the initial pilot, the intention is to scale and apply the methodology to other corridors and regions on the continent, with the ultimate goal of eventually developing a single continental framework for ICBT data collection.

Eswatini and the IMF: 2020 Article IV Consultation report. Extracts from Annex VII: Trade, export competitiveness and growth

Over the last two decades, exports performance in Eswatini have been declining, reflecting negatively on GDP growth. Exports of goods and services have halved from about 78% of GDP in the early 2000s, a time when global trade was booming and commodity prices were high, to 40% of GDP in 2018. As a result, unlike peer middle income countries, Eswatini’strade volumes have not kept up with global trends, resulting in a loss of share in global markets. Exports of services have similarly experienced a loss of market share and a trend decline, representing 1.5% of GDP in 2018 (about 10% of GDP in the early 2000s). The contribution of exports to growth is much lower from an average 3.2% during the 1990s and 2000s to 0.35 contribution during 2010-2017.

Eswatini’s export base has also narrowed and become less diversified, increasingly dominated by exports from a few traditional sectors. Up to 2008, exports were relatively diversified and of good quality and Eswatini was among the more diversified product exporters in Sub-Saharan Africa (measured by a Theil diversification index) and the quality level (measured by the unit value of exports) was higher than the average of African countries. In recent years, export diversification has, however, declined. Exports have increasingly been dominated by few items and there has been little increase in new products. Today, about 90% of exports are concentrated in four manufactured goods from traditional sectors: soft drink concentrate, sugar, textiles, and wood manufacturing. In particular, soft-drink concentrate accounts for half of goods exports in 2018 (compared to 33% in 2000).

Export concentration, compounded with a concentration in trading partners, suggests that the country has been unable to take advantage of its various trade agreements. Despite numerous trade agreements, including SACU, SADC, COMESA, and with the European Union (EPA) and the US (AGOA), among other regional bodies, about half of total trade is conducted with South Africa. Major commodities, such as sugar, textiles, and soft-drink concentrate are destined to South Africa. This increases the trade sector’s dependence on its neighbour’s performance. Other trade agreements such as the African Growth and Opportunities Act, which gives Eswatini preferential access to US markets, are not being exploited beyond textiles. [Lesotho and the IMF: 2020 Article IV visit completed]

Nigeria on the move: A journey to inclusive growth (World Bank)

This Systematic Country Diagnostic (pdf) examines the challenges the government and people of Nigeria face in achieving the twin goals of poverty reduction and shared prosperity. It identifies key constraints and presents possible pathways for moving forward. Reflecting the multifaceted nature of the development challenges in Nigeria, the list of constraints is rather long. Based on available evidence and feedback gained through stakeholder discussions, 10 key constraints have been identified. The SCD establishes the priorities and links among these 10 constraints and proposes four possible pathways to tackle the constraints. The four pathways are: breaking oil dependency; building human capital to bridge the north-south divide; promoting private sector–led growth; rebuilding social contracts.

Constraint 8: Limited domestic, regional, and global integration. Extract (pdf): Nigeria’s regional and global integration is also limited by restrictive policies. Though intraregional trade in Sub-Saharan Africa has doubled since 2000, to reach 25% in 2017, it has not increased as much as intraregional trade in East Asia and the Pacific or in the European Union. Exports to Nigeria accounted for 0.3% to 0.5% of the Sub-Saharan African total in 2000–16, well below South Africa’s 5.7% (figure 2.21, panel a). Nigeria’s poor performance in regional trade partly derives from its more restrictive border crossings relative to South Africa (figure 2.21, panel b). Cross-sectional analyses indicate that income per capita is inversely correlated with border restrictions. Countries that are more open to trade, ideas, and (appropriately sequenced) inflows of foreign capital are more well integrated into the global economy and benefit from their interactions with other countries.

This suggests that the thick borders around Nigeria are a major deterrent to growth spillovers to Nigeria’s neighbors in the Economic Community of West African States. Implementing measures to reduce drastically the thickness of Nigerian borders would be a win-win: more open borders would boost regional exports, create larger agglomeration economies, help attract more private investment from abroad, and bolster the growth potential of the Economic Community of West African States and, beyond, all Sub-Saharan Africa. Furthermore, a review of the Nigerian Investment Promotion Commission Act of 1995 and proposed amendments to the act passed by the House of Representatives and existing international investment agreements reveal there is some room for improvement, particularly regarding the lack of clarity on the list of sectors restricted to investment and the protection of foreign investors from discriminatory treatment by the government.

Import data underscore Nigeria’s relatively low level of integration with international markets. Between 2010 and 2015, the value of imported inputs equaled only 8% of the value of exports, far below the share in other commodity exporters such as Kenya (18%) and Mexico (33%). However, productivity among importing firms is greater in Nigeria than among non-importers, suggesting that access to foreign inputs enhances labor productivity. Moreover, 70% of exporting firms are also importers, highlighting the opportunities offered by international value chains. It is important for policy makers to monitor the outward orientation of domestic firms because exporting and importing are both closely correlated with innovation.

Launched: 2nd Biennial Review Report on the implementation of the June 2014 Malabo Declaration (AU)

The African Union has launched the second Biennial Review Report on the implementation of the June 2014 Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods. Out of the 49 Member States that reported on progress in implementing the Malabo Declaration during this 2019 biennial review cycle, four countries are on-track towards achieving the Malabo commitments by 2025. While this number is significantly less than the 20 Member States that were on-track in 2017 during the inaugural biennial review cycle, it is cardinal to note that 36 countries have made significant improvement in their score from the 1st BR to the 2nd BR. The benchmark for the 2019 cycle 6.66, is much higher than that of the 2017 cycle which was 3.94. The four Member States, which obtained or surpassed the benchmark of 6.66 to be on-track toward achieving the commitments of the Malabo Declaration by 2025 are: Rwanda (7.24), Morocco (6.96), Mali (6.82) and Ghana (6.67).

Selected, new papers on fintech issues from the Bank of International Settlements:

  1. Policy responses to fintech: a cross-country overview. Technological innovations in financial services (fintech) are increasingly transforming the way financial services are provided. While fintech opens opportunities, it also comes with potential risks. Financial authorities have responded to fintech developments in various ways. Based on survey responses from around 30 jurisdictions, this paper provides a cross-country overview of policy responses to fintech developments. In addition, building on the work by global standard-setting bodies and other international organisations, the paper proposes a conceptual framework through which to analyse policy responses to fintech, referred to as the “fintech tree”. The fintech tree identifies three categories: fintech activities, enabling technologies and policy enablers.

  2. The economic forces driving fintech adoption across countries. Fintech is being adopted across markets worldwide – but not evenly. Why not? This paper reviews the evidence. In some economies, especially in the developing world, adoption is being driven by an unmet demand for financial services. Fintech promises to deliver greater financial inclusion. In other economies, adoption can be related to the high cost of traditional finance, a supportive regulatory environment, and other macroeconomic factors. Finally, demographics play an important role, as younger cohorts are more likely to trust and adopt fintech services. Where fintech helps to make the financial system more inclusive and efficient, this could benefit economic growth. Yet the market failures traditionally present in finance remain relevant, and may manifest themselves in new guises.

  3. Impending arrival – a sequel to the survey on central bank digital currency. Research and experimentation on central bank digital currencies continue to fuel discussion and debate. This BIS paper updates an earlier survey that asked central banks how their plans in this area are developing. The latest responses show emerging market economies reporting stronger motivations and a higher likelihood that they will issue digital currencies, with central banks representing a fifth of the world’s population reportedly likely to issue very soon.

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This post has been sourced on behalf of tralac and disseminated to enhance trade policy knowledge and debate. It is distributed to recipients across Africa and internationally, serving in the AU, RECs, national government trade departments and research and development agencies.

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