tralac’s Daily News selection
South Africa: February 2020 trade surplus of R14.15bn (SARS)
The South African Revenue Service has released trade statistics for February 2020 which record a trade surplus of R14.15bn. The year-to-date (1 Jan - 29 Feb) trade surplus of R11.43bn is an improvement from the R9.40bn deficit for the comparable period in 2019. The February trade surplus is attributable to exports of R109.60bn and imports of R95.45bn. Exports increased from January 2020 to February 2020 by R8.71bn (8.6%) while imports decreased by R8.16 billion (7.9%).
The main month-on-month movements for exports, by trade region: Europe (up 28.3%), Africa (up 16.0%), Oceania (up 14.6%).
The main month-on-month movements for imports, by trade region: Africa (-14.0%), Oceania (-11.5%), Europe (-10.9%), Asia (-6.2%).
The Top 5 countries South Africa exported to: China (10.5%), Germany (9.8%), US (7.5%), India (4.9%), Netherlands (4.6%).
The Top 5 countries South Africa imported from: China (17.9%), Germany (9.9%), US (7.3%), India (5.4%), Saudi Arabia (5.3%).
Related commentary: ABSA’s South Africa Morning Sheet (pdf). Moving forward, it is fairly difficult to forecast whether South Africa will post a trade deficit or surplus in March because COVID-19 has affected both global supply and demand, as well as domestic demand for imported goods. Therefore, both exports and imports will likely be lower and hence making the merchandise trade balance depend on the relative declines. Notably, however, South Africa’s terms of trade should have improved, given the particularly steep fall in Brent crude oil prices, and higher gold prices.
Digital trade in MENA: Regulatory readiness assessment (World Bank)
A strong regulatory framework can provide essential tools for remote transactions and improve trust in digital trade. Yet, regulations can also introduce restrictions that hamper the conditions for digital markets. Based on a database of 20 Middle East and North Africa countries and 20 comparator countries around the world, this paper shows that the Middle East and North Africa region is falling behind in establishing a modern governance framework for the digital economy. The analysis focuses on a set of regulatory areas, including electronic documentation and signature, online consumer protection, data governance, cybersecurity, and intermediary liability regulations. It assesses each country’s domestic regulatory framework in light of recent international trends and regulatory models. The study shows that regulation of digital markets in countries in the region is still in its infancy, being mostly governed by general laws that were not originally intended for the digital era. Some countries have tried to support an export-oriented information technology sector by keeping an updated regulatory framework. However, regulation in most countries in the region, regardless of their level of development, still features some major loopholes that can limit consumer trust in digital markets or reduce certainty - and increase costs - for digital businesses.
Against this backdrop, the Economic Commission for Africa has undertaken the present study (pdf) on appropriate drivers for boosting intra-African investment towards Africa’s transformation. This study responds to the outcomes of the continental investment dialogue of the AU, which was initiated in 2013, and which includes a recent request to undertake further research on intra-African investment flows and mechanisms to promote intra-African investment (African Union, 2013 and 2016). The study provides evidence of the complementarities between trade and investment in Africa. Given the trade potential of the AfCFTA and its likely implications for boosting intra-African trade and investment, there is a need for African countries to harness the area as a platform to boost intra-investment. Boosting intra-African trade through the area is instrumental in increasing productivity, enhancing competitiveness and supporting economic growth. This needs to be accompanied, however, by investment regulation and policies that unlock the associated joint benefits of trade and investment growth. It is therefore relevant to develop common rules on investment in the context of the area to lock in the expected dynamic and static effects of trade and investment flows on the continent.
Covid-19 and trade policy: selected commentaries, responses
As South Africa’s President announced various social distancing measures as part of a Covid-19 State of Emergency to curb the spread of the virus, numerous concerns about access to imports led people flocking to retailers to panic-buy and stock-up on various food and non-food items. This has led to various questions being raised about how secure South Africa’s food supply is in the time of the current pandemic. Initial concerns were related to the potential impact of the strict lockdown measures put in place in China but have subsequently increased as more countries implement similar measures. [The author: Willemien Viljoen]
The following recommended short, medium and longer term trade policy actions can fuel the African response to the Covid-19 pandemic. Recommended trade policy actions to be taken:
Urgently suspend tariffs on essential Covid-19 imports
Create customs ‘Green Lanes’ for super-fast clearance of medical supplies
Coordinate diplomacy against the imposition of export limits on essential Covid-19 medical supplies
Identify Covid-19 medical supplies that can be produced with repurposed capacity within Africa
Demand urgent access to medical intellectual property
Ensure international movement of critical health and technical experts
Pool and share medical quality standards and resources for the rapid approval of new medical products
Launch emergency Public-Private Partnerships for medical supplies
Leverage the Regional Economic Communities and African Continental Free Trade Area for coordination
Identify new means of increasing socially-distant work, including through digital trade in services
The Bureau expressed concern about the possible shortages of medicines and vaccines as factories close or countries retain supplies for their own consumption. In this regard, the Bureau underscored the vital importance of coordinating efforts to increase global production and improve the availability of medical products and equipment. Given the limited health infrastructure in Africa and the reality that most of the pharmaceuticals and medical supplies consumed on the continent are imported, the Bureau called on the international community to encourage open trade corridors, especially for pharmaceuticals and other health supplies. [Eddie Ndopu (UNSG’s Advocate for the Sustainable Development Goals): The threat of coronavirus in Africa flags a deeper crisis of global solidarity; Neema Kaseje: Why Sub-Saharan Africa needs a unique response to COVID-19]
The Covid-19 shock to developing countries: Towards a “whatever it takes” programme for the two-thirds of the world’s population being left behind (UNCTAD)
Employing our Global Policy Model, we estimate (pdf) a boost to the national incomes of advanced economies and China of about $1.4 trillion in 2020, substantially smaller than the headline values of the packages. This no doubt will have a positive impact not only on their own economies but the world economy as well. Developing countries, however, face distinct pressures and constraints which make it significantly harder for them to enact effective stimulus without facing binding foreign exchange constraints. And as these countries do not issue international reserve currencies, they can only obtain them through exports or sales of their reserves. What is more, exports themselves require significant imports of equipment, intermediate goods, know-how and financial business services. Finally, the financial turmoil from this crisis has already triggered sharp currency devaluations in developing countries, which makes servicing their debts and paying for necessary imports for their industrial activity far more onerous.
The economic fallout from the Covid-19 shock is ongoing and increasingly difficult to predict but there are clear indications that things will get much worse for developing economies before they get better:
- In general terms, there are three main transmission mechanisms or channels through which the Covid-19 shock can be expected to increase financial pressures on developing economies over the coming months:
It is therefore a matter of immediate urgency for the international community to co-ordinate appropriate economic rescue packages with a more global reach to address the looming financing gap which many developing countries are now imminently facing. These would have to include, as a minimum, the following [four] measures:
pdf G20 Trade and Investment: ministerial statement (75 KB) (G20 Saudi Arabia)
We are concerned about the impact of COVID-19 on vulnerable developing and least developed countries, and notably in Africa and small island states. We are also concerned about the daunting challenges facing workers and businesses, particularly the most vulnerable ones. We will ensure our collective response is supportive of micro, small and medium-sized enterprises, and recognize the importance of strengthening international investment.
We will convene again as necessary, and we task the G20 Trade and Investment Working Group to address these issues closely and to identify additional proposed actions that could help alleviate the wide-range impact of COVID-19, as well as longer-term actions that should be taken to support the multilateral trading system and expedite economic recovery. The next Italian G20 2021 Presidency is committed to continue paying the highest attention to the international trade climate in the discussion of long-term actions. [G20 finance chiefs and central bankers met again yesterday on coronavirus]
Agency chiefs issue call to keep food trade flowing: joint statement by QU Dongyu, Tedros Adhanom Ghebreyesus, Roberto Azevêdo (WTO)
Uncertainty about food availability can spark a wave of export restrictions, creating a shortage on the global market. Such reactions can alter the balance between food supply and demand, resulting in price spikes and increased price volatility. We learned from previous crises that such measures are particularly damaging for low-income, food-deficit countries and to the efforts of humanitarian organizations to procure food for those in desperate need. We must prevent the repeat of such damaging measures. It is at times like this that more, not less, international cooperation becomes vital. In the midst of the COVID-19 lockdowns, every effort must be made to ensure that trade flows as freely as possible, specially to avoid food shortage.
We must also ensure that information on food-related trade measures, levels of food production, consumption and stocks, as well as on food prices, is available to all in real time. This reduces uncertainty and allows producers, consumers and traders to make informed decisions. Above all, it helps contain ‘panic buying’ and the hoarding of food and other essential items. [DG Azevêdo welcomes G20 ministers’ commitment to notify WTO of COVID-19 related trade measures]
Simon Evenett: 82 curbs on exports of COVID-19 medical supplies and medicines have been introduced this year by 68 governments. Where are Africa and other importers supposed to source their medical supplies from? This is not going to end well.
The International Air Transport Association has published new analysis showing that airlines may burn through $61bn of their cash reserves during the second quarter ending 30 June 2020, while posting a quarterly net loss of $39bn. This analysis is based on the impact assessment IATA released last week, under a scenario in which severe travel restrictions last for three months. In this scenario, full-year demand falls by 38% and full-year passenger revenues drop by $252bn compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71% drop. The impact will be severe, driven by the following factors (pdf). [Remarks by IATA’s Alexandre de Juniac]
World Bank’s April 2020 Economic Update for East Asia and the Pacific: East Asia and Pacific in the Time of COVID-19
In a rapidly changing environment, making precise growth projections is unusually difficult. Therefore, the report presents both a baseline and a lower case scenario. Growth in the developing EAP region is projected to slow to 2.1% in the baseline and to negative 0.5% in the lower case scenario in 2020, from an estimated 5.8% in 2019. Growth in China is projected to decline to 2.3% in the baseline and 0.1% in the lower case scenario in 2020, from 6.1% in 2019. Containment of the pandemic would allow for a sustained recovery in the region, although risks to the outlook from financial market stress would remain high. The COVID-19 shock will also have a serious impact on poverty. The report estimates that under the baseline growth scenario, nearly 24 million fewer people will escape poverty across the region in 2020 than would have in the absence of the pandemic (using a poverty line of US$5.50/day). If the economic situation were to deteriorate further, and the lower-case scenario prevails, then poverty is estimated to increase by about 11 million people. Prior projections estimated that nearly 35 million people would escape poverty in EAP in 2020, including over 25 million in China alone. [Summary: key recommendations, findings; Table of contents (extract): Part II. Slowing growth and trade tensions. Chapter I: Trends in growth, poverty, and policy; Chapter II: The impact of the China-US trade agreement]