USTR’s 2020 National Trade Estimate: extracts on commentary for South Africa, Kenya, Nigeria

The Office of the United States Trade Representative has issued the 2020 National Trade Estimate Report, an annual report detailing foreign trade barriers faced by US exporters of goods and services and USTR’s efforts to reduce those barriers:

Extracts from the South Africa chapter: US exports face a disadvantage compared to EU goods in South Africa. South Africa’s tariffs applied to imports from the EU on TDCA-covered tariff lines average 4.5% based on an unweighted average. The MFN duty rate, which applies to imports from the United States, averages 18.4% for the same TDCA-covered lines. Key categories in which US firms face a tariff disadvantage include cosmetics, plastics, textiles, motor vehicles, and agricultural products and machinery. The EU-SADC EPA further erodes US export competitiveness in South Africa and the region due to the greater disparities in tariff levels that US exports will face under the EPA compared to the TDCA. The United States has raised concerns about the tariff disparity in bilateral discussions with South Africa noting the unilateral benefits the United States offers South African imports under the African Growth and Opportunity Act. In recent years, the South African government has encouraged domestic industry to appeal for increases up to the WTO bound tariff rates for those products where a lack of global competitiveness was a concern.

Extracts from the Kenya chapter: Kenya maintains complex, non-transparent, and costly requirements for importation of all meat, dairy, and poultry products including a standardized sanitary certification and a “Letter of No Objection to Import Permit” (no-objection letter) from the Department of Veterinary Services (DVS) under the Ministry of Agriculture, Livestock, and Fisheries. DVS requires an importer to explain the reason for importation through a “Letter of Application to Import” and specifically address the market need the import would meet before issuing a no-objection letter. DVS issues the no-objection letter for meat, dairy, and poultry products at its discretion on a case-by-case basis. Although Kenya purports to prohibit imports only on sanitary grounds, importers have reported that, in practice, DVS has at times provided them with other rationales for denying permits, such as the local availability of a certain product. DVS reportedly has never formally provided this guidance in writing to the permit applicants.

US firms have had limited success bidding on government tenders in Kenya. There are widespread reports that corruption often influences the outcome of public tenders, and many of these tenders are challenged in the courts. Foreign firms, some without proven track records, have won government contracts when partnered with well-connected Kenyan firms. All Kenyan tenders and procurement are required to be undertaken through the Integrated Financial Management Information System (IFMIS) as of January 2019.

Kenya’s Data Protection Act, 2019, passed in November, includes unclear and potentially restrictive provisions governing the cross-border transfer of personal information. The Act requires that data controllers provide “proof” that personal data will be secure as a condition for transferring the data outside Kenya, but does not describe what would constitute proof. The Act also requires consent of the data subject as a condition for the cross-border transfer of any “sensitive personal data,” a broad category of information. Such conditions may prove burdensome for firms that supply services on a cross-border basis or depend on data processing systems located abroad. Additionally, the Act empowers a political official to prohibit the cross-border transfer of certain categories of data, creating uncertainty for businesses operating in Kenya that depend on cross-border data flows. [CNBC Africa interview: Grant Harris (CEO, Harris Partners) on the Kenya, US trade agreement

Extracts from the Nigeria chapter: Nigeria uses nontariff measures in an effort to achieve “self-sufficiency” in certain commodities. These measures have made it difficult for US businesses to export the covered items to Nigeria and for Nigerian companies to source inputs needed for production. In December 2018, the CBN added fertilizer to the list of covered products and announced that the list could rise to as many as 50 products. In August 2019, the CBN further announced a ban on foreign exchange for milk, but without official guidance on its implementation. Representatives of US-based exporters have expressed concern over the implications of a ban on milk products, if it were to include all dairy. The U.S. Government has repeatedly raised concerns regarding the foreign exchange restrictions both bilaterally and in the WTO.

Nigerian customs practices continue to present major obstacles to trade. Importers report inconsistent application of customs regulations, lengthy clearance procedures, and corruption. These factors can sometimes contribute to product deterioration and result in significant losses for importers of perishable goods. Disputes between Nigerian government agencies over the interpretation of regulations often cause delays, and frequent changes in customs guidelines slow the movement of goods through Nigerian ports.

The Nigerian government has made modest progress on its pledge to conduct open and competitive bidding processes for government procurement. The BPP has made a variety of procurement procedures and bidding information publicly available on its website. Nigeria’s National Assembly operates its own procurement process that has not been subject to BPP oversight and that has lacked transparency. Although US companies have won contracts in a number of sectors, difficulties in receiving payment are common and can discourage firms from bidding. Supplier or foreign government subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements. The Guidelines require ministries and development agencies to source and procure all computer hardware only from NITDA-approved OEMs. The Nigerian Oil and Gas Industry Content Development Act also mandates a maximum quota of five percent of all positions that can be allotted to expatriates and minimum host community requirements among other local content stipulations.

pdf Download the Report (3.99 MB)

• Fact sheet on major developments

• Fact sheet on agricultural measures

• Fact sheet on digital trade issues

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pdf Zimbabwe: 2019 Article IV Consultation Staff Report (3.31 MB) (IMF)

Zimbabwe is experiencing an economic and humanitarian crisis. Macroeconomic stability remains a challenge: the economy contracted sharply in 2019, amplified by climate shocks that have crippled agriculture and electricity generation; the newly introduced ZWL$ has lost most of its value; inflation is very high; and international reserves are very low. The climate shocks have magnified the social impacts of the fiscal retrenchment, leaving more than half of the population food insecure. With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing. The government that came to office following the 2018 elections adopted an agenda focused on macro stabilization and reforms. This was supported by a Staff Monitored Program from the IMF, adopted in May 2019, but is now off-track as policy implementation has been mixed.

Policy uncertainty and missteps have limited the development of the economy - export diversification has not occurred and FDI remains well below peers (Text Figure 3). During 2009–18, gold, platinum, and tobacco accounted for about 60% of total export earnings. Further, about 66% of Zimbabwe’s exports were to South Africa. Annual FDI was 1.6% of GDP during 2004–2017, compared to the SSA average of 2.6% and well below similarly endowed peers - Zambia attracted 6% of GDP during 2004–2017. Weak institutions, policy inconsistencies, and fiscal indiscipline have eroded investors’ confidence.

There is a risk of a social backlash as the adverse exogenous shocks and stabilization policies needed to promote macro stability affect vulnerable sections of the population. The fiscal retrenchment and currency reform, followed by the sharp depreciation, exacerbated the disastrous effects of the climate shocks by cutting real wages, wiping out domestic savings, increasing poverty in both rural and urban areas, and generating fiscal drag on activity. Risks for another drought in 2020 are also high, which would weigh on the economy’s recovery and exacerbate food shortages and BOP pressures. If no additional donor support materializes in the first half of 2020, pressures for large central bank financing of the budget will increase further. A return to excessive money printing would result in further depreciation, high inflation, and further erosion in the confidence of the new currency (Annex II).

Note: On February 24, 2020, the Executive Board of the IMF concluded the Article IV consultation1 with Zimbabwe. As the Board meeting and the policy discussions with the authorities on which the staff report is based occurred before the COVID-19 became a pandemic, the staff report does not reflect the implications of this development. While highly uncertain at this stage, it is clear that COVID-19 will adversely impact the economic outlook for Zimbabwe and require additional health-related spending and international support. COVID-19 will make it even harder to balance the policies needed to restore macroeconomic stability with those to address urgent social needs.

Continuing our daily set of updates on the trade-related impacts and consequences of the COVID-19 pandemic:

1. The WTO Secretariat has released a new report on trade in medical products critical for the global response to the COVID-19 pandemic. The report traces trade flows for products such as personal protective products, hospital and laboratory supplies, medicines and medical technology while providing information on their respective tariffs. Trade in medical products which have now been described as critical and in severe shortage during the COVID-19 crisis totalled about $597bn in 2019, accounting for 1.7% of total world merchandise trade according to the report. The ten largest supplying economies accounted for almost three-quarters of total world exports of the products while the ten largest buyers accounted for roughly two-thirds of world imports. Commitments made under various WTO negotiations and agreements have helped slash import tariffs on these products and improve market access, with the average tariff on COVID-19 medical products standing at 4.8%, lower than the 7.6% average tariff for non-agricultural products in general. The statistics show that 52% of 134 WTO members impose a tariff of 5% or lower on medical products. Among them, four members do not levy any tariffs at all: Hong Kong, China; Iceland; Macao, China; and Singapore. The report, however, also identifies markets where tariffs remain high. Tariffs on face masks, for example, can be as high as 55% in some countries. Extract (pdf):

   World imports of medical products totalled $1011bn in 2019 (Table 1), a 5% increase from 2018. Together with exports, trade in these medical products amounted about $2 trillion and accounted for 5% of the total of merchandise trade in 2019. As shown in Chart 1, the largest category by value were the “medicines”, which represents 56% of the total value of medical product imports, followed in a distant second place by “medical supplies” with a share of 17%. “Medical equipment” and “personal protective equipment” have the lowest share with 14% and 13%, respectively.

   During the last three years, the United States was the largest importer of medical products, accounting for 19% of total world imports in 2019. The ranking and shares are consistent during the 2017-2019 period. As shown in Table 1, Germany had a share of 9%, followed by China and Belgium (6%). The other importers who make up the top 10 importers include the Netherlands, Japan, UK, France, Italy, and Switzerland. In terms of the relative importance of medical goods vis-a-vis each country’s total imports, Belgium and Switzerland’s imports of medical goods represent around 13% of their total imports. Among the top 10 importers, this share is smallest for China, for which medical imports represent 3% of its total imports. Except for China, the shares of the Member in the top 10 are all higher than the global average share, 6%.

2. UNCTAD’s latest Investment Policy Monitor shows that investment policy responses to the coronavirus pandemic vary from country to country. They include measures supporting investors and domestic economies in general and policies to protect critical domestic infrastructure and industries, particularly in the health sector. At the international level, the G20 and G7 leading economies have issued statements in support of investment and global value chains. The pandemic is expected to have a lasting impact on future investment policymaking. The IPM shows (pdf) that during the pre-crisis review period (November 2019 - February 2020), investment liberalisation, promotion and facilitation accounted for three-quarters of newly adopted policy measures - a ratio broadly in line with the longer-term policy trend. At the same time, a further increase in measures related to the screening of foreign investment for national security reasons was observed.

3. The OECD’s Covid-19 Country Policy Tracker is compiling data, analysis and recommendations on a range of topics to address the emerging health, economic and societal crisis, facilitate co-ordination, and contribute to the necessary global action when confronting this enormous collective challenge. This new series brings together policy responses spanning a large range of topics, from health to education and taxes, providing guidance on the short-term measures needed in affected sectors and a specific focus on the vulnerable sectors of society and the economy. Beyond immediate responses, the content aims to provide analysis on the longer-term consequences and impacts, paving the way to recovery with co-ordinated policy responses across countries.

   In brief:

   IMF Executive Board approves $109.4m disbursement to Rwanda to address COVID-19 pandemic

   IMF’s Catastrophe Containment and Relief Trust: policy proposals and funding strategy

   As of March, more than 30 countries had introduced policies to support MSMEs: this ITC blog highlights measures that are of direct relevance to MSMEs engaged in trade or investment.

   WFP: Africa, especially, at risk of food shortage due to Covid-19

   Non-profit international organisation IFDC calls on ECOWAS not to subject fertilizers to any restrictions on importation, distribution or use within its 15 member countries during the coronavirus outbreak.

   Covid-19 outbreak could be Indian pharma’s big opportunity in Africa