tralac’s Daily News selection
Wamkele Mene: Digital trade the only tool for Africa’s economic recovery (EWN)
AfCFTA secretary-general Wamkele Mene said he had gone back to the drawing board to review his priorities post the COVID-19 pandemic and digital trade may be the only way to awaken the sleeping giant. Mene said digitisation was already a priority before for the AfCFTA before COVID-19, and its advantages were even more pronounced now. He said the African Union was already working to develop digital trade infrastructure to enable the trade agreement to be effectively implemented. “I’m talking from a customs point of view and for goods-in-transit, it’s very important to establish trade facilitation digital platforms but we don’t have them yet at the pan-African level, which is what we are striving towards and this crisis has underscored the need for us to accelerate that work and rely more on digital trade platforms,” said Mene.
In Mene’s vision, the AfCFTA will ensure that rules of origin support Africa’s industrial development objectives. He wants car manufacturers in African countries to use African components that can be manufactured even by countries that don’t have an automobile strategy. He sees more agro-processing because of its high-value addition and contribution to food security, as well as centres of excellence that will benefit not only countries that are industrialised like South Africa but all countries. “Ghana, Nigeria, Rwanda, Kenya, Uganda, Morocco and South Africa all have an auto strategy – all of them see a potential for inward investment if they establish a manufacturing base for automakers to come and invest. We can harness this through the agreement into a pan African value chain of automobiles and other sectors.”
The WTO Secretariat has published a new information note looking at how the COVID-19 pandemic has affected e-commerce, including the implications for cross-border trade. It notes the increased use of e-commerce as consumers adapt to lockdowns and social distancing measures and draws attention to several challenges, such as the need to bridge the digital divide within and across countries. The COVID-19 pandemic has made it clear that e-commerce can be an important tool/solution for consumers in times of crisis, and that it is also an economic driver, including for small businesses. However, the pandemic has highlighted not only the importance of digital technologies in general, but also several vulnerabilities across the world. These experiences and lessons raise some useful questions:
Should new and practical e-commerce solutions to enable the fast and secure crossborder movement of goods and services be considered, to help economic recovery and job creation after the COVID-19 pandemic?
Network capacity and higher bandwidth services have proved to be crucial, not only during the pandemic itself, but also for e-commerce and economic inclusion in general. Even more importantly, they have demonstrated their role in the delivery of essential services and the equipment of less connected communities when faced with a global crisis. Given these insights, what can WTO members do to improve communications networks and services?
What can the WTO do to assist e-commerce in developing countries and LDCs, to reduce the digital divide and promote economies that are more resilient to possible future crises or shocks?
Are there additional actions relating to e-commerce at the WTO that can be taken to assist MSMEs?
South Africa: Statement by SARS Commissioner Edward Kieswetter (SARS)
Whilst it is early days, our initial view is that revenue performance will be lower than the February Budget announcement by between 15%-20%. This means that revenue under-recovery could move up to R285bn. From the preliminary assessment of revenue performance of the first month we can report: Import tax overall down on prior year by 19.7%: Import VAT down 25% on prior year - tax value R1.6bn, Customs duties down 11.8% on prior year - tax value R100m. [Download: pdf Statement (1.20 MB) ]
Botswana to slowly end lockdown (Xinhua)
The country’s legislators will convene an emergency parliament meeting on Wednesday to discuss new regulations expected to usher in opening of businesses and schools, under strict supervision. According to proposed regulations, presented by President Mokgweetsi Masisi to parliament on Tuesday, the Southern Africa country wants to gradual allow businesses, traders or school to operate after satisfying Health Services Director or any authorized official that they will prevent the spread of COVID-19.
The Great Shutdown: How COVID-19 disrupts supply chains (ITC)
The factory shutdown in the EU will have the strongest repercussion for the supply-chain exports of other countries. Why? Because the EU is the largest importer of manufacturing inputs (China is the largest exporter), the largest market for three of the world’s five geographic regions, and highly integrated into global value chains. The EU is the main importer of manufacturing inputs from both Africa and Asia and buys almost as much of manufacturing inputs from Latin America as the United States does. Our estimations suggest that EU imports of manufacturing inputs will drop by $147bn, out of which $101bn is intra-EU trade, and $46bn is imports from other regions. China and the United States come second and third, with shutdowns in China and the United States triggering the reduction of imports of manufacturing inputs by $42bn and $38bn respectively (see the columns in the table below). The combined reduction amounts to $228bn, or 2.4% of the total manufacturing imports by the G3, or 11% if only GVC trade is considered.
African exporters may lose over $2.4bn in global manufacturing value-chain exports due to the shock caused by factory shutdowns in the G3. About three quarters of this loss is caused by the temporary disruption of the supply chain linkages with the EU, while the remaining quarter of the reduction being caused by the shutdowns in China and the United States. When it comes to global value chains, Africa is one of the least integrated regions, and hence experiences the least severe effects of supply-chain disruptions originating in the G3. [The authors: Olga Solleder, Mauricio Torres Velasquez]
At the epicenter of this turmoil are multinational corporations - companies that made investment decisions to fragment and relocate production, in a process that has shaped the geography of global value chains over the last three decades. These enterprises account for 22% of global output and contribute about 70% of total trade—particularly in sectors highly involved in global value chains, such as motor vehicles, electrical equipment, chemicals, and electronics (figure 2). Multinationals also contribute a substantial share of employment. U.S. multinationals alone employed 42.3 million workers worldwide in 2016 and represent 22% of total private industry employment in the United States. Multinational companies in the Netherlands created approximately 1.4 million full-time jobs in 2014—almost 20 % of all full-time jobs created in the country. In China, multinationals employ more than 26 million workers, accounting for 6.4% of total urban employment. [Note: This blog is part of a three-part series on the way in which global value chains are affected by COVID-19]
UNCTAD’s latest Investment Policy Monitor has been posted: This Special Issue of UNCTAD’s Investment Policy Monitor (pdf) analyses what this bleak forecast means for investment policymaking and provides an updated overview of specific investment policy measures that countries have undertaken since the release of UNCTAD’s latest regular IPM in early April 2020. Looking ahead, the pandemic is likely to have lasting effects on investment policy making. It may reinforce and solidify the ongoing trend towards more restrictive admission policies for foreign investment in industries considered as being of critical importance for host countries. At the same time, the pandemic may result in more competition for attracting investment in other industries as economies strive to recover from the crisis and disrupted supply chains need to be re-established. The crisis may also enhance the utilization of online administrative approval procedures for investors and staff. It is also expected that the post-pandemic period will witness an acceleration of countries’ efforts to reform their IIAs to ensure their right to regulate in the public interest, while maintaining effective levels of investment protection. The magnitude of the post-pandemic reconstruction task and the priorities in this process will differ from country to country. However, all governments will face the common challenge of how to make the best use of investment policies in bringing their economies back onto a sustainable development path. In addition to national efforts, successful international cooperation will be crucial, especially for the recovery of developing countries, including least developed countries.
Paul Akiwumi, Giovanni Valensisi: COVID-19 exacerbates poverty risks in the poorest countries (UNCTAD)
To provide a preliminary appraisal of the impact of COVID-19 on LDC poverty levels, UNCTAD has examined the International Monetary Fund’s growth forecasts in GDP per capita (in constant 2011 international dollars) and looked at the effects, stemming from its downward revision following the outbreak of the pandemic. This allows the direct comparison of poverty estimates consistent with the IMF’s reassessment of growth forecasts between October 2019 and April 2020. The results of this UNCTAD research are highlighted in Figure 1: the worsening economic outlook following the emergence of COVID-19 entails an increase of over three percentage points in LDC poverty headcount, with more than 33 million additional people living in extreme poverty. While this exercise is fraught with uncertainties, there are good reasons to believe that these figures are – if anything – a conservative estimate.
Tanzania: Rapid eTrade Readiness Assessment (pdf, UNCTAD)
As Tanzania continues to diversify its economy, it has ambitions to become a regional e-commerce hub. Although the country is geographically well-positioned to reach this goal and has made strides in key areas such as mobile money and logistics infrastructure, an enabling environment across policy areas will be key. The Government should take an integrated approach to policy action, with a clear focus on mainstreaming e-commerce into national development planning and engaging more strongly with the private sector. Deeper trust in digital commerce will also need to be developed among consumers, merchants and investors. To overcome the interconnected challenges and create an enabling e-commerce environment, the Government should begin developing a national e-commerce policy and strategy. This should be led by the Ministry of Industry and Trade and be anchored in the National Committee on Trade Facilitation. E-commerce vendors and the start-up/innovation community should become part of the NCTF, as part of broader efforts to strengthen public-private sector dialogue and partnerships.
The potential benefits of e-commerce are not limited to external trade; it can also spur domestic markets and provide a key avenue for income generation for women. Most Tanzanian MSMEs today, many of which are owned or operated by women, are unable to immediately access international markets. The large domestic market, as well as the market of the East African Community Customs Union, can serve as stepping stones. The Government has signalled interest in establishing a national e-commerce platform, which could help Tanzanian MSMEs deepen their access to domestic and regional markets.
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