tralac’s Daily News selection
The first round of talks for the proposed Kenya-USA FTA will take place from 9-17 July. Multi-video: CS Maina unveils negotiation guide
Proposed Kenya-United States FTA Agreement: Negotiation principles, objectives and scope (GoK)
Kenya and the US, in February 2020 jointly announced their intent to initiate negotiations on a Free Trade Agreement between themselves. Towards this end, the Ministry of Industrialization, Trade and Enterprise Development, having consulted and heard from various stakeholders, developed Negotiating Objectives and Principles to guide the negotiations for this first bilateral FTA between Kenya and the US. This is now made available for public review.
The following principles will be articulated and guide the negotiations:
The FTA will be WTO compatible and will allow for application of the ‘Special and Differential Treatment’
The FTA will be an instrument for economic and trade development
The FTA negotiations shall respect the commitments that Kenya has taken at Multilateral (WTO), Continental (AfCFTA), Regional (EAC, COMESA, TFTA) and Bilateral level
The FTA will preserve and build on AGOA acquis
The Negotiations shall cover substantially all trade
Any EAC Partner State that did not participate in these negotiations at the outset should be allowed to join the negotiations, subject to terms and conditions already agreed or accede to the concluded FTA.
Related: The East African Trade Network has issued a statement opposing the FTA
Building trade integration dynamics in the Indian Ocean Rim Association: A technical analysis (Institute for International Trade)
This technical report, prepared for the Australian Government Department of Foreign Affairs and Trade, examines the evolution of trade, investment and regional integration amongst IORA member states since 1997 and makes observations about how to enhance intraregional trade to support ongoing discussions in this regard. Section 2 briefly describes the methodologies used in the technical analysis, encompassing data sources and techniques. It also sets out a few caveats regarding the availability of key data, as well as limitations of certain data sets.
Section 3 anchors the trade and investment analysis in a high-level overview of IORA members’ economic propositions. This builds on previous assessments, as indicated in the corresponding text. Two levels of supplementary analysis are provided: aggregate IORA members’ data set against a reference group of countries and regions including IORA dialogue partners; and a brief review of economic performance and structural change within IORA members.
Section 4 discusses IORA members’ trade performance, starting with a comparison of their trade performance over the past two decades with comparator regions, for both goods and services. It then analyses the current trade structure of IORA members disaggregated by trading partners, product categories, and individual IORA member. The section concludes with an analysis of trade flows among sub-regions within the IORA membership.
Section 5 changes focus from trade in final goods to trade in parts and components through the prism of GVC participation. It considers the degree to which IORA members collectively, and individually, are engaging in GVCs. Then the intensity of trade in parts and components, and countries from which these products are sourced, is mapped in order to judge how far IORA members have maximised the developmental advantages to be gained from GVCs. Section 6 explores investment flows into and from IORA members, in comparative perspective.
Nigeria Development Update (World Bank)
The report, pdf Nigeria in times of COVID-19: Laying foundations for a strong recovery (2.04 MB) estimates that Nigeria’s economy would likely contract by 3.2% in 2020. This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020. If the spread of the virus becomes more severe, the economy could contract further. Before COVID-19, the Nigerian economy was expected to grow by 2.1% in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points. The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus.
Oil represents more than 80% of Nigeria’s exports, 30% of its banking-sector credit, and 50% of the overall government revenue. With the drop in oil prices, government revenues are expected to fall from an already low 8% of GDP in 2019 to a projected 5% in 2020. This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy. Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance.
Extracts: Nigeria’s Border Closure - Impacts and the Way Forward
In light of the COVID-19 pandemic, the closure order has now been extended indefinitely and broadened to include any kind of cross-border activity. This analysis highlights six key impacts of Nigeria’s border closure and subsequent COVID-19 restrictions. These comprise:
an increase in inflation, especially for food products;
lower household consumption due to higher food prices, with the average Nigerian now having to pay two percent more for the same basket of goods;
a decrease in welfare standards among Nigeria’s neighbors, especially Benin;
a marked shift in formal trade to Nigeria and away from Benin, leading to some improvement in customs revenues;
a short-term but not potentially not sustained reduction in smuggling; and
a decline in trade for some private sector businesses, although precise outcomes vary greatly depending on the industry sector, import requirements, and customer base of individual firms.
The COVID-19 crisis provides an opportunity for Nigeria to cooperate more closely with its neighbors on shared priorities, including public health, counterterrorism, trade and investment. Nigeria’s industries will stand to benefit from streamlining cross-border trade. Making transit procedures and logistical services more efficient would also present advantages. Among the anticipated benefits of these measures would be to strengthen Nigeria’s participation in regional and global value chains, lower the prices consumers face, accelerate economic diversification, and increase value addition and competitiveness of domestic firms.
East Africa Regional Market and Trade Update: June 2020 (WFP)
On regional cross border trade: COVID-19 related disruptions and delays at the Kenya-Tanzania border led to reduced cross-border trade volumes of both maize and beans from Tanzania to Kenya in April and May 2020, compared to the same period last year and the five-year average. Beans imported from Ethiopia into Kenya also dropped drastically during the same period. Despite some reported challenges initially at the Malaba and Nimule Borders that increased delivery lead-times, overall, maize, sorghum and beans imports from Uganda into Kenya and South Sudan in April-may 2020 was slightly higher than the same period in 2019. This was after an initial dip in cross border trade volumes in March following COVID-19 related restrictions.
There are 11 main trade corridors that WFP is using to deliver food to multiple in-country destinations in the region. Status of major corridors is as follows.
Mombasa to: Uganda, Rwanda, Burundi, DRC - fully functional with limited delays at border crossings because of testing of divers
Mombasa to: Uganda and South Sudan through Nimule - fully functional
Mombasa to Juba South Sudan through Nadapal - partly functional
Mombasa to Ethiopia through Moyale - partially functional
Central Corridor and Lake Tanganyaki Corridor:
Dar es Salaam Tanzania to Burundi, Rwanda and Uganda - fully functional
Dar-es Salaam Burundi through rail and Lake Tanganyika - fully functional
Zambia-Burundi through Lake Tanganyika - fully functional although with quarantine restrictions at Bujumbura Port
Berbera-Addis Ababa-Gambela corridor - partially functional
Djibouti-Addis Ababa-Gambela corridor - fully functional
Southern Somalia Trade Corridor - most roads closed or inaccessible although ports are operational. Most roads in northern regions are functional
Sudan-South Sudan Corridor - partially functional-the border is open for humanitarian cargo, after obtaining clearance & approval from Authorities. Road convoys are also experiencing challenges.
Sudan-South Sudan Corridor - partially functional - From Ethiopia, road and river access to South Sudan is allowed only for essential goods.
Exploring the impact of COVID-19 in Africa: A scenario analysis to 2030 (ISS)
This report presents three scenarios on the potential impact of COVID-19 in Africa and compares that to a pre-COVID-19 baseline, using the International Futures forecasting platform, Ifs. The likely impacts are then examined on economic growth, per capita income, poverty and the attainment of selected SDG targets with a forecast horizon to 2030. The report concludes with four main policy recommendations aimed at reducing vulnerability and strengthening Africa’s resilience. These recommendations aim to make a robust contribution to the debate about policy options for Africa facing the international community, African governments and in-country stakeholders. In addition to the scenarios presented in this report, a parallel qualitative approach undertook a series of three dialogues that provided a platform for deliberation between economists, political analysts, public health experts and other development practitioners from Africa as well as global experts on Africa. The impact of COVID-19 on current and future trends and drivers of change was discussed. The focus of the study was on 15 African countries considered to be broadly representative of Africa’s developmental, regional and cultural diversity. [The authors: Jakkie Cilliers, Marius Oosthuizen, Stellah Kwasi, Kelly Alexander, TK Pooe, Kouassi Yeboua, Jonathan D Moyer]
The report enlightens policy makers and citizens by presenting concrete case studies showing how exchange of information has been useful in tax investigations carried out by several African tax administrations to improve tax transparency and tackle tax evasion. It shows significant progress has been made on two pillars of the Africa Initiative: (i) Raising political awareness and commitment in Africa and (ii) Developing capacities in African countries in tax transparency and exchange of information.
Particularly, progress has been made through the expansion of exchange of information networks of African countries of up to 3 262 bilateral relationships compared to 2 523 in 2018. The increase in exchange of information requests translated into additional tax revenue for countries. More African countries can now use cross-border exchange of information in their tax investigations.
As a step forward, the African Union is committed to playing a leadership role in the implementation of the Africa Initiative on tax transparency and keeping the discussions at the high political level to ensure that all Member States join the Initiative. The Union will also make sure that Member States prioritise domestic resource mobilisation by improving good governance and increasing tax transparency among jurisdictions. The African Union will spare no effort to work with policy decision makers and tax administrations of its Member States, the Global Forum and development partners to ensure the sustainable financing of its development.
Note: 33 African countries responded to the Tax Transparency in Africa 2020 questionnaire: Angola, Benin, Botswana, Burkina Faso, Cameroon, Cabo Verde, Chad, Côte d’Ivoire, Eswatini, Gabon, Ghana, Guinea, Guinea Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Namibia, Niger, Nigeria, Rwanda, Senegal, Seychelles, South Africa, Tanzania, Togo, Tunisia, Uganda.