tralac’s Daily News Selection
Diarise: 2020 IMF-World Bank Annual Meetings (12-18 October)
Next stages of WTO DG selection process: General Council Chair Walker announces timelines
Commemoration of the first edition of Africa Integration Day: Closing remarks by H.E. Amb Albert M. Muchanga, African Union Commissioner for Trade and Industry
As we bring the commemorative activities to a close, I wish to conclude with three main messages:
The first message is a word of thanks to all our partners who have worked tirelessly with us to make this first commemoration of Africa Integration Day a memorable event. Let me mention the Regional Economic Communities, AfroChampions Initiative, AeTrade Group, African Development Bank (AFDB), Africa Export-Import Bank (Afreximbank), African Economic Zones Organisation (AEZO), AUDA-NEPAD, African Energy Commission, United Nations Economic Commission for Africa (UNECA), United Nations Conference on Trade and Development (UNCTAD), Trade Law Centre (TRALAC); AUC Departments and AUC Missions abroad. Special thanks to H.E. Mr. Mahamadou Issoufou, President of the Republic of Niger and Champion of the AfCFTA; H.E. Obasanjo, and H.E. Helen Sirleaf Johnson for their active participation in some of the activities as well as the messages of support such as the one delivered by the King of Eswatini.
The second message is one of encouragement to African Union Member States and the Regional Economic Communities. I urge them to take advantage of the AfCFTA by putting in place all the necessary measures, so as to fully benefit from this huge single market of 1.27 billion consumers so that when we reconvene next year for the second edition, there will be even more results and achievements to celebrate. This will require working with all segments of the society; and in particular encouraging and facilitating intra-African private investment in national economies through the provision of conducive investment climates; collaborating with the private sector and academia in research and development; and working with the African Youth to harness their talents and innovative potentials, to support the industrialisation and economic diversification of the Continent a key lever to its trade and economic integration.
The third and final message is that of strategic focus to deliver on key programmes of trade and economic integration outlined in Agenda 2063; so that year after year, we can build on our present collective achievements and success to realize the next milestones on our journey towards the African Economic Community, which is to establish the African Common Market by 2023. If there is one main take away from this commemoration; it is, as stated by the Chairperson of the Union, H.E. Mr. Cyril Ramaphosa, President of the Republic of South Africa; the Leader of the AfCFTA, H.E. Mr. Issoufou Mahamadou, President of the Republic of Niger and H.E. Mr. Moussa Faki Mahamat, Chairperson of the AU Commission in their Joint Statement, and I quote: “the future of Africa as regards recovery [from the COVID-19 Pandemic], development and resilience lies in accelerating its economic integration through the implementation, at the level of Africa, of the AfCFTA. The AfCFTA offers the best platform for us to build and deliver inclusive and sustainable development by using the large market space to mobilise investment.
pdf Closing Remarks by AU Commissioner for Trade and Industry Albert Muchanga on Africa Integration Day - 9 July 2020 (268 KB)
The impact of the COVID-19 crisis on trade: Recent evidence from East Africa (Brookings)
This paper uses Kenyan trade data published up through May 2020 to provide a preliminary evaluation of the impact of the COVID-19 crisis on regional trade in the East African Community. Paradoxically, given the prevailing pessimism surrounding the prospects for global trade, Kenya actually experienced a significant improvement in exports in the first quarter of the year, together with a moderation of imports, leading to a marked decline in the trade deficit. While the initial shock to Kenyan trade caused by the COVID-19 crisis initially looked dramatic in terms of the declines registered, this paper reveals that i) the shock is not so alarming when seasonality is taken into account; ii) re-exports and imports have been the primary foci of impact; and iii) domestic exports have actually performed extraordinarily well under the circumstances, with incremental growth since 2019. Highlighted policy recommendations (pdf):
A coordinated EAC-wide approach is required to ensure trade continues to flow and vulnerable countries are cushioned from the fallout. Regional protocols and initiatives like TradeMark East Africa’s $23m Safe Trade Emergency Facility which focuses on making ports, borders, and supply chains safe for trade, are critical in this respect. The East Africa region and Africa in general need more initiatives of this nature for intraregional trade to remain buoyant in these challenging times.
In the face of disruptions to traditional transport corridors, there is a need to be flexible in the utilization of different modes of transport. Kenya’s rapid decision to retool its passenger aircrafts for cargo is an example. Rwanda has followed a similar strategy and found success: Its air cargo (imports and exports) increased from $57m in April to $134m by May. Indeed, whereas in May 2019, just 18% of Rwandan exports were shipped by air, by May 2020 that figure had reached 73%. Air transport is, of course, more costly and as a long-term measure it may not be viable for all traded goods. However, as a short-term measure, it is a way to avoid the collapse of both export revenues and essential imports.
Additional policies may be required to support border communities where livelihoods are heavily dependent on informal cross-border trade. This trade is typically dominated by women traders, and they and their dependents are thus likely to suffer disproportionately from the restrictions on cross-border trade.
For Kenyan trade, imports have been the principal victim of the crisis, declining by a quarter over the three months since the crisis began (March-May 2020). This trend will have implications for long-term economic growth—capital goods imports have declined markedly. But it could also set the scene for a revitalization of national and regional industry, as local producers step up to fill the void created by the sharp lull in imports.
Against this backdrop, the urgency of implementing the AfCFTA is even more palpable. All the evidence suggests that its rapid implementation, together with new trade facilitation measures, could significantly mitigate COVID-19’s negative impact on the continent’s economy. [The authors: Andrew Mold, Anthony Mveyange]
Uganda Economic Update: Digital solutions in a time of crisis (World Bank)
The increased use of digital technologies during the COVID-19 lockdown such as mobile money, on-line shopping, on-line education, digital disease surveillance and monitoring, and dissemination of public health messages shows the great potential to support faster economic recovery and strengthen resilience against similar shocks. “The digital space in Uganda is very innovative – and has quickly adapted during the pandemic. Fintechs have offered payment options, and digital solutions have reinforced and enabled the health sector’s calls to social distance and limit movement and contact. These solutions, if upscaled and developed to their potential would boost the digital economy and maximize its benefits to Ugandans,” said Tony Thompson, World Bank Country Manager for Uganda. Extract:
The COVID-19 pandemic is placing new pressure on the current account, reversing gains made in the first half of FY20. The external shortfall shrank to 4.8% of GDP during the first half of FY20 from 7.7% of GDP during the same period the year before. In the first half of FY20, the merchandise trade deficit more than halved (from 8.1% of GDP to 3.8% of GDP). Cheaper oil imports and a continued reduction in project-related government imports fully offset higher spending on non-oil imports. Meanwhile, exports grew faster, at 7.4% (compared to 6.2% a year ago), driven by larger exports of gold, coffee, maize and cotton. The country’s two biggest exports – gold and coffee – grew by 58 and 10 percent, respectively. Remittances grew by 7% during the first half of FY20, keeping the income account in surplus. The COVID-19 crisis is, however, reversing these gains and is expected to widen the current account deficit from 8.6 percent of GDP in FY19 to 10.4% of GDP in FY20 (Table 2). The combined fall in merchandise exports, tourism earnings and remittances are expected to outweigh the decline in imports.
pdf Uganda Economic Update, Fifteenth Edition: Digital Solutions in a Time of Crisis (9.49 MB)
Daniel Murenzi: Digital technology re-opening Africa (New Times)
To address the challenge, the EAC is working with The Commons Project, a Swiss-based non-profit public trust that builds digital services for public good. Using an app called CommonPass, travellers will share their recent test in a way that ensures authenticity of results and the privacy of the traveller. CommonPass is being implemented through a collaborative design sprint that starts on July 9 with national, regional and global stakeholders that include the design firm IDEO and The World Economic Forum, with the support of the Rockefeller Foundation. Travellers begin their journey using CommonPass by taking an accredited lab test that can be shared electronically to their mobile phone. That certificate is a digital analogue to the widely used “yellow card”, an international certificate of vaccination. Moving forward, our major priority is to ensure that Covid-19 does not disrupt implementation of the African Continental Free Trade Area, which will improve so many lives by removing trade obstacles between 28 African countries. This is a major achievement, which must be protected and progressed further. [Note: The author is the head of information technology at the East African Community]
Nigeria: Monitoring COVID-19’s impact on Nigerian households (World Bank)
The pandemic has disrupted employment and income-generating activities for large numbers of ordinary Nigerians. These impacts are risky for the majority of working Nigerians who report their main activities to be in farming or family businesses. The pandemic’s employment impacts have been large, affecting non-farm enterprises and those working in the commerce and service sectors the most. As many as 42% of respondents who were working before the outbreak reported that they were not working at the time of the survey. The second round of the NLPS was completed in June 2020 and is expected to provide further insights. Forthcoming Round 2 results will provide more information on the impacts of COVID-19 on employment and livelihoods, food security and access to basic goods, human development, and many other issues.
The UK and Sub-Saharan Africa: Prosperity, peace and development co-operation (UK Parliament)
We find that UK trade with and investment in Sub-Saharan Africa has flatlined over the last decade. Concerted action by the Government will be needed to address this. The UK–Africa Investment Summit in January 2020 was a high profile beginning, but follow-up will be required. We also identify leaving the EU as an opportunity for the UK to re-cast its trade relationships in the region, and remedy some of the defects in the EU’s Economic Partnership Agreements. We were surprised to hear that no detailed work has yet been done to consider how to offer better access to African exporters.
The UK’s economic relationship with Sub-Saharan Africa - profiled recommendations:
There is appetite within Sub-Saharan Africa to improve trade with the UK; the UK should explore these opportunities with countries in the region. African partners are working to develop the AfCFTA and are likely to seek new agreements which are consistent with this planned continental agreement. (Paragraph 416)
In its post-Brexit trade policy, the UK should explore ways of giving better access to Africa’s agricultural exports and supporting the processing in Africa of a greater proportion of its agricultural products. (Paragraph 417)
UK trade with and investment in Sub-Saharan Africa has flatlined over the last decade. The appetite of UK businesses is uncertain, and a concerted effort will be needed by the Government if it is to deliver on its goal significantly to increase trade with and investment in the region. (Paragraph 430)
The Government must ensure that its provision of export credits is consistent with its commitments to tackling climate change. It should match its announcement at the UK–Africa Investment Summit that it will no longer invest in new coalmining or power production projects with similar commitments on gas and oil. (Paragraph 432)
Education is an important UK sector for UK–Sub-Saharan African trade The visa regime for potential students from the region is unduly onerous and requires reform. (Paragraph 433)
Remittances from the UK to Sub-Saharan Africa are given too little profile in the narrative of the UK’s economic relationship with the region. Remittances from the UK exceed aid and charitable giving to Sub-Saharan Africa, and provide essential economic support. (Paragraph 447)
pdf The UK and Sub-Saharan Africa: Prosperity, peace and development co-operation (3.39 MB)
Rwanda: World Bank Country Partnership Framework 2021-26 (World Bank)
The World Bank Group Board of Executive Directors today discussed the Rwanda Country Partnership Framework for the period 2021-26. This CPF will guide the Bank Group’s work for the next 6 years, supporting the Government of Rwanda’s strategic priorities as laid down in the National Strategy for Transformation. The CPF also supports the recovery from the COVID-19 impacts. The proposed program of engagement is built around 5 strategic objectives: i) improving human capital; ii) improving conditions for private sector development; iii) expanding access to infrastructure and the digital economy; iv) increasing agricultural productivity and commercialization; and v) intensifying urban agglomeration.
The WTO, the International Chamber of Commerce and B20 Saudi Arabia yesterday issued a joint statement pointing to the diminishing availability of trade finance. Warning that gaps between trade finance supply and demand could seriously impede the ability of trade to support post COVID-19 economic recovery, they are urging private and public-sector actors to work together to address shortages. The joint call for action, which highlights the importance of cross-border trade in driving economic recovery from the downturn caused by the COVID-19 pandemic, has its origins in a WTO Trade Dialogues meeting with the private sector in May, where concerns about trade finance featured prominently. Given the scale of the shortfall, the public and private sectors should work together:
Enable a rapid transition to paperless trading by: (a) making progress in removing legal requirements for trade documents to be in hard-copy paper format; and (b) fast-tracking the adoption of the UNCITRAL Model Law on Electronic Transferable Records to provide a sound legal basis for the use of e-documents in the processing of trade finance transactions.
Exchange views on how regulatory authorities could help mitigate constraints hindering the deployment of essential trade finance - particularly to MSMEs.
Share risk to support trade finance during this period, especially among export credit agencies, multilateral development banks, and private sector banks, including in the short term segment of the market.
Further scale development bank schemes, if possible, to provide risk mitigation and liquidity for trade finance transactions, especially in countries that need it the most.
pdf Trade Financing and COVID-19: Joint WTO, ICC and B20 Statement (176 KB)
Ten steps to mainstream gender in trade deals (ITC)
It’s no secret that mainstreaming gender in free trade agreements creates more inclusiveness. Yet most accords don’t even mention gender - and those that do, typically fail to offer women the same opportunities as men to participate in trade. The International Trade Centre’s new report, Mainstreaming Gender in Free Trade Agreements, addresses this shortfall with 10 key explicit preambles, explicit access to skill development and compulsory dispute settlement mechanisms are among the recommendations in the report, launched at a joint event with the Organization of Women in International Trade. More than a quarter of the 292 agreements in force today and notified to the World Trade Organization have at least one provision that explicitly mentions gender. ‘The last three years have been phenomenal in this respect,’ the report says. This report builds on analysis of 73 trade pacts in Commonwealth countries, and the results are similar. Just 28% use best practices to mainstream gender concerns, meaning they have considerable scope to improve. Only 5% are advanced, as they use best practices and need little or no upgrade, and 40% make no explicit reference at all to gender considerations. Extract (pdf):
Some findings are not surprising. For example, only about 5% of the accords have an advanced level of responsiveness. Almost two-thirds have a limited level of responsiveness, and about 28% are evolving. Canada is the only country among the 25 that has two advanced FTAs. This shows that Canada is a frontrunner at negotiating gender-responsive trade pacts. Many African and Asian countries have agreements with the lowest levels of responsiveness. Yet, most of the FTAs classified as evolving are found among African countries. These accords do not have a stand-alone chapter on gender or women, or exhaustive provisions on cooperation activities – but they have used a handful of provisions with binding force and obligatory expressions.
Some of these trade agreements even include gender-explicit minimum legal standards. In fact, three African countries – Kenya, Rwanda and Uganda – are party to an FTA with advanced gender responsiveness. The clusters formed mostly among East African countries with almost all evolving FTAs are informative. East African countries have signed on to various plurilateral trade agreements among themselves, most of which are evolving in terms of their gender responsiveness. Furthermore, many of these evolving accords are closer to ‘advanced’ than ‘evolving’ trade agreements in other geographical regions. This is because many African countries have included women’s economic empowerment as a key concern related to development.
Global chain reaction: Unprecedented trade measures to tackle COVID-19 (ITC)
Governments have put in place a number of trade policy responses to contain the pandemic and its consequences. The daily tracker on the ITC Market Access Map, officially launched on 9 April, shows that more than 100 countries have implemented 128 temporary export measures and 134 countries have implemented 157 temporary import measures to combat COVID-19. The exponential rise in extraordinary export and import measures coincided with WHO’s pandemic declaration on 12 March. However, by mid-April the curve of adopted measures began to ‘flatten’ and, in May-June, some countries began lifting COVID-19 trade measures. As of mid-June, 15% of temporary measures have been lifted, mostly relating to export restrictions. By end of June, 7% more lapsed, mostly on the import side. However, more than half of the measures do not have a specific lapse date, with many attached to a date of lifting the national emergency. It is crucial to continue monitoring the measures, as their dismantling appears to be more gradual than their enactment. A possible explanation is the lingering second wave of mass infections - however, protectionist motives and the new status quo could also play a role.
Staying alert and responding to sudden trade-policy changes will become part of a new daily life of small businesses in the near future. To grapple with the new trade reality, they should benefit from the ITC market intelligence tools, such as the COVID-19 dashboard on temporary trade measures and other tools, which provide timely trade intelligence, including real-time data on temporary barriers and liberalizations on medical gear, food and other products. [The authors: Yannick Joller, Dzmitry Kniahin]