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UNCTAD events on the margins of the 10th WTO Ministerial Conference in Nairobi
In partnership with the Government of Kenya, UNCTAD has organized a series of high-level events on the margins of the 10th Ministerial Conference of the World Trade Organization (MC10) in Nairobi.
The African Union Commission, the Commonwealth Secretariat and the World Free Zones Organization will also partner in some of the events.
These events will bring together leading voices of the international trade community and serve as a conduit for enriching debates on relevant trade and development issues.
A selection of background documents prepared by UNCTAD are summarised below. Additional documents may be downloaded here.
The Continental Free Trade Area: making it work for Africa
In June 2015, at the 25th Summit of the African Union (AU) held in South Africa, African Heads of Government agreed to the creation of the Continental Free Trade Area (CFTA) by 2017 through negotiations on liberalization of trade in goods and in services.
The initiative presents major challenges as well as opportunities to boost intra-African trade. While strengthening the multilateral trading system remains vital, a parallel negotiating process to expeditiously launch the CFTA and monitor the implementation of the agreement is also important. Also in order to multiply the benefits of the CFTA and promote development regionalism in Africa, a comprehensive vision of trade and development needs to be in place.
Expanded markets for African goods and services, unobstructed factor movement, and reallocation of resources should promote economic diversification, structural transformation, technological development and enhancement of human capital.
The CFTA must be ambitious in dismantling barriers and reducing costs to intra-African trade, and improving productivity and competitiveness. The intraregional trade liberalization needs to be contextualized in a broader developmental framework that will provide benefits in terms of realizing Africa’s Agenda 2063 and the UN 2030 Agenda for Sustainable Development.
Development oriented regionalism will contribute spearheading Africa’s achievement of development goal, build resilience to external financial and economic crises, and foster inclusive growth. It would have spill-over benefits in terms of helping foster peace, security and political stability in the continent.
UNCTAD, working in partnership with the African Union Commission, African States and other development partners is committed to supporting the attainment of these objectives embodied under the CFTA.
» The Continental Free Trade Area: making it work for Africa (PDF, 297 KB)
Enhancing the Contribution of Export Processing Zones to the Sustainable Development Goals
Over the past decade, the popularity of Export Processing Zones (EPZs) has grown in many countries across the global south. There are now over 4,000 EPZs, which is over 3,000 more than 20 years ago. Some countries have made the promotion of such zones central to their economic development strategies, while others have questioned their contribution to national development. Meanwhile, the increasing implementation of international trade rules mean that some of the traditional incentives for EPZs, such as tax breaks for exports, are no longer in line with WTO rules. In that context EPZs, also called Special Economic Zones (SEZs), need to innovate new means of maintaining and developing their competitiveness.
This exploratory report suggests that changes taking place in the global market mean that Export Processing Zones (EPZs), and Special Economic Zones (SEZs) more generally, can be restructured as centres of excellence for sustainable development. Such restructuring would increase the appeal of EPZs to multinational enterprises (MNEs) and their suppliers, while simultaneously contributing to the implementation of the Sustainable Development Goals (SDGs), also known as ‘Global Goals’.
EPZs can enhance competitiveness through a ‘role reversal’: switching from a narrow focus on cost advantages and lower standards to become champions of sustainable business. EPZs can find new grounds for competitiveness through meeting the growing expectations on MNEs and their suppliers to exercise good social and environmental practices. “Next generation” EPZs can gain a competitive advantage by not only providing conventional commercial benefits (such as modern infrastructure and expedited permitting), but by also providing cost-effective support for good environmental and social practices for firms operating within their boundaries.
A ‘Framework for Sustainable Economic Zones’ is offered to guide consideration of EPZ standards, infrastructure and administrative assistance to enhance sustainability performance.
Addressing Regulations and Non-Tariff Measures to Strengthen Regional Integration and Sustainable Growth
Exporters need to comply with extensive product requirements: tolerance limits for pesticide residues, hygienic practices during production, processing methods, microbiological criteria of the final product and certification, among others. These regulations, found in all developed countries and increasingly in developing countries, represent an immense challenge for exporters, importers and policymakers. UNCTAD research found that the aggregate restrictiveness of regulations is two to three times higher than tariffs. Furthermore, regulations are particularly concentrated in sectors of export interest for developing countries.
Due to their impact on trade such technical regulations are considered as non-tariff measures (NTMs). NTMs are policy measures, other than ordinary customs tariffs, that can have an economic effect on international trade. NTMs thus include a wide and diverse array of policies that countries apply to imported and exported goods equally to domestic producers but still have important restrictive and distorting effects on international trade. However, these measures cannot simply be eliminated. These regulations can however become non-trade barriers if the trade restrictiveness, whether or not deliberate, exceeds what is needed for the measure’s non-trade objectives.
This can and should be addressed although it may be difficult to be clearly identified. An exporting country may perceive the hygienic production requirements for apple juice as too strict, while the importing country could argue that these requirements legitimately pursue the highest level of consumer safety.
» Addressing Regulations and Non-Tariff Measures to Strengthen Regional Integration and Sustainable Growth (PDF, 3.81 MB)
Building the African Continental Free Trade Area
Some suggestions on the way forward
The formation of the CFTA would be a timely initiative. It will provide a framework for national and regional coordination in the trade and economic sphere to spearhead Africa’s implementation of the new development agenda in the post-2015 period. As pointed out by UNCTAD, achieving an economic integration process in Africa that is people-centred and development-oriented is a key to building up the continent’s resilience in addressing and recovering from global financial and economic crises, as that of 2008. Such “developmental” regionalism brings added benefits of peace, security and political stability on the continent.
Once fully implemented, the CFTA would offer African countries considerable benefits, and gains would be even higher if trade liberalization is complemented by trade facilitation measures, elimination or reduction of non-tariff barriers, strengthening of regulatory frameworks and improved infrastructure. A recent statement by the AUC articulates succinctly the expected gains while pointing out that “Africa’s integration is not a matter of choice. It is rather imperative”.
According to most estimates, the opening of the regional market to African goods and services will increase intra-African trade significantly. It has been estimated, for instance, that the removal of tariffs on intra-African trade could raise their share in total African trade from about 10.2 per cent to 15.5 per cent from 2010-2022. With enhanced trade facilitation measures the gains would double to reach 21.9 per cent. Moreover, most of the increase in trade from the removal of tariffs would be felt in the manufacturing sector, as intra-African trade has a relatively higher industrial content than trade of African countries with the rest of the world. A further boost to intra-African trade would arise from the removal of non-tariff barriers, and gains would be augmented if informal traders are better integrated into the formal trade channels.
The path towards an accelerated pan-African economic integration, however, presents formidable political, economic, legal and functional challenges. These need to be tackled efficiently, using efficiently scarce resources. To multiply the benefits of the CFTA – expanded markets for goods and services, unobstructed factor movement, new investment opportunities, and the like – an ample vision of trade, investment and business facilitation needs to prevail.
» Building the African Continental Free Trade Area: Some suggestions on the way forward (PDF, 6.04 MB)
If you care about Least Developed Countries, care about Non-Tariff Measures
The sustainable development goals call for a doubling of least developed country (LDCs) export. Two main elements to achieve this goal are to increase productive capacity and improve market access conditions for LDCs. These two elements are closely related as even the best market access conditions cannot be exploited if productive capacity is unable to meet increasingly demanding international markets. Although DFQF treatment remains essential for LDCs, actual market access is increasingly determined by other requirements many of which are more linked to productive capacity. These requirements are generally referred to as Non-Tariff Measures (NTMs) to trade and include a wide range of requisites from technical standards (TBTs) and sanitary and phytosanitary (SPS) measures to antidumping, rules of origin and other administrative provisions.
All these measures add to the cost of trading for all exporters. However, the costs of compliance with many of these measures are asymmetrical across exporters because compliance depends on technical know-how, production facilities, and an infrastructural base that, while usually available in developed and emerging markets, is often lacking in many LDCs. In short, the presence of NTMs often makes LDCs exporters unable to compete in international markets. Moreover, the presence of NTMs is particularly large in sectors of fundamental importance for LDCs growth potential such as textile and apparel and many agricultural sectors. All considered, about two-thirds of LDC exports are subject to some form of NTMs. A concern for LDCs is that the trade regulatory framework makes a substantial part of LDCs products uncompetitive or even unmarketable and therefore diverted to less profitable markets.
Policy responses are important. Least developed countries package at MC10 should go beyond DFQF to include technical cooperation and trade facilitation mechanisms to help them comply with the asymmetric and increasing costs associated with NTMs. Global regulatory convergence towards international standards to the extent possible is important so that LDCs do not face different regulations in each market. Furthermore, ensuring effective and coherent regulations within LDCs is important to strengthen participation in regional and global value chains.
» If you care about Least Developed Countries, care about Non-Tariff Measures (PDF, 1.4 MB)
Modalities for tariff negotiations towards a Continental Free Trade Area (CFTA)
Some key issues for consideration
The CFTA project started from the premise on the necessity to boost intra-African trade by fast-tracking continental FTA to support development in the continent. At the root lies the observed low level of intra-African trade, which hovered around 10 per cent of total African merchandise trade over the recent past.
There is a large disparity in trade flows among different RECs. SADC’s strong propensity to import from Africa is largely a reflection of its large intra-REC trade with 80 per cent of SADC’s total intra-African imports originating in other SADC countries. This is followed distantly by COMESA and ECOWAS while its trade with UMA is marginal. Generally all RECs import most intensively from the same REC partners with notable exceptions of ECCAS and COMESA. For both regions, SADC is the largest source of imports reflecting their proximity, the level of market integration achieved and complementarity. UMA registers a high rate of intra-REC imports, as well as imports from the neighboring COMESA. ECOWAS appears to enjoy a high level of reliance on its own regional sources. In general, the intra-African trade linkage appears to follow geographical congruity (e.g., UMA-COMEAS, COMESA-SADC, ECCAS-SADC) but weak essentially between remote areas, on the North-South, EastWest, and North-Central-West axes.
One of the critical issues in the CFTA negotiations is to ascertain the adequate level of ambition for CFTA. This should be ideally informed by possible economic gains and losses that may be expected from the continental CFTA liberalization. As the objective of the endeavor is to boost intra-African trade, including with a view to doubling the share of intra-African trade by 2020, and to foster the continent’s broadbased development, the assumption of the negotiations is to aim at a highest level of ambition to realize zero tariffs for a large share of products.
» Modalities for tariff negotiations towards a Continental Free Trade Area (CFTA): Some key issues for consideration (PDF, 3.95 MB)
The oceans economy: a formidable asset for the advancement of sustainable development
The 2030 Sustainable Development Agenda contains for the first time a specific goal dedicated to the role and conservation of oceans. Sustainable Development Goal 14 aims at conserving and sustainably using the oceans, seas and marine resources for sustainable development. UNCTAD is contributing to the advancement of this goal by supporting developing countries, and particularly Small Island Development States (SIDS), in developing their own oceans economy and trade strategies. UNCTAD is also supporting developing countries in building consensus in multilateral trade negotiations that are relevant to sustainable fisheries, designing sustainable trade in fish national and regional policies and in addressing harmful incentives to conservation such as fishing and fuel subsidies.
The value of the oceans economy sectors, such as fisheries, maritime transport, coastal tourism, off-shore energy and marine bio prospecting, has been estimated at about 3 trillion USD annually. These would equal the size of the fifth economy in the world. The top fifth economies in the world, according to GDP size in 2014 were the United States of America, China, Japan, Germany and the United Kingdom.
» The oceans economy: a formidable asset for the advancement of sustainable development (PDF, 473 KB)
Non-tariff measures and Sustainable Development Goals: Direct and indirect linkages
Trade creates employment opportunities, generates income, reduces costs for industries and consumers, motivates entrepreneurs and attracts investment in essential infrastructure. Trade and economic development can generate substantial private and public financial means to pursue the social and environmental dimensions of sustainable development.
Certainly, the development impact of trade is not unconditional. Firstly, economic development requires an appropriate sequencing of trade openness as well as an enabling environment of other policy and non-policy factors. Secondly, for economic development to become inclusive, sustained and sustainable, another layer of conditions applies. For example, a positive effect on poverty reduction relies on favourable sectorial growth patterns and inclusive employment and social policies. The latter are important to address potential inequalities within economies as a result of trade.
In this context, and with falling tariffs, non-tariff measures have moved to the forefront of trade policymaking. This policy brief argues that the proliferation of non-tariff measures plays a crucial role in shaping global trade patterns and their sustainability.
» Non-tariff measures and Sustainable Development Goals: Direct and indirect linkages (PDF, 255 KB)
