Building capacity to help Africa trade better

Inquiry into UK’s Africa Free Trade initiative: Written submissions


Inquiry into UK’s Africa Free Trade initiative: Written submissions

Inquiry into UK’s Africa Free Trade initiative: Written submissions
Photo credit: APPG-TOP

The All-Party Parliamentary Group on Trade Out of Poverty (APPG-TOP) received written submissions supporting the Inquiry into UK’s Africa Free Trade initiative from the following individuals and organisations. The Hearings took place on 19 April 2016.

Trade Law Centre (tralac)

We would like to comment of the following topics:

  • Key opportunities and challenges for boosting trade in Africa, and promoting regional integration

  • Suggestions for development partners like the UK in boosting trade and investment in Africa

Key opportunities for boosting trade in Africa and promoting regional integration

The capacity to produce tradeables competitively is a fundamental challenge for African countries. Industrialisation requires innovative policy support, but, the market integration agenda already adopted by RECs, to support industrialisation and specifically value chain development, which features as a specific objective in this context, should not be neglected. This agenda provides the scope for achievement of economies of scale, attracting foreign direct investment and the associated learning and technology transfer processes – the dynamic benefits of regional integration.

The broader scope of competitiveness development should infuse the negotiations to establish the CFTA. This requires, for example, recognizing the inter-connections between the trade-in-goods and the trade-in-services agenda’s, as well as a trade facilitation agenda that complements the WTO Trade Facilitation Agreement. The design and scope of the CFTA should be such as to facilitate progress by willing partners in specific priority areas, while others may take longer to achieve such progress.

More work on an African services agenda is essential; we may have to re-visit the approach of the General Agreement on Trade in Services (GATS) with its strong focus on market access. The agenda needs to reflect the important connections between services sectors; the collection of ICT services is closely related to financial services innovation and provision, to education and health care services. These connections have to be accommodated and supported by an appropriate services governance regime. The role of regulation in services sectors should enjoy central focus. Shaping a sui generis services agenda for Africa; embedded in services sector development strategies, with key focus on appropriate levels of regulatory intervention, and regulatory cooperation or harmonization should be an integration priority.

Successful trade facilitation initiatives are built on policies implemented by governments as solutions to specific barriers to trade experienced by firms, service providers and traders operating in their economies. This involves national and regional action and reforms. Increased risk management at borders, and stronger coordination among border agencies will reduce the time spent at border posts, and hence costs. Improved access to trade information through trade portals will reduce the scope for rent seeking and corruption related to cross-border trade which impinge particularly heavily on small traders, many of whom are women.

Suggestions for support by development partners

  • Enhancing rules-based governance by i) supporting regional courts, ii) assisting private parties to access these courts (e.g. access to information)

  • Supporting a practical trade facilitation agenda (e.g. inter-agency cooperation and national and cross-border levels, computerisation of processes and single window facilities, reduction of duplication of documentation and processes)

  • Regional integration for competitiveness (support at enterprise-level; access to information on regional agreements, regional market opportunities)

  • Infrastructure services regulatory reform (transport, energy, communication, water – identification of appropriate regulatory interventions to support cross-border economic activities (cooperation/harmonisation) through access to reliable supply, quality and competitively priced services)

  • Standards and technical regulations (technical and institutional capacity for quality assurance and compliance with requisite standards for public policy objectives)

Overseas Development Institute (ODI)

This brief is a submission from Neil Balchin, Linda Calabrese and Max Mendez-Parra (Overseas Development Institute). We have organised this brief in three sections, following the questions outlined in the terms of reference.

  1. Trade Policies and trade facilitation systems in Africa and their effects on wealth creation, employment and poverty reduction

  2. Findings from recent work on vulnerable groups and informal cross-border trade

  3. The role of development partners in boasting trade and investment in Africa

Trade facilitation promotes productivity growth, employment creation and poverty reduction by raising volume and diversification of exports, reallocating resources to more productive activities, improving access to inputs and enabling participation in value chains.

Physical (hard) and regulatory (soft) infrastructure are both important, and are in fact complementary in order to facilitate trade. The indirect effects of regional infrastructure on households, firms and governments need to be considered.

Aid for Trade has been effective in raising exports and improving the investment climate. Future Aid for Trade interventions need to aim at reducing the cost of trading; address binding constraint to growth; ensure effective coordination between donors and recipients; address the transnational and regional level constraints and; improve M&E of impacts, outcomes and outputs.

Development finance institutions play an increasingly important role in promoting growth, especially when they focus on in power generation and on the financial sector, that can in turn catalyse investment in other sectors.

Paul Brenton, Lead Economist, Trade and Competitiveness Global Practice, World Bank Group

This submission outlines three aspects of the importance of regional trade integration in Africa for development and poverty reduction.

First, there are great challenges, but consequently there is enormous untapped potential through regional integration in Africa to deliver poverty reduction and development gains. Second, we must take a fresh look and reinvigorate some regional integration initiatives if the continent is to become better integrated. Finally, that the World Bank Group and other development partners should be ready to intensify support for those governments and regional communities that are committed to use deeper regional integration as a key tool to drive economic diversification and poverty reduction.

The challenge being faced – and the opportunities that exist if these challenges can be overcome

Regional trade integration has long been a strategic objective for Africa yet, despite some success in eliminating tariffs within regional communities, the African market remains highly fragmented. A range of non-tariff and regulatory barriers still raise transaction costs and limit the movement of goods, services, people and capital across borders throughout Africa.

Barriers to trade continue to limit integration in all African regional groupings. By imposing unnecessary costs on exporters these barriers raise prices for consumers, undermine the predictability of the trade regime, and reduce investment in the region.

United Nations Economic Commission for Africa

Trade facilitation reforms must be considered a priority for Africa to increase its trade competitiveness. The United Nations Economic Commission for Africa has estimated significant benefits for Africa if it implements trade facilitation reforms in addition to agreeing a Continental Free Trade Area.

Despite recent progress on general trade facilitation reforms, Africa has made limited progress on implementing paperless trade. The average African country ranks in the worst performing 25 percent of all emerging and developing countries on the cost of border processing and document requirements.

LDCs will require assistance so that they can benefit from the 2013 Trade Facilitation Agreement. Development partners should focus their support on the most vulnerable countries, particularly landlocked countries, and the fast-tracking of trade facilitation measures in agriculture and agro-processing.

New technologies and tools can help to support trade facilitation, but there is a need to provide knowledge on e-customs and digital trade to less-informed LDCs and assist Governments to upgrade their countries’ infrastructure and enact legislation on electronic signatures and transactions.

In order to ensure inclusive and gender sensitive growth, structural transformation policies should first focus on transforming the agricultural sector through promoting value addition and agro-processing and creating avenues for African countries to compete in agro-based global value chains.

There is a need to strengthen social safety nets and safeguards for those who lose their jobs or livelihoods as a result of trade liberalisation, particularly vulnerable rural communities.

Trade facilitation would help intra-African trade and integration and is an important target for UK Aid-for-Trade. However African countries require assistance in formulating bankable Air-for-Trade projects. Aid-for-Trade to Africa is currently highly concentrated on certain countries.

The UK should consider technical cooperation with African countries on regulatory reform drawing from the UK’s expertise in designing regulations and institutions that balance improved business environment with the environmental and social imperatives behind regulation.

The UK could consider assisting African countries with financial integration with the UK, particularly in using London’s financial markets to raise finance for both the public and private sectors.

Light Years IP & African IP Trust

A time-sensitive set of opportunities!

At a time when consumers report that they believe that only 28% of established brands add value to our quality of life and wellbeing, new African-owned brands have a better opportunity than at any time in the last 50 years.

The greatest impact on trade, poverty and employment comes from positioning African export businesses and cooperatives in control of retail brands and with some control of the supply chain up to the door of the final retail store where brand-intensive consumption occurs.

This submission gives practical examples of positioning showing much higher impact than any other method at surprisingly modest cost, therefore, more cost-effective.

In our opinion, it is important that the UK international trade effort does not miss this timing opportunity.

African Centre for Economic Transformation (ACET)

The UK’s Africa Free Trade initiative (AFTi) focuses on three key issues which stand in the way of Sub-Sahara Africa’s (SSA) capacity to benefit from trade; namely, trade barriers, both tariff and non-tariff, and poor “hard” infrastructure. Overcoming them requires continued commitment from African governments and donor support.

Thankfully, the All-Party parliamentary Group inquiry raises questions beyond the issues presently covered by AFTi. Two such questions are the focus of our submission; namely, “What are the key opportunities and challenges for boosting trade in Africa, and with the rest of the world, in specific sectors such as agriculture, manufacturing and services?” and “What is the role for development partners like the UK in boosting trade and investment in Africa… through promoting two-way trade and investment with African countries?

For SSA to fully unleash its export potential two issues, presently not covered by AFTi, need to be tackled. On both issues the UK, as an influential Member of the EU could help ensure EU’s trade policies support, or at least “do not harm” Africa.

  1. Market access to rich consumer markets, in view of the potentially adverse impact of the Transatlantic Trade and Investment Partnership (TTIP), presently negotiated between the EU and the US on Africa’s exports. This submission advocates not just preventing negative impact, but using TTIP to improve Africa’s access to both the US and the EU market;

  2. The need for Africa to increase trade within the region. Given the limited institutional trade capacity of most SSA countries, Africa’s already overburdened trade negotiators urgently need to focus on deeper integration within the African market. This submission advocates that trade negotiators are given the breathing space to do so, by proposing a moratorium on all trade negotiations with third parties that would require reciprocity, including on the implementation of the EPAs.

Salamat Ali and Chris Milner, University of Nottingham

It is now widely recognised that trade costs need to take account of both policy barriers and non-policy or natural barriers. The former includes tariffs and non-tariff measures, shipping line connectivity, and infrastructure performance, whereas the later comprises geographical or natural factors, such as distance and the lack of common language, etc.

The main focus of research to-date has been on the trade volume effects of trade costs. One area which has received much less attention is the impact of trade costs on the composition of trade.

The compositional effects of high trade costs on developing countries’ manufactured exports

Trade costs in Africa are relatively higher than those in other developing regions. These high trade costs affect not only the export volume but also the export mix of African countries. Reducing these costs would not only increase the volume of Africa’s manufacturing exports, but would also help countries in this region to diversify their manufacturing exports and increase the share of more complex and trade cost-sensitive, manufactured exports.

Infrastructure and institutional reform is central to a broad concept of trade facilitation, which will be required for export diversification and structural transformation in the Africa region.

Oliver Morrissey, University of Nottingham

This brief submission, from Oliver Morrissey, Professor of Development Economics at the University of Nottingham, in a personal capacity, has two aims:

  1. To clarify that while trade can support a poverty-reduction strategy, trade policy cannot ensure that trade is pro-poor and gender equitable because trade is not targeted on either the poor or specific genders.

  2. Growing and processing agricultural products remains the largest sector in terms of employment in sub-Saharan Africa and food accounts for the largest share of consumption spending, so agricultural trade is the most important sector for poverty reduction.

Development partners can support African trade by providing finance for trade facilitation and supporting intra-regional trade. The UK, either itself or with the EU, cam promote this in Economic Partnership Agreements with Africa. African countries are more likely to benefit from such regional trade partnerships if there are allowed some trade policy discretion to support sectors with potential for intra-regional trade. Investment in physical trade infrastructure and administrative trade facilitation measures is an important way to provide financial support for sustained growth in trade with the potential to benefit the poor.

International Trade Centre

The International Trade Centre (ITC) is a joint technical cooperation agency of the World Trade Organisation (WTO) and the United Nations dedicated to supporting the internationalisation of small and medium-sized enterprises (SMEs), a mandate that combines focus on expanding trade opportunities with fostering of inclusive sustainable development through economic empowerment and job creation. ITC is 100% Aid for Trade agency, helping translate trade opportunities into trade impact for good.

ITC’s three objectives are to (i) strengthen the integration of the business sector of developing countries into the global economy, (ii) improve the performance of trade support institutions for the benefit of SMEs, and (iii) improve the international competitiveness of SMEs.

Trade, aid and investment play a critical role in generating the means of transformative change required to end extreme poverty by 2030. The Sustainable Development Goals adopted September 2015, reaffirm this position and have put trade, as well as technology, at the centre as an enabler of inclusive sustainable economic growth, job creation and poverty reduction, with equal opportunities given to all, in particular women empowerment.

ITC is responding to the 2030 Agenda. It’s SME Competitiveness Outlook, which combines analysis, thought leader insights and case stories about developing country SMEs in international markets together with the supporting country profiles, emphasises that SMEs are the ‘missing link’ to inclusive growth and a key element of development policy. For the gains from trade to be distributed equitably and benefit the economically vulnerable – and the majority of employees – SMEs have to be at the heart of our development efforts.


Email This email address is being protected from spambots. You need JavaScript enabled to view it.
Tel +27 21 880 2010