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Building capacity to help Africa trade better
tralac Newsletter • Issue 35 • October 2021

Welcome to the October tralac newsletter

 

Welcome to the tralac newsletter. This month we include a collection of Blogs covering what we call “systemic issues” (such as AfCFTA related developments about which we regularly report) and topical developments such as the climate crisis.

The COP26 climate summit began on Sunday 31 October, bringing together world leaders from more than 100 countries (but not all the big polluters), private sector representatives, civil society organisations and notably a large number of impressive young climate activists.  The stakes are high; pitting the future of the planet against specific economic interests, some of which are fighting hard against measures to reduce greenhouse gases and transform economy and society for a sustainable future. We include two blogs here, and will be bringing out a newsletter post-COP26 to address the climate agenda and summit outcomes in more detail.

The recent South African ban on the use of imported cement in relation to Government contracts falls in the latter category. The ban applies irrespective of the level of Government involved. This is an important development since it gives effect to official localisation programmes in South Africa. The more traditional remedies (anti-dumping duties or tariff increases) have not been utilised. They may still follow. Does this signal a new trend? Will others follow?

The judgement by the International Court of Justice in The Hague earlier this month on the maritime boundary dispute between Somalia and Kenya is discussed in another Blog. This is not a typical trade issue but important for regional integration, access to maritime resources, and the peaceful settlement of border related disputes; of which there are several in Africa. Many go back to former times and how colonial borders were drawn and inherited after independence was gained.

Kenya initially participated in the proceedings in The Hague after direct consultations between the Parties had failed, but then pulled out of the proceedings some months ago, apparently in anticipation of an adverse ruling. Kenya has now rejected the Court’s judgment. This is a worrying development. What happens next? How will the United Nations respond and how will this dispute be settled? And what does it tell us about intra-African dispute settlement, including disputes over trade issues? Disputes about the interpretation or application of binding legal instruments (in this case the United Nations Convention on the Law of the Sea) are ultimately to be decided by an impartial adjudicating forum in a final and binding manner. This case shows that the familiar argument that intra-African disputes are settled through consultations, is not true. Consultations are always the opening bid. When they do not result in a settlement, adjudication must follow. And the outcome must be respected.

The Newsletter carries a Blog on “dirty money” and money laundering. It shows the consequences for the bigger economy (in this instance the negative signals sent out in respect of attracting foreign investment) when domestic governance fails in respect of controls over banking services. In a globalised economy, there are international monitoring structures that will detect such failures. They have consequences.

In another “money-related” Blog we discuss trade costs. This touches on an old theme and we quote the Director-General of the World Trade Organisation, Dr Ngozi Okonjo-Iweala about the implications of Africa’s hight trade costs for the ambitious goals of the AfCFTA.

The implementation of trade remedies and safeguards under AfCFTA rules is analysed. We note that very few African States have the legislation and domestic structures in place to implement these remedies and safeguards. We discuss the reasons for this situation and express the hope that things will change for the better. There are plans in the AfCFTA instruments to beef up the capacity of African States to collect reliable trade data and to develop the ability to undertake the necessary investigations. This will be a positive trade governance advancing development, in which transparency and due process should be part of the reforms.

We also have two contributions dealing with the RECs and their future. We recall that they have been around for a long time and that some of them have made important contributions to economic integration on the continent. They are not going to disappear any time soon, and neither do the AfCFTA legal instruments indicate that they should. Overlapping membership challenges need to be sorted out and the RECs’ role as building blocks of the AfCFTA must still be clarified, but developments such as the confirmation of the acquis adds to their legitimacy.

We look forward to your feedback.

The tralac team.

UN Climate Change Conference (COP 26)

 

COP 26’s collective action problem

The 26th Conference of Parties (COP 26), to be held in Glasgow in November, is in danger of falling a long way short of the ambitious goals of host country, the United Kingdom (UK). At COP 26, the UK Government wants to ‘accelerate the phase-out of coal, curtail deforestation, speed up the switch to electric vehicles, encourage investment in renewables, protect and restore ecosystems, build defences, warning systems and resilient infrastructure, and make good the COP 15 promise (Copenhagen, 2009) to raise US$100 billion per year to fund low carbon development in poorer countries.’

COP 26 is intended to be a particularly important landmark as it is the occasion where the 196 signatory countries (to the United Nations Framework Convention on Climate Change (UNFCCC), are required deliver on the commitment made at the historic 2015 Paris Climate Agreement. In 2015 all signatories agreed to present their Nationally Determined Contributions (NDCs) – which outline their carbon emissions reduction goals – and to update these by 2020. They have been allowed an extra year to do so thanks to the disruption of the Covid-19 pandemic. But only 93, fewer than half, had done so by the 20th September 2021.

 

Climate finance matters for COP 26

At the Conference of Parties held in Copenhagen in 2009 (COP 15), 23 developed countries pledged to commit a total of US$100 billion per year to finance measures to deal with climate change in poorer nations. Going into COP 26 this year, less-developed countries are concerned that this goal has not been met once in the preceding twelve years and their disillusionment could prove to be both a hurdle to the seriousness of their future climate commitments and a distraction at the conference.

The promised climate finance assistance is notably smaller even than the sums spent globally to subsidise the production or consumption of fossil fuels in 2019 – US$178 billion in 2019, according to the OECD. It appears even more trivial next to the United Nations International Panel on Climate Change (UNIPCC) consensus estimate that it will require investments of US$2.4 trillion per year into the energy ecosystem, through to 2035, to keep the increase in global temperatures below the benchmark 1.5°C.

tralac Webinar: Preparing for MC12


Focus on Agriculture, Special and Differential Treatment and Fisheries Negotiations


In the run up to the World Trade Organisation’s 12th Ministerial Conference, to be held from 30 November to 3 December 2021 in Geneva, Switzerland, tralac will be hosting a webinar focusing on Agriculture, Special and Differential Treatment, and Fisheries Negotiations.

The discussions will include speakers and experts from the World Trade Organisation, South Centre, CUTS International, the Commonwealth Secretariat, the Department of Trade, Industry and Competition of South Africa, and DALRRD. Opening and concluding remarks will be delivered by Trudi Hartzenberg, Executive Director, tralac.

Date: 8 November 2021

TIme: 11:00 - 12:30 (GMT+2)

Registerhttps://bit.ly/3m5CZ04

tralac Trade Briefs


Should the RECs disappear in order to have the AfCFTA?
 

There are high expectations about the benefits that the African Continental Free Trade Agreement (AfCFTA), an ambitious and comprehensive plan for the establishment of a continent-wide free trade area, could bring. According to the World Bank, as African economies continue to struggle to manage the consequences of COVID-19, the AfCFTA can provide an anchor for long-term reform and integration. Expectations for real income gains and the lifting of nearly 100 million people out of extreme and moderate poverty are, however, conditional on effective implementation once all foundational elements of the Agreement have been concluded.

As at October 2021, tariff schedules, rules of origin, and conditions for trade in the five priority services sectors are still being negotiated. Once in place, the private sector and investors can expect preferential trade and opportunities for doing business across Africa’s many borders to become a reality. That is, after all, the raison d’être of the AfCFTA.

How will the Trade Remedy Regime of the AfCFTA impact on Trade Governance?
 

The legal instruments of the African Continental Free Trade Area (AfCFTA) provide for a detailed regime to implement Trade Remedy and Safeguard measures, modelled on World Trade Organisation (WTO) principles and procedures. One gets the impression that this aspect of trade governance could be an important new continental development, even though very few African States are active users of these measures.

How will the AfCFTA trade remedy regime work and what may change? Will the AfCFTA bring about a dedicated intra-African Trade Remedy and Safeguards arrangement? How may such a development impact on African countries’ ability to use multilateral Trade Remedies and Safeguards?

Recent Blogs

Dirty Money in domestic Economies and some of the Consequences. Financial services is one of the priority sectors on African Continental Free Trade Area (AfCFTA) Trade in Services agenda. The financial services sector plays a critical role in national

South Africa bans the use of imported cement on government-funded projects. The South African Government has banned the use of imported cement in state-awarded contracts. Bidders for state projects will only have their offers considered if they agree to source all

Making the AfCFTA work: Some additional Requirements. States have jurisdiction over their territories. They control the movement of goods, services, capital, and persons across borders. But no country can prosper in isolation. Trade agreement

International Court rules on the Maritime Boundary between Kenya and Somalia. In 1829, the English adventurer Sir Walter Raleigh wrote: “For whosoever commands the sea commands the trade; whosoever commands the trade of the world commands the riches of
 

Regional Resources

tralac maintains a collection of regional and national trade-related resources including copies of the texts and annexes of regional and bilateral trade agreements, copies of various regional protocols, memoranda of understanding and tariff offers, and copies of national legislation and trade-related policy documents.


VIEW ALL TRALAC REGIONAL AND CONTINENTAL RESOURCES

Please note: Free registration is required to download resources.

Latest AGOA news

2021 AGOA Forum

Following the cancellation of the 2020 AGOA Forum as a result of Covid-19, various events around the 19th AGOA Forum took place physically and virtually during October 2021. Early October the Civil Society AGOA Forum event was hosted by the Civil Society Organizations (CSO) Network in Miami under the theme “U.S.-Africa Trade and Economic Cooperation: The Way Forward”. Private sector (“AGOA and Beyond”) and AGOA Ministerial (“Building Back a Better U.S.-Africa Trade and Investment Relationship”) sessions followed in the second half of October. See a readout of USTR Ambassador Tai’s opening remarks at this link.
 
In her remarks, Ambassador Tai identified Africa’s relatively low Covid pandemic vaccination rates as an important factor that needs to be addressed in order to avoid Africa’s economic post-pandemic growth rates lagging behind much of the rest of the world, while also committing further U.S. support to the delivery of vaccines, both through direct donations as well as by supporting investments in vaccine manufacture in Africa through the International Finance Corporation (IFC). On AGOA, USTR Tai asks what improvements can be made, for example to help small and women-owned businesses find new markets, and how the conditions necessary for a long-term, durable trade and investment relationship between the US and Africa can be created. One such mechanism is through supporting African integration, with $450m in trade capacity building support already provided to Sub-Saharan Africa annually; these will in time also help with maximising th­­e outcomes of the AfCFTA. Ambassador Tai further expressed excitement about the Protocol of the AfCFTA that will promote Africa’s Women and Youth when it is negotiated. At the multilateral level, the U.S. is committed to helping to “rejuvenate and rebuild the WTO’s Committees” and “return the organization to its consultative, problem-solving foundations.”

  • Download Ambassador Tai’s remarks here.

  • Download AGOA Forum agendas, communiqués and presentations here. Additional documents will be added as they become available.

Key trade stats for AGOA beneficiaries for the year to end August 2020 / 2021
 

 
2020 to end Aug
2021 to end Aug
% Change
Aggregate exports to US: $ 12.2 billion $ 18.1 billion + 48%
- - (Share) of AGOA exports: $ 2.5 billion $ 4.3 billion + 70%
Total US import duties on combined imports from AGOA beneficiaries: $ 26.0 million $ 42.4 million + 63%
 
Top 10 Exporters (AGOA trade only) 2020 YTD Aug exports to US 2021 YTD Aug exports to US Change 2020/21
South Africa 1,113 1,931 73%
Nigeria 316 809 156%
Kenya 282 326 16%
Angola 40 300 644%
Ethiopia 159 178 12%
Lesotho 158 171 8%
Madagascar 134 162 21%
Congo-Kinshasa 2 145 7033%
Ghana 115 85 -27%
Côte d'Ivoire 49 43 -12%
All AGOA countries 2,521 4,297 +70%


US imports entering under AGOA/GSP preference increased by 70% in the year to end August 2021, compared to the equivalent period in 2020. Of the leading ‘AGOA exporters’, South Africa’s year-on-year AGOA trade grew by 73% (+81% yoy to July), cementing its position as the leading exporter of AGOA-eligible goods.
 
The key driver for this performance is strong export growth in motor vehicles (+137% yoy, $758m), articles of jewellery (+174% yoy, $276m) and ferroalloys (++52% yoy, $245m), the three leading exports from South Africa that utilise AGOA preferences. Citrus fruit, by some distance in fourth place, saw a small increase to $57m (+1% yoy). Kenya, the third largest exporter of AGOA, saw an increase in AGOA exports by 16% (+11% yoy to July) to $326m while those from Ethiopia increased by 12% to $178m. Both Nigeria (Rank 2) and in particular Angola (Rank 4) have significantly increased their AGOA exports during 2021 due to higher oil exports to the US, and given global oil price movements, this trend is expected to continue over the next months.

National AGOA strategies

During the first part of 2021 a number of new or updated National AGOA Strategies have been published. These – and previous strategies from other AGOA beneficiaries – are available on AGOA.info in the AGOA Strategies section. The most recent publications involve Namibia’s (new) and Botswana’s (updated) AGOA Strategies, which were facilitated through the support of the USAID TradeHub.
 
Various AGOA-related infographic styled brochures have been updated recently and are available to download from AGOA.info, with others to follow shortly. See for example Namibia, Botswana, Kenya, Nigeria, Ghana, Ethiopia and Lesotho, as well as the textiles and apparel-specific sector document.

AGOA Business Connector

The AGOA Business Connector is an online facility on AGOA.info to help enable trade and business connections between producers, exporters, importers, sourcing agents, trade-related service suppliers including trade finance, logistics and related services, support organisations (such as business chambers and exporter associations and others), both from within sub-Saharan African AGOA beneficiary countries and the United States. Registered users are also able to list their businesses or professional trade-related service on the platform, and to communicate with other listings through a messaging facility. 
 
> Download the AGOA Business Connector Brochure at this link
> Register on AGOA.info and list your business or service

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