This paper argues that adopting a “developmental regionalism” approach to trade integration provides the best prospects for the African Continental Free Trade Agreement (AfCFTA) to catalyse the process of transformative industrial development, cross-border investment and democracy, governance, peace and security in Africa. It also looks at the progress being made by African countries and the continent in implementing each of the four pillars of this approach.
This paper was written in celebration of the significant contribution to African integration made by Chief Olu Akinkugbe.
Dr Faizel Ismail also presented the Keynote Address at the Olu Akinkugbe Business Law In Africa Fellowship Conference held at the Lagos Business School on 28 November 2018.
The African Growth and Opportunity Act (AGOA) is a non-reciprocal preferential trade programme that the US offers to 49 sub-Saharan African countries. President Obama's decision to extend AGOA, which was set to expire at the end of September 2015, for another 10 years (2015 to 2025), was highly controversial. The Extension and Enhancement of AGOA Act, signed into law by President Obama on the 29 June 2015, had thus included many new provisions to incorporate the views of the US Congress on the implementation of the 10-year extension and the future trajectory of AGOA.
In this paper, the Extension and Enhancement of AGOA Act is analysed to elucidate the new and additional powers that the new AGOA Act provides the US Congress, the US Administration, and US business lobbies, and the implications of these changes for sub-Saharan African countries. At least three new trends in the 2015 AGOA Act can be identified: payment for preferences, institutional attrition, and a shift to reciprocity. These trends, it is argued in this paper, are potentially contrary to a more mutually beneficial relationship between the US and Africa. The paper offers some reflections on the future of AGOA.
This paper argues that the dramatic changes in the trade architecture of the world during the first decade of the new millennium have created both opportunities and challenges for Africa’s development. African countries need to develop proactive strategies to harness these new changes and use them to advance the integration of the African continent.
The paper looks at the main elements of the changes in the global trade architecture in the first decade of the new millennium. It then explains how these changes impacted on the Doha Development Round. The shift to mega-regionals and mega-bilaterals by the major developed country players and the implications of these developments for Africa’s trade with the world are also briefly discussed. The paper then sets out the changes in the trade policies of the EU and the US on Africa in the new millennium and the implications of these policies for Africa’s economic development. The paper also discusses the role of China in the trade and economic development of Africa and looks at the unfolding regional integration strategy of African countries.
See Commonwealth Trade Hope Topics Series Issue 131 The changing global trade architecture: Implications for Sub-Saharan Africa's development
Faizel Ismail is Adjunct Professor in the School of Economics, University of Cape Town and a TIPS Research Fellow
Presentation and Panel Discussion:
Faizel Ismail – TIPS and UCT: AGOA - A Game of Chicken
Malose Letsoalo – Department of Trade and IndustrY
Christopher Wood – TIPS: Making the Best of AGOA through Export Promotion Policies
Tinashe Kapuya - Agricultural Business Chamber: An Agriculture Industry Perspective
The importance of exporting to the US for any developing country cannot be downplayed. Exports to the largest economy in the world along with various support measures has been of cruciall importance to countries such as Japan and South Korea during their industrialisation, more recently for China. The Africa Growth and Opportunities Act (AGOA) recognises the potential benefits of the US market and is a mechanism to encourage African economies to export into that market. While AGOA is a unilateral agreement by the US it gives benefits to the recipient countries and also is a means to encourage investment by US firms into Africa. The potential to support industrial development is therefore significant and is part of the motivation to extend AGOA by 10 years. Outside of the oil exporters, South Africa is the largest exporter through AGOA. South Africa exports value added products including automotive components and vehicles through AGOA. The recently adopted AGOA, however, specifically required a review of South Africa, mainly as a result of the requirement for poultry and pork imports from the US into the country. The poultry issue has been resolved and a number of compromises reached. The threat of the provisions of the Act that could exclude South Africa still remain. The benefits of South Africa being part of AGOA are applicable to both South Africa and the US,; it is therefore desirable on the side of both countries to find the compromises that would enable that.
The TIPS paper to be presented also forms part of a research project undertaken for NEDLAC.
Faizel Ismail: Dr Faizel Ismail is an Adjunct Professor at the UCT School of Economics and a TIPS Research Associate. He has previously been an advisor to the dti on International Trade and Special Envoy on the African Growth and Opportunity Act and served as the Ambassador Permanent Representative of South Africa to the WTO (2010-2014).
Malose Letsoalo: Malose is the Director of Americas Bilateral Trade Relations in the International Trade and Economic Development Division (ITED) of the Department of Trade and Industry (the dti).
Christopher Wood: Chris is a TIPS economist focusing on trade and industry policy. He previously worked as a researcher in economic diplomacy at the South African Institute of International Affairs.
Tinashe Kapuya: Tinashe is the head of international trade and investment intelligence at the Agricultural Business Chamber (Agbiz).
Date: Tuesday 24 January2017
Time: 13h30 – 16h00
Venue: TIPS Boardroom, 234 Lange St, Nieuw Muckleneuk, Pretoria
RSVP by email: firstname.lastname@example.org to confirm attendance.
This paper reviews the state of play of the African regional integration agenda, inspired by the vision of the Abuja Treaty and Agenda 2063. It argues that the Continental Free Trade Area (CFTA) negotiators should adopt a “development integration” approach to ensure that the outcome of the CFTA benefits all its members. Towards this end, the CFTA negotiators should work on three parallel tracks: a) they must ensure that the architecture of regional integration is asymmetrical in favour of the Small, Vulnerable Economies (SVEs) and the Least Developed Countries (LDCs); b) they must prioritise the fullest participation of all Africa’s members in regional productive value chains that enhance Africa’s industrialisation; and c) they must facilitate the co-operation of member states towards the building of cross-border infrastructure. It is argued that this vision and agenda of the CFTA and Agenda 2063 provide Africa with a powerful negotiating mandate to drive the process of engagement between Africa and its main trading partners, multilaterally in the World Trade Organization (WTO) and bilaterally with the European Union (EU), United States (US), China and others.
This policy brief considers the three main options available to South Africa in a post-AGOA trade and investment relationship with the United States: to stay in AGOA, negotiate a Free Trade Agreement, or fall back on Most Favoured Nation terms and the Generalized System of Preferences.
Ten years is a very short time in the global economy, and by all accounts a decade is all that is left of the African Growth and Opportunity Act (AGOA). While the United States’ unilateral preferential access programme for Africa has been reauthorized three times since it began in 2000, it looks very unlikely to be extended beyond 2025.
This article looks at options and present three immediate interventions could prove useful.
What are the main changes in the global trading architecture over the past 15 years? How have these changes impacted on Africa’s economic development and the nature of trading relations between Africa and its traditional developed country partners, the European Union, the UK and the USA, and its main developing country partner, China? What are the implications of 'Brexit' - the UK's departure from the European Union - for Africa's trade? And how has the changing narrative of trade and trade integration impacted on Africa’s own strategy to integrate its market? This issue of Commonwealth Trade Hot Topics explores these questions and offers some policy recommendations for African policy-makers and trade negotiators.
See Journal of World Trade 51, no. 1 Wournal of World Trade 51, no 1 2017 by Faizel Ismail: The changing global trade architecture: Implications for Africa's regional integration and development
Faizel Ismail is Faizel Ismail is Adjunct Professor in the School of Economics, University of Cape Town and a TIPS Research Fellow
Session 4: Market integration and trade
Session 2: Regional integration and SADC
This paper investigates the extent of trade integration of Sub-Saharan African countries in the global economy as well as within the region. Four key concepts are used to assess integration: 1) trade openness, 2) the centrality in the global and regional trade network, 3) gravity model estimates, and 4) global value chain (GVC) integration. We find that the region's trade openness has increased strongly since the mid-1990s, reflecting a growing partnership with emerging markets, particularly China, and budding intraregional trade. However, the region's trade flows have barely kept up with the rapid expansion of global trade. The trade centrality of the economies in the region remains relatively low, and has not increased much over the last 20 years. It remains lower than the one observed in other comparable emerging and developing economies. Likewise, the region still has some way to go to better integrate in global value chains - a feature associated with higher income growth overtime in regions such as South East Asia and Eastern Europe. Some countries are showing progress, albeit from low starting points, with the EAC and SACU particular bright spots. A better insertion into the global economy would help foster structural transformation, export diversification, and the possibility to absorb technology and skills from abroad.
For many of the African states, negotiations to liberalise trade in services is a relatively new phenomenon. For the Southern African Customs Union (SACU) member states, the only experience acquired on this subject was during multilateral negotiations in the context of the General Agreement on Trade in Services (GATS). Now SACU countries are confronted with the issue of services liberalisation in the context of the Economic Partnership Agreement (EPA) negotiations, seemingly without a clear and coherent strategy on how to deal with this new trade related issue. There are a number of reasons for this, and the paper attempts to present the possible explanations for this state of affairs. It starts with an assessment of the depth and scope of commitments undertaken during the Uruguay Round and the challenges created by the different degrees of liberalisation. This places the SACU member states at different stages in their services liberalisation process, which together with their different levels of development have the potential to produce a fragmented approach towards services liberalisation.
The paper further considers the effect services liberalisation currently has at the regional level of SACU, the regional level of SADC and the bilateral level of the EPA, as well as the future impact these services negotiations can have on the SACU member states. The SADC Protocol on Services, which is being circulated amongst member states for approval, is also analysed to provide an indication of what can be anticipated at SADC regional level.
The final part of the paper deals with the preparation for negotiations and the activities countries can carry out in order to equip government to more effectively understand and negotiate the complexities of trade in services. The preparation phase focuses on two aspects, that of defensive interests which feed into the formulation of the services offer and, that of offensive interests which play a role in the formulation of the services request. The paper considers, amongst other things, the sources where regulatory information on services can be found, how to conduct a trade regulatory audit, the alignment of international obligations with domestic laws, the creation of enquiry points, and the establishment of communication channels between government and stakeholders.
This report takes a closer look at the trade and the trade agreements between South Africa and its free trade agreement (FTA) partners. Although the pace of unilateral trade reform has slowed, trade liberalisation has occurred through the negotiation of a number of bilateral trade agreements.
This study seeks to model the effects of trade on employment in South Africa in a Labour Demand framework. The study uses aggregated data, as opposed to a number of studies that have used either factor content or growth accounting approaches. The paper specifically seeks to determine the extent to which imports, exports, wages and output have impacted upon employment levels across the primary, secondary, and tertiary sectors. The analysis carried out in the study revealed that the derived labour demand in the primary sector and the secondary industries have been impacted negatively by increased imports. However, there was insufficient statistical evidence from the data to suggest that derived labour demand for any of the sectors was increased by increased exports openness.
Information on the impact of immigration on a host country's trade with particular reference to the African continent and the SADC region remains scant, if indeed it is ever available. This study seeks to fill this gap with an analysis of data. More specifically, the main objective of this study is to analyze the impact of cross-border movements of SADC citizens into South Africa on the latter country's trade (exports and imports) with SADC countries from which the migrants had originated. The estimated results of this study confirm the existence of a positive and statistically significant migration-trade relationship in the case of South Africa's trade with its SADC trading partners.
Member countries of the Southern Africa Development Community (SADC) engaged in a number of bilateral trade liberalisation agreements and initiatives from as way back as the 1950s, the main objective being to increase bilateral trade flows through deeper opening and access of regional markets. Southern African countries saw these ‘country to country' trade agreements coupled with the adoption, by the SADC region, of a ‘Protocol on Trade' (TP) in 1996, and its implementation from 2000, was viewed as a coherent trade policy strategy to promote regional economic growth and help reduce poverty. Bilateral trade flows have been analysed on sensitive products textiles and apparel, cereals and vehicles between SADC countries that have signed bilateral trade agreements between themselves and implemented the SADC TP which led to the adoption of a SADC Free Trade Area in 2008. Analysis focused on sensitive products because preferential bilateral trade agreements seem to be more generous (offer better concessions) on these products as compared to commitments member states undertook at the wider regional level under the SADC TP. Trade creation on wheat and sugar products dominates trade diversion even though the percentage increase in trade in these products is small. Moreover, there is no conclusive evidence that bilateral trade agreements increased bilateral trade flows beyond the market access opportunities provided by the SADC TP except only for textile products from Malawi into South Africa. SADC countries need to do more to implement commitments in their bilateral trade agreements to realise the real market access benefits of trade liberalisation.
Empirical studies on regional economic integration process in Africa exhibit sluggish progress and there by limited level of intra trade. The existing literatures in Africa, particularly in Southern African regional integration bloc, SADC have neglected effects of regional economic integration dealing with disaggregated data. This study analyzes trade creation and diversion effects of the Southern African Development Community (SADC) using disaggregated data from 2000 to 2007.
The investigation estimates an augmented gravity model using panel data and random effect estimator methods. The results show that the intra -SADC trade is growing in fuel and minerals, and heavy manufacturing sectors while it displays a declining trend in agricultural and light manufacturing sectors. This implies that SADC has displaced trade with the rest of the world in both fuel and minerals, and heavy manufacturing sectors. SADC has served to boost trade significantly among its members rather than with the rest of the world. Countries participating in SADC have moved toward a lower degree of relative openness in these sectors trade with the rest of the world. However, the increasing trend of extra-SADC trade bias over the sample period in both agricultural commodities and light manufacturing sectors means that there has been a negative trade diversion effect. In other words, the value of trade between members and non-members has been increasing for the two sectors. These results seem to suggest that SADC countries retained their openness and outward orientation despite they signed the trade protocol for enhancing intra-SADC trade in agricultural and light manufacturing sectors.
The heads of states of the Common Markets for East and Southern Africa (COMESA), the East Africa Community (EAC) and the Southern African Development Community (SADC) met in Uganda in October 2008 to discuss broader objectives of the three regional trading blocs. This was later referred to as the Tripartite Summit. Discussions centred on achieving acceleration of economic integration on the continent in line with the Abuja Treaty and on the African Union objective of the formation of one continental economic bloc. The key issues for the three blocs were regional trade liberalisation, infrastructure development and a legal and institutional framework. The leaders agreed to initiate a process of coordination and harmonisation of programmes in order to progress towards the goals of expanding trade, alleviating poverty and attaining the overall development objective. The Summit provided a platform for the three blocs to join forces in forming a larger Free Trade Area (FTA).
Trade-in-services is fast becoming one of the foremost areas of research and policy making in the international trade arena. Although the General Agreement on Trade-in-Services (GATS) was implemented in 1995, it is only recently, with the realisation of the close linkages between goods and service exports and the advent of better data, that researchers have begun to pay more serious attention to questions such as 'comparative advantage' and 'trade liberalisation' in the service trade. While research on the subject has lagged, negotiations and policy analysis (because of GATS) has had to make do with what little is understood about the service sector. One reason for the lack of clear stylised facts about service exports is the diverse nature of the industries that comprise it. The World Trade Organization (WTO) defines twelve service industries, each with specific characteristics, measurement issues and economic incidence. Furthermore, each service industry consists of four modes of trade. In addition, trade involves both imports and exports. South Africa has a long history of travel service exports. The first Europeans settled in the Cape to provide services to passing ships on their voyages to the East Indies and back to Europe. Cape Town, known as the 'Tavern of the Seas', offered sailors and soldiers accommodation, entertainment and health care before commencing the second leg of their journey. Today, South Africa offers the international traveller a diverse travel experience. Blessed with unique natural landscapes, fauna and flora, history and cultures, together with a built environment offering quality services, travel exports are one of the fastest growing sectors in the South African economy. Given this, South Africa seems to enjoy a comparative advantage: Travel service exports comprise more than 65% of the country's total service trade, significantly higher than the world average of 38%. This paper defines travel service exports and reflects on its development in South Africa. Using a new United Nations Conference on Trade and Development (UNCTAD) dataset, tests the hypothesis that South Africa has a comparative advantage in exporting travel services. The relative advantage of this sector is also compared against that of other countries. The evidence supports the notion that South Africa has a revealed comparative advantage in exporting travel services.
As tariff barriers are reduced around the world, increasing attention has been paid to non-tariff measures. Although differing definitions exist of exactly what these NTMs are, let alone how their quantitative impacts are measured, they can basically be defined as government measures other than tariffs that restrict trade flows.
This paper evaluates bilateral trade between South Africa and the EU over the past decade, where possible up to 2003.
Structure of the Report:
Part A: Aspects of trade and tariff patterns
Part B: A preliminary quantitative assessment of the impact of the FTA on South
Africa's trade with the EU