African govts shoot themselves in the foot on trade

Peter Fabricius writes on continental efforts to make adoption of the WTO's TFA conditional on implementation of Doha Development Agenda

Africa is balking at a chance to let trade go viral

10 July 2014

If only African borders were as porous to trade as they are to Ebola. The latest epidemic of the deadly virus is out of control. It spread from its origins in Guinea, killing at least 518 people there, in Sierra Leone and Liberia since February according to the World Health Organisation, which has warned other West African countries to prepare for its arrival.

Meanwhile, African governments seem to be doing much better at resisting trade than Ebola.

Representatives of African nations at the World Trade Organisation (WTO) proposed in April that the continent should not agree to the WTO's recently negotiated Trade Facilitation Agreement (TFA) - which would considerably accelerate the movement of traded goods across national borders - until all other elements of the stalled 2001 Doha Development Agenda were implemented.

This decision has dismayed and annoyed the European Union (EU), the United States (US), some other Western countries, the WTO itself and even China, reportedly. A few US legislators have hinted that they might not renew the African Growth and Opportunity Act (AGOA), which is due to expire next year, unless the African countries drop this condition for the acceptance of the TFA.

The AGOA, of course, gives duty-free and non-reciprocal access to most African exports into the lucrative US market. Losing it would be yet another big blow to African trade, which is already pretty dismal - representing only 3% of total global imports and exports.

Orrin Hatch, the influential senior Republican in the Senate's Finance Committee, wrote to South Africa's US Ambassador Ebrahim Rasool in June, criticising the African group's proposal ‘to stop the agreement's entry into force until conclusion of the Doha round.'

The chairperson of the House Ways and Means committee - the Republican, Dave Camp - has also indicated that he is taking Africa's conditional stance on the trade facilitation agreement into account as Congress considers the renewal of the AGOA, Inside US Trade reported.

South Africa itself is already facing the possibility of being ‘graduated' from the AGOA, even if it is renewed - in part because some Congress members regard it as too wealthy to need non-reciprocal market access. Many are also annoyed by South Africa's recent increase of import tariffs on imported US foodstuffs, which was severely complicating the renewal of AGOA - as Hatch also reported in his letter to Rasool.

Trade and Industry Minister Rob Davies recently suggested that South Africa was willing to increase US access to the South African market if that was what it took to stay in the AGOA. South Africa's AGOA status has hugely boosted exports to the US, including many industrialised products, like automobiles.

The US has been reviewing the AGOA since last year. President Barack Obama is expected to unveil the administration's proposals on how to reform the programme at the first US-Africa summit, which he will host for African leaders - including President Jacob Zuma - in Washington early next month.

There have been some hints that the Africans are succumbing to the pressure from the US, EU and others, and might be backing off their conditional stance on the TFA. This stance was evidently discussed at the African Union (AU) summit in Malabo, Equatorial Guinea, last month.

However, there was no reference to this in the published decisions of the summit, and it remains unclear exactly what happened - despite a statement approved by AU trade ministers at the summit, read by Lesotho's WTO representative at a meeting on the TFA in Geneva earlier this month.

According to Inside US Trade, the statement said the TFA ‘should be implemented in line with the decision trade ministers took in Bali' in December 2013, at the WTO ministerial conference. The Bali decision endorsed the creation of a WTO preparatory committee to ensure the ‘expeditious entry into force' of the TFA and its efficient operation after that, as Inside US Trade noted.

But the journal also reported that the Lesotho WTO representative was equivocal about what the AU trade ministers had decided in Malabo, saying AU member states were still discussing the issue among themselves, and so did not want to disclose the content of the discussions.

Evidently there are disagreements between African capitals that mostly want to move ahead with the TFA; and their Geneva-based trade representatives, who would prefer to use the TFA implementation as a bargaining chip in exchange for agreement on the more explicitly development-related aspects of the Doha agreement.

If that is so, this would represent yet another example of the propensity of African governments to shoot themselves in the foot - to withhold something that is actually in Africa's own best interests, even if others also want it, unless they get something else which they perceive to be in their own interest.

As WTO Director-General Roberto Azevêdo told AU member government representatives in Geneva this month, the TFA would considerably help the AU to actually implement its own ambitious plans for industrialisation and regional economic integration - including the proposed Tripartite Free Trade Area encompassing the Southern African Development Community, the Common Market for Eastern and Southern Africa and the Economic Commission for Africa - which so far largely remain at the rhetorical stage of development.

‘Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within Africa to unsustainable levels, creating a further barrier to intra-African trade,' Azevêdo said. The TFA would help to address those bottlenecks. ‘It will support regional integration, and therefore complement the African Union's efforts to create a continental free trade area. And it will begin to remove some of the barriers that prevent full integration into global value chains.

‘As such, it will create an added impetus for industrialisation and inclusive sustainable development. 'Azevêdo also reminded the African governments that as a result of representations by themselves and other developing world countries, several advantageous elements had been included in the TFA. Among these are a unique clause that would enable developing countries to begin implementing it only when they felt they were ready to do so, and the establishment of a fund that would help them to do so.

Michael Spicer, former CEO of Business Leadership South Africa, was more explicit in a recent speech to the SA Institute of International Affairs. He noted that behind the ambitious plans for ever-larger free trade areas in Africa, ‘just too little attention is paid to the nuts and bolts of regional integration, common visas, open skies and trade facilitation.'

Why this is so is something of a mystery. Is it because too many customs officials derive too much benefit from border red tape, that African governments seem reluctant to improve trade facilitation?

Or is the problem that the TFA actually demands that they do something themselves rather that others doing something? Or do they have an inherent zero-sum suspicion that if something like the TFA is good for the US, EU and others, it must necessarily be bad for Africa?

The TFA offers the chance for Africa to really start moving regional integration out of the echo chambers of the AU into the real world. It should grasp this rare opportunity with both hands.

Peter Fabricius is Foreign Editor, Independent Newspapers, South Africa.

This article first appeared in ISS Weekly, the online newsletter of the Institute for Security Studies.

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