IEA – World Bank Conference on “New Thinking in Industrial Policy: Implications for Africa”

Johannesburg, South Africa 3-4 July 2012

Dominique Njinkeu

ContentI. African Trade in industrial Products

1. Pattern2. Salient features of the New Global Trade order

II. Securing markets for African products1. Regional integration2. Bilateral trade agreements: EU, US, emerging markets3. Multilateral trade rules

III. Complementary Actions1. Beyond tariff: Non-Tariff Measures agenda2. ICT-enabled services agenda3. Connect to Compete: trade facilitation agenda

IV Concluding remarks

IntroductionIndustrialization has been associated with trade

liberalization and some form of supportThe traditional sequence :agriculture to pre-

industrial stage, to industrial production and to mass consumption is no longer the rule

African trade policy increasingly at regional level

Agglomeration for Africa considered at the regional level

This has implications on how Reindustrialization in the new global order will be shaped in Africa

Characteristics of African trade

Intra vs trade with ROW (in Billion USD) and by share

Intra-African exports

African exports to RoW

Sectors 2000 2010

Sectors 2000 2010

Value * Share Value * Share

Value * Share Value * Share Agriculture and food 2.57 17.9% 9.98 17.0%

Agriculture and food 12.21 9.1% 33.01 7.6%

Primary 5.01 34.9% 21.15 36.0%

Primary 81.95 60.9% 295.08 68.0% Manufacture 6.58 45.8% 25.30 43.1%

Manufacture 37.16 27.6% 96.39 22.2%

Other 0.19 1.4% 2.33 4.0%

Other 3.19 2.4% 9.38 2.2% Total 14.35 100.0% 58.76 100.0%

Total 134.50 100.0% 433.87 100.0%

Intra-African Imports

African Imports from RoW

Sectors 2000 2010

Sectors 2000 2010

Value * Share Value * Share

Value * Share Value * Share Agriculture and food

3.07 17.8%

10.17 16.6%

Agriculture and food

14.41 9.9%

34.12 7.4%

Primary 5.82 33.7% 23.36 38.0%

Primary 87.42 59.9% 314.94 67.9% Manufacture 8.27 47.9% 27.60 44.9%

Manufacture 39.57 27.1% 98.10 21.1%

Other 0.12 0.7% 0.27 0.4%

Other. 4.48 3.1% 16.96 3.7% Total 17.28 100.0% 61.41 100.0%

Total 145.88 100.0% 464.12 100.0%

*= Values are presented in Billion USD Sources: compiled from UNCTAD, UNCTADstat

Figure 1: Intra-African export and import trends over the period 2000-2010

Sources: compiled from UNCTAD, UNCTADstat

Figure 2: Intra-African trade composition (exports and imports) by main sectors (2000-2010)

Intra-African Exports

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Agriculture and food

Primary

Manufactured

Others

Comparison of the compositions of intra-African trade and Africa’s trade with the ROW in 2000 and 2010

Sources: compiled from UNCTAD, UNCTADstat

Variation of African import shares to Africa and to the ROW in 2000 and 2010

Sources: compiled from UNCTAD, UNCTADstat

Level of intra-regional trade

Regional intra-industry trade: Africa behind

I.1 Trend in African tradeIntra-African trade: 12 % total trade in

2010. Intra-African trade composition

More sophisticated manufactures trade: Intra-African exports in manufactures over 45%

Agriculture and food only 15% despite the huge potentials: exploit potential linkages between agriculture and industry, including in high value added trading activities.

I.1 Trend in African tradeTrade with ROW

Main trade category: manufactured goods (16.7%), machinery and transport equipment (11.6%), chemicals and related products (9.6%).

The primary commodities trade: crude materials except fuels (6 per cent) and mineral fuels, lubricants and related materials, which account for 30 per cent.

Growth linked to market access opportunities offered under initiatives such as AGOA and “Everything but Arms”.

I.2 Lessons from African growthGrowth experience: extremely varied and

episodic, particularly in large countries.Low productivity growth: Africa yields less than

half the return measured in growth terms compared to other developing regions: reducing transactions costs, supporting innovation; and improving skills and institutional capacity.

Poor and erratic policy and governance account for between one-quarter and one half of the difference in predicted growth between African and non-African developing countries.

I.2 Lessons from African growthGeographic isolation and fragmentation, and

insufficiently diversified production and trade: 1/3 growth gap with other developing countries.

International trade: reduced barriers to trade and strengthened capabilities for international.

Demographic transition : 2/3 observed difference: growth labor force and employability of youth.

Consequence: Improving the investment climate, more and better infrastructure ,innovation (ICT and skill formation), institutional capacity

I.2 Features of current Global OrderProduction broken down into tasks by plants

located in countries with relative prices of factors of production: distant sub-contracting arrangements with foreign firms becoming a norm

Ability to adopt and improve upon existing technologies : partnerships programs for training from cutting-edge high-tech institutions, incentives for experts to retire or migrate to set up globally competitive enterprises in Africa.

I.3 Features of current Global OrderExcellence in international service trade:

network of think tanks and R&D institutions to generate cutting edge knowledge and nurture a new culture and work ethic of innovation, high-quality decision making, and product excellence.

Nurture a vibrant domestic export industry through policies promoting high-tech and high domestic value-added industries.

I.3 Features of current Global OrderProduction of sophisticated goods generate

positive externalities via learning-by-doing especially coupled with government assistance consistent with country’s comparative advantage

To reap economies of scale, manufacturing needs to be concentrated and a particular location requires a minimum level of industrial agglomerations

Trade in tasks are highly transport-intensive hence needed attention to efficient trade facilitation and modern telecommunications.

I.3 Lessons as Ingredients for African industrializationProduction of sophisticated goods generate

positive externalities via learning-by-doingSome export goods have higher spillover effects

than othersComparative advantage: avoid “comparative

advantage defying strategies”. Increasing trade of intermediate goods and

services produced in plants located in several countries and often belonging to the same firm

Agglomerations to reduce costs and be competitive

• 1. Regional integration• 2. Bilateral trade agreements: EU, US, emerging markets• 3. Multilateral trade rules

II. 1Regional integration agendaTowards a Continental FTA: timeline

1. Tripartite: 20172. West Africa: vision 20203. Central Africa: CEMAC 2025

Bilateral trade agreements: Align timeline to above

1.USA: AGOA: third country fabric (2012), AGOA expiry (2015)

2.EU: December 2013 (Interim EPA)3.WTO: EBA

II.2 Proposals for AGOAThird country multi-fiber provision beyond the

new sunset period determined for AGOA itself.Stability and predictability e.g. 10 years, together

with the establishment of benchmarks.Broaden coverage: tobacco (Malawi), peanuts

(Gambia), groundnuts (Zambia), dairy products (Kenya) and meat products (Botswana).

Incentive package to spur U.S. FDI particularly for non-energy and non-extractive raw materials

System of sanctioning errant countries without hurting other economies to which they are tied

II. 3 Consolidated trade regime to concentrate on CFTACoordination of ongoing discussion at AGOA,

EPA, WTO with an extension of current trade regime for a fixed period aligned with REC and CFTA liberalization timelines ( 2025?)

Extent the above to emerging countriesAt WTO aligned all countries in African RECs

to the LDC trade regimeFocus on a CFTA rules of origin regime that

would enable trade with developed and emerging countries: AGOA RoO could serve as a model

Complement trade rules with actions to enhance competitiveness

III.1 Connect to compete: trade facilitationAlong corridors Think and Act

holistically• The Transport corridors link a

gateway to an inland terminal:– Physical infrastructure (ports,

roads, railways, dry ports)– Logistics services– Procedures (notably transit)

• Institutional environment:– Articulation of regional, corridor

and national levels– stakeholders engagement– policies

• Monitor and improve– corridor performances– identification of non tariff

barriers to address through policies / operational measures

III.1 Connect to compete : GatewaysDouala for Cameroon, Chad and CAR; Congo

Brazzaville, Equatorial Guinea and GabonTEMA for Ghana and Burkina Faso, Mali, NigerDakar - BamakoDurban and North-South CorridorRole of African Alliance for Electronic

Commerce comprising most SW in Africa: Morocco, Tunisia, Senegal, Cote d’Ivoire, Ghana, Cameroon, Gabon, Madagascar, Mauritius, ….

27

Missions

Reduce cost and delays in clearance

External Trade Transaction

Objectives

III.2 Connect to compete : corridors to Inter-connect landlocked to sea

Mombasa :Kenya, Uganda, Rwanda, Burundi and DRCDar-es-Salaam :

(1)Tanzania, Rwanda, Burundi, Uganda and DRC (2), Tanzania, Zambia, DRC, Malawi

Walvis Bay: (1) Namibia, Botswana and South Africa; (2) Namibia, Zambia and DRC , (3) Namibia and Angola

Douala : Cameroon ,CAR and ChadDakar : Senegal, Mali, Burkina Faso and Niger, Cotonou : Benin, Burkina Faso, Niger, and MaliWA cost: Cote d’Ivoire, Togo, Ghana, Benin and

Nigeria

….ET DU PROGRAMME DE POOL ÉNERGÉTIQUE DE L’AFRIQUE CENTRALE (PEAC) QUI SONT COHÉRENTS AVEC LES PROJETS D’INFRASTRUCTURES DU NEPAD.

III.2 Connect to compete : corridors to

Inter-connect landlocked to sea

Ligne Afrique de l’Ouest Ligne Afrique australe Ouest Ligne Afrique australe Est Ligne Afrique centrale Ligne Afrique centrale – Afrique du Nord

INTERCONNEXIONS ENERGIQUES EN AFRIQUE

III.2 Connect to compete: corridor priorities and actions?Despite widely held view hard infrastructure cost

represents a small part of total logistics costsMost gains in trade likely from investment in soft

rather than hard part:road quality has more impact on delays or

predictability of trade flows than on cost of transportation through maintenance and fuel consumption;

infrastructure sustainability given low trafficLow reliability of the transit supply chain more

worrisome than average transit time

III.2 Connect to compete: Inter-REC connectivity

Ligne Afrique de l’Ouest Ligne Afrique australe Ouest Ligne Afrique australe Est Ligne Afrique centrale Ligne Afrique centrale – Afrique du Nord

CORRIDORS ROUTIERS EN AFRIQUE

III.3. Trade in services (Factor mobility)Removal of restrictions on free movement of labor:

exchange of information on regulatory regimes, streamlining immigration processes for business travelers and workers and temporary residence of business people

Experience of regional groupings such as EU or APEC Business Mobility Group provide practical guidance

SADC univisa scheme, other RECs should do the same

III.3. Trade in services: Mutual recognition Agreements(MRA)Promote Academic and professional qualifications:

Accreditation of schools or academic programsRegional qualification and licensingRegional conduct and ethics: standards of

professional conduct and nature of disciplinary action for non-conformity with those standards

Professional development and re-certification: continuing education and ongoing requirements to maintain professional certification

III. 4 Non-Tariff MeasuresApplicable to imported and domestically-

produced goodsNot always bad e.g. regulations to protect local

and global public goods desirable Legitimate NTMs imposed in response to market

failure otherwise not allowed by WTOMost NTB: customs valuation, TBT, SPS, rules on

import-licensing proceduresNTB major concern in a small country b/o can be

captured by special interests as they lack transparency and are complex.

III. 4 Non-Tariff MeasuresMost prevailing NTM in Africa

Cumbersome customs and administrative documentation procedures;

Immigration procedures;Cumbersome inspection requirements;Varying trade regulations within same RECsVarying, cumbersome and costly procedures

for transit and verification of imports and export cargo;

Business registration and licensing.

Major bottlenecks include:Veterinary certificates : Required from

exporting and importing countries and issued separately for every individual shipment

Quality analysis: National quality seals are meant to be sufficient proof of compliance with standards but every EAC country requires further testing by own lab or other body

Ineffectiveness of the National Monitoring Committees

Limited dialogue/exchange of information; regulatory assessments and audits

36

III.4 NTM in dairy trade in EAC

Figure 1: Coverage and frequency ratios

Burundi

Ouganda

Kenya

Namibie

Maurice

Afrique du Sud

Madagascar

Sénégal

Amérique Latine

Af. Nord & MO

Asie

UE

100 80 60 40 20 0 20 40 60 80 100

Taux de fréquence Taux de couverture

Source : Cadot

Figure 1: Incidence of NTM, # of measures

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Cinq et plus

Quatre types

Trois types

Deux types

Un type

Source des données : World Bank and UNCTAD

III.3 NTMIn sum

African countries heavy userNote sure what heavy regulatory apparatus addresses; not consumer concerns as in developed countries

Mostly regulatory overkill: streamline

Conclusion: NSE and African Re-industrialization in New Global OrderStep 1 : Documented African success storiesStep 2: constraints to alleviate: coherent/

sustainable policy, skill and technology, NTB, trade facilitation

Step 3: firm incubation: build capacity of private sector in international trade

Step 4: careful about governance; regional approach adds to complexity

Step 5: Mixed performance of Africa SEZ; Support other regional public goods

Step 6: compensating pioneer firms : complicated

Conclusion: NSE and African Re-industrialization in New Global OrderBroaden the market space to foster greater

opportunities for scale production, competition, investment, and trade

Eliminate existing tariff and non-tariff barriers, bost trade facilitation reform

Take into account human and institutional capability and include a component on stakeholders empowerment

Conclusion: Summary of main messages

1.Trade regimes African countries are subjected to need to be consolidated and secured to enable focus on Continental FTA agenda

2.For this consolidation rule of origin under EBA, EPA, AGOA should be harmonized and aligned to CFTA; emerging countries should be fully involved… an agreement in the G20 framework preferable

Conclusion: Summary of main messages3. NSE should be considered in the framework

of RECs and the CFTA

4. Support should draw relevant lessons from the past and the complication associated with using a regional approach: preference to measures that enhance competitiveness (trade facilitation, NTM, ICT-enabled services) and skills that can be transferred to other sectors