A Positive Agenda for Trade Facilitation Negotiations in Africa

This paper I wrote is a little dated but the concision is still useful given the conclusion of the WTO Trade Facilitation negotiations. The paper can be assessed here.

Trade facilitation is definitely a potential source of growth promotion in Africa and African countries need to continue focus on an integrated and coherent approach. Progress achieved in such a broad approach does not, however, necessarily mean multilateral binding. It is important to provide adequate policy flexibility in the rules to enable countries commit according to own priorities and capabilities. Members should be allowed to pre-commit, with the option of linking pre-commitments to effectiveness of capacity building efforts. A multilaterally agreed monitoring framework will be necessary. Such a review needs to monitor and evaluate the commitments made, the implementation capacity and the availability of technical and financial assistance. Experience with ongoing trade facilitation programme suggests that the cost of ambitious multilateral agreement on trade facilitation will be high and certainly beyond the capability of African countries. 

There is, therefore, a need for trade facilitation fund to cater for necessary adjustment costs arising from the expected new commitments in the final WTO trade facilitation agreements. The next steps for adequate participation of Africa in these negotiations would be to document the situation in a selected group of countries that have made relatively good progress in these areas and that could provide “best practice” examples. These case could be used to design a comprehensive programme that a typical African country would have to undertake in order to comply to a multilateral agreement on trade facilitation with elements in proposals being tabled are to become binding. Additionally, submissions to the negotiating group on trade facilitation can be made specifically to address concerns of African countries and present possible positions following the needs assessment exercise.

See other comments I have made on trade facilitation here.

India Files WTO Challenge Against US Visa Fee Increases

India has has filed a dispute against the US under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) which constitutes Annex 2 of the WTO Agreement and has requested consultations with the US.

According to the dispute, under the Consolidated Appropriations Act of 2016, Washington increased fees for L-1 type visas by US$4500 and for H-1B type visas by US$4000 for companies with 50 or more employees in the US, if more than 50 percent of their employees are non-immigrants employed on such visas. It was signed into law by President Barack Obama in December 2015, with the measures in place through September 2025.

H1B is work permit for temporary specialty workers while L1 visas are issued for intra-company transfers that allows companies to relocate qualified employees to US offices.

India claims that these measures, along with earlier fee increases between August 2010 and September 2015, appear to violate the US’ commitments under its Schedule of Specific Commitments under the WTO’s General Agreement on Trade in Services (GATS) – the set of global rules involving services trade- along with being inconsistent with other GATS provisions. 

India claims that the visa fee increases: 

appear to: (i) be inconsistent with the terms, limitations and conditions agreed to and specified by the United States in its Schedule of Specific Commitments under the GATS, (ii) accord to juridical persons of India having a commercial presence in the United States treatment that is less favorable than that accorded to juridical persons of the United States engaged in providing like services in sectors such as the Computer and Related Services sector with respect to which the United States has taken commitments in its Schedule of Specific Commitments, and (iii) affect the movement of natural persons seeking to supply services in a manner that is inconsistent with the United States' commitments in its Schedule of Specific Commitments. These measures also appear to nullify or impair the benefits accruing to India directly and indirectly under the GATS. 

In its complaint, India said that the current measures (of visa fee hike) result in less favorable treatment for Indian companies with commercial presence in the US in comparison to US companies engaged in providing like services and according to the GATS Schedule. 

This violates the principle of ‘national treatment’ embedded in multilateral trade rules, which lays down that foreign companies will be treated on a par with local firms. 

The Government of India is of the view that these and comparable measures, taken by the United States are not in conformity with at least the following provisions of the GATS: Articles XVI, XVII, XX, and paragraphs 3 and 4 of the GATS Annex on Movement of Natural Persons Supplying Services. These measures also appear to be inconsistent with Articles III:3, IV:1 and VI:1 of the GAT 

Furthermore, New Delhi is also claiming that recent US changes to its numerical commitment for H-1B visas – specifically due to modifications Washington has made under FTAs with Singapore and Chile – also are inconsistent with its GATS schedule. 

According to the consultations request, the US included under its horizontal commitments regarding mode 4 – that involving the movement of natural persons – that it would permit up to 65,000 people annually on a worldwide basis under the category of fashion models and specialty occupations. 

Under the two FTAs mentioned above, these “numerical commitments” have allegedly been changed. According to India, US homeland security officials must now set country-specific limits for both countries, with these numbers taken away from the global total of 65,000 receiving H-1B visas.

WTO Trade Facilitation Agreement and Facility

The WTO Trade Facilitation Agreement (TFA) adopted In December 2013 in Bali is the first multilateral trade agreement to be concluded since the WTO was established 20 years ago. WTO members also adopted on 27 November 2014 a Protocol of Amendment to insert the new Agreement into Annex 1A of the WTO Agreement. According to the WTO Agreement, a Member formally accepts the Protocol by depositing an “ instrument of acceptance” for the Protocol with the WTO. The Trade Facilitation Agreement enters into force once two-thirds of members of the 162 have completed their domestic ratification process, that is 108 members. As of writing, 70 countries have completed the ratification process and deposited their instrument of acceptance with the WTO.

The agreement aims to clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. Among the issues addressed in the Agreement are:

• norms for the publication of laws, regulations and procedures, including Internet publication
• provision for advance rulings
• disciplines on fees and charges and on penalties
• pre-arrival processing of goods
• use of electronic payment
• guarantees to allow rapid release of goods
• use of "authorized operators" schemes
• procedures for expedite shipments
• faster release of perishable goods
• reduced documents and formalities with common customs standards
• promotion of the use of a single window
• uniformity in border procedures
• temporary admission of goods
• simplified transit procedures
• provisions for customs cooperation and coordination.

The agreement is groundbreaking in that for the first time in WTO history, the commitments of developing and LDC's are linked to their capacity to implement the TFA. In addition the agreement states that capacity building support should be provided to these countries to help them implement the TFA provisions.

To benefit from Special and differential Treatment (SDT), a member must categorize each provision of the Agreement, as defined below, and notify other WTO members of these categorizations in accordance with specific timelines outlined in the Agreement.

• Category A: provisions that the member will implement by the time the Agreement enters into force (or in the case of a least-developed country member within one year after entry into force) 
• Category B: provisions that the member will implement after a transitional period following the entry into force of the Agreement 
• Category C: provisions that the member will implement on a date after a transitional period following the entry into force of the Agreement and requiring the acquisition of assistance and support for capacity building.

In order to assist developing and LDCs secure assistance and support to implement the provisions of the TFA, the WTO has established the Trade Facilitation Agreement Facility through which the WTO and other partners will expand its traditional technical assistance programmes to assist with matchmaking of donors and recipients.

WTO Ministerial Conference in Nairobi

The just concluded 10th WTO Ministerial Conference (MC10)  was held on 15th-19th December 2015 in Nairobi Kenya.  Four issues of interest to Africa — more favorable preferential rules of origin for LDCs,TRIPS agreement, the operationalization of the services waiver for LDCs, and elimination of export subsidies — were resolved during the 10th Ministerial Conference. The meeting also concluded the Information Technology Agreement in which tariffs on over 201 technology products will be eliminated for the benefit of participating importers all for the expansion of trade in information technology products.

The 10th Ministerial Conference has come more than 20 years after the conclusion of the Marrakesh Agreement in Morocco which led to the creation of the WTO in January 1995. The Ministerial Conference is the top-most decision-making body of the WTO. It usually meets every two years, and brings together all members of the WTO.  This is first time the meeting has been held on African soil.

For related documents see here.

New Database on Trade in Services

A new services database has been developed and it may be an interesting tool for policy makers. I-TIP Services is a joint initiative of the World Trade Organization and the World Bank. It is a set of linked databases that provides information on Members' commitments under the WTO's General Agreement on Trade in Services (GATS), services commitments in Regional Trade Agreements (RTAs), applied measures in services, and services statistics.

In its four modules (GATS, RTA Commitments, Applied Regimes, and Statistics), the integrated database permits searches by Member, sector, agreement, or source of information.

To access the database click here.

Kenya Nominates Renowned Scholar to the Appellate Body of the WTO

The government of Kenya has nominated Professor James Thuo Gathii a renowned international scholar for appointment to the Appellate Body of the World Trade Organization (WTO), for a slot opening up after David Unterhalter's term comes to an end in December this year.

Professor Gathii is currently a professor of Law at Loyola University Chicago where he holds the distinguished Wing-Tat Lee Chai in International law. He teaches International trade law, facilitates international law student and faculty exchanges, plans and develops international programs and conferences. Gathii has also consulted for a variety of United Nations agencies on WTO law and is a graduate of the prestigious Havard Law School with  SJD (Phd.) 1999

The WTO Appellate Body was established in 1995 under Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO Members. The Appellate Body sits in Geneva Switzerland and Members appointed by the DSB to serve, do so for four-year terms, with the possibility of being reappointed once. The Appellate Body membership is broadly representative of the Membership in the WTO.

Case for a Multilateral Investment Agreement?

Despite the importance of FDI, its governance is fragmented and is found in multilateral agreements, RTAs and in BITs. There is however no single, comprehensive multilateral treaty or institution to oversee investment activity. Previous attempts to bring FDI under multilateral purview have failed. The result is a complex and confusing overlay of disciplines at different levels. To address this issue, a recent study on Investment under the auspices of the World Economic Forum makes a case for multilateral rules on investment and six reasons are stressed. 

First, the rise of Global Value Chains (GVCs) sharpens the need for global and holistic regulations; GVCs need global rules. Second, there is a proven appetite for international investment regulation; nations are “voting with their pens” for more discipline – signing hundreds of BITs and RTAs. But the result lacks coherence in terms of rules and application. Third, the North-South divide is disappearing on the investment-governance issue. Emerging markets’ role in FDI has grown tremendously in recent years –both as home and host nations. Fourth, the stigma that has been historically attached to FDI has sharply abated in recent years. Many countries are pursuing economic liberalization for the recognized benefits it brings. Fifth, and by contrast, the fragile and slow recovery of the world economy has led some countries to adopt protectionist measures against trade and investment. This regression heightens the need for multilateral rules. Sixth, increased FDI by State Owned Enterprises (SOEs) and Sovereign Wealth Funds (SWFs) presents new challenges to ensuring that competition conditions in the global marketplace remain equitable and do not give rise to national security concerns.

The report further argues that if an International Investment Agreement (IIA) is to emerge in the future, the WTO is the logical home for it. The WTO has the potential to yield more equitable outcomes and ensure non-discrimination, and it provides access to a dispute settlement mechanism that has worked well. This IIA may entail provisions in different areas, including the protection of investors, establishing investor-state dispute settlement and subjecting the agreement to the WTO state-state system, and providing post establishment national treatment. Pre-establishment or access provisions on investment are also important, as are notions of corporate social responsibility. In any case, there is a sense that the balance of rights and obligations needs to be revisited.

However another Study by Econstor states that the case for a WTO agreement on investment is weak. Four main reasons are given. 

• The absence of such an agreement has not prevented the recent boom of FDI in developing countries through RTAs, BITs and unilaterally.
• Likewise, substantial unilateral liberalization of FDI regulations was undertaken in the past even though multilateral obligations to do so did not exist. 
• The coverage of protections provided for investors in various BITs (and RTAs) goes beyond what can be expected from the Doha Round. Nevertheless, BITs do not appear to have had a significant impact on FDI flows to signatory countries. 
• It is also questionable whether RTAs such as NAFTA as well as MERCOSUR had a strong and lasting effect on FDI flows to developing member countries. 

National Treatment and Kenya's Land Reform Following the New Constitution

Kenya has over time proved to be the preferred investment point in the East African region due to its strategic location and free market economy which places no significant restriction on the movement of foreign currency in and out of the market.  However there is one important change to the investment environment since the promulgation of the new Constitution of Kenya (the 'Constitution') found in Chapter Five Part 1 on Land and Environment.

The Constitution was brought into law on August 27 2010 and inter alia sets the reform agenda for better governance. In general the new Constitution will lead to the creation of new institutions that will promote good governance and in turn boost investor confidence. 

However, in one aspect, the Constitution contains articles that now limit the period that a foreigner may hold land to 99 years (Article 65 (1). This includes any company which has any element of foreign shareholding.  The Constitution also provides that any interest in land that is currently held by foreigners which is in excess of 99 years will have the term reduced to 99 years and freehold land will be converted to 99 years leasehold interest (Article 65(2)). Investors have indicated to Government that limiting the interest period to 99 years will not be conducive to foreign investors looking to invest in Kenya. There is also no provision for compensation to foreigners in the Constitution. The Constitution gives Parliament a time frame of eighteen months for the enactment of legislation relating to land and it will be interesting to see the impact the legislation will have on the business environment.

In the WTO Trade in Services context, Kenya made horizontal commitments in the Uruguay Round on market access in Mode 3 requiring that for commercial presence investors should establish their business locally.  There are however no horizontal limitations on national treatment to which limitations on foreign ownership of land would be reflected. In the sectors where Kenya has undertaken specific commitments, Telecommunications services, Financial services (including banking and insurance), Tourism & Travel related services and Transport services (air and road), mode 3 national treatment commitments are in some cases left unbound. However in the hotels and restaurants category, arguably a sub sector to which land is a determinant, Kenya has completely liberalised mode 3 both in the WTO GATs context and the EAC Common Market Services Schedule (Annex V).

Additionally, in the EAC Common Market Protocol, Article 13 on the Right of Establishment and Article 14 on the Right of Residence are relevant to the land question.  To the extent that they relate to access to and use of land premises, these provisions are subject to Article 15 which provides that land issues shall be governed by the national policies and laws of Partner States. Hence even in the common market, one could say that national treatment has not been extended to the land issue especially as it relates to establishment (investment).  

Lamy Warns on WTO DDA Negotiations

At a meeting in Kenya last week, Mr Pascal Lamy said the risk of failure of the talks — commonly referred to as Doha Development Agenda (DDA) after the Qatari city that first hosted them — is higher today than it was a few years ago. 'Should the talks fail, this could lock exports from poor countries out of major world markets'. See full report here.

WTO Agreement on Government Procurement Possible by December

BRIDGES 20th October 2010

A deal that would liberalise access to billions of dollars worth of public procurement contracts among over forty WTO members is within reach by the end of the year. However, it remains unclear whether China will become part of the optional scheme in the foreseeable future; major trading powers like the US and the EU want China to join, but not on the terms Beijing has offered thus far.

At the top of the The WTO government procurement committee’s agenda are two issues, neither of which are linked to the WTO’s struggling Doha Round talks: revising the Agreement on Government Procurement (GPA), a plurilateral WTO accord that has since 1996 opened up access to several types of public tenders to companies from all participating countries; and negotiating the accession to the GPA of several WTO members, most significantly China.

Government agencies’ procurement of goods and services tends to account for 10 to 20 percent of national GDP. Joining the GPA requires governments to give up the ability to direct certain types of public purchases to domestic firms - traditionally a much-used lever for promoting particular economic sectors (albeit one that has been vulnerable to abuse, at increased cost to taxpayers). In return, their companies receive access to the types of public tenders covered by the GPA in all countries that are party to it.

But not all types of public procurement are covered by the GPA. When the 41 WTO members covered by the agreement signed up to it (the figure includes all 27 member states of the EU), each made a detailed offer describing which types of public purchases of goods and services would be open to competition from other GPA signatories. These offers spelled out which ministries would be covered, monetary thresholds below which GPA obligations would not apply, and exceptions. For instance, the US excludes food aid from its commitments, enabling it to direct such purchases exclusively to domestic suppliers; it also has exceptions for the purchase of construction-grade steel and programmes to support veteran soldiers. Sub-central entities like state and provincial governments are often (but not always) subject to disciplines under the GPA, but tend to have greater latitude to source locally than central governments.

The present GPA and its commitments were negotiated in the Uruguay Round. These negotiations achieved a 10-fold expansion of coverage, extending international competition to include national and local government entities whose collective purchases are worth several hundred billion dollars each year. The new agreement also extends coverage to services (including construction services), procurement at the sub-central level (for example, states, provinces, departments and prefectures), and procurement by public utilities. The new agreement took effect on 1 January 1996.

It also reinforces rules guaranteeing fair and non-discriminatory conditions of international competition. For example, governments will be required to put in place domestic procedures by which aggrieved private bidders can challenge procurement decisions and obtain redress in the event such decisions were made inconsistently with the rules of the agreement.

See full article here. Other resources on the GPA can be found here.

EPAs: Of what significance Multilaterally?

My article published on Tralac Website (original dated January 2008)

January 2008 ushered in useful milestones. Seven EPAs are reportedly in place, of which six are coined interim EPAs and therefore earmarked for further negotiations while the Caribbean-EC EPA has been crowned the full comprehensive EPA. All agreements have met the core objective, which is to conclude WTO compatible trade in goods agreements under Article XXIV and have thereby prevented trade disruption on the part of ACP States. EPAs have also provided the EU private sector with historic market access opportunities into some of the poorest countries in the world. Nonetheless, with additional negotiations anticipated in six EPA regions, the Cotonou Agreement preparatory period is far from over. Additionally, the repercussions of these agreements both regionally and at the WTO are not encouraging. 

The new EPA environment has been birthed amidst controversy and ingenuity. The conclusion of interim EPA or full comprehensive EPA has further compounded confusion as to the legal basis for additional negotiations, when in fact both EPAs meet the Cotonou Agreement core objective of WTO compatibility in trade in goods. GATT Article XXIV technically only differentiates between fully liberalised FTAs and interim tariff dismantling FTAs, while WTO practice finds that almost none of the near 300 regional trade agreements notified under Article XXIV to the WTO RTA Committee, have been notified as interim agreements. In practice however, interim EPAs are expected to rapidly migrate beyond goods into full comprehensive EPAs, by concluding on a range of rules, some of which the WTO has not even considered, such as the Singapore issues. 

This migration plunges ACP States into a minefield of multilaterally unregulated trade territory and one with almost no disciplines for regional trade agreements. The graduation of the interim EPA also moves against the negotiating procedures of the Cotonou Agreement Article 37, which mandates that EPAs would progressively eliminate barriers in accordance with relevant WTO rules. Furthermore, the development objective of negotiations in areas the WTO has not even considered remains questionable given various documented research findings that comprehensive EPAs would not support the development objectives of many poor countries. Nonetheless, taking into account the limited to non-existent negotiating capacity including incoherent regional participation in some EPA regions which dismally constitute only one or two ACP countries, its not clear how or whether the additional negotiations scheduled for 2008 would be consummated on the part of the ACP EPA Parties. 

At the WTO, reciprocal parties to FTAs with developed countries will for the first time include LDCs, in essence contradicting the developmental arguments put forth in the Doha Round by the poorest countries. The same can be said of the Small Economies whose vulnerabilities have been acknowledged by trade and development experts globally and considered in the Doha negotiations. On this basis, the role of the WTO in the area of development could be eventually eroded as the negotiating positions and coalitions among developing and LDCs are thrown into further disarray and possible fragmentation.

The second phase of EPA negotiations could also potentially worsen what is already an uncomfortable situation in trade in goods both in the regional and WTO context. Regionally EPAs may provide EC goods access into the wider ACP markets. At the WTO, EPAs appear to have compromised the potential development benefits of the Doha Round, given concluded provisions reverse some of the Doha negotiating positions of developing countries. These include EPA commitments even by LDCs, to reduce up to 80% of tariffs, to eliminate export taxes and other useful development tools. Further negotiations with the EC, before the conclusion of the Doha round could further detract from development objectives of developing countries and their negotiating leverage at the WTO. 

Additionally, future negotiations on the development dimension of Article XXIV may have been compromised by these agreements. It remains doubtful if the threshold for substantially all trade even for LDCs will be reviewed or whether additional flexibilities for developing countries under GATT Article XXIV will be permissible in the WTO negotiations, beyond that agreed upon in the EPAs. 

Finally, EPAs may essentially determine or provide advance impetus for a possible agenda for the next round of multilateral trade negotiations. This agenda may include the formerly rejected Singapore issues such as investment, competition, public procurement, among other areas now agreed as part of the interim EPA, but not presently regulated by the WTO. If the interim EPAs are fully concluded by most ACP States, this may compromise future multilateral negotiations, when these issues do come under the ambit of the WTO. 

ACP States and the EU Members combined, constitute close to two thirds of the 150 WTO Membership. So far about half the ACP membership has concluded an EPA with the EC, with more ACP countries likely to do so to safeguard their regional integration efforts. Which raises the question; what impact could EPAs have on the multilateral trade and development agenda as a whole?

EU Raw Material Shortages and Elimination of Export Restrictions

According to a European Commission Report, the EU faces shortages of 14 key raw materials used in making cell phones, solar power cells, batteries, and other electronics. The materials that are critical for the EU include: Antimony, Beryllium, Cobalt, Fluorspar, Gallium, Germanium, Graphite, Indium, Magnesium, Niobium, PGMs (Platinum Group Metals), Rare earths, Tantalum and Tungsten.  According to the Report, demand for these metals and minerals could triple over the next 20 years. 

The low global supply of these raw materials is mainly due to the fact that a high share of  worldwide production mainly comes from a handful of countries: China (antimony, fluorspar, gallium, germanium, graphite, indium, magnesium, rare earths, tungsten), Russia (PGM), the Democratic Republic of Congo (cobalt, tantalum) and Brazil (niobium and tantalum). This production concentration is compounded by low substitutability and low recycling rates. Nonetheless, this puts pressure on European nations to maintain strong trade relations with the primary exporters of those materials namely; China, Russia,the Democratic Republic of Congo, and Brazil.

Source: Europe Press Release Rapid

However, as shown above, China is the major source of most of these raw materials.  However she has been accused of restricting the export of certain deposits thereby affecting global supply and prices. A notable illustration of the growing importance of export restrictions, was the establishment of a panel by the WTO Dispute Settlement Body (DSB) in December 2009 to examine complaints brought by the United States, the European Union, and Mexico concerning China’s export restrictions on selected raw materials. Meanwhile Argentina; Brazil; Canada; Chile; Colombia; Ecuador; India; Japan; Korea (Republic of); Mexico; Norway; Chinese Taipei; Turkey and Saudi Arabia have also joined this dispute as third parties. 

According to the USTR, China is the top or near top producer of these materials and these measures skew the playing field against the US and other countries, by creating substantial competitive benefits for downstream Chinese producers, that use the inputs in the production and export of numerous processed steel, aluminum and chemical products and a wide range of further processed products. 

Meanwhile, there has been considerable debate in the WTO, as to whether export taxes actually violate any WTO disciplines, with some arguing that is an area of policy space that was intended to be outside of the multilateral disciplines and hence within Members jurisdiction- especially in low income developing and LDCs.  

However, in the EPA context, the EU has insisted on the elimination of export taxes, even though EPAs are supposed to meet the development needs of the world's poorest countries. Export taxes are used in Africa for industrial or export diversification, revenue, efficient management of resources, environment, job creation, value addition and macro-economic stability. In fact some have advocated that a policy focus on local content, such as available raw materials, is the most sustainable way of ensuring attainment of broader development goals. (see previous post on local content here).

The irony of the matter is that Europe's critical needs are met largely by China- and not Africa. Can the use of such policy measures by African countries be seen to distort world trade or be expected to help Africa move out of poverty and lessen her reliance on donor aid? 

President's Obama 2010 Trade Policy Agenda

 President's Obama's 2010 Trade Policy can be accessed here. 


The policy has a distinctly Asian and Pacific slant (understandably so) and in particular mentions China, India, ASEAN, APEC and a proposed FTA- the- Trans-Pacific Partnership (TPP) Agreement, with Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam.  

EU, Russia and Brazil are also addressed (i.e. all the BRICs).

Snippets of the policy priorities include:

a). Support and Strengthen a Rules-Based Trading System

b). Enforce Our Rights in the Rules-Based System

c). Enhance U.S. Growth, Job Creation and Innovation

d). Work to Resolve Outstanding Issues with Pending FTAs and Build on Existing Trade and   Investment Arrangements

e). Facilitate Progress on National Energy and Environmental Goals

f). Foster Stronger Partnerships with Developing and Poor Nations: 

• "The United States stands by our Hong Kong commitment to provide duty-free and quota-free market access to least-developed countries as part of the implementation of a successful conclusion to the Doha Round.
• Sub-Saharan Africa is the location of the world’s largest cluster of extremely poor countries, but the beginnings of growth and reform are evident. The United States will continue to partner with African countries to perpetuate positive changes. Building on the success of last summer’s AGOA Forum in Nairobi, USTR will work with Congress and stakeholders toward a new U.S.-Africa trade paradigm that takes into account new and evolving global trade developments. The next AGOA Forum of U.S. and African trade ministers, to be hosted by the United States this year, can promote the benefits of U.S.- Africa trade to the American public, develop plans to better incorporate small- and medium-sized businesses into trade with Africa, and work with Congress to help African countries take better advantage of AGOA and other trade opportunities. The United States also will continue to work on a bilateral investment treaty with Mauritius, to work with African partners through existing Trade and Investment Framework Agreements (TIFAs), and to consider what other types of trade arrangements the United States can advance with African nations".

g). Reflect American Values in Trade Policy

Comment: On the new policy approach to Sub Saharan Africa,the newly proposed trade agenda, is expected, among other things, to foster regional integration in Africa and increase investment by offering incentives for US investors in Africa. See previous post here.

Do Strict BITS result in increased FDI?

A working paper by the WTO titled More Stringent BITs, Less Ambiguous Effects on FDI? Not a Bit!  asks the question: do host countries of foreign direct investment (FDI) gain attractiveness by granting more rights to, and offering better protection of foreign investors through firmer dispute settlement rights?

The research finds that stricter dispute settlement provisions in Bilateral Investment Treaties (BITS) does not necessarily result in higher FDI inflows hence the effectiveness of BITs as a credible commitment device remains elusive.

The document can be assessed here.

What Could the Doha Round Mean for Africa?

The Doha Debates continued….

Recently, This is Africa held an exclusive interview with Mr Pascal Lamy, the Director General of the WTO, to discuss the status of the Doha Negotiations and Africa. Lamy said “What is on the table for Africa is huge,” referring to issues such as the possibility of duty free-quota free access to developed markets for Least Developed Countries, many of which are in sub-Saharan Africa.  He added that "the reduction of export subsidies by the EU, US, Japan and other developed economies, as well as reducing tariff escalation, both of which are often seen to stifle low income countries’ ability to compete on the export of manufactured goods, can also have a potentially significant impact on African trade".

However, according to a study by the Carnegie Endowment for International Peace entitled “What Could the Doha Round Mean for Africa?”, the actual benefits for low income African countries would be minimal, with the exception of South Africa.   In addition, the study found that, assuming FULL Duty Free Quota Free (DFQF) access to developed markets for LDCs was provided, this would allow Africa to benefit from the Doha Round. The estimate sees the region gaining $1.2bn or 0.63 percent of GDP, clearly highlighting the importance of this particular metric.

Indeed at the October 2009 Sixth LDC Ministerial meeting in Dar Es Salaam Tanzania, LDCs called on the WTO Membership to fully implement, the decision on DFQF market access for all products originating from all LDCs, as contained in Annex F of the Hong Kong Ministerial Declaration, accorded through Agricultural and Non-Agricultural Market Access modalities and ensure market access for at least 97 per cent of products originating from LDCs, at the tariff-line level.  Lamy reportedly attended this meeting and informed Ministers that there was no mandate for an early harvest and that LDCs would have to wait until the round was concluded to reap any benefits.

Meanwhile, products from LDCs have enjoyed DFQF access to the EU market since 2001 under the Everything But Arms initiative which gives the 49 LDCs duty free access to the EU for all products, except arms and ammunition.

Additionally,the Canadian Africa PACCIA/PACT program also implements DFQF for LDCs.

The US market benefits some African countries under the AGOA regime however it excludes other LDCs due to the eligibility criteria established in the Act.  For instance, of the 47 GSP eligible Sub-Saharan African countries, only 34 are AGOA eligible. A non discriminatory regime for LDCs would be ideal however, at the December 2009, 7th WTO Ministerial meeting in Geneva, the US Trade Representative Ambassador Ron Kirk instead called on major developing countries to offer DFQF access to LDCs and indeed Brazil and India have extended such offers.  China has extended a similar offer to African LDCs with diplomatic relations with China.

One could say Africa is already enjoying the huge benefits- ahead of the conclusion of the Doha round. However, recent DFQF offers do not immediately extend 100% market access.  In addition, most LDCs, exports to these markets have not materialized due to: the immediate exclusion of non commodity products they are able to produce competitively; the high costs of doing business; transport costs to distant markets; non-tariff barriers, and the lack of capacity to produce diversified exportables.   

SACU Centenary: Champagne?

The Southern African Customs Union (SACU) is commemorating its centenary and the theme of the celebrations is “Implementing a Common Agenda towards Developmental Integration in Southern Africa”. As I reflect on the theme, I am reminded that the combined population of the SACU countries is around 55 million with South Africa accounting for some 87% of the total.  South Africa also accounts for over 90% of SACU's aggregate GDP and will continue to maintain its predominant position in the region.

The SACU agreement was formalized in June 1910 between the then Union of South Africa — Territories of Basutoland, Swaziland and the Bechuanaland Protectorate.  The Agreement was renegotiated into the 1969 SACU Agreement, signed by the sovereign states of Botswana, Lesotho, and Swaziland (BLS) and South Africa, on December 11, 1969.  The second SACU Agreement provided two major changes: the inclusion of excise duties in the revenue pool and a multiplier in the revenue sharing formula that enhanced BLS revenues annually by 42 percent.  

With the independence of Namibia in 1990 and the end of apartheid in South Africa in 1994, SACU members embarked on a third round of new negotiations in November 1994, which culminated in a new SACU agreement in 2002. Namibia therefore joined SACU following her independence in 1990 and is the newest Member to the regional community.

Over the decades, intra-SACU trade has intensified but the traditional importance of South Africa as a regional hub has remained broadly unaltered. More than 95% of commercial flows within the customs union involved South Africa as a destination or supplier.  Moreover, South Africa accounts for around half of total BLNS trade, whereas the intra-SACU component of South Africa's total trade is relatively minor, reflecting SA’s greater diversification in terms of export destinations and import sources.

The EC continues to absorb the largest share of overall SACU exports, followed by the United States.  However, similar to the trend in the rest of Africa, the U.S. market remains the single most important single country destination (outside SACU) for exports from Lesotho and Swaziland, mainly due to the preferences granted under the African Growth and Opportunity Act (AGOA).  Exports to China from SACU, although still relatively modest, registered the fastest growth during the period reviewed (2003-2009).  Imports into SACU originate largely from the EC, China, and the United States.  Since 2005, imports from China have exceeded those originating in the United States and SACU's imports consist mainly of machinery and transport equipment, fuels, and chemicals.

However despite the longevity of the agreement, the results of regional integration have been imbalanced and fall far short of a century of progressive progress.  For instance, according to the WTO Third Trade Policy Review of SACU of November 2009, deeper integration is necessary for more balanced development in the SACU region and even though SACU economies have  collectively expanded at an average annual rate of about 4% in real terms since 2003, there is variation in growth rates in each economy and a generally unsteady performance.  The mixed growth record may reflect severe infrastructure bottlenecks, fluctuations in mining output, volatile national currencies, polarisation as well as the global economic downturn in recent years.

According to World Bank Trade data, SACU countries over the period 2006-2009 generally shrunk in average annual growth rate of total trade i.e. exports, imports of goods (merchandise) and services at constant 2000 U.S. dollars. As shown in the chart, Lesotho (the smallest economy of the five) shows to be the only exception to this trend.  

As a customs union, SACU policy harmonization efforts aimed at achieving a more cohesive, integrated regional market with balanced export-led growth is vital.  Considering the centennial theme has been acknowledged by the SACU Heads of State, one can only say "a 100 years later, its about time".