Fostering Trade in Africa

In this digitally powered twenty-first century global economy, innovative policy solutions are being generated by leveraging on the role of technologies in unlocking trade relations, business opportunities, entrepreneurship and inclusive trade in Africa. One of the major goals of this book is to help economists, policy experts and business leaders to understand the challenges facing Africa’s trade growth but also its incredible potential, in order to reshape the African trade agenda for the future of inclusive growth and sustainable development. In addition, it provides a robust background for enhancing evidence-based policymaking across selected sectors—agriculture, manufacturing, services, high technology, etc—thereby creating opportunities to pursue the reforms needed to stimulate trade and investments towards job generation and economic expansion.

It is becoming more evident that better market access conditions alone do not translate directly into increased trade opportunities for African countries. A greater obstacle than tariffs is the high cost of moving goods across Africa’s borders. In addition to supply-side capacity constraints, behind the border barriers and non-tariff measures (NTMs) are increasingly hampering African trade, whose share in world merchandise trade remains a measly 2.7% in 2018. With the aim of lowering transaction costs for businesses and to help expedite the clearance and release of goods across borders, in 2013, Members of the World Trade Organization (WTO) have successfully concluded a new multilateral Agreement on Trade Facilitation, the first since the Uruguay Round twenty years before. The Trade Facilitation Agreement (TFA) entered into force in February 2017, with over two-thirds of the membership ratifying the Agreement. On September 1, 2019, there are 35 African countries out of 41 who have ratified the TFA. According to the OECD and WTO, estimates show that the full implementation of the TFA could reduce trade costs by an average of 14.3% and boost global trade by up to US$ 1 trillion per year, with the biggest gains in the poorest countries. While there are benefits for African countries to implement the TFA sooner rather than later, many will require substantial technical assistance and capacity building (TACB) support to properly implement the trade facilitation measures in the TFA. Equally as important, the need for African policymakers is to recognize the political economy aspects of the implementation challenges, which are intertwined in trade facilitation domestic reform. This chapter will first address some of the key challenges facing African countries’ trade potential and the benefits accruing from facilitating their trade. Then, a brief description of the TFA and its novel provisions will be outlined as well as the status of implementation of African countries. Finally, the constraints related to the implementation of trade facilitation measures are addressed and in conclusion, some policy recommendations.

Trade and trade-related policy making and implementation require deep analysis of interactions of technically distinct non-tariff measures. Fragmented understanding of policies little appreciation of their mutual exclusivity has denied countries and regions an opportunity to reap economic dividends therefrom. Therefore, chapter makes a case for a need for systems thinking regarding conceptualization of the interaction of SPS and trade facilitation measures at implementation level. While these measures are technically distinct and serve distinct purposes, to a greater degree their successful implementation requires recognition of their mutual dependability for their respective objectives to be fully discharged. However, this notion requires further consideration by African countries in respect of their current notifications at the WTO as well as in the context of their regional integration efforts. African countries with a view to improving their trade facilitation and SPS regimes at national and regional level must consider a number of key areas. To this end, a review by this chapter makes a case for African countries’ need to consider revisiting the following: potential implications heterogeneous TFA notifications of SPS-related trade facilitation measures; outdated REC level TF measures relative to WTO’s TF Agreement; correcting conditioning of implementation of AfCFTA TFA measures in individual country’s commitments notified under WTO’s TFA; consideration of functional diagnosis of areas in which TFA measures and SPS measures mutually enhance beneficial achievement of each other’s objectives. Last but not least, the policy measures whether it is TF or SPS must be adaptable to the market structure of the African continent. They must meet the needs of micro, small and medium enterprises, transnational companies as well as ICBTs.

The chapter analyzes the impact of trade facilitation on bilateral trade flows within sub-Saharan Africa to help appreciate the need to formulate and implement trade facilitation policies to promote the integration of developing countries into the global trading system and international markets. The study employs country-specific data for business environment, information and communication technology, port efficiency and infrastructure for 29 countries over the period (2004–2014). Using an augmented gravity model, findings from the study show that a well-regulated business environment is vital for African countries to fully gain from other trade facilitation measures. It also provides evidence of the marginal effect of air transport as an alternative means to move goods across borders. The study also highlights the need for government and policymakers to prioritize ICT as it significantly expands trade particularly with regards to the contribution of the private businesses investment in ICT. The inclusion of zero trade flows in the analysis also brings to light the need for African countries to ensure governments are accountable in all aspects of their dealings by adopting strategies that would ensure a well-regulated business environment. The results reveal the essence of appropriate checks and verification procedures at ports and other revenue collection posts to control for inefficiencies in the system particularly corruption. Finally, it provides evidence indicating that enhanced port efficiency has a positive effect on trade volumes, especially with custom clearance procedures and the ease at which competitively priced shipments could be arranged for transport. Recommendations emanating from findings of the study indicate that improvement in infrastructure quality will bring huge benefits in terms of intra-regional trade. The essence of the study is to provide useful information to guide policymakers in formulating and implementing policies targeted at improving these trade indicators to promote bilateral trade among SSA countries.

Liberalization of trade is a universal subject globally and in the West African region as well. Despite liberalization policies, there are fundamental concerns that are inherent regarding the West African region, depicting minimal intra-regional trade as against higher inter-regional trade for the region, including an enormous level of unaccounted exports, making development for the region rather implausible. This study aimed at examining the effect of trade liberalization on economic development in the (ECOWAS) region. It used pooled data for fourteen West African countries for the period within years 2000 and 2017. The method of analysis utilized was the pooled ordinary least square baseline regression, generalized least square, fixed and random effect model technique. The study found the trade liberalization had insignificant impact in relation to economic development for the region. It was discovered that the member countries despite efforts regarding liberalization were not at all ready for the technicalities of liberalization to say the least, hence consequently showing reason for minimal and unaccountable trade within the region. Thus, the study recommends that the government of ECOWAS countries should consider their level of readiness to generously benefit from the policies regarding liberalization in the region. It is beneficial as well, that the level and accountability of intra-regional trade should be enhanced so as to ensure that gains of these strategies are fully exploited by member economies to provide required increase in income, better education, improved life expectancy, enhanced socio-economic environment adequate to create anticipated economic development for the ECOWAS member countries.

Africa is seen today as a continent of enormous opportunity, a destination for investors and development actors seeking high-growth markets. However, Africa’s economic growth is being hampered by weak infrastructure especially on connectivity. The connectivity bias is, however, more profound for landlocked economies. As a result, the level of intraregional connectivity is very low, when measured in the context of transcontinental highway links, power inter-connectors, or intraregional fiber optic backbone. Thus, despite phases of economic growth in many African countries in recent years, these insufficient infrastructure networks have limited cross-border flows of trade, capital, information and people, drastically affecting Africa’s growth and broader development performance and regional integration. In response to the infrastructure deficit and poor connectivity challenges, African countries have taken a number of concrete actions and made some progress toward the implementation of transport-related commitments and goals. Some of the initiatives the United Nations Transport and Communications Decade in Africa (UNTACDA-I) in 1978, the second decade program, UNTACDA-II in 1991, Program for Infrastructure Development in Africa (PIDA) to provide strategic long-term planning for infrastructure development in a coherent way for all African stakeholders, Infrastructure Consortium for Africa (ICA) by African Development Partners and the Infrastructure Trust Fund (ITF). While these initiatives have successfully intervened with the construction of roads, rail, maritime port and airport to enhance the intra- and inter-country connectivity in the African continent, the poor intra- and inter-country connectivity challenges still remain. Consequently, China has also made a strong attempt to assist with the infrastructural connectivity in Africa. Adopting an explorative approach, the Chinese OBOR framework was analyzed vis-a-vis other sources of infrastructural support to the continent. Although, the OBOR initiative represents a cheaper alternative, the political economy of the initiative is not favorable to Africa. For example, the current financing arrangement in OBOR will not likely be beneficial to the African economies involved in the initiatives. In addition, there does not seem to have been any major public-private partnership arrangements for the OBOR projects in Africa. It was suggested that policy makers in Africa should adopt a more circumspect approach toward dealing with China.

A trade war occurs if a country reacts against the other by increasing import tariffs or employing some other constraints on the rival country’s imports. A tariff usually is termed as a charge or levy obligated on the import of goods into a country. In a global context, a trade war could be severely destructive to the consumers and industries of both countries, of which the transmission could be amplified to cause disturbances in several facets of both countries. They could further be referred to as the spinoff of protectionism, which government of countries utilize from time to time in the form of policies which restrain the trade facilitation process. Countries most times usually initiate protectionist concept with the intention of barely preserving domestic industries and entrepreneurs from foreign rivalry. Other than the preservation of domestic industries, it also could be utilized to readjust deficits in trade.

There exists enormous potential for increasing business relations between the USA and Africa, across a number of strategic sectors, especially agriculture, ICT, high-tech manufacturing, fintech, health, textile and digital economy. In view of this, Africa is geo-strategically repositioning itself as companies are gradually shifting production out of China partly due to the ongoing U.S.-China trade wars. Based on this background, the purpose of this article is to discuss the pressing issues and opportunities for fostering U.S.-Africa trade relations, and how to effectively leverage the remaining six years of US-Africa AGOA space in this digital era. Another component to the argument is that multiparty trade agreements yield optimal economic and geopolitical benefits, and several megatrade agreements that do not include the USA that are ongoing on the continent. It is hoped that this chapter will also provoke some thoughts towards dialoguing and contributing to the development of robust policies and programs in the face of changes that lie ahead for the U.S.-Africa relations.

This paper analyzes how Aid for Trade (AfT) is contributing to improve corridor development, regional integration, and logistics services in Africa. This research argues that in contrast to other studies showing AfT as having less positive impact on intra-regional trade in Africa, particularly in Africa, an important area where AfT is having a positive impact is in the development of transport (road) infrastructure interconnectivity. More importantly, building road networks and corridors to ease means of exchange of goods by land remains an important issue for landlocked nations and a cost-effective solution to least developed countries (LDCs) which constitute a large share of Africa.

Over the last decades, commerce has continued to serve as one of the strategic enablers of the African economy. With the recent changes in its trade and international diplomacy, policies focusing on the strategic role of digital trade cannot be overemphasized as the African economy prepares itself for disruptive changes in selected sectors. This concluding chapter presents how the ongoing transition to a digital economy could play out in Africa and the implications for its business opportunities, economic trajectory and policies implementation dynamics. This economic foresight does not aim to predict the future or prescribe policies certainties. Rather, it aims to provide knowledgable tools towards  enhancing decision-making capacities in anticipating and addressing Africa’s trade, regional integration and sustainable development challenges. Further, as we identify and capture the benefits that may arise as the economy creates an enabling environment for the implementation of digital tools, these transformative instruments are crucial for fostering trade opportunities and the realization of economic buoyancy.