September 09, 2019 /09:02AM / By Africa Business /
Header Image Credit: WSJ
After years of wrangling, the outlook for trade in Africa received a major fillip in March 2018 with the signing of the African Continental Free Trade Agreement (AfCFTA), an ambitious plan that aims to expand regional trade by 54% through removing tariffs on 90% of goods traded across the continent. The agreement was further strengthened in July when Nigeria, the continent's largest economy and one of the last major holdouts, finally agreed to join. On a continent long used to the inconveniences of border delays and overly officious customs staff, the signing of the AfCFTA has been greeted as a major sign that the continent is ready to embrace a future of free trade and more flexible borders, in contrast to the broader trade tensions on display elsewhere in the world.
Sean Doherty, head of trade and investment at the World Economic Forum, says the agreement is useful for catalysing political and business support around an often-controversial topic. "Leaders have limited numbers of hours so they want to focus on things that are moving forwards. In big multinational trade deals there's value in the text but a fair amount comes from it being a focusing device - people say, this is important and let's make sure it happens. It focuses attention on what needs to be done. The CFTA is quite a big deal, there's still quite a long way to go in terms of it having a concrete impact, but it's definitely positive in getting to a deal."
For the World Economic Forum, the pro-trade sentiment expressed in the deal offers a useful backdrop as it pursues a range of nuts-and-bolts initiatives to boost trade in Africa and beyond. As well as encouraging broader dialogue around trade issues, Doherty's team works on policy recommendations and the implementation of specific initiatives where consensus can be found. The hard slog of technical work may be less glamorous than the signing of major agreements, but is often crucial to sustaining their wider impact. One such area is trade facilitation - in short, making it easier for countries to allow goods to cross borders and get through customs. "With a number of partners we set up the Global Alliance for Trade Facilitation, and this supports countries in making trade facilitation reforms.
It's reasonably active in Africa - we have projects ongoing in Kenya, Ghana, Morocco, Nigeria and Zambia. In Zambia they are looking at customs broker licensing systems and trying to make things easier so that companies have an easier time working with customs brokers and it [all] becomes less bureaucratic. In Ghana and Kenya it's more to do with advanced rulings for customs, so you know how much you're going to pay before goods arrive rather than waiting." Other initiatives focus on allowing customs to predict the likely cargoes of long-term importers and exporters, saving time on unnecessary inspections and speeding up traffic-choked border posts. Investment facilitation is also a key part of WEF's work on the continent, allowing would-be investors to connect easily with target companies and the wider ecosystem of subcontractors and support businesses. "In Ghana we're looking at what it can do to make sure it's both easier for outsiders to invest and to help the chances of that investment being sustainable, with knock-on effects in terms of jobs and environmental spinoffs. We're not a traditional development implementation agency, we span the policy development area and the making-impact area. There are discussions happening about investment facilitation at the World Trade Organisation [WTO].
What we're doing is taking these ideas, going to Ghana and talking to local businesses and government and seeing which ones are relevant." Working on these smaller-scale initiatives helps to provide the glue for the wider agreements at the multinational level, says Doherty. "It's useful to Ghana but also useful for broader global policy development in getting a good sense of what is practically useful in developing countries, so that agreements reached globally are relevant for African economies. That provides weight and momentum for these agreements." WEF is hoping to build on this encouraging work with a new focus on e-commerce, another controversial topic being widely discussed at WTO level, which will prove relevant to Africa's future as retail and technology grow in importance, but which is often mired in thorny discussions around taxation. "There has been some reluctance in some quarters to bind countries too tightly because of fears of what will happen in the long term around tax policy for digital trade. And that's why it's important these issues are put on the table and thought through in advance, to reassure people."
In an era when trade scepticism is growing amid ongoing tensions between China and the US, Doherty says that such multilateral discussions and agreements have a crucial role to play. "Partly it helps to overcome vested interests. In most trade deals there will be a big gain for large numbers of people but there will be one or two who are worse off as a result. So of course you need to find ways to compensate them but there can be political barriers to going forward. When you're able to agree at multi-country level it's easier to overcome that resistance." Yet Doherty admits that policymakers need to make the case for trade not only via headline-grabbing initiatives but also through the hard work of proving that implementation actually benefits the lives of citizens.
Without this, US-China tensions could presage a wider retreat from free trade. "I think we will find a way through this. There's an important challenge we have to overcome which is providing a positive narrative that a large group of people can buy into. Perhaps in the last decade more people have become disconnected and thought, it's not going to really help me, [reduce] social inequality or help the environment. We need to have much clearer evidence for how trade can do that, and change the way trade works to make sure it does deliver on those objectives."
Credit: The post Making The Case For Trade first appeared in The African Business Magazine September, 2019