Can Africa Trade Itself Out of Poverty?

ATPC UNECA AU AfDB Can Africa Trade Itself Out of Poverty? Accelerating Intra-African Trade and Enhancing Africa s participation in Global Trade BACKGROUND NOTE September 2011

1. Background and Rationale 1.1 Trade, Development and Economic Growth The experience of most developed countries and emerging economies points unequivocally to the significant role that trade has played in stimulating growth and enhancing economic development. Empirical evidence also suggests that trade, complemented by appropriate domestic policies and a supportive external environment, has been one of the most powerful catalysts for economic transformation in poor countries, including those in Africa. In recent years, the volume as well as value of goods and services traded across borders has increased exponentially. Global trade (in current prices) has increased from USD 13 trillion in 2000 to an estimated USD30 trillion in 2010. Yet African countries have not benefited from this steady increase in the volume of international trade. Indeed, Africa s share of in world trade has been in decline since 1980 and currently stands at about three per cent. This dismal trade performance of Africa can be attributed to a variety of internal as well as external factors, including but not limited to the following: - The continent remains heavily dependent on the export of a few primary commodities, most of which until recently had suffered significant decline in prices over the years, leading to large trade losses and worsening balance of payments. Most of Africa s exports are derived from the agricultural sector, but Africa has been unable to increase the productivity because of low investment in the sector. Africa has not been able to tap into cheaper finance, efficient logistics (including transport and communication networks), increased capital resources and skills, which play a key role in international trade. The combined effect of trade-distorting domestic support and export subsidies provided by developed countries to their producers; high tariff peaks and tariff escalation; the erosion of preferences for developing countries; the application of non-tariff barriers in trade; all of which are significant features of the trade policy of Africa's key trading partners, have had a negative impact on Africa s competitiveness in global trade. African countries have not been able to deal effectively with supply side constraints and challenges, particularly for manufactured products, a phenomenon which is largely attributable to the lack of a strong manufacturing capacity within Africa and also weak support infrastructure for industrialisation. It is broadly acknowledged that in order to make trade work for Africa and reduce the high incidence of poverty, there is the need to mainstream trade in the national development policies and strategies of African countries. Regrettably, very few African countries can boast of a comprehensive well-documented National Trade Policy and Trade Sector Support Programme. In Africa, there has been very little attention paid to the linkage between trade and cross-cutting themes such as Gender, HIV/AIDS and the Environment. This has often led to negative impacts on trade. Finally, the role of ICT in enhancing both domestic and external trade in Africa has not been fully explored., 2

1.2 Intra-African Trade and Regional Integration In addition to the challenges constraining Africa s participation in global trade as outlined above, intra-african trade remains weak compared to trade within other regions. On average over the past decade, only about 10 12 % of African trade is with African nations, whilst 40% of North American trade is with other North American countries, and 63% of trade by countries in Western Europe is with other Western European nations. Enhanced intra-african trade should provide many opportunities within the continent to promote specialisation amongst African countries; develop regional value chains to enhance diversification and competitiveness; and consolidate and integrate production infrastructure and processes across borders to achieve economies of scale. African countries therefore need to aggressively pursue comprehensive regional trade policies as a collective development and transformation strategy. From a continental strategic standpoint, stronger and deeper regional integration in Africa will not only help to promote sustainable economic growth and development, it will also enhance Africa s effective participation in the global economy, and make it less vulnerable to external shocks. It would promote exports to regional markets, build experience to enter global markets and provide a framework for African countries to cooperate in developing common services for finance, transport and communications. It is within this context that African Ministers of Trade, in November 2010 in Kigali, recommended the need for Africa to fast-track the creation of a continental Free Trade Area which would provide the basis for a continental Customs Union and eventually the setting up of the African Common Market. The Common Market would contribute to deepening Africa s integration, as the 54 African Countries would be transformed into one single market with free movement of goods and services, persons, labour, and capital, as well as guaranteeing the right of establishment and residency of African citizens within the Common Market zone. The recommendations of the African Ministers thus builds on the landmark decision in 2008 by three Regional Economic Communities (RECs) namely COMESA, EAC and SADC to establish a single Free Trade Area incorporating the three RECs. The challenges outlined above with respect to Africa s participation in global trade, as well as promoting Intra-African Trade and Regional Integration, need be addressed in a comprehensive, integrated and inclusive manner, if trade is to become the engine of growth for Africa. A first major step in this direction, would be to provide a platform for intense policy dialogue between various trade constituencies (often with diverse and conflicting interests), to deliberate and agree on common approaches and implementation strategies, that would enhance Africa s participation in global and regional trade. It is against this background, that the African Trade Policy Centre (ATPC), an initiative of the United Nations Economic Commission for Africa (UNECA) with funding support from the Canadian International Development Agency (CIDA) is organising, in collaboration with the African Union Commission (AUC), African Development Bank (AfDB) and other partners, the first Africa Trade Forum, which will later become a calendar event of ECA. 2. ATF Objectives and Expected Outcomes The strategic objective of the inaugural Africa Trade Forum, ATF 2011 is to promote and enhance multi-stakeholder policy dialogue and advocacy on trade issues in Africa, by mobilising all the different trade constituencies across Africa and the world in general, to debate and exchange views on all the key issues relating to intra-african trade, and Africa s trade with the 3

rest of the world. It is envisaged that in subsequent years, the ATF will focus on specific issues which would already have been introduced in the inaugural Forum. The various stakeholders include policy makers and high level government officials, private sector operators (large corporate, small and medium scale entrepreneurs), civil society, parliamentarians, academia and researchers, RECs, corridor management institutions, export promotion agencies, development partners, gender advocates and the media. The specific objectives of the Forum are to: 1. Review key challenges and opportunities in accelerating intra-african trade and enhancing Africa s participation in global trade. 2. Deliberate and agree on common approaches and implementation strategies to address key challenges and develop a comprehensive agenda on how trade can be used to stimulate and sustain growth in Africa. 3. Share experiences and best practices amongst various trade constituencies on enhancing trade performance in Africa. 4. Explore new and innovative ideas on addressing emerging issues such as trade and HIV/AIDS; trade and climate change. 5. Discuss and agree on specific inputs into the WTO Ministerial Conference scheduled for December 2011, in particular, how trade agreements could help in achieving the MDGs. 6. Discuss and agree on specific inputs into the African Ministerial Conference on Trade, as well as the African Union Heads of States Summit scheduled for January 2012, on the theme Boosting Intra-African Trade. This shall include but not be limited to a discussion on the establishment of a continental FTA and the African Common Market. Major Expected results will include: 1. The adoption of an Implementation Framework and Action Plan for enhancing Africa s participation in Global and Regional Trade. 2. Strengthened effective strategic alliances and partnerships on Africa s Trade and Regional Integration agenda. 3. Enhanced knowledge of African stakeholders in mainstreaming cross cutting issues such as Gender, Environment and HIV/AIDS into development policies and practices. 4. Better awareness and understanding by African countries of the relationship between Trade, Growth and MDGs. 5. Contribution of insights toward better Trade Policy formulation and implementation in African countries. 3. Forum Structure and Proceedings The basic architecture of the Forum would be a combination of Plenary Sessions, Mini- Plenaries, Breakout Discussions and a parallel Workshop on Unpacking Doha Round in the context of MDGs, as well as an Exhibition that will run till the end of the Forum. The Forum structure is designed to provide a platform for participants to focus on major Global & Regional Trade issues (Plenary Sessions) which will be distilled into specific sub-themes (Mini-Plenaries) and further disaggregated into very specific functional or sectoral issues (Breakout Discussions). Each Plenary would have a Keynote Speaker, followed by a high-level panel discussion of renowned practitioners and experts facilitated by a moderator. An opportunity will be given to participants to field some questions. 4

The Mini-Plenaries on the sub-thematic issues would also have panel presentations with inputs from discussants, followed by an interactive discussion by participants in the Forum. The Breakout Discussions would provide an opportunity for a more comprehensive exchange of views between Forum participants on specific issues facilitated by moderators. The Workshop on the Doha Round and the MDGs will focus on an interrogation of the draft Doha Round modalities and determine if they take into account the interests of African countries.. In order to deepen the appreciation of the link between trade agreements and MDGs, the workshop will also consider empirical evidence related to other potential trade agreements such as the EPAs. A detailed outline of the issues and topics to be discussed is provided as an Attachment to this Background Note. The discussion in each Session will be guided by an Issues Paper and a more detailed Background Paper on key thematic areas. 4. Participation The Forum, to be attended by about 700 participants, will be the first major gathering on Trade, bringing together all key trade constituencies in Africa and from around the world, including policy makers and high level government officials, private sector operators, civil society, parliamentarians, development partners, academia and researchers, RECs, development corridor management institutions, export promotion agencies, and the media. 5. Exhibition An integral part of the Forum would be a 3-day Exhibition which will showcase the following:- o Technology inputs for Africa s industrial and agricultural production e.g. Machinery, Equipment and Raw Material Inputs o Export products and commodities from Africa e.g. Coffee, Tea, Cocoa, Cotton, Horticulture, manufactured products such as Garments, Leather etc. o Trade Support Service Providers e.g. Export Promotion Agencies, Financial Institutions, Customs Agencies, International Development Organisations, etc. 6. Venue and Date The Forum will be held at the United Nations Conference Centre (UNCC) in from 22 24 November 2011, Addis Ababa, Ethiopia 7. Registration and Logistics Participants would be required to register online on the Forum s website http://www.uneca.org/atpc/africatradeforum (to be activated) and/or through the ATPC office: African Trade Policy Center United Nations Economic Commission for Africa P.O.Box 3001 Addis Ababa Ethiopia Tel: (251-115) 443801 5

Fax: (251-115)153005 Deadline for Registration is the 1st of November 2011. Block Hotel reservations will be made at selected hotels and those intending to take advantage of such reservations shall indicate their preference at the time of registration. Participants are also free to make reservations with other hotels of their choice. For Participants coming from countries with an Ethiopian Embassy, introductory letters to the Embassy will be provided when registration is completed and accepted. All other registered participants coming from countries without an Ethiopian Embassy will receive their visas on arrival. A detailed Information Note for Participants on other administrative matters will be circulated before the Forum. 6