Trade barriers cause Africa to lose billions of dollars in potential trade earnings – World Bank
A new World Bank report has painted a gloomier picture of intra-African trade, saying the continent is losing billions of dollars in potential trade earnings every year because of high trade barriers with neighbouring countries.
And this report comes days after African leaders made a call for a continental free trade zone by the year 2017.
African Heads of State meeting at the 18th African Union (AU) Summit in Addis Ababa, Ethiopia in January 2012 resolved to establish a continental free trade area (FTA) by the year 2017, in a move designed to boost intra-African trade.
The leaders directed the AU Commission to draw a road-map on implementation of the proposed FTA and a detailed plan of action.
The World Bank report shows that it is easier for Africa to trade with the rest of the world than with itself.
The report titled ‘De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services’, points out new World Bank forecasts suggesting that economic slowdown in the Eurozone could shave Africa’s growth by up to 1.3 percentage points this year, and as a result, regional fragmentation could become even more costly for the continent.
“While uncertainty surrounds the global economy and stagnation is likely to continue in traditional markets in Europe and North America, enormous opportunities for cross-border trade within Africa in food products, basic manufactures and services remain unexploited,” authors of the report say.
It is not only in intra-African trade that Africa is losing from. The continent’s share of global trade is also declining, facts on the ground show.
Despite the exponential increase in the volume as well as the value of goods and services traded across borders Africa’s share in global trade continues to decline.
According to the African Trade Policy Centre (ATPC) of the United Nations Economic Commission for Africa (UNECA), global trade (in current prices) has increased from $13 trillion in 2000 to an estimated $30 trillion in 2010, but Africa’s share in world trade has been in decline since 1980 and currently stands at about three per cent.
The World Bank report says this situation deprives the continent of new sources of economic growth, new jobs, and sharply falling poverty. It also says that these are factors which accompanied significant trade integration in East Asia and other regions.
“The cross-border production networks that have spurred economic dynamism in other regions, especially East Asia, have yet to materialize in Africa,” it adds.
“It is clear that Africa is not reaching its potential for regional trade, despite the fact that its benefits are enormous they create larger markets, help countries diversify their economies, reduce costs, improve productivity and help reduce poverty,” says Obiageli “Oby” Ezekwesili, the World Bank’s Vice President for Africa, and a former Nigerian Minister of Extractive Industries.
She adds, “yet trade and non-trade barriers remain significant and fall most heavily and disproportionately on poor traders, most of whom are women. African leaders must now back aspiration with action and work together to align the policies, institutions and investments needed to unblock these barriers and to create a dynamic regional market on a scale worthy of Africa’s one billion people and its roughly $2 trillion economy.”
The report therefore, suggests that Africa will have to diversify its exports from depending solely on precious metals and other commodities and encourage more people to trade goods and professional services in accounting, law, education, healthcare, among others, adding that “the region’s large number of young people also calls for significant numbers of new jobs, intensive trade, and growth.”
“Imagine the benefits of allowing African doctors, nurses, teacher, engineers and lawyers to practice anywhere in the continent, but responsibility for making this happen lies with countries first and foremost,” says Marcelo Giugale, the World Bank’s Africa Director for Poverty Reduction and Economic Management.
For African countries to address this challenge and benefit from trade with neighbours, the report recommends reform in the following three areas.
– Improving cross-border trade, especially by small poor traders, many of whom are women, by simplifying border procedures, limiting the number of agencies at the border and increasing the professionalism of officials, supporting traders associations, improving the flow of information on market opportunities, and assisting in the spread of new technologies such as cross-border mobile banking that improve access to finance;
– Removing a range of non-tariff barriers to trade, such as restrictive rules of origin, import and export bans, and onerous and costly import and export licensing procedures; and
– Reforming regulations and immigration rules that limit the substantial potential for cross-border trade and investment in services.
By Emmanuel K. Dogbevi