Identifying Priorities for Standards Harmonization in Africa

1. ECA Identifying Priorities for Standards Harmonization in Africa Lily Sommer, Trade Policy Expert, African Trade Policy Centre, ECA African Day of Standardisation Nairobi, Kenya | 19 June 2019 UNECA.ORG

2. ECA UNECA.ORG BACKGROUND Identifying Priorities for Standards Harmonization in Africa

3. ECA BACKGROUND 3 • AfCFTA • The African Continental Free Trade Area (AfCFTA) entered into force on 30 May 2019 • 24 Member States have now ratified the agreement • The AfCFTA provides the potential to be a game changer for Africa’s industrialization. • This potential, however, cannot be realized without adequate quality infrastructure systems including metrology, standardization, accreditation, quality management and conformity assessment Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

4. ECA BACKGROUND 4 • Cooperation at the continental level • Intra-African trade is constrained by the volume and complexity of technical regulations and the variation in certification, testing, inspection practices and standards used by different African countries • Some harmonization progress has been achieved at the REC level but significant gaps remain, and REC efforts have not been sufficiently coordinated at the continental level • The AfCFTA offers a platform for African countries to cooperate more effectively on quality infrastructure systems! Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

5. ECA BACKGROUND 5 • TBT and SPS Annexes • TBT and SPS measures are included within the scope of the AfCFTA • Annexes 6 and 7 of the AfCFTA Agreement detail the commitments of State Parties to facilitate trade through cooperation in areas related to TBT and SPS. In particular, they require the: • Elimination of unnecessary and unjustifiable TBTs through reinforcing international best practices • Harmonization of standards and equivalence in technical regulations, metrology, accreditation and conformity assessment • Development of capacity building programmes for cooperation Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

6. ECA BACKGROUND 6 • Prioritize: not all standards need to be harmonized! • The harmonization of standards is an expensive task that requires extensive, costly and lengthy negotiations • This means that it is not possible to harmonize all standards at once, and highlights the need for a well-informed and appropriate prioritization strategy to maximize the impact of standards harmonization • Recognized as an important issue at the 24th ARSO General Assembly, and reiterated at the 12th PAQI Joint Committee Meeting • In this context, the meetings requested that ECA, as ARSO Champion for RVCs, prepare an empirical study to inform the prioritization of standards harmonization on the continent Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

7. ECA UNECA.ORG METHODOLOGY Identifying Priorities for Standards Harmonization in Africa

8. ECA METHODOLOGY 8 • Approach • Identify priority products and value chains for standards harmonization, moving beyond a focus on most commonly traded goods • This is a typical criterion for prioritization, since it is simplistic and relatively easy to apply • This criterion overlooks the significant opportunity to tap into “under-exploited” or “untapped” opportunities to scale up intra-African trade under the AfCFTA (currently constrained by tariff and non-tariff barriers) Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

9. ECA METHODOLOGY 9 • Scope • The methodology developed is applied at the REC-level • RECs covered: COMESA, EAC, ECCAS, ECOWAS, SADC, UMA • Indicator • In order to examine products with export potential for each REC, CEPII’s contribution to trade balance (CTB) and international market position (POS) indicators are calculated • Data • UNTRADECOM data at the six-digit level of HS classification • 2016-2018 three-year averages (ECCAS 2015-2017 three year averages) • World Bank WDI GDP data Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

10. ECA METHODOLOGY 10 • Analysis and results • If a product in a particular region qualifies as competitive according to both the indicators (i.e. CTB and POS), the product is selected for the continental competitive export basket for the said region • The ultimate outcome of the exercise is the identification of products with high potential for intra-African trade at the REC-level • These products are then compared against existing REC priority products and value chains according to regional integration and industrialization strategies Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

11. ECA METHODOLOGY 11 • Advantages of methodology • Aligned to REC RVC and industrialisation priorities - likely to differ based on varying geographies, natural resources, skill-sets and historical comparative advantages • CTB indicator more accurately reflects comparative advantage in products than revealed comparative advantage (RCA) indicator since it’s based on imports as well as exports • The competitive export basket identifies under-exploited trade opportunities at the continental-level, for which the AfCFTA is expected to provide a supportive environment for African countries to tap into Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

12. ECA UNECA.ORG PRELIMINARY RESULTS Identifying Priorities for Standards Harmonization in Africa

13. ECA PRELIMINARY RESULTS 13 African markets are under-exploited • Large share of intra-African trade is within RECs • The AfCFTA offers an opportunity for existing RECs to tap into under-exploited market opportunities in other African countries (outside their current RECs) Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

14. ECA PRELIMINARY RESULTS 14 COMESA: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

15. ECA PRELIMINARY RESULTS 15 EAC: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

16. ECA PRELIMINARY RESULTS 16 ECCAS: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

17. ECA PRELIMINARY RESULTS 17 ECOWAS: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

18. ECA PRELIMINARY RESULTS 18 SADC: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

19. ECA PRELIMINARY RESULTS 19 UMA: most common exports Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

20. ECA PRELIMINARY RESULTS 20 Summary: most common exports • Some products feature in the top 10 exports to Africa (and within REC) and not the top 10 exports to the world • These are typically more industrialized products (e.g. cement and motor vehicles) – African markets offer opportunity for industrial upgrading • Unprocessed raw materials dominate RECs exports to the rest of the world • A focus on prioritizing standards harmonization based on the most common exports would overlook the significant opportunity to tap into “under-exploited” or “untapped” opportunities to scale up intra-African trade under the AfCFTA • Remainder of analysis: CEPII’s contribution to trade balance (CTB) and international market position (POS) indicators for all RECs Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

21. ECA PRELIMINARY RESULTS 21 PEB of COMESA to Africa (interpretation) • Possible for the value of the Contribution to Trade Balance (CTB) to be positive even if the value of International Market Position (POS) is negative - indicates COMESA does not have competiveness in the product on the African market • To avoid this, we use stricter criteria: the product is only selected for the Potential Export Basket (PEB) of COMESA to Africa if it has both a positive CTB and POS Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

22. ECA PRELIMINARY RESULTS 22 PEB of COMESA to Africa • 1,110 products make up COMESA’s potential export basket to Africa - these products offer high potential for intra-African trade Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

23. ECA PRELIMINARY RESULTS 23 PEB of EAC to Africa • 1041 products make up EAC’s potential export basket to Africa - these products offer higher potential for intra-African trade Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

24. ECA PILOT STUDY: PRELIMINARY RESULTS 24 PEB of ECCAS to Africa • 500 products make up ECCAS’s potential export basket to Africa Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

25. ECA PILOT STUDY: PRELIMINARY RESULTS 25 PEB of ECOWAS to Africa • 439 products make up ECOWAS’ potential export basket to Africa - these products offer higher potential for intra-African trade. Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

26. ECA PILOT STUDY: PRELIMINARY RESULTS 26 PEB of SADC to Africa • 2117 products make up SADC’s potential export basket to Africa. These products offer higher potential for intra-African trade. Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

27. ECA PILOT STUDY: PRELIMINARY RESULTS 27 PEB of UMA to Africa • 1,705 products make up UMA’s potential export basket to Africa - These products offer higher potential for intra-African trade. Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

28. ECA PRELIMINARY RESULTS 28 SIMILARITIES ACROSS RECS • Overlap in the PEB of RECs – products that should be considered as priority products for standards harmonization at the continental level: • Nuclear reactors, boilers, machinery and mechanical appliances • Inorganic and organic chemicals, and chemical products • Electrical machinery • Plastics • Iron and steel • Fish and crustaceans, molluscs and other aquatic invertebrates • Cotton, apparel, textile and clothing • Cutlery • Edible vegetables • Wood • Vehicles (other than railway or tramway rolling stock) • Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

29. ECA PRELIMINARY RESULTS 29 PEB – AFRICA VS. ROW • For comparative purposes, the study also calculates the CTB and POS indicators vis a vis the rest of the world – to assess whether REC comparative advantage in African markets differs from its comparative advantage globally • In general REC comparative advantage within Africa (compared to ROW) is more diversified with greater value addition (e.g. sugar confectionary, chocolate, refined vegetable oils and cutlery) and less limited to primary products • Some products enter REC’s PTB for both African and World markets – offer potential for developing competitive RVCs which are better positioned to enter GVCs (e.g. leather, textiles, works of art, essential oils and processing of agricultural products) Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

30. ECA UNECA.ORG WHAT NEXT? Identifying Priorities for Standards Harmonization in Africa

31. ECA WHAT NEXT? 31 Next steps… • Further interrogate results (at both HS6 and HS 2 level) and identify priority products and value chains for standards harmonization in the context of the AfCFTA • Compare these priorities to existing efforts on standards harmonization within RECs • What gaps exist? • What REC harmonized standards could be used as a basis for developing common African standards? • Compare with priorities of REC industrialization strategies • Final report: September 2019 Identifying Priorities for Standards Harmonization in Africa UNECA.ORG

32. ECA THANK YOU! More info: sommerl@un.org UNECA.ORG