African Re-Industrialization in the New Global Order

1. African Re-Industrialization in the New Global Order IEA – World Bank Conference on “New Thinking in Industrial Policy: Implications for Africa” Johannesburg, South Africa 3-4 July 2012 Dominique Njinkeu

2. Content • African Trade in industrial Products • Pattern • Salient features of the New Global Trade order • Securing markets for African products • Regional integration • Bilateral trade agreements: EU, US, emerging markets • Multilateral trade rules • Complementary Actions • Beyond tariff: Non-Tariff Measures agenda • ICT-enabled services agenda • Connect to Compete: trade facilitation agenda IV Concluding remarks

3. Introduction • Industrialization has been associated with trade liberalization and some form of support • The traditional sequence :agriculture to pre-industrial stage, to industrial production and to mass consumption is no longer the rule • African trade policy increasingly at regional level • Agglomeration for Africa considered at the regional level • This has implications on how Reindustrialization in the new global order will be shaped in Africa

4. Part I Characteristics of African trade

6. Figure 1: Intra-African export and import trends over the period 2000-2010 Sources: compiled from UNCTAD, UNCTADstat

7. Figure 2: Intra-African trade composition (exports and imports) by main sectors (2000-2010)

10. Level of intra-regional trade

11. Regional intra-industry trade: Africa behind

12. I.1 Trend in African trade • Intra-African trade: 12 % total trade in 2010. • Intra-African trade composition • More sophisticated manufactures trade: Intra-African exports in manufactures over 45% • Agriculture and food only 15% despite the huge potentials: exploit potential linkages between agriculture and industry, including in high value added trading activities.

13. I.1 Trend in African trade Trade with ROW • Main trade category: manufactured goods (16.7%), machinery and transport equipment (11.6%), chemicals and related products (9.6%). • The primary commodities trade: crude materials except fuels (6 per cent) and mineral fuels, lubricants and related materials, which account for 30 per cent. • Growth linked to market access opportunities offered under initiatives such as AGOA and “Everything but Arms”.

14. I.2 Lessons from African growth • Growth experience: extremely varied and episodic, particularly in large countries. • Low productivity growth: Africa yields less than half the return measured in growth terms compared to other developing regions: reducing transactions costs, supporting innovation; and improving skills and institutional capacity. • Poor and erratic policy and governance account for between one-quarter and one half of the difference in predicted growth between African and non-African developing countries.

15. I.2 Lessons from African growth • Geographic isolation and fragmentation, and insufficiently diversified production and trade: 1/3 growth gap with other developing countries. • International trade: reduced barriers to trade and strengthened capabilities for international. • Demographic transition : 2/3 observed difference: growth labor force and employability of youth. Consequence: Improving the investment climate, more and better infrastructure ,innovation (ICT and skill formation), institutional capacity

16. I.2 Features of current Global Order • Production broken down into tasks by plants located in countries with relative prices of factors of production: distant sub-contracting arrangements with foreign firms becoming a norm • Ability to adopt and improve upon existing technologies : partnerships programs for training from cutting-edge high-tech institutions, incentives for experts to retire or migrate to set up globally competitive enterprises in Africa.

17. I.3 Features of current Global Order • Excellence in international service trade: network of think tanks and R&D institutions to generate cutting edge knowledge and nurture a new culture and work ethic of innovation, high-quality decision making, and product excellence. • Nurture a vibrant domestic export industry through policies promoting high-tech and high domestic value-added industries.

18. I.3 Features of current Global Order • Production of sophisticated goods generate positive externalities via learning-by-doing especially coupled with government assistance consistent with country’s comparative advantage • To reap economies of scale, manufacturing needs to be concentrated and a particular location requires a minimum level of industrial agglomerations • Trade in tasks are highly transport-intensive hence needed attention to efficient trade facilitation and modern telecommunications.

19. I.3 Lessons as Ingredients for African industrialization • Production of sophisticated goods generate positive externalities via learning-by-doing • Some export goods have higher spillover effects than others • Comparative advantage: avoid “comparative advantage defying strategies”. • Increasing trade of intermediate goods and services produced in plants located in several countries and often belonging to the same firm • Agglomerations to reduce costs and be competitive

20. Part II: Securing markets for African goods and services 1. Regional integration 2. Bilateral trade agreements: EU, US, emerging markets 3. Multilateral trade rules

21. II. 1Regional integration agenda • Towards a Continental FTA: timeline • Tripartite: 2017 • West Africa: vision 2020 • Central Africa: CEMAC 2025 • Bilateral trade agreements: Align timeline to above • USA: AGOA: third country fabric (2012), AGOA expiry (2015) • EU: December 2013 (Interim EPA) • WTO: EBA

22. II.2 Proposals for AGOA • Third country multi-fiber provision beyond the new sunset period determined for AGOA itself. • Stability and predictability e.g. 10 years, together with the establishment of benchmarks. • Broaden coverage: tobacco (Malawi), peanuts (Gambia), groundnuts (Zambia), dairy products (Kenya) and meat products (Botswana). • Incentive package to spur U.S. FDI particularly for non-energy and non-extractive raw materials • System of sanctioning errant countries without hurting other economies to which they are tied

23. II. 3 Consolidated trade regime to concentrate on CFTA • Coordination of ongoing discussion at AGOA, EPA, WTO with an extension of current trade regime for a fixed period aligned with REC and CFTA liberalization timelines ( 2025?) • Extent the above to emerging countries • At WTO aligned all countries in African RECs to the LDC trade regime • Focus on a CFTA rules of origin regime that would enable trade with developed and emerging countries: AGOA RoO could serve as a model

24. Part III Complement trade rules with actions to enhance competitiveness

25. III.1 Connect to compete: trade facilitation Along corridors Think and Act holistically • The Transport corridors link a gateway to an inland terminal: • Physical infrastructure (ports, roads, railways, dry ports) • Logistics services • Procedures (notably transit) • Institutional environment: • Articulation of regional, corridor and national levels • stakeholders engagement • policies • Monitor and improve • corridor performances • identification of non tariff barriers to address through policies / operational measures

26. III.1 Connect to compete : Gateways • Douala for Cameroon, Chad and CAR; Congo Brazzaville, Equatorial Guinea and Gabon • TEMA for Ghana and Burkina Faso, Mali, Niger • Dakar - Bamako • Durban and North-South Corridor • Role of African Alliance for Electronic Commerce comprising most SW in Africa: Morocco, Tunisia, Senegal, Cote d’Ivoire, Ghana, Cameroon, Gabon, Madagascar, Mauritius, ….

27. III.1 Connect to compete : Single Windows Missions External Trade Transaction Objectives Reducecost and delays in clearance

28. III.2 Connect to compete : corridors to Inter-connect landlocked to sea • Mombasa :Kenya, Uganda, Rwanda, Burundi and DRC • Dar-es-Salaam : • (1)Tanzania, Rwanda, Burundi, Uganda and DRC • (2), Tanzania, Zambia, DRC, Malawi • Walvis Bay: (1) Namibia, Botswana and South Africa; (2) Namibia, Zambia and DRC , (3) Namibia and Angola • Douala : Cameroon ,CAR and Chad • Dakar : Senegal, Mali, Burkina Faso and Niger, • Cotonou : Benin, Burkina Faso, Niger, and Mali • WA cost: Cote d’Ivoire, Togo, Ghana, Benin and Nigeria

29. III.2 Connect to compete : corridors to Inter-connect landlocked to sea INTERCONNEXIONS ENERGIQUES EN AFRIQUE ….ET DU PROGRAMME DE POOL ÉNERGÉTIQUE DE L’AFRIQUE CENTRALE (PEAC) QUI SONT COHÉRENTS AVEC LES PROJETS D’INFRASTRUCTURES DU NEPAD.

30. III.2 Connect to compete: corridor priorities and actions? • Despite widely held view hard infrastructure cost represents a small part of total logistics costs • Most gains in trade likely from investment in soft rather than hard part: • road quality has more impact on delays or predictability of trade flows than on cost of transportation through maintenance and fuel consumption; • infrastructure sustainability given low traffic • Low reliability of the transit supply chain more worrisome than average transit time

31. III.2 Connect to compete: Inter-REC connectivity CORRIDORS ROUTIERS EN AFRIQUE

32. III.3. Trade in services (Factor mobility) • Removal of restrictions on free movement of labor: exchange of information on regulatory regimes, streamlining immigration processes for business travelers and workers and temporary residence of business people • Experience of regional groupings such as EU or APEC Business Mobility Group provide practical guidance • SADC univisa scheme, other RECs should do the same

33. III.3. Trade in services: Mutual recognition Agreements(MRA) Promote Academic and professional qualifications: • Accreditation of schools or academic programs • Regional qualification and licensing • Regional conduct and ethics: standards of professional conduct and nature of disciplinary action for non-conformity with those standards • Professional development and re-certification: continuing education and ongoing requirements to maintain professional certification

34. III. 4 Non-Tariff Measures • Applicable to imported and domestically-produced goods • Not always bad e.g. regulations to protect local and global public goods desirable • Legitimate NTMs imposed in response to market failure otherwise not allowed by WTO • Most NTB: customs valuation, TBT, SPS, rules on import-licensing procedures • NTB major concern in a small country b/o can be captured by special interests as they lack transparency and are complex.

35. III. 4 Non-Tariff Measures Most prevailing NTM in Africa • Cumbersome customs and administrative documentation procedures; • Immigration procedures; • Cumbersome inspection requirements; • Varying trade regulations within same RECs • Varying, cumbersome and costly procedures for transit and verification of imports and export cargo; • Business registration and licensing.

36. III.4 NTM in dairy trade in EAC • Major bottlenecks include: • Veterinary certificates : Required from exporting and importing countries and issued separately for every individual shipment • Quality analysis: National quality seals are meant to be sufficient proof of compliance with standards but every EAC country requires further testing by own lab or other body • Ineffectiveness of the National Monitoring Committees • Limited dialogue/exchange of information; regulatory assessments and audits

39. III.3 NTM • In sum • African countries heavy user • Note sure what heavy regulatory apparatus addresses; not consumer concerns as in developed countries • Mostly regulatory overkill: streamline

40. Conclusion: NSE and African Re-industrialization in New Global Order • Step 1 : Documented African success stories • Step 2: constraints to alleviate: coherent/ sustainable policy, skill and technology, NTB, trade facilitation • Step 3: firm incubation: build capacity of private sector in international trade • Step 4: careful about governance; regional approach adds to complexity • Step 5: Mixed performance of Africa SEZ; Support other regional public goods • Step 6: compensating pioneer firms : complicated

41. Conclusion: NSE and African Re-industrialization in New Global Order • Broaden the market space to foster greater opportunities for scale production, competition, investment, and trade • Eliminate existing tariff and non-tariff barriers, bost trade facilitation reform • Take into account human and institutional capability and include a component on stakeholders empowerment

42. Conclusion: Summary of main messages • Trade regimes African countries are subjected to need to be consolidated and secured to enable focus on Continental FTA agenda • For this consolidation rule of origin under EBA, EPA, AGOA should be harmonized and aligned to CFTA; emerging countries should be fully involved… an agreement in the G20 framework preferable

43. Conclusion: Summary of main messages 3. NSE should be considered in the framework of RECs and the CFTA 4. Support should draw relevant lessons from the past and the complication associated with using a regional approach: preference to measures that enhance competitiveness (trade facilitation, NTM, ICT-enabled services) and skills that can be transferred to other sectors