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Trade facilitation and regional integration in Africa

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Trade facilitation and regional integration in Africa

Trade facilitation and regional integration in Africa
Photo credit: UNECE

On 21 July 2016, UNCTAD and Trade Mark East Africa (TMEA) will host a joint side event at UNCTAD 14. The panel will discuss linkages between trade facilitation reforms and regional integration, with a special focus on the East African Community (EAC). The following article aims at providing some initial considerations for this discussion.

This article discusses two linkages between regional integration and Trade Facilitation in Africa:

First, Trade Facilitation is increasingly important for regional integration, competitiveness and development. Intraregional trade is far lower in Africa than in most other regions and Trade Facilitation should be among the priority areas for policy action and international support.

Secondly, this article also discusses Trade Facilitation measures in view of their regional dimension. For several specific Trade Facilitation reforms, collaboration and cooperation among regional partners is helpful or even necessary. Such collaboration and cooperation itself can provide an additional impetus to further African integration.

The African continent and its Regional Economic Communities (RECs) record less intra-regional trade than most other regions of the world. According to UNCTAD data, intra-African trade amounts to only about 13.8% as compared to intra-regional trade among Latin America countries (22%), Asian countries (52%) and Europe (about 70% for the EU). One of the major factors behind this low level of trade integration is the low level of Trade Facilitation implementation. Africa has a roughly comparable size in terms of population and output as India, yet African countries are separated by 104 international borders between them. Facilitating crossborder trade is key for any further economic integration.

Trade facilitation implementation is also necessary for over-seas trade. It is particularly relevant for the participation of African countries in global value chains and trade in manufactured goods. Especially small and medium-sized enterprises (SMEs) and perishable, time sensitive and intermediate goods sectors in least developed and landlocked developing countries benefit from reduced transaction costs and times. Many Trade Facilitation reforms are in themselves positive steps towards human, enterprise and institutional development. They help small traders- often women- to enter the formal sector, make economic activities more transparent and accountable, promote good governance, generate better quality employment, strengthen IT capabilities, and generally help modernize societies by bringing benefits in terms of administrative efficiency.

Many Trade Facilitation solutions also have a regional dimension in their implementation. By requiring collaboration and cooperation among partner countries, their implementation itself can be a positive step towards further regional integration. It is thus recommended that ambitious Trade Facilitation measures are incorporated into regional integration schemes, including arrangements such as the Continental Free Trade Area for Africa (CFTA) and African Regional Economic Communities (RECs).

Facilitating regional integration and development in Africa

Most African countries are part of regional integration schemes. From the perspective of Trade Facilitation, having more Regional Trade Agreements (RTAs) can lead to a “spaghetti bowl”, requiring more certificates of origin and possibly other documents so as to benefit from preferential tariffs. Obtaining and submitting these documents, in turn, requires more paperwork and potential waiting times. To counter this potentially negative impact of RTAs it is crucial that African countries engage in ambitious Trade Facilitation reforms that contravene the possible additional paperwork.

The Action Plan for Boosting Intra-Africa Trade of the African Union specifically aims at deepening Africa’s market integration and significantly increasing intra-African Trade. To achieve this, the plan is composed of seven clusters, of which Trade Facilitation is one. Other examples of regional programmes that cover Trade Facilitation are the Common Market for Eastern and Southern Africa (COMESA) strategic medium plan, the West African Economic and Monetary Union (UEMOA) Trade Facilitation programme, and the regional indicative strategic development plan of Southern African Development Community (SADC). The Africa Trade Fund by the African Development Bank (AfDB) also specifically targets Trade Facilitation programmes in Africa’s regional organisations.

Compared to other regions, Africa records among the least favourable trade and transport facilitation indicators. The World Bank’s Doing Business 2016, for example, reports the highest documentary compliance time to export (108 hours) and to import (123 hours) for Sub-Saharan Africa. The World Bank’s Logistics Performance Index reports the lowest regional average for SubSaharan Africa. And research by UNCTAD shows that African countries have the lowest level of implementation of Trade Facilitation measures as recorded by the World Trade Organization’s category A notifications under the TFA.

The relationship between Trade Facilitation and development is dynamic. African countries with more capacities, higher trade volumes and financial resources, are in a better position to invest in reforms that make trade faster, easier and more transparent. At the same time, if Africa invests in programs that modernize Customs administrations and trade procedures, it will reap the benefits of more trade, revenue collection and institutional development. African countries that trade more will find it easier to attract financial resources to invest in Trade Facilitation as larger trade volumes help to achieve a higher rate of return on trade related investments. And those African countries that invest in Trade Facilitation will help their trade to grow further.

The regional cross-border movement of goods also requires the facilitation of its transport. This includes the border crossing of vehicles, their drivers, and containers. Transhipment of cargo at the border is costly, as is an empty return voyage if market restrictions do not allow transport companies to pick up cargo in both directions. Efficient transit requires functioning Customs guarantee schemes. Transport infrastructure needs to be planned regionally to take into account cross-border trade flows, vehicle standards, and axle loads. There needs to be mutual recognition of permits, insurances and drivers’ licences. All of the above requires regional collaboration and coordination.

Choosing the right Trade Facilitation measures for regional collaboration

It will be critical that African countries use their existing REC mechanisms to identify which Trade Facilitation measures could benefit from regional coordination or collaboration. The following six criteria are proposed for consideration in the identification process:

  1. The measure itself requires or benefits from bilateral cooperation, as is the case for example for border agency cooperation (see Box 1).

  2. There are similar needs for technical assistance. For example, large number of countries in the REC may have the same TFA measure notified as category C.

  3. A small or weak member of a regional grouping can benefit from the experience and strength of more advanced fellow-members possibly through intra-regional technical assistance and support. Experiences gained in a regional “pilot” country can be passed on to the next country within the region.

  4. Implementation could benefit from regional standards and mutual recognition. Examples here can include Customs automation and other technological solutions, as well as AEO schemes.

  5. There already exist regional agreements such as common Customs codes. It can also be beneficial to pool resources for updating such regional codes.

  6. On-going regional programmes exist to support broader transport and Trade Facilitation integration. Examples here may include trade hubs, TMEA, corridor programmes et al.

In order to support regional aspects of TF implementation, a regional coordinating mechanisms, such as a regional TR Committee should be considered. Hosted within an appropriate regional intergovernmental structure, the Regional Trade Facilitation Committee (RTFC) could be assigned, inter alia, the following mandates.

  • To support, coordinate and monitor the establishment of national Trade Facilitation committees (NTFCs) with the region.

  • To provide a regional platform for the exchange of experiences and expertise

  • To develop and compare KPIs to benchmark and benchmark successful TF implementation.

  • To serve as a regional platform for UNCTAD’s NTFC empowerment programme and other technical assistance projects.


Box 1: TFA Articles with a potential regional dimension

The implementation of several Articles of the WTO Trade Facilitation Agreement (TFA) may have a regional dimension. They may allow for collaboration, or they may require or benefit from working with neighbouring countries or trading partners.

Article 1 (Publication) can be implemented jointly to provide traders with a common platform. Article 1.3 (Enquiry Points) specifically, allows members to “establish or maintain common enquiry points at the regional level”.

Article 5.1 (Notifications for enhanced controls or inspections) could also help traders in neighbouring countries if implemented regionally. Under Article 5.3 (Test Procedures), a “Member may, upon request, grant an opportunity for a second test”; this second test could be undertaken in a third country, possibly under a scheme of mutual recognition of test results.

A number of Customs related measures included in Articles 7 and 10 require regional coordination if the country is member of a Customs union. Pre-arrival Processing as per Article 7.1 can benefit from regional cooperation, especially when involving land-transport. The EAC Revenue Authorities Data Exchange (RADEX), for example, provides advance information to allow Customs to process data before the goods arrive at the land-border. Article 7.6 on the Establishment and Publication of Average Release Times becomes more relevant and interesting if comparable standards and benchmarks are established on a regional level. Article 7.7 (Measures for Authorized Operators) can involve mutual recognition of authorized operators within a region. Article 10.3 encourages the use of international standards. Data models, codes, and document lay-outs should all be harmonized globally. At times, a first step can be harmonization on the regional level.

Article 8.2 (Border Agency Cooperation), specifically requests WTO Members to coordinate procedures at border crossings to facilitate cross border trade. This may include aspects such as working hours, aligned procedures and formalities, common facilities, joint controls and the establishment of one stop border post controls.

Article 11 (Freedom of Transit), as well as several other articles that make reference to transit, aim at facilitating transit trade. Their implementation would ideally take place within broader regional transit or corridor programmes that may also involve infrastructure investments, regional transport markets, or the mutual recognition of licences and certificates.

Article 12 (Customs Cooperation) provides for a wide range of possibilities for cooperation, including through technical assistance, capacity building and information exchange.


Conclusions and the way forward

The special and differential treatment (SDT) provisions included in Section II of the WTO TFA provide a unique opportunity to take Africa’s development into consideration when planning for Trade Facilitation implementation. Developing countries have the opportunity to notify specific Trade Facilitation measures as category B (to be implemented later) and C (requiring financial or technical assistance), and there is a commitment by the international community to provide financial and technical assistance towards TFA implementation.

Given the importance of Trade Facilitation for regional integration, trade competitiveness and development, Trade facilitation should be among the priority areas for policy action and support by the international community.

In addition, there is also a regional dimension in the implementation phase of Trade Facilitation reforms. For several specific Trade Facilitation measures, collaboration and cooperation among regional partners is helpful or even necessary. Such collaboration and cooperation itself can provide an additional impetus to further African integration.

This article was published in the UNCTAD Transport and Trade Facilitation Newsletter No. 69, First Quarter 2016. Updates on the UNCTAD14 side event will soon be posted on http://unctad14.org.

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