Africa and the Implementation of the Trade Facilitation Agreement

17 Mai 2017

For Africa, the Trade Facilitation Agreement (TFA) brings potential benefits but also significant challenges. How can we ensure that the TFA is a development tool for the continent?

 

Since the Trade Facilitation Agreement (TFA) on 7 December 2013 in Bali, some have insisted on the new obligations it entails for developing countries, others have been focusing on the potential benefits of the agreement, and still others on the second-generation special and differential treatment measures contained in Section II of the agreement, which grant them flexibilities. On 22 February 2017, the TFA came into effect, bringing all the members of the WTO back to their responsibilities and commitments. Taking into account the new obligations contained in the agreement, what are the challenges for Africa, which is represented by 44 member countries within the organisation?

According to the provisions of Section II, developed countries, which are considered donors, have committed to provide aid and support to developing countries when it comes to building the capacity to implement this agreement. What will African countries – most of which belong to the group of least developed countries (LDCs) – do if this commitment, which is non-binding for developed countries, is not fulfilled by them? Furthermore, as the entry into force of the TFA coincides with significant efforts to establish the Continental Free Trade Area, how can Africa benefit from this agreement in a way that encourages and increases intra-regional trade? This article analyses the progress of the agreement’s implementation, a mere two months following its entry into force, as well as the opportunities and challenges it provides for the continent, before discussing the way forward to securing optimal benefits from this process.


A moderate level of commitment

On 30 April 2017, 115 instruments of acceptance of the Protocol Amending the WTO Agreement had been received by the WTO, including 19 from African countries. This data is currently insufficient to draw specific conclusions. Indeed, in accordance with Article 15.2 of the TFA, LDCs have an additional period of one year to deposit their instrument of ratification following the entry into force of the TFA. However, the notification of measures under different categories is a relevant indicator. As a reminder, Article 13 of the TFA sets out three categories of measures: category A for measures that developing countries must apply from the date the agreement is concluded; category B for measures that developing countries will implement following a period to be set by each country; and category C for measures that must be implemented once technical and financial aid has been provided to help build the implementation capacity.

Based on the 96 notifications received by the WTO Secretariat to date, 27 of which are from African countries, 40.4 percent of the measures were notified under category A, 2.6 percent under category B, 2.1 percent under category C, and 54.9 percent have not yet been notified. For African countries in particular, 18.9 percent of measures were notified under category A, 2.7 percent under category B, and 3.6 percent under category C, which means that 74.8 percent of measures have yet to be notified. To date, the African average has therefore not reached 50 percent, whereas the share of measures notified under category A remains below 20 percent.

Aside from South Africa, which has already implemented most of the measures, the African developing countries that are not LDCs[1] have already categorised measures under category A – Mauritius being the only one of these countries to have also notified measures under categories B and C. However, they have not done enough to lead the way, given the key role they play in their respective regions when it comes to regional integration. The share of measures notified under category A is approximately 27 percent. Only Morocco had over 91 percent. If we add category B commitments, assuming that they are implemented by the set deadline, Mauritius could reach a similar level of commitment.

According to the WTO database, the five measures that were notified the most under category C by Sub-Saharan African countries were related to the single window (Article 10.4), average release times (Article 7.6), risk management (Article 7.4), enquiry points (Article 1.3) and border agency cooperation (Article 8). It might therefore be reasonable to suppose that there could be a link between the provision of aid and support by developed countries and the level of commitment of African countries. Furthermore, the current level of commitment could reflect a degree of caution that could be explained by the deterrent effect of implementation costs. This is somewhat reminiscent of the position of African trade ministers who demanded binding financial commitments from developed countries for technical assistance. Were the minimalist assumptions of WTO analysts – who, when the time came to calculate the potential benefits of the agreement, estimated that the level of commitment of members would not fall below 75 percent – too optimistic?


Irresistible opportunities

Long before the TFA was concluded, African ministers had already recognised the potential benefits it could bring to Africa. In October 2013, they reaffirmed “the importance of Trade Facilitation where our priorities include enhancing infrastructure and boosting productive and trade capacities, in addition to reducing transaction costs, barriers, incentivising the undertaking of reforms and improvements to the customs regulatory systems as well as boosting intra-African trade.” According to WTO computable general equilibrium simulations presented in the World Trade Report 2015, export gains from the TFA would be between US$ 750 billion and over US$ 1 trillion dollars per annum. The gravity model estimations show even higher figures, ranging from US$ 1.1 trillion to US$ 3.6 trillion. According to the same source, developing countries and LDCs would be the main beneficiaries of the “full” implementation of the agreement. LDCs in particular could see their exports increase by 36 percent, much more than for other categories of WTO members. The WTO also predicts that, if the TFA is fully implemented, access to foreign markets will increase by 39 percent for developing countries and 60 percent for LDCs, with potential gains of up to US$ 50 trillion per annum for African exports. In summary, according to the WTO, “the poor have a lot to gain from trade facilitation.”


The challenges of implementing the TFA

Despite the benefits identified, African regional communities and their member states will have to face significant challenges to make this agreement serve regional integration. To date, only half of the members of ECOWAS and SADC have ratified the agreement. Furthermore, the lack of consultation before notifying commitments or depositing instruments of approval poses a specific challenge. From a general point of view, although developed countries all have the capacity to implement this agreement, developing countries are showing themselves to be more cautious. India and China, for example, have only committed to implementing, respectively, 75.4 and 70.1 percent of the TFA’s measures at the time of its entry into force. African countries seem – and rightly so – to expect developed countries to provide aid and support when it comes to building the capacity to implement this agreement. The WTO itself states that “available information on the cost of implementing trade facilitation reforms is quite limited.” In this regard, the organisation surprisingly concludes that “the anticipated costs of implementing the TFA appear modest relative to the expected benefits.”

Despite the absence of figures, the cost categories are known. In its studies on the topic, the OECD examines institutional costs, regulatory costs, infrastructure costs and, finally, training costs, which it considers to be the most essential.[2] Implementation costs may have been underestimated, which could be all the more problematic given that the WTO’s mechanism for implementing the agreement has been given anecdotal funds compared to the needs of developing countries. This mechanism is not intended to finance infrastructure. Members only turn to it as a last resort. The African trade ministers were already wary of such developments when they demanded that developed countries commit to “delivering binding, new and long-term technical and financial assistance and capacity building necessary for African countries to achieve full implementation capacity.” They were hoping to avoid having to permanently implement their commitments with only a one-off offer of aid.

For similar reasons, the agreement had been met with criticism from civil society. After the Bali Ministerial Conference, for example, the Africa Trade Network emphasised in a statement that the TFA requires “massive legislative, policy and infrastructural changes”, while considering that the need “to provide commensurate policy, technical, institutional and financial space and support for African countries to meet these changes was not adequately addressed in the text.” The statement also added: “the text introduces new processes which stand to give foreign corporations undue influence in the customs of African countries and diminish the role of domestic customs operators, further undermining African agenda of boosting intra-African trade and regional integration.”

While this criticism may seem excessive, it reveals the problems posed by the Western strategy to conquer developing-country markets through the notions of trade facilitation and transparency, which do not always guarantee benefits for all. What benefits could be guaranteed for a country with a chronic trade deficit and a lack of export capabilities? Therefore, the implementation of the TFA has real costs and potential gains. Although African countries are not starting from scratch when it comes to implementing the TFA, it should be pointed out that the commitments made are an unnecessary burden.


Turning the TFA into a development tool for Africa

On the whole, Africa wants to turn the TFA into a key instrument for strengthening its intra-regional trade and integration process. However, as it clearly sees the costs and weight of the implementation, it has expressed its fear that the significant commitments in the agreement might impact negatively on its efforts to pursue its development goals. With the entry into force of the TFA, it would be to its advantage to show some creativity in freeing the provisions of Section II – relating to special and differential treatment – from their legal isolation and turning them into the main springboard of the agreement’s implementation. This is all the more desirable since regionally-coordinated implementation would beneficial, in particular as regards customs cooperation, the financing of cross-border infrastructure, as well as the implementation of a regional platform on this matter.[3] These are all opportunities to explore to strengthen infra-African trade and speed up the regional integration process. Without underestimating their capabilities, African countries would do well to set their commitments at levels that do not hinder their development goals. Failing that, they would lose all the benefits stemming from flexibilities granted during the negotiations.

Nevertheless, this informed, coordinated approach to the implementation of the TFA by African countries will not compensate for what is expected from developed countries, which make haste slowly. Without any evidence of financial commitments from industrialised countries, the TFA will essentially represent a series of obligations for developing countries, specifically African ones. This agreement will only represent a win-win outcome for all parties once developed countries fulfil their obligations to provide technical and financial aid to help developing countries.

 

Author: Paul Batibonak, Focal point of the African Group at the WTO for trade facilitation and Coordinator of the CREDIS.


[1] South Africa, Botswana, Cameroon, Congo, Cote d’Ivoire, Egypt, Gabon, Ghana, Kenya, Morocco, Mauritius, Nigeria, Tunisia, Zimbabwe.
[2] Evdoka Moïsé, "The Costs and Challenges of Implementing Trade Facilitation Measures", OECD Trade Policy Papers, No. 157, OECD Publishing, Paris, 2013.
[3] See Batibonak, Paul, “Perspective africaine de la mise en œuvre de l’accord sur la facilitation des échanges”, Speech at the International Organisation of La Francophonie, Antananarivo workshop, 2016.
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