Trade & diversification

Trade performance back on track but eurozone crisis a threat. More needed to tackle supply side constraints, reduce trade barriers, deepen intra-African trade and deliver Doha commitments.

Key commitments

Africa: African governments have consistently emphasised the importance of trade, with three broad, inter-related commitments: (a) to reduce supply-side constraints, improve competitiveness and foster comparative advantages in industrial production; (b) to take practical steps to reduce trade barriers and facilitate trade; and (c) to deepen regional integration. Recent commitments emphasise regional integration, modernising domestic and regional trading systems, removing obstacles to trans-border trade and rationalising Regional Economic Communities (RECs). In January 2012, African Heads of State and Government adopted a Decision and a Declaration to boost intra-African trade and fast-track the establishment of the Continental Free Trade Area (CFTA) by 2017 (see Box 2 in Appendices).

Development partners: Development partners have reiterated:

(a) long standing commitments to bring the Doha Development Round to a balanced and ambitious conclusion in particular for Least Developed Countries (LDCs);

(b) commitments on enhancing trade capacity and access to markets, including specific commitments in the G-20 Multi Year Action Plan on Development to at least maintain Aid for Trade (AfT) levels in 2011 above the 2006-08 annual average;

(c) commitments to keep markets open, and to refrain from raising new trade barriers or imposing new export restrictions; and

(d) support free trade areas in Africa and improve the efficiency of trade corridors. 

In Cannes the G-20 reaffirmed its commitments, as agreed in Toronto, to roll back any new protectionist measure that may have arisen during the global financial crisis.

What has been done to deliver on these commitments?

Africa: African governments and RECs are tackling supply-side and competitiveness problems, demonstrated by the high level of investments in infrastructure and productive capacity building (see also Topic 3). Average applied tariffs have fallen from 16.7% to 7.1% on sub-Saharan African imports between 2000 and 2009, through unilateral measures and implementation of regional integration protocols. COMESA, EAC and SADC formally launched negotiations for the establishment of an integrated market of 26 countries in June 2011 at the second Tripartite Summit.

Development partners: There has been little progress on the Doha Round. There has been some progress on duty and quota free market access for LDCs, with several emerging economies introducing preferential schemes. At the end of 2011, WTO members adopted a waiver to enable developing and developed-country Members to provide preferential treatment to services and service suppliers of least-developed country Members. Commitments made in response to the financial crisis are positive, leading to an increase in Aid for Trade. Africa has become the largest AfT Recipient: commitments increased to US$17.4 billion in 2010 versus an average of US$11.3 billion in the five previous years, with economic infrastructure receiving the greatest support, followed by productive capacity.

While the overall level of trade barriers has not increased significantly, there is no indication that recourse to new trade restricting measures by the G-20 has diminished, nor indication that efforts have been made to remove existing restrictions. The number of restrictive measures introduced between May and September 2011 declined slightly to 108, down from 122 recorded during the preceding six months. Removal of previous restrictions, however, remains low such that the share of world trade concerned with new trade restrictions since the beginning of the financial crisis keeps rising, to over 2% at the end of 2011.

What results have been achieved?

Africa’s trade performance improved significantly between 2000 and 2008. Its merchandise trade rose to US$1.022 billion, and its share of world merchandise trade increased from 2.1% to 3.2%, though still only half its 1980 peak. Africa’s share in trade of commercial services grew to US$220 billion in 2008, 3% of world trade in commercial services.

With a steep fall in world trade in 2009, Africa’s trade merchandise fell to US$778 billion (-24%). African merchandise export volumes fell by 2.4% and imports by 7.9%. The loss in value was sharper, at 30.9% for exports and 19.5% for imports, reflecting a significant deterioration in African terms of trade. 

During 2010 and 2011 Africa returned to its previous strong performances, with an estimated merchandise trade of US$963 billion (+24%) in 2010 and US$1,152 billion (+20%) in 2011. Growth was driven by the significant improvement in African terms of trade (+20% and +4% in 2010 and 2011 in sub-Saharan Africa) and the corresponding rise in fuel, agricultural and food commodity prices: the IMF Commodity Price Index, which includes both Fuel and Non-Fuel Price Indices, grew by 59% over the 2010-2011 period. 

‌African trade of commercial services amounted to US$227 billion (3.2% of world trade) in 2010 and to US$234 billion (2.9% of world trade) in 2011. The impact of the global slowdown on Africa has to date been limited to a few countries in 2011. However it could become more significant in 2012. African exports remain poorly diversified in structure. Eighty percent of Africa’s exports are oil, minerals and agricultural commodities.

In 2010, African export of manufactured goods accounted for less than 1% of global manufactured exports. Europe and North America continue to absorb most African exports, though the share to developing countries is increasing dramatically, from 34% to 47% between 2005 and 2010. China has gradually progressed from one of Africa’s smallest trading partners in 2001 to one of the largest in 2010—second to the United States as Africa’s largest export partner and the largest import partner. 

Intra-regional trade remains low, constituting only about 10% of total African exports, on average, over the last decade. However, this is gradually increasing, with proportions rising to 12% of total African exports in 2010. Though this share is significantly lower than in Asia (53%) and South and Central America (26%), it reflects important progress in some RECs, such as COMESA and EAC, where intra-regional trade has been booming in recent years. 

What are the future priority actions?

Africa:

•Continue to improve competitiveness by tackling supply-side constraints and improving infrastructure and productive capacities. (see also Topic 3)
•Continue to remove constraints to trade, including through the reduction of tariff and non-tariff barriers and further trade facilitation measures;
•Accelerate regional economic integration and finalise the tripartite FTA initiative by 2014 and the establishment of the CFTA by 2017.

Development partners:

• Continue to keep markets open, taking action as necessary to dismantle restrictive measures;
• Agree urgently, with other parties, on a way to bring the Doha Round to a balanced and ambitious conclusion as soon as possible;
• Continue to meet Aid for Trade commitments with increasing focus on regional projects and trade facilitation.