Wednesday 8 July 2009

tralac - trade law centre for southern africa




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Hotseat Comment


Taku Fundira


Taku Fundira, a tralac Researcher, comments on aid for trade and the global financial crisis.
Trade has long been regarded as an engine for growth, development and poverty reduction in developing and least developing countries (LDCs). To this effect the Doha development agenda (DDA) of the World Trade Organisation (WTO) has accentuated the importance of promoting trade and growth in developing and least developed countries.



It is well acknowledged that market access improvements are a necessary, but may not be a sufficient condition for increasing trade opportunities for developing countries and ensuring sustained trade growth. In their efforts to improve trade and growth, many developing countries and LDCs are confronted with other problems apart from market access. Thus, there is a realisation that any ambitious market access package will need to be accompanied by Aid-for-Trade to address these other problems. To benefit from liberalisation, developing countries will need to make public investments in infrastructure and institutions as well as private investment in productive capacity.

The aid for trade agenda reflects the realisation that, for developing countries, the necessary investments are particularly large, and the capacity to meet them is particularly small. The WTO notes that Aid for Trade is about helping developing countries, in particular the least developed to build the trade capacity and infrastructure they need to benefit from market access and more broadly, to expand their trade in the global economy.

Aid for Trade is not a new concept but one that has evolved and has an important role in enabling developing countries, particularly LDCs, to use trade more effectively in promoting growth, development and poverty reduction. Building supply-side capacity and trade-related infrastructure is the key to facilitate access to markets and to increase exports.

There is an emerging consensus that the current WTO Doha Round will require adequate trade related assistance to mitigate the detrimental effects of trade reforms, and to enhance the trading capacity of developing countries. However, there are also cautious sentiments that argue that any Aid for Trade should not just compensate for the adjustment shocks stemming from trade reforms but rather ensure that future expansion of trade is promoted.

As Aid for Trade involves the flow of development finance from rich to poor countries for the purpose of enhancing the world trading system, there is a need to ensure that the right programmes are implemented. Donors must ensure that aid complements and strengthens a recipient country’s own plans, budgets, and structures, rather than undermining them with parallel donor-run administration.

For successes to be achieved, any aid for trade programme should be demand driven with a sense of country ownership rather than donor driven and reflecting the agenda of the donor countries. The finance provided should not be used as a tool to extort greater concessions from developing countries on liberalisation or used as a “way out” for developed countries to avoid making concessions in sectors of importance to developing countries such as agriculture.

The world economy is confronting one of its worst economic periods. The financial crisis and its impact in the real economy, highly volatile commodity prices, and the failure to conclude the Doha Development Agenda have all worsened the economic outlook. Looming on the horizon is the risk of countries reverting to protectionism and the drying up of aid finance.

The developing world is now confronted with a situation in which the credit crunch and the recession in major Developed markets might choke aid, trade and investment flows. This, in turn, will put pressure on their budgets, making it harder to finance their Millennium Development Goal (MDG) strategies. These risks are looming while much needed resources to finance in-depth investments to generate economic growth are diverted to pay for higher food prices.

This makes aid for trade all the more important, not less. Especially at a time of slack demand combined with increased competition, aid for trade is critical to improve the supply side response.

Thus, donors need to honour their aid for trade pledges, particularly to the poorest developing countries, who might well be confronted by cuts in other sources of development finance.

Tell us what you think...

Sources: tralac, OECD, WTO

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Special Features


* BUSA is supporting the dti in hosting workshops on the export opportunities available under the SACU-EFTA FTA. The Department of Trade and Industry (the dti) invites all South Africa’s exporters and potential exporters to attend seminars on exporting to the European Free Trade Association market. The workshops also provide information on the SACU-EFTA Free Trade Agreement that entered into force in May 2008.

The seminars are export focused and targeting all economic operators interested in exporting goods to the EFTA market. The target audience is the business community, chambers of commerce, exporters associations, provincial trade promotion agencies and potential exporters in South Africa. Government officials responsible for trade promotion are also invited to participate in these seminars. The South African seminars will take place on the following days at the following venues:

o 15 and 16 July 2009 | Pretoria | Manhattan Hotel, 247 Scheiding Street, CNR Andries and Scheiding Str
o 17 and 18 July 2009 | Cape Town | WESGRO, 12th Floor, Warldorf Arcade, 80 St George's Mall
Read more here...

* tralac MEDIA LIBRARY. View a new interview by Mr Chiedu Osakwe, Accessions Division WTO. He comments on the objectives the WTO is trying to achieve with acceding countries. Also view an interview by Dr Dickson Yeboah (Institute for Training and Technical Cooperation WTO) on the kind of negotiating skills African countries need.

* Read more here about the students who graduated with Post-Graduate Diploma in Management Practice (Trade Law and Policy Management) from the University of Cape Town. The programme is presented by tralac in collaboration with the Graduate School of Business, University of Cape Town. For more information about this progamme please go the NEW tralac Training Website.

* Download the latest Weekly Customs, Excise, Tariff and Trade Remedy Summary Notification.

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News


G8 agree to finalise Doha in 2010
Leaders of the Group of 8 (G8) as well as Brazil, India, China, Mexico and South Africa will agree at a summit tomorrow (Thursday) to conclude the Doha round of multilateral trade talks
successfully in 2010, a draft communiqué has stated.

SADC, Africa Forum sign MOU on regional integration
The Southern African Development Community (SADC) and the Forum for Former Heads of State and Government have signed a Memorandum of Understanding (MOU) to address regional integration in Southern Africa as well as the special needs of the district.

Trade can stimulate economy, says UN chief
Trade is a vital part of global efforts to stimulate an economic recovery, United Nations chief Ban Ki-moon said at a World Trade Organisation (WTO) conference yesterday.

Exporters struggle to get trade loans
Exporters are struggling to receive the loans necessary to ship their goods, World Trade Organisation (WTO) Director-General Pascal Lamy said ahead of a high-level meeting on ways to boost commercial flows from poor countries.

UN system bodies call for collective response to financial and ecological crises [Press release]
Green Economy: A Transformation to Address Multiple Crises: An Interagency Statement of the United Nations System. The current financial and economic crisis is throwing millions of people into poverty, especially the most vulnerable in the developing world. This is happening amidst the ongoing food, water, energy, ecosystem, and climate crises. Together, these crises are undermining the efforts to achieve the Millennium Development Goals and setting back development progress of the past few decades.

SA re-thinks import tariff pledge
The South African government is considering increasing import tariffs on garments to the maximum levels agreed to at the World Trade Organisation (WTO), contradicting its pledge as part of the Group of 20 (G20) countries not to engage in protectionism during the global economic downturn.

EU to look into threats to SACU
The European Union (EU) is set to look into some of the issues that could precipitate a break-up of the Southern African Customs Union (SACU).

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Events

* BUSA is supporting the dti in hosting workshops on the export opportunities available under the SACU-EFTA FTA. The Department of Trade and Industry (the dti) invites all South Africa’s exporters and potential exporters to attend seminars on exporting to the European Free Trade Association market. The workshop also provides information on the SACU-EFTA Free Trade Agreement that entered into force in May 2008.

The seminars are export focused and targeting all economic operators interested in exporting goods to the EFTA market. The target audience is the business community, chambers of commerce, exporters associations, provincial trade promotion agencies and potential exporters in South Africa. Government officials responsible for trade promotion are also invited to participate in these seminars.
o 15 and 16 July 2009 | Pretoria | Manhattan Hotel, 247 Scheiding Street, CNR Andries and Scheiding Str
o 17 and 18 July 2009 | Cape Town | WESGRO, 12th Floor, Warldorf Arcade, 80 St George's Mall
Read more here...


* On 19 June 2009 tralac hosted a Workshop on Regional Integration in Southern Africa. The post-workshop report will be published on our website soon.

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Publications

* New Working Paper (An assessment of the trade measures proposed as part of the Department of Trade and Industry's Draft Rescue Package for the clothing and textile industry) by Sean Woolfrey. The working paper addresses the value of the new trade measures proposed by the DTI. The paper begins by providing a brief overview of the clothing and textile industry in South Africa, including an analysis of the recent quota experience. Next it highlights the industry's weaknesses, posing the important question of whether it has a sustainable future. Leaving this question open, the paper examines the trade measures mentioned above, looking in particular at a number of issues that need to be explored when considering an increase in import tariffs, including the scope that exists for such a move, the nature and coverage of the proposed tariffs, and the impact that such an increase would have on the South African Customs Union (SACU), as well as on South Africa's trade relations with developing country exporters of clothing. Read more...

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AGOA.info

2009 AGOA Forum
The 2009 AGOA Forum takes place in Nairobi, Kenya, from 4-6 August. Follow the link to the Forum's dedicated website on AGOA.info. Programme details have been published and may be downloaded from AGOA.info at the following links:

* AGOA 8 Ministerial Session
* AGOA 8 Private Sector Session
* Registration Form Private Sector
* AGOA 8 Civil Society Session

Data to April 2009 available, May data out this week

Trade data to April 2009 has been updated on AGOA.info. New data to May will be released on 11 July. Exports under the Act remain well below comparable 2008 levels, with most countries showing significant declines in US-bound exports. Nigeria and Angola (-70% and -47% YOY respectively) showed some of the largest year-on-year contractions in exports, mainly as a result from depressed oil prices and lower demand in the US. Southern African countries are also feeling the impact of difficult trading conditions: South Africa's AGOA exports have declined by 28% to April, Lesotho is down 9%, Botswana 16% lower and Namibia has lost 49%albeit off a very low base. Swaziland is currently the only SACU country with higher year-on-year exports under AGOA, and is showing a 21% increase in exports to the USA.

Bilateral US-Africa country trade profiles

Profiles of disaggregated bilateral US-Africa trade, by country, has been updated to reflect March 2009 data. This includes regional profiles - SACU, BLNS, COMESA, ECOWAS, and CEMAC. Follow this link

Other updated AGOA data sections include disaggregated bilateral trade profiles for each AGOA country individually (as well as within various regional configurations) , aggregate bilateral trade, preferential trade under AGOA / GSP and sectoral data from AGOA-eligible countries by value and as a proportion of US imports, as well as sectoral new AGOA and GSP AGOA data. Textile data, which is categorised by rules-of-origin category (for example, it distinguishes garments made from local or third country fabric), is available both by value and by volume. Data to March 2009 shows that exports appear to be relatively resilient to difficult global trading conditions: Aggregate garment exports under AGOA are down 4% for the year, with the sub-category permitting the use of third country fabrics shwoing a 2% drop. Aggregate garment exports under AGOA are down 11% for the year, with the sub-category. Export data to March 2009 is available at this link.

The current quota period commenced in October 2008 with the latest available quota utilisation rates for the period October-June indicating an overall uptake of 11.90% (10.55% to May), and 23.13% (20.48% to May) under the 3rd country sub-quota. The total allowable quota for the October 2008-September 2009 annual period has been set at 1,711,900,006 square meter equivalents (SME), which for the first time is lower than the quota allocated to a previous year (2007/8: 1,746,798,542).

Follow these links to diagrams showing clothing exports under AGOA, and quota utilisation during the current quota period.

Trade acronyms and terminology
Visit AGOA.info's alphabetically-ordered database of trade-related acronyms and terminology

Latest AGOA news

* Kenya: US-Africa trade program shows negative trend
* Ghana prepares for Obama visit
* US hopes Obama's visit to Ghana will spur others
* Africa: Agoa forum seeks to expand US-Africa trade and investment

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* Read these and other AGOA-related news articles in AGOA.info's news area, which is continuously updated with articles sourced from a wide range of African and foreign publications.

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