Nairobi,13-15 November 2012

The Link between

CFTA & WTO

Trade Facilitation Negotiations

Dr. Halima Noor Abdi

Outline

• Background

• Key Issues and Lessons of CFTA

• CFTA, TF and WTO Negotiations

• CFTA TF Cluster• Synergies between CFTA

and WTO TF Negotiations

• Expected Outcomes from the Establishment of the CFTA

• Benefits of CFTA from the Adoption of TF Measures

• Conclusion/Policy Recommendations

Background• Africa: Integration into the World economy

through WTO and EPAs• Stalemate of negotiations pushing Africa to

explore boosting intra-Africa Trade• Boosting Intra-Africa trade and deepening

regional markets is a key response to the challenges facing Africa

• CFTA expected to assist, enhance capacity and prepare African Countries compete more effectively on the global market.

Key Issues and Lessons of TF

• Africa’s performance in main trade, transport and logistics performance indicators has been poor

• Africa’s performance lags behind other regions in critical factors that influence trade

Therefore:• Opportunities offered by AU CFTA • Will result in deeper integration to boost intra-

African trade

Key Issues & Lessons of TF (2)

• Key question: What complementary measures will translate AU vision and aspirations into tangible trade growth?

• Global trade performance can help point us in the right direction….

• WTO TF measures as benchmark

• This has implications on how we approach TF– Optimizing supply chain efficiency i.e.– Cost, time, quality and reliability (consistency)

Key Issues & Lessons of TF (3)

• Efficient border controls by governments• Improves logistics for traders• Reduces transaction costs thus lowers prices• Reduces transit costs for landlocked countries • Reduces bureaucracy and corruption• Facilitates trade for SMEs, etc burdened with

excessive bureaucracy and red tape • Increased GDP output.

CFTA,TF and WTO Negotiations

• The WTO Secretariat has circulated a “checklist of issues” that summarizes the central issues of trade facilitation. These include:

• Physical movement of consignment (transport and transit) and border-crossing problems;

• Import and export procedures, including customs;• Information and communication technology;• Payment, insurance and other financial requirements

that affect cross-border movements of goods in international trade; and

• International trade standards

CFTA,TF & WTO Negotiations (2)

Articles V, VIII and X• Article V allows for free movement of transit

goods • Article VIII rationalizes and simplify border

procedures, formalities and charges • Article X requires prompt publication of trade

laws and regulations • The objective of the GATT Articles is to

reduce trading costs and facilitate trade.

CFTA: Trade Facilitation Cluster

PROGRAMME/ACTIVITY

OUTPUT/TARGET TIME FRAME

RESPON-SIBILITY

Reduction of road blocks

All unnecessary road blocks are removed

Short term MS

Harmonizing and simplifying customs and transit procedures, documentation and regulations

Number of customs documents are reducedKey customs documents are harmonized within RECsBorder operation hours are harmonized

Short term RECs,MS

CFTA: Trade Facilitation Cluster (2)

Establishment and operationalisation

of One-Stop Border Posts

OSBPs at all key border posts established Border time crossings of goods are reduced by 50%

Short term MS, REC

Integrated Border Management (IBM)

Customs procedures, standards, regulations and documentation are harmonized and simplified

Short term MS, RECs, AU

CFTA: Trade Information

PROGRAMME/ACTIVITY

OUTPUT

/TARGET TIME FRAME RESPONSIBILI

TY

Creation of inter-connected centres of trade information exchange

Information on business opportunities and trade regimes on the continent is provided

Short term MS

CFTA: Productive Capacity Cluster Main objective: Creating regional and continental value chains/complementarities, to

increase local production/ trade in goods produced in Africa

Establishment of integrated and inter-connected trade information systems

Integrated and inter-connected trade information systems are put in

place

Short term

AU, RECs, MS

*Trade Finance System

Improving Payment system

Cross-border payments are facilitated and currency constraints are avoided

Short term

MS

Synergies between CFTA and WTO TF Negotiations

• Synergy between WTO and CFTA TF– Streamlining customs, procedures– Harmonization and standardization of border

procedures– Intention of minimizing costs and time, etc

• Qs. Of Implementation time-frame: WTO category A, B,C. and CFTA, short, medium to long-term

Benefits of CFTA from the Adoption of TF Measures

According to the ECA analysis the larger thereform the greater the associated gains• The creation of CFTA accompanied by more

efficient customs procedures and reduction in delays that merchandise spend at African ports, would lead to a 128.4% (or $85.0 billion) increases in intra-Africa trade to the baseline 2022

• In fact, the share of intra-Africa trade would more than double over the next decade passing from 10.2% to 21.9% in 2022

Table 1 – Share of intra-African trade – 2012 vs. 2022 and depending on the implemented trade reforms

2012 Without trade reformAfter CFTA reform

implemented

After CFTA reform implemented and

complemented by Trade Facilitation measures

10.2 10.6 15.5 21.9

2022

Table 2 – Intra-African trade structure by main product categories – 2012 vs. 2022 and depending on the implemented trade reforms

2012 Without trade reformAfter CFTA reform

implemented

After CFTA reform implemented and

complemented by Trade Facilitation measures

Agriculture and food products

17.9 16.3 16.3 12.4

Primary and petroleum products

18.5 18.4 16.9 15.6

Industrial products 59.3 60.7 62.7 69.4

Services 4.3 4.7 4.1 2.7

2022

Additional Benefits of CFTA from the Adoption of TF Measures (2)

• Sophistication (diversification) of intra-Africa trade would increase as intra-continental trade in industry would grow the fastest with reforms

• Boost further exports at both country and global levels• Positively impact both skilled and unskilled workers

employed in non-agric activities• Benefits for Industrial, agriculture and food sectors• Real wages of skilled workers would increase with FTA

reforms-more when such reforms are accompanied by TF measures

Conclusions and policy recommendations

• Complementary measures (such as trade facilitation) are critical to generate real income gains for all African economies

• Trade facilitation measures are also key for:

– Boosting intra-African trade

– Enhancing export diversification of African economies

– Need to identify sectors with supply chain potential to enhance diversification of African economies

Conclusions & policy recommendations(2)

• Nevertheless, adopting trade facilitation measures and improving infrastructure are very costly

– For example: the Program for Infrastructure Development in Africa (PIDA) has identified 51 priority projects for the period 2012-2020 and the cost of implementation is estimated to about US$70 billion

• Therefore, there is a need to find financial resources

– Aid for Trade (AfT) could be devoted to key priority projects aiming at tackling constraints to intra-African trade

– Limit losses from Illicit Financial Flows (IFF)