SA negative on deal to ease trade in Africa
• Government has not ratified job-creating agreement to help speed up the movement of goods across borders
The government is facing a showdown with the UN and the World Trade Organisation (WTO) over SA’s attempts to bend the rules of the recently instituted Trade Facility Agreement.
The agreement mainly targets developing countries as a means of boosting trade, wealth creation and job opportunities by expediting freight movement, cutting red tape and harmonising customs. Broadly speaking, it provides technical assistance and capacity-building and promises money and timesaving through a more streamlined movement of trade goods.
Africa’s reaction to the agreement is lukewarm at best, with only 17 of the WTO’s 40 African member states signing on. The organisation’s global membership is 164.
The South African government is worried about the insistence by the agreement’s sponsors, the UN Conference on Trade and Development and the WTO, that member governments are obliged to participate on a joint committee with the private sector.
The Department of Trade and Industry has formed an interdepartmental forum “in accordance with the prescripts of the committee’s terms of reference”, but it has representatives only of the government. This means that at this stage, the National Economic Development and Labour Council (Nedlac), business and industry and labour groups cannot be members of the committee. The department did not respond to e-mailed questions about SA’s ratification of the agreement or the work done by its committee.
SA has not ratified the agreement but is bound by WTO regulations to recognise it when 110 member governments — two-thirds of the organisation’s membership — sign it. So far, 108 countries have ratified it.
“The Trade Facility Agreement is a vital new and insightful means of boosting trade, wealth creation and job opportunity worldwide,” says Pat Corbin the SA director of the International Chamber of Commerce, the world business organisation.
“It promises what African trade needs most: the expediting of the movement, release and clearance of goods including those in transit, harmonised interaction between customs and other authorities on trade facilitation and customs compliance. It aims to reduce member countries’ trade costs by about 14%, with developing countries scoring highest. The agreement is most beneficial to African countries, all of which are classified as developing or least developed, the latter demanding most attention.”
Nigeria ratified the agreement at Davos in January, saying that it was in line with its presidential initiative to create an enabling, rules-based environment for business.
The agreement will replace the now defunct Almaty programme, a long-standing WTOled arrangement that assisted with the costs and logistics of the trade of landlocked countries.
“Border posts across the continent are bedevilled by utter inefficiency and blatant corruption, which means the money and time-saving promises of the agreement are in danger of coming to naught,” says Corbin.
Disappointing for the agreement’s main backers, the WTO and UN, was the small number of African countries to sign on although Africa and other poor regions have the most to gain. One of the motivations for the agreement is the massive cost to developing countries of getting their goods to and from distant foreign markets.
The WTO reckons these logistical costs are upwards of 25% of the value of the cargoes and they are, therefore, not competitive in foreign markets. The agreement was designed to turn that around by offering financial and technical support for streamlining the movement of trade. Research by the World Economic Forum found that the agreement’s implementation could add up to 80% in crossborder sales by small and medium-sized enterprises.
If it is ratified by two-thirds of WTO members, it will become an official part of the multilateral trading system covering about 96% of global GDP. The International Chamber of Commerce estimates the deal could support the creation of 20-million jobs worldwide, most of them in developing countries.
SA has offered no reason for its negative attitude to an agreement that, if it succeeds, could bolster foreign earnings considerably and help build trade bridges for interregional commerce — a prize African countries have been seeking for decades but on which little progress has been made.
The recalcitrance to engage with the agreement possibly has its roots in the way SA is beginning to regard global organisations; the withdrawal from the International Criminal Court is a clear warning, say some in industry, that the government will not be told what to do, even when it benefits its citizens.
In the absence of an explanation, most people in industry believe it could be a reaction to a provision in the WTO document Trade Facilitation Agreement: A Business Guide for Developing Countries: “Business communities will have to find ways of engaging with their respective governments through national consultation mechanisms. This is recognised in a simple provision that obliges each WTO member state to form or maintain a national committee on trade facilitation or designate an existing mechanism.”
The agreement stipulates that such committees should facilitate domestic co-ordination and the implementation of the agreement. Business will have to bring issues and problems that traders face to the attention of national governments for the measure to be effective, “so that they can play an active part in bringing up concerns covered by the new agreement”.
Because the government will be bound to the agreement, whether it wants to be or not, after it is ratified, it probably expects that its all-government forum fulfils the UN’s requirement that a “national committee” be established.
“SA is a reluctant player in a deal the rest of the world has warmly welcomed. Africa is the main target and beneficiary of the Trade Facility Agreement, particularly due to its distance from major world markets and its infrastructure deficiencies.
“It should have been at the forefront, considering the importance to the region of the agreement,” says Corbin.
Negotiations on the agreement were concluded in 2013 at the Bali ministerial conference of the WTO. The organisation is prepared to offer technical support for trade facilitation to its members and other intergovernmental organisations including the World Bank and the World Customs Organisation. The joint public-private working committees will identify problems and act as the conduit between member countries and the WTO.
“Our government is playing with semantics when they disagree,” says Corbin. “Equally puzzling is why the government has not involved the private sector, since the formation of a joint committee was first raised by business in Nedlac in 2014.”
IT AIMS TO REDUCE MEMBER COUNTRIES’ TRADE COSTS 14%, WITH DEVELOPING COUNTRIES SCORING HIGHEST