New WTO boss Ngozi Okonjo-Iweala in vaccine plea
South African heading free trade area sees it as tool to industrialise
● The man charged with implementing Africa’s historic free trade agreement has rallied against the World Trade Organisation (WTO), saying it needs to refine its rules to make it possible for Africa and the developing world to industrialise.
“We have a consistent demand … give us the policy space for industrial development, the policy space that we require for us to develop. Some of the rules need to be changed, they must be reformed,” said Wamkele Mene, the South African chosen as the inaugural secretary-general of the African Continental Free Trade Area (AfCFTA).
Speaking to the Business Times from the secretariat headquarters in Accra, Ghana, Mene said while the world had experienced a rise in trade protectionism and trade wars, Africa had within a period of five years shown the way by negotiating an agreement that liberalises trade and establishes a rulesbased system.
“Actually, we have helped the WTO, we have strengthened the WTO. We have added a very significant portion of market opening to the WTO based on rules. As much as we know WTO rules are unfair, we have worked with the WTO rules and we’ve improved on them in order to open our markets and to ensure that we strengthen the multilateral trading system.”
Mene was SA’s chief representative at the
WTO for a number of years.
Asked if the appointment of Nigeria’s Ngozi Okonjo-Iweala as the first woman and first African director-general of the global body would help the continent in its fight for a fair trading system, Mene said while they welcomed the appointment, it would be unfair to expect her to push for fair treatment of the continent because those powers lie with member states of the multilateral trade organisation and not its administrative head.
“As someone who has negotiated for many years in the WTO, I know for a fact the problems cannot be solved by the directorgeneral, they are solved by member states. You are as successful a DG as the members allow you to be.
“We have to be careful as Africans not to think that because there is an African who is director-general our problems will be solved. We are making her job even more difficult than it ordinarily is and we are placing expectations on her that no human being could ever achieve.”
A continental free trade agreement was adopted by member states of the African Union in Kigali, Rwanda, in 2018, making it the largest free trade agreement in the world.
It seeks to reduce imports, cut tariffs within the bloc, eliminate borders and eventually create a single currency and customs union.
African nations have agreed to 90% tariff liberalisation over a 10-year period, with the first five years being the transition period. Countries can ring-fence an additional 7% of their traded goods as “sensitive products” against which a reduction in tariffs will occur over a much longer period.
Mene said the proliferation of illicitly traded products and the dumping of subsidised goods by wealthier countries were barriers to trade reform on the continent.
He said that 30% of pharmaceutical products that find their way into the continent were counterfeit. It is projected that by next year, counterfeiting will cost the global economy $4.2-trillion (R61.5-trillion).
Africa also experiences massive problems with under-invoicing at ports. According to the United Nations Conference on Trade and Development, intentionally misrepresenting the total value of a transaction costs Africa $52bn annually.
Mene said the secretariat was turning to digital interventions to fight illicit trading.
“We are going to launch an app in the next few months that will enable the tracing of goods, that will enable the verification and serialisation of goods that are being traded so that it is very simple, efficient and easy for customs authorities to be able to identify which goods are counterfeit, which are genuine and which are traded illicitly.”
He said the secretariat had met twice with heads of customs authorities on the continent to get their agreement on the digital solution and other efforts against illicit trade.
“We will not be able to implement this agreement as state parties without the cooperation of customs authorities.”
The dumping of textiles, second-hand cars, meat products and other goods is also a headache that gives him sleepless nights.
“The dumping of products creates job losses, it displaces local markets. The export of subsidised goods into markets causes job losses,” Mene said.
The problem of dumping was compounded by the fact that only two countries on the continent — SA and Egypt — had the necessary anti-dumping legislation and other safeguards in place to prevent subsidised goods flooding their markets, he said.
“We have got to build this capacity and create a continental body that will confront and fight this issue of dumping subsidised goods.”
Mene said the dream of creating a common market, culminating in a single currency and a customs union, would take time because of developmental challenges.
For starters, those countries that rely on tariffs as an important source of revenue have to be assisted in the short to medium term as the free trade agreement comes into effect.
The secretariat is in discussions with the African Export-Import Bank, which has agreed to provide an initial $1bn adjustment facility for those countries that will experience short-term revenue losses when tariffs are dropped.
“It is not going to be a direct transfer of funds from the adjustment facility to a country’s central bank. It is going to be direct intervention in a particular sector for productive investment,” Mene said. “If you come to the adjustment facility and say as a result of tariff reduction I can no longer compete in the area of textiles and clothing, then the adjustment facility would be at your disposal to say we will invest in your capital machinery so you can become more competitive in the region and globally, or will retrain your workforce to be deployed in another part of the economy.”
AU member states and investment and development partners will contribute.
Mene said it was no longer sustainable for African economies to treat tariffs as a source of revenue collection. “Tariffs should be a tool of industrial development. This is where we want to be as a continent, but it’s going to take time.”