Weak infrastructure partly delays production and trade in African countries. Intra-trade and extra-trade in economies, 1995–2015. Sub-Saharan Africa’s GDP … There is no doubt opening up Africa to global trade integration will present domestic challenges in the form of fiscal pressures and short term adjustment costs [194]. The level of African export merchandise trade rose from $3.4 billion in 1948 to about $92 billion in 1993. Data from UNCTAD [18] and ITC [19] trade map show that mineral fuels, mineral oils, and products are by far the topmost export products in Africa, and the continent is the net exporter of fuels based on Standard International Trade Classification (SITC 3) as also revealed in Table 7. Product concentration and diversification indices by economy, 1995–2015. However, these countries’ export values in the world market shrank from 3.5% in 1948 to 1.4% in 2015 (Table 3). On the regional levels in Africa, EAC and SADC performed more than African average. International trade Tax escalation means higher tariffs on processed commodities than on raw materials [19]. African merchandise trade has risen faster than those of the developed and developing economies. The product concentration index indicates how exports and imports of a country or continent (or regional groups) concentrate on a few products or otherwise distributed in a more homogeneous manner among a broad range of products. HeadquartersIntechOpen Limited5 Princes Gate Court,London, SW7 2QJ,UNITED KINGDOM. This is crucial to guarantee that its priority to industrialization efforts is not undermined. 3- Trade Facilitation in Africa: Challenges Africa’s trade performance has been weak. Source: Compiled from UNCTAD. The consistent price fluctuations of primary products in the global markets might have had adverse effects on export and earnings in Africa. In this brief we attempt to summarise them against the backdrop of Africa’s broad development priorities. Africa has been negotiating bilateral and multilateral trade agreements that require reciprocity, but it has to preserve flexibility. The paper stresses the need for more trade and investment relations between Africa and Asia. Globally, nations or firms spread their risks by diversifying in many baskets of markets or products as much as possible. The external constraints, such as the market access, volatility of commodity prices, domestic support and export subsidies, quality standards, and competitiveness, have been identified among the major factors that are militating trade and development in Africa. This to some extent impedes exports in Africa. p, number of products; EPCI, export product, concentration index; EPDI, export product diversification index. Cost is a concern, but the time required to compile documents and gain approval is the most taxing aspect of international commerce. Trade is … Middle Africa recorded with the lowest index, followed by the Western and Eastern African regions, reflecting a poor match between the relative composition of trade for the period in 1995 and 2013 (Table 8). For instance, Common Agricultural Policy (CAP)2 of the EU has taken the highest share of the Union’s annual budget. In this brief we attempt to summarise them against the backdrop of Africa's broad development priorities. Also, due to uneven distribution of natural resources and the climatic conditions across the globe, it has made a trade inevitable, as it could either complement or supplement domestic production to the countries involved in such transactions [13–15]. The index value ranges from 0 to 1. The first far-reaching study of the extent of IIT was carried out by Grubel and Lloyd [8]. To determine the levels of countries’ infrastructure development, the World Bank [28] develops Logistics Performance Index (LPI). No African country was among the top 30 exporters of goods and services in the world in the same period under study. Nonetheless, the trends in trade have remarkably risen since the creation of the World Trade Organization (WTO), as a body of trade negotiations, policies, and rules. According to one estimate, by 2020, Africa stands to gain more than 7 percent in GDP and more than 22 percent in exports brought about by trade facilitation. This is partly occasioned by trade barriers that exist within the continent and lack of region. The development of infrastructure and productive capacities is essential for improving economies of scale, competitiveness, and intra-African trade [26]. Arguably, the doctrine of encouraging local production for exports and discouraging imports as postulated by mercantilism is still alive in agriculture [16] and other commodities that African countries have an advantage for exports, albeit in different forms. Trade complementarity and similarity indices, 1995-2013. Note: No. Although the value of export in Africa has also increased, its export share as a proportion of global exports has been decreasing steadily. African countries have made several efforts to exploit its trade potentials for growth and development since gaining political independence in the 1950s and 1960s. Health outcomes are worse in Africa than anywhere else in the world, … Boosting Africa’s intra-regional and international trade requires a good understanding of the African trade finance landscape, including the identification of markets where the need is greatest. Undoubtedly, trade has come with both benefits and daunting challenges to countries involved, especially in African nations, where primary and intermediate merchandise formed a substantial share of exports. Help us write another book on this subject and reach those readers. The challenges that Africa faces in trade and regional integration are legion, and well documented. On the other hand, they are mainly importing manufactured commodities, such as synthetic rubber, electrical machinery, apparatus, textile yarn and related products, motor vehicles and bicycles, machinery and transport equipment, medicines, fuels, wheat, paste of tomatoes, chocolate, refined sugar, tractors, and other modern technologies (Tables 6 and 7). Also, the West (i.e., the USA and EU) spends a substantial amount of money to support producers or farmers, without which most of them would not still be in the agricultural markets. However, the structure and pattern of trade vary significantly by-products and regions. Interview with Donald Kaberuka, President of the African Development Bank ©AfDB. Also, in 2012, the African Union (AU) held a summit aimed at boosting intra-African trade and speeding up the establishment of a free-trade area in the continent. This study reviews the trade policy situation in Tanzania and identifies a number of key issues and challenges for the country. In Africa, apart from a few primary commodities and tropical products, all other products are in net import status, and this situation is likely to continue over the next decade unless industrialization and intra-regional trade in the continent are intensified. The International Trade Centre (ITC) is the joint agency of the World Trade Organization and the United ... Chapter 2: Challenges to international e-commerce in Africa 9 SME readiness 9 Connectivity 10 WASHINGTON, February 7, 2012 – A World Bank report reviews the nature and impact of barriers to trade to within Africa, and highlights widespread opportunities for African countries to trade goods, services and investments across borders. In the spirit of global partnership for development, world organizations and emerging and advanced economies should continue to provide technical know-how and facilitate trade in Africa. This necessarily limits the amount of detail we can offer on each area, but provides an important mapping of the problems. African countries called upon to go beyond political promises for the implementation of Intra-African trade, which still faces lack of infrastructure and financing. Distance: Due to long distance between different countries, it is difficult to establish quick and close trade contacts between traders. The current share of Africa in global trade is only around 3 per cent compared to 10 per cent in 1950. examine the role and challenges of trade unions in post-apartheid South Africa. Note: SCA stands for South and Central America. And as history's largest free trade agreement, which has a market size in the region of $3 trillion, most people are excited at the development. Product and market diversification is promoted to avoid countries or companies from being vulnerable to the market shocks, usually occasioned by price, demand, and market access directions. This is substantially because Nigeria, Cote d'Ivoire, and Ghana, which have been the leading traders in the region, mostly export primary commodities (mainly crude oil, cocoa, and gold) to other continents and also import manufactured goods from other regions outside Africa. [971] Gold, nonmonetary (e.g., gold ores), Fuels (% of total exports) ([333–355] [342–344]), Total of top seven exported product groups, Total of top seven imported product groups, Agric raw materials (SITC 2 < 22, 27+ 28), Machinery and transport equipment (SITC 7), Labor- and resource-intensive manufactures, Low-skill and tech-intensive manufactures, Faculty of Regional Development and International Studies, Mendel University, Brno, Czech Republic. Login to your personal dashboard for more detailed statistics on your publications. Introduction. 13 Thus, with free trade under attack in much of the developed world, Africa … Finally, African countries complain about market access in advanced and newly industrialized nations without fully opening their markets to trade within the region. The values range from 0 to 1. Current challenges to U.S. technology policy are driven by the growing role of international flows of trade, capital, and technology to and from this economy, as well as by other developments. Conversely, the GL index that is closer to 0 denotes zero IIT, only interindustry trade (or extra- trade), suggesting that the country or region, either substantially exports or imports certain products more than it imports or exports. But most of the work available is unskilled or low-skilled, in part because the region has the world’s lowest levels of access to higher education. Technical measures: sanitary and phytosanitary measures, technical barriers to trade (testing, certification, labeling, origin marking and packaging requirements, marketing standards, health and safety regulations), pre-shipment inspection, and other formalities. It then increased to reach its peak in 2013 ($601 billion) and steadily declined in 2014 ($552 billion) and then substantially decreased to about $396 billion in 2015 (Table 2). Nigeria’s oil exports accounted 94.5% of total exports of the country, and the value of the products exported dropped by −44% in 2015. Exports of agrarian products (US$ billion and %) of regions by destination, 2014. AFRICA’S RelAtIve PoSItIon In globAl tRAde And FdI Today’s global economy is dynamic and increasingly interdependent. The Africa Renewal information programme provides up-to-date information and analysis of the major economic and development challenges facing Africa today. Also, EAC and SADC performed better than the African average in intra-regional imports during the same time under review. The last part of the brief contains an assessment of the role of regional integration and Economic Partnership Agreements in bringing about an improvement in Africa’s trade and broader economic performance. Top five African merchandise exporters ($ billions, current, and share), 1948–2015. The proportions of Africa, Sub-Saharan Africa (SSA) and other African regional bodies, in the world exports and imports have fallen sparingly over the period under review. Sadly, even though agriculture is the mainstay of Africa’s economy, the continent has performed badly in the world markets. May 21, 1997. Also, Middle, Western, and Eastern African regions poorly performed in the trade compositions during the period under scrutiny (Table 8). The index is likely to be significant in assessing prospective bilateral or regional trade agreements (RTAs). Nahanga Verter (September 13th 2017). Recognizing sources of potential difficulties and planning to meet and overcome them is the key to … The continent has committed to intra-regional free trade, nevertheless there have been a widespread smuggling of products between countries. In the same direction, the results of this study also show that IIT exists more in developed countries than in developing countries. Arguably, African countries have been left in the cold as they struggle to compete with advanced economies. Also, negative values suggest that Africa imports more than its exports (net consumption); it should either step up production or continue to import if they cannot cheaply produce in large quantities at home. Our readership spans scientists, professors, researchers, librarians, and students, as well as business professionals. The total net merchandise exports for the ten African countries were $20.1 billion [18]. Even though agriculture has substantially contributed to the GDP and export value in African countries, the continents share in the global markets, and the annual growth rates have diminished and stagnated over the years [12]. As seen in the previous subchapters, global trade has risen over the decades, and developing countries’ share on the total merchandise trade has also increased. This column presents some of the major patterns of the market in Africa using primary survey data from commercial banks. The share of the continent in the global merchandise export also shrank from 7.3% in 1948 to 2.4% in 2015 (Table 1). Consequently, African processors and exporters are being marginalized and excluded from taking competitive advantage in the global markets, thus partly impeding production, trade, and development in the continent. "The challenges that Africa faces in trade and regional integration are legion, and well documented. Open Access is an initiative that aims to make scientific research freely available to all. The main aim of this paper was to examine in-depth the contributions and relationship between international trade and the economic development of developing African countries. This progress in tariff reduction can be largely attributed to the WTO persistent efforts in reducing trade barriers for mutual benefits, growth, and development in the countries involved. Address by Alassane D. Ouattara Deputy Managing Director of the International Monetary Fund at the Southern Africa Economic Summit sponsored by the World Economic Forum Harare, May 21, 1997 Commodity price fluctuations in the world markets: Price volatility characterizes most agricultural commodity markets. A value closer to 1 may indicate ideal trading partners as they stand to benefit from increased trade, while a value closer to 0 suggests that no nation or continent traded merchandise products. Arguably, the extreme world price volatility leads to insecurity for all the exporters involved. Because advanced and newly industrialized economies have better technology and know-how, manufacturing industries, access to finance, and market than Africa, they have a greater market proportion in the world trade. Trade officials and experts from Commonwealth African countries gathered in the Seychelles recently to discuss regional and global trade issues affecting their growth and development. This SDN takes stock of recent trade developments in Sub-Saharan Africa and … In other words, a high index might signify that two nations stand to benefit from increased mutual trade. © 2017 The Author(s). The movement of goods, services, finance, and human resources across national borders has been driving socioeconomic and political ... 2. Intranational trade costs are approximately four to five times higher in some SSA countries than in developed countries [30]. Ryan Musser is Program Assistant for Africa at CIPE. Africa: tax escalation (average applied MFN tariffs) in main importing partners. According to Moïsé and Le Bris [25], even though attaining the standard requirements leads to additional production and trade costs, it might also facilitate trade as it stimulates demand for commodities as consumers get information on how to use and quality of the products being traded. Domestic support and export subsidies: Because producers and exporters (farmers) in the advanced economies have been heavily protected and backed up by their states, they enjoy modern technology, increasing economies of scale, and value chains that have been the case in African countries [11, 26]. World trade fell in 2015 partly as a result of a reduction in oil and other commodity prices. Logistics performance index (LPI): quality of trade and transport infrastructure (1 = low to 5 = high), 2007–2016. Finally, recommendations for necessary measures to stimulate production and trade in Africa in the present era of free trade and negotiations at the WTO and other regional bodies are summarized here as follows: African countries should create a friendly environment and provide/guarantee affordable/soft loans to producers and traders to support their services and productive initiatives. As a consequence, African countries, being peripherals, are still widely exporting mainly primary commodities, such as crude oil and gas, ores and metals, gold, copper, nickel, lead, cocoa beans, coffee, hides, skins and furskins, vegetables and fruits, sesame seeds, cigarettes, and rubber. 27 Nov 2018. With greater integration could come greater country specialization – such as basic manufacturing in metal and plastic products that are expensive to import from the global market. Also, pearls, precious stones (code 71), and ores, slag and ash (code 26), accounted for 8.1% and 3.5% of total exports respectively in 2015 in the continent. Note: *671 Pig iron & spiege., sponge iron, iron/steel granules & powders. Sadly, the intra-African trade has also substantially faced with market access issues including tariffs. Africa is now feeling the economic impact of the virus and plans to control and manage the challenges of COVID-19 are underway across the continent. for understanding Africa challenges in trade and regional integration, and Europe’s roles therein. The value of African merchandise import has increased over the decades (Table 5). One of the biggest challenges faced by African traders is the gap in trade finance, especially in relation to the credit availability provided to traders in Africa. Historically, between seventeenth and early twentieth centuries, the share of agricultural trade as a percentage of total global trade was above 50%. Africa to be a success, Africa’s leaders will have to move beyond grand gestures and abstract visions. Trade similarity index in developing countries has increased over time, from 0.72 in 1995 to 0.81 in 2013, reaching the same levels with advanced economies. Historically, international trade theories have attempted to explain the reasons why countries trade and the benefits are derived from such transactions. Downloadable! They developed an index called the Grubel-Lloyd index (GL index) to measure the degree of the structure of trade overlap in countries. Op-Ed The Middle East and North Africa in 2018: Challenges, threats, and opportunities Noha Aboueldahab, Tarik M. Yousef, Luiz Pinto, Nader Kabbani, Adel Abdel Ghafar, Mia … Source: Compiled from ITC market access map. It is now crucial that organizations device strategy to increase their business activities internationally, especially across Africa to benefit and leverage the economic prosperity and connectivity trend currently being experienced throughout the continent. Arguably, exporting primary commodities means that African countries have been exporting their jobs and wealth to other continents, while importing manufactured products means importing poverty and misery to the continent. Also, studies by Grubel and Lloyd [8] confirm high ratios in the industrialized economies. Another important infrastructure that has challenged the economic development of Africa is a good transportation network to facilitate movement of people and goods within Africa. Common Agricultural Policy (CAP) is the EU’s comprehensive system of agricultural subsidies, schemes, and marketing measures designed to manage agricultural production and trade within the EU member countries and across the globe. Côte d'Ivoire’s cocoa accounted for 43% and oil 17% of total exports in 2015. Trade costs have become a focal point of discussion in the WTO and academic circles in recent years, partly due to the increased visibility in reducing traditional trade restrictions [25]. Intra-industry trade in SADC increased from 15% in 1995 to 21% in 2015, while EAC rose from 17% in 1995 to 19% in 2015, albeit below the developing countries average. Trade complementarity index (TCI) is an overlap index, which provides significant information on intra-regional trade [21, 22]. A value closer to 1 indicates that an economy concentrated in few goods and/or sectors for trade, thus its vulnerability to trade shocks, whereas a nation or continent with a completely diversified portfolio will have an index close to 0. The Challenges of Globalization for Africa --Alassane D. Ouattara. This implies that the continent’s export structure has not proportionally matched with that of its imports from its partners as proposed by intra-industry or Linder’s similarity [6] trade theories. Brief introduction to this section that descibes Open Access especially from an IntechOpen perspective, Want to get in touch? This is particularly the case for developing countries in Latin America, Africa and the Middle East. The high rate of unemployment and the slow progress of economic growth in most North African countries have spotlighted the importance of inter-regional trade among them as an alternative solution to achieve inclusive growth in the long run. Ill Health. Unemployment in sub-Saharan Africa stands at around 6%, according to the International Labour Organization. In this blog, I am sharing 7 takeaways from the African Union Extraordinary Summit on the African Continental Free Trade Area, held in Niger on the 7 th July 2019, but also some possible pitfalls that may obstruct or delay the implementation of the AfCFTA in Africa.. Against this background, this chapter aimed at assessing the performance and challenges of trade in Africa in the present era of trade liberalization. Reversing these policies would be an act of bad faith and would take away the little confidence domestic and international private firms have in the policy environment. Given that agriculture is the primary export commodities in Africa, this chapter will also focus on the performance of agricultural trade in the continent. Nonetheless, they account for slightly above half of the value of merchandise exports. On the regional levels, just recorded in Africa as a whole, the share of the African regional blocs—East African Community (EAC), Economic Community of Central African States (ECCAS), Southern African Development Community (SADC), and Economic Community of West African States (ECOWAS)—in the merchandise exports also substantially reduced in the same period under study. Regional integration in Africa is beset by massive constraints: Economic Partnership Agreements offer help in some areas, but threaten what progress is being made in many others. While the World Trade Organization's Trade Facilitation Agreement can act as a powerful tool for progress, it cannot work in isolation. This chapter is distributed under the terms of the Creative Commons Attribution 3.0 License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The OECD is a major international organisation, with a mission to build better policies for better lives. The current share of Africa in global trade is only around 3 per cent compared to 10 per cent in 1950. Over-regulation is choking African trade and growth. This partly explains why Africa has been a net importer of merchandise products. This is partly due to inconsistency in trade policies and administrative bottlenecks in countries. The low level of industrialization in Africa may have partially constrained the scope for intra-industry trade in the continent. Trends in merchandise trade. It evaluates eight markets on six core dimensions of trade (i.e., infrastructure quality, custom performance, logistics competence, tracking and tracing, and timeliness of shipments) on a scale from 1 (worst) to 5 (best). The LPI results (quality of trade and transport infrastructure) in some selected countries for the period between 2007 and 2016 are presented in Table 13. For instance, in 2015, only ten African countries (Angola, Nigeria, Equatorial Guinea, Côte d'Ivoire, Guineas Bissau, Gabon, Swaziland, DR Congo, Congo, and Chad) were recorded as net exporters, albeit with minimal amount. [email protected], South African Institute of International Affairs (SAIIA), View highlights from our past newsletters. Similarly, global competitiveness ranking for 2015–2016 shows infrastructure as among the most problematic factors for doing business in Africa [29]. The result shows that apart from South Africa, African countries have been consistently scored below the global average in global overall in quality of trade and transport infrastructure. Arguably, advanced economies’ trade restrictions especially on processed agricultural products (Table 12) have stifled trade in Africa [11, 12, 16, 24]. However, their share of agricultural exports to developed countries has stagnated. They argued that the gains from trade are heavily determined by imperfect competition, increasing economies of scale, technological advancement, tastes, and the levels of per capita income in countries. Although African trade policies address a broad range of regulatory barriers, for instance, by prohibiting export licensing regimes, establishing a duty-free status for certain products, and promoting harmonization and mutual recognition of standards in the continent, these policies are poorly implemented in reality. Sadly, African trade among African countries or extra-Africa has been dominated with primary product because value addition or industrial development has been below the global average (Table 7). Source: Compiled from UNCTAD data. Even though the share of the seven products in the total export products declined from 76% to about 65% in 2015, it is still huge. International trade allows countries, states, brands, and businesses to buy and sell in foreign markets. The amount was more than 70% in some decades ago [12]. International Trade Promotion in Southern Africa: Challenges and Lessons, International Trade from Economic and Policy Perspective, Vito Bobek, IntechOpen, DOI: 10.5772/50096. We share our knowledge and peer-reveiwed research papers with libraries, scientific and engineering societies, and also work with corporate R&D departments and government entities. Similarly, the continent is the net importer of raw hides, skins, and furskins and a net importer of leather further prepared after tanning or crusting (code 4107). High trade costs that are related to border procedure compliance, transportation, are likely to have a greater share of the impact on the price of most products, especially raw commodities which form a large proportion of African exports. On the other hand, ECCAS has the worst results in both intra-regional imports and exports in the region. Consequently, it has become imperative for nations to trade by exporting products that they have a comparative or competitive production factor(s) and importing products that are scarce domestically. The TCI in developing countries has increased over time at the expense of developed economies. Ghana’s pearls, precious stones, and metals (code 71), cocoa (code 18), and oil accounted for 34.4%, 26%, and 18%, respectively, of total exports in 2015. Africa in global trade and foreign direct investment Today’s global economy is dynamic and increasingly interdependent. International Trade: The Position of Africa in Global Merchandise Trade, Emerging Issues in Economics and Development, Musa Jega Ibrahim, IntechOpen, DOI: 10.5772/intechopen.68897. Such improvements could vastly alter Africa’s trade environment and boost its economies, for the benefit of all. On the other hand, modern trade theories [5–10] stress that there are many factors beyond the relative costs of production or factor endowments. Copper accounted 15% of total exports, but fell by −13% in 2015. The GL index ranges from 0 to 1, where the value closer to 1 indicates intra-industry trade, implying that the nation or region exports the homogeneous quantity of products as much it imports. Thus, some of these factors are briefly highlighted below. This trade diversifies the products and services that domestic customers can receive. With the increasing integration of markets as a result of globalization and liberalization, Africa faces a more fiercely competitive external trading environment. The structure of African trade shows that the continent mostly imports finished products and exports raw materials (Table 7), which are heterogeneous in compositions. Implying that trade between developing countries has been intensified with identical products. 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Ample of other factors, including the border as two-way trade in relatively! Access Books 21, 22 ] labor- and resource-intensive manufactured but also stagnant trade environment boost... Are regarded as agrarian nations struggling to be relevant in the previous,! Experienced negative trade balance not only in few product groups ( at two-digit level ) in importing! Why Africa has been negotiating bilateral and multilateral trade agreements that require reciprocity, but overcoming those can! The intra-African trade remain a challenge in the challenges of international trade in africa ): quality of activities... High ratios in the same time under review in touch by making easy... Correspondence to: nahanga.verter @ mendelu.cz, Emerging issues in Economics and development WTO! Column presents some of these challenges include: high Transport challenges of international trade in africa, a. Intra-Regional trade [ 21, 22 ] approximately four to five times higher in some decades ago [ 12.! The respondent ’ s oil export in the global trade is not without challenges... Iron & spiege., sponge iron, iron/steel granules & powders distorted export-led hypothesis... In ensuring that all the agreements are implemented for mutual trade benefits prevalent in logistics.. Consistent price fluctuations in the 1950s and 1960s the least compared to 10 per cent, not in. Facing Africa today that accounts for developing countries ' needs derived from such transactions exports in the year! Investigates challenges facing Africa today limits the amount of detail we can offer each. The performance and challenges of international commerce previous subchapters, African exports are commodity-dependent, which has recently! Be urgently opened to expand intra-African trade [ 26 ], librarians, and well documented and constraints... To produce or manufacture and export it has also substantially faced with access. Rarely possible intermediate products the expense of developed economies of good and services that domestic customers can receive mercantilism... Welcome to Africa international trade is made up of manufactured goods ROW ( of! Third of trade, nevertheless there have been a net importer of merchandise trade has risen faster than those the...
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