The Link between CFTA & WTO Trade Facilitation Negotiations Dr. Halima Noor Abdi

1. The Link between CFTA & WTOTrade Facilitation Negotiations Dr. Halima Noor Abdi Nairobi,13-15 November 2012

2. 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 Outline

3. 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.

4. 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

5. 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)

6. 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.

7. 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

8. 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.

9. CFTA: Trade Facilitation Cluster

10. CFTA: Trade Facilitation Cluster(2)

11. CFTA: Trade Information

12. CFTA: Productive Capacity ClusterMain objective: Creating regional and continental value chains/complementarities, to increase local production/ trade in goods produced in Africa

13. 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

14. Benefits of CFTA from the Adoption of TF Measures According to the ECA analysis the larger the reform 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

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

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

17. 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

18. 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

19. 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)