P1254325981GTSiX - PowerPoint PPT Presentation

Title: P1254325981GTSiX


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Enhancing African Regional Integration Trade
Policy and Trade Facilitation Presentation to
the World Bank Course on Regional Integration in
Africa and EPAs Nairobi, Kenya 22-24 May
2006 Mark Pearson
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• Benefits of Trade

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(No Transcript)
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• Regionalism or Multilateralism or both?

Economic theory supports trade liberalisation -
leads to more efficient allocation of resources
and higher growth. Regionalism is a stepping
stone to multilateralism as long as the regional
trade arrangement is not based on closed borders
- trade should not be liberalised at the regional
level at the expense of liberalising with the
rest of the world. Trade diversion (whereby
partner products replace more efficient, cheaper
world alternatives) represents a loss to the
countries involved (at least those importing) and
also to the world as a whole.
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• Rationale for Regional Integration

• - Development objective is to reduce poverty and
  improve the populations quality of life.
• - Achieved through economic growth.
• - Economic growth depends to a large extent on
  foreign investment (low domestic capital low
  foreign aid high public sector borrowing)
• - Attracting investment depends in part on-
• larger markets
• reduced costs and improved competitiveness
• predictable business operating framework and
• a stable and peaceful environment.

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Stage Description
Preferential Trade Area Trade among countries is conducted on a preferential basis, with agreed rules of origin, with each country maintaining its own tariffs on goods imported from third countries.
Free Trade Area Tariffs and non-tariff barriers are eliminated between members of the FTA, in conformity with agreed rules of origin, with each country maintaining its own tariffs on goods imported from third countries.
Customs Union Member countries operate a common external tariff. Free movement of goods once they enter the customs union. Tariff revenues are either shared among member countries or allocated according to the destination of the goods.
Common Market There is free movement of goods, services, labour and capital, and the right of establishment and residency, between members of the common market
Economic Community In addition to common market conditions, the economic community has a single currency issued by one monetary authority and common monetary and fiscal policies.
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e.g. - PTA / COMESA Timeline
1960
1970
1980
1990
2000
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• Tariff Reduction Effects

If tariffs are reduced government revenues will
fall ? NOT always true depends on Elasticity
of demand if demand for a good is sensitive to
its price, sales will go up if price goes down as
a result of a reduction in tariffs. Government
revenue lost as a result of a reduction in tariff
rates may be made up in increased VAT
receipts. Higher compliance levels if tariffs
are low the incentive to smuggle goods is less so
compliance will be higher, leading to increased
revenues from the lower tariff rates and VAT
being paid.
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• So, why the reticence?

• Leap of faith Governments and private sector are
  asked to accept on faith that trade
  liberalisation will be beneficial remember
  structural adjustment on which everything was
  blamed.
• Lag effects Governments work on variants of
  cash-based budgeting. Tariff reduction will have
  an immediate effect but adjustment measures will
  take a while to have an effect.

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• So, why the reticence?

• Anti-competitive behaviour lack of effective
  national and regional competition policy means
  that larger firms operating regionally are able
  to limit the effectiveness of a PTA or a FTA.
• Local pressure groups In any trade
  liberalisation the overall effect should be
  beneficial for the country and region but, within
  this effect, there will be winners and losers.
  The losers will be well entrenched with political
  clout and will be difficult to dislodge.

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• Customs Union what needs to be done?

• Common Tariff Nomenclature
• Divide up the Harmonised System coding (but first
  get every country in the grouping using the same
  HS) into categories raw materials, intermediate
  goods, finished goods, capital goods. Compromise
  necessary as goods have many different usages.
• Common External Tariff
• The group needs to agree a common external tariff
  for each category in the CTN. Need to consider
  phase downs and exclusions sensitive lines.

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• Customs Union what needs to be done?

• Customs Procedures and Documentation A Customs
  Union needs harmonised procedures (valuation
  methods, risk assessments, code of ethics for
  customs officers, statistical systems, etc) and
  documentation (single administrative document).
  Ideally, all parts of customs are computerised,
  with all countries in the CU using the same
  system. All customs posts should be linked
  electronically to a national centre and the
  national centres to a regional centre.

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• Customs Union what needs to be done?

• Revenue Sharing Systems CUs such as SACU have a
  revenue sharing system. Revenue from EU customs
  partly finances the EC. For a CU to work
  effectively customs revenues need to be collected
  at the borders of the CU with a third party. If
  this does not happen (i.e. if end-user collects
  revenue) border controls within the CU will need
  to be maintained, and RIB will apply, thus
  limiting the benefits of a CU. Implementation of
  a revenue sharing mechanism requires trust
  between countries that, in SSA countries, is not
  often present for obvious reasons.

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• Non-Tariff Barriers to Trade

• 2004 WTO for most SSA countries share of
  transport costs in value of trade 5 times greater
  than duties paid. Increase in transport costs of
  10 - estimated result - 20 reduction in
  trade.
• Africa suffers from poor infrastructure
  -condition of roads poor (2 billion kms 30
  paved), few railways, lack of interconnectivity
  and 3 gauges.
• Admin problems also check points (UNECA report
  27 police controls Mombasa-Uganda border) delay
  transport and incur costs as do lack of
  harmonised transport systems, customs procedures
  (UNECA reports 12 days to clear customs in SSA, 7
  days in LA and 5.5 days in Asia), standards and
  SPS.

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Estimated unit transport costs for container
Route Distance (km) Cost ( per km)
Dar-es-Salaam-Kigali 1650 3.0
Dar-es-Salaam-Bujumbura 1750 3.0
Doala-DJamena 1900 4.2
Lome-Ouagadougou 1000 2.6
Lome-Niamey 1234 2.6
Mombasa-Kampala 1440 2.3
Maputo-Johannesburg 561 1.4
Source UNECA
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• Selected EAC reported NTBs

• Link between ASYCUDA and SIMBA.
• Initial problems with SIMBA Ksh 15,000 for
  training and same annual access fee no
  operational manual system crashed regularly.
• ASYCUDA in limited border posts (Dar and Malaba)
• Limited customs opening hours.
• Arbitrary use of Rules of Origin - goods
  classification
• 100 verification of imports 24 of cargo at
  borders takes gt1 week to unload for inspection.
• Immigration procedures and visa fees.
• PSIs for standards international accreditation.

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• Selected EAC reported NTBs

• Police checking commercial vehicles rent
  seeking leading to transit delays 12 of checks
  take gt1hr.
• Delays at weighbridges.
• Variations in axle load limits and GVM.
• Delays in offloading and clearing cargo at Dar
  Sept 2005 11,000 containers - 2-4 weeks to
  clear - incur demurrage after 15 days. Lack of
  rail wagons.
• Delays in clearing LCs average 30 days.
• Import and export inspection and certification
  procedures involve duplication and high costs
  Tanzanian food exporter pays Tsh200,000/export
  and TBS certificate not always recognised by EAC.
• Business registration and licensing procedures.

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• Trade Facilitation Instruments

• Revised Kyoto Convention widely used as the basis
  for benchmarking the regional and national
  development of harmonised and simplified
  clearance and transit procedures and standards.
  Various instruments have been developed or exist
  to enhance this further, such as Single
  Administrative Documents (SADs), Time Release
  studies, the WCO Diagnostic and the WCO data
  model.

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• Trade Facilitation Instruments

• Efficiency and Security Objectives Trade
  Facilitation is being discussed in WTO as part of
  the DDA as well as at the regional level. WCO is
  also very active in TF issues. In terms of
  customs procedures the emphasis is on security
  rather that revenue.
• Border Administration Agencies would allow more
  efficient information processing at the border.
• One Stop Border Posts reduces time taken at
  borders which reduces costs. Sharing of data and
  computerisation of other border post services.

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• Trade Facilitation Instruments

• Carriers License - allows back-loads which
  reduces costs of transport.
• Axle Load Limits and Vehicle Dimensions - allows
  trucks to operate with the same axle loads
  through-out the region.
• RCBGS - speeds up transit and frees up money held
  in bonds.
• 3rd Party Vehicle Insurance makes transiting
  easier and cheaper.
• Removal of Visa requirements for business persons
  - Encourages cross-border trade.

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• Trade Facilitation Instruments

• Air Traffic Liberalisation Yamoussoukro
  decision - reduces costs through competition and
  improves accessibility.
• NTB monitoring system - Need to track non-tariff
  barriers, which are a moving target, eliminate
  those that are genuine NTBs and try to limit
  appearance of new ones initiatives from EAC,
  COMESA, SADC.
• Harmonised trading standards and SPS - Difficult
  to have trade between countries of the standards
  and health and phytosanitary regulations
  incompatible.

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• A Note on Implementation

There are a number of initiatives and regional
organisations dealing with implementation of
trade facilitation instruments. (SSATP, PMAESA,
Transit Transport Coordination Authority TTCA,
Maputo Corridor, Regional Organisations, and,
indirectly, UNECA and World Bank). All of these
are involved in introducing trade facilitation
instruments. Challenge is to ensure no
duplication of effort and overlap of instruments.
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Enhancing African Regional Integration Trade
Policy and Trade Facilitation Presentation to
the World Bank Course on Regional Integration in
Africa and EPAs THANK YOU