Regional Integration and Trade Facilitation Joseph Atta-Mensah Regional Integration, Infrastructure and Trade Division (RITD) United Nations Economic Commission for Africa Ethiopia Commodity Exchange – UNDP Knowledge Forum 24 February 2010, Addis Ababa, Ethiopia

PRESENTATION OUTLINE Evolving definition and scope of trade facilitation Key issues of trade facilitation Trade facilitation initiatives in Africa Way forward 11/14/2018 UNECA

Evolving Definition and Scope of Trade Facilitation Logistics of moving goods through ports or documentation associated with cross-border trade Environment in which trade transaction takes place Transparency of customs, regulatory agencies Harmonization of standards, conformity with international and regional regulations Natural barriers to trade Non-tariff barriers 11/14/2018 UNECA

Regional Economic Communities (RECs) Considered by the African Union as the building blocks of the African Economic Community within the context of an African Common Market 8 are seen by the AU as the main pillars namely: Arab Maghreb Union (UMA) Common Market for East and Southern Africa (COMESA) Community of the Sahel-Saharan States (CENSAD) East African Community (EAC) Economic Community for Central African States (ECCAS) Economic Community for West African States (ECOWAS) Inter-Governmental Authority on Development (IGAD) Southern Africa Development Community (SADC) 11/14/2018 UNECA

Evidence of weak Intra-African Trade REC Intra-community Rest of Africa EU US Others CEMAC 1.9 2.2 41.2 30.5 24.2 COMESA 6.0 8.2 39.3 20.8 25.7 EAC 18.1 12.4 40.5 3.6 25.4 ECCAS 2.5 45.2 27.7 22.8 ECOWAS 10.3 2.9 39.0 26.1 21.8 SADC 12.8 4.6 26.6 14.0 42.0 Africa 6.8 5.8 49.7 15.1 22.7 11/14/2018 UNECA 5

Marginalisation in the Globalisation Process Volume of goods across borders has increased exponentially in recent years: 50 times higher in 1999 than in 1960 Africa has failed to benefit from steady increase in international trade In 1950, Africa delivered 10% of world exports, by 2000 this share had declined to <3% Situation worse in sub-Saharan Africa whose share of world exports of goods and services is < 1.5% 11/14/2018 UNECA 6

KEY ISSUES OF TRADE FACILITATION High transport costs Complicated customs procedures Inadequate usage of information and communication technology Payments, insurance and other financial requirements International trade standards 11/14/2018 UNECA

CONTRIBUTING FACTORS TO HIGH TRANSPORT COSTS IN AFRICA Inadequate infrastructure network Inefficient transport services Multiplicity of rules governing international transportation of goods Numerous roadblocks We will not focus too much on factors relating to transport costs in Africa, however we will focus on the opportunities that may be afforded by the advent of commodity exchanges, especially considering the fact that Africa is rich in a plethora of primary commodities. 11/14/2018 UNECA

CUMBERSOME CUSTOMS AND ADMINISTRATIVE PROCEDURES HAMPERS TRADE EXPANSION Excessive documentary requirements Insufficient use of automated systems Lack of transparency, predictability and consistency Lack of cooperation among customs and other governmental agencies Separated border posts, differences in working hours, visa requirements for transport crew members New maritime security measures 11/14/2018 UNECA

Negative results that emanate from most of these challenges may seemingly be overcome by an effective commodity exchange on a continental scale 11/14/2018 UNECA

INSUFFICIENT USE OF ICT INCREASES TRADE TRANSACTION COSTS Telecommunication services are inadequate, inefficient and very expensive Strong linkage between customs delays and telephone charges and internet distribution: Botswana and Namibia: 4 days delay; $4.8 and $4.28 per 3 minutes international call respectively Ethiopia and Cameroon: 30 and 20 day delays; $7.44 and $7.7 per 3 minutes international calls respectively Low level of awareness of e-commerce Insufficient physical infrastructure Deficient electronic transaction infrastructure Inadequate legal and regulatory framework 11/14/2018 UNECA

Mobile Telephone and Internet connectivity in African RECs Cellular subscribers per 100 people Internet users per 10,000 people CEMAC 5.2 21.8 COMESA 5.8 35.0 IOC 15.6 115.5 SACU 11.3 490.5 SADC 10.1 147.1 UMA 129.3 The nature of commodity exchanges actually fosters the use of ICTs as demonstrated by the presentation given by Dr. Elleni Gebre-Medhin in the morning. 11/14/2018 UNECA

INEFFICIENT INTERNATIONAL PAYMENT MECHANISMS RESULT IN LONG DELAYS Documentary credit is the most popular international payment system in Africa Half of all payment requests are rejected because of documentary inconsistencies. High insurance premiums for African countries Customs guarantee payments represent a high cost for transport operators Multiplicity of currencies and exchange rate arrangements The adoption of efficient settlement systems within commodity exchanges will address some of these challenges. 11/14/2018 UNECA

MULTIPLICITY OF INTERNATIONAL TRADE STANDARDS CONSTITUTE A BARRIER TO TRADE Standards have potential to substitute tariffs and quantitative restrictions Standards impose higher production costs for firms in developing countries EU standards on agricultural products are of great concern to Africa The insistence on maintaining product quality within commodity exchanges trickles down to the farmer in ensuring that their products are fit for the commodity exchange market. Consequently getting competitive prices for their produce. 11/14/2018 UNECA

ONGOING EFFORTS TO FACILITATE TRADE IN AFRICA Efforts at sub regional level Several RECS have trade facilitation programmes Bilateral cooperation Several bilateral agreements exist Cameroon has signed conventions with Chad and CAR; special facilities provided to landlocked countries at seaports Efforts at country level - One stop shops Efforts by international organizations Corridor management committees Observatories of abnormal practices Joint border posts Consequently, commodity exchanges may be seen to be the next realm of facilitating Intra-African trade on a continental scale. 11/14/2018 UNECA

Probable and Unique Regional TF Activities : Creation of Knowledge Networks Questions that can be addressed through creation of Knowledge Networks as rightly stated amongst themes of this Knowledge Forum are: How can markets be appropriately developed to transform the African primary commodities sector? What are the prospects for commodity exchanges in Africa? How can commodity exchanges be regionalized or contribute to regional trade? Observatories could also play an important role in that regard The objectives of the Knowledge Forum are to highlight lessons from comparative global experiences in establishing commodity exchanges and to engage in learning on the actual process of implementation and the challenges faced. 11/14/2018 UNECA 16

THE WAY FORWARD ON TRADE FACILITATION 1. Strengthen Africa’s infrastructure network to support international trade 2. Improve the efficiency of transport services 3. Remove illegal roadblocks 4. Speed up customs and border crossing procedures 5. Promote the use of new technology 6. Strengthen regional initiatives 7. Reduce negative impact of multiplicity of standards 11/14/2018 UNECA

Thank you! 11/14/2018 UNECA