Hinterland Connectivity, A Key Factor Of Port Competitiveness The WTO Perspective # Deputy Director-General Agah World Trade Organization 17 September 2018 Abuja, Nigeria

Topics Covered Background WTO Trade Facilitation Agreement Aid for Trade WTO Information Technology Agreement What you can do

Ways the WTO can help Provides a platform to influence the trade debate Assist African countries to improve their capacity to trade Deliver new reforms to the trading system 44 African countries are Members of the World Trade Organization. The WTO is where nations negotiate and oversee the rules of international trade. Through these rules Members have established a framework for improved global trading practices. In addition the WTO also manages many initiatives that help developing countries and LDCs become more active in the global economy and the trade arena. Overall the WTO can help hinterland connectivity by: Providing a platform for African countries to influence the trade debate Assisting African countries to improve their capacity to trade Deliver new reforms to the trading system More specifically, I will focus my remarks on 2 WTO agreements and a development initiative that can have a direct effect on improving hinterland connectivity. Before I explain how, let me start with a few words on the current situation in Africa.

Africa is on the rise Trade growth is expected to increase in the coming years Young population Growing consumer base Expanding workforce Africa is often described as the next growth frontier. Growth in Sub-Saharan Africa is expected to pick up in the coming years. An increase of 3.7% was estimated for this year. Africa has the youngest population and a growing consumer base. By 2034, the continent is expected to have a larger workforce than China or India. Africa is on the rise. But for the continent to reach its full potential, it means finding ways to strengthen infrastructure, both soft and hard. The physical networks need to be in place, and the underpinning institutions and processes must be adequate and effective. And, of course, the competitiveness of African ports will be vital. Ports are central to Africa's trading system. Around 90% of trade in the continent happens by sea. Ports are also very important for the customs revenues that they collect. In some African countries, customs accounts for some 40% of government revenue. Clearly, then, continuing to strengthen your ports will be vital for continued economic development.

This can be higher than the impact of tariffs. Current Situation Delays in African ports can add up to 10% to the cost of imported goods. This can be higher than the impact of tariffs. But there is much work to do. Trade costs involved in shipping goods from African ports are comparatively high. For example, in Africa the average waiting time for containers to be shipped abroad is around 3 weeks. Compare that to emerging markets where the waiting time is around one week. High trade costs pose challenges for imports, which effects the production chain. Studies show that delays in African ports can add up to 10% to the cost of imported goods. This can be higher than the impact of tariffs. Clearly, these issues must be addressed to ensure that Africa can successfully integrate into the global trading system. However, African port authorities are already taking on reforms to improve port infrastructure and competitiveness. And African Governments are moving forward with reform.

WTO Trade Facilitation Agreement Streamline & simplify border procedures Enhance access to information Border agency co-operation Lower trade costs Of the 44 African countries that are WTO Members 66% (29 countries) have already ratified the new WTO Trade Facilitation Agreement and are in the process of working towards its implementation. This new WTO Agreement is the biggest global trade deal in two decades. It aims to streamline, simplify and standardise border procedures, thereby reducing the time and cost of moving goods across borders. It will help to make ports more efficient. It will help standardise access to information, such as data, regulations, documents, in a non-discriminatory and easily accessible manner. It will encourage cooperation and information sharing between border agencies, helping to promote regulatory coherence. And it will support authorities in facilitating and streamlining the release and clearance of goods. The result will be to cut red tape and improve efficiency, to combat corruption and promote good governance, and to cut trade costs dramatically.

WTO Trade Facilitation Agreement Full implementation can reduce trade costs by an average of 14.5%. Increase in exports up to $1 trillion each year, with the biggest gains being felt in the poorest countries. Studies show that the full implementation of the Agreement could reduce trade costs by an average of around 14.5%. This would boost exports by up to 1 trillion dollars each year, with the biggest gains being felt in the poorest countries.

Trade Facilitation Agreement Facility Provide technical assistance on TFA Find donor support Grant program TF- related information on web Database The WTO also has a Facility to help developing and LDC Members find the support they need to implement this new Agreement. The Facility provides technical assistance, helps Members find donor support to implement the provisions of the Agreement. It will also launch a grant program this autumn to assist with implementation. Full information will be available on the Facility website. There are actually two websites that you might be interested in. The Facility website shown in this slide is a one stop shop for all information relating to trade facilitation. The other is a database with statistics on the implementation status of all WTO Members. www.TFAFacility.org www.tfadatabase.org

Connecting the Hinterlands “Ports are a key facilitator of trade and economic activity.” “Connecting ports to their hinterland networks effectively is a key part of what allows the sector to deliver concrete economic benefits.” UK report on Port Connectivity ___________ “A great high capacity port cannot be used to full potential if the connecting road or rail network is not equipped to handle similar cargo volumes.” 2016 OECD Report on Hinterland Connectivity While the Trade Facilitation Agreement will improve transparency and cut costs through streamlined fees and formalities, we can’t ignore the need for improved infrastructure. This slide contains quotes from 2 studies. The first 2 quotes are from a study completed last year by the British government on port connectivity in the UK. The study found a strong link between trade facilitation and port connectivity while emphasizing the importance of hinterland transportation systems. And a 2016 OECD report further stressed the importance of improving hinterland connectivity and emphasized that smooth cooperation between hinterland and maritime networks in a country are crucial to establishing adequate trade channels. The findings from the UK report can be applied to African countries as well: A well-connected port system must include smooth transit connections to the hinterlands. As the report states: “Connecting ports to their hinterland networks effectively is a key part of what allows the sector to deliver concrete economic benefits.” (p.22) Many African nations have made progress in building a robust maritime and hinterland transportation infrastructure in recent years. There is still progress to be made and the WTO can help here.

AID FOR TRADE Priorities for aid Dispersed 102.3 billion USD to African countries. $1 invested = 8 USD of exports from developing countries. $1 invested in LDCs = 20 USD of exports. The WTO can assist with infrastructure through an initiative called Aid for Trade that helps mobilize resources to address the trade-related constraints identified by developing and least developed countries – including transport infrastructure. Between 2006 and 2014, the Aid for Trade initiative disbursed around 102.3 billion USD to African countries. One dollar invested in Aid for Trade results in nearly 8 USD of exports from developing countries - and 20 USD of exports for the poorest countries. This chart from 2017 shows that the top priorities for Aid for Trade were for Trade Facilitation and transportation infrastructure.

Information Technology Agreement (ITA) Finally I will mention the WTO Information Technology Agreement or ITA. Through this Agreement Members aim to completely eliminate tariffs on IT products. This Agreement is a little different from other WTO Agreements because Members can decide whether to sign on to it or not--- and the participating members have agreed on the list of IT products that will have zero duties. The ITA was concluded by 29 Members in 1996 and covered around 200 products that they agreed would be duty-free. Since then, the number of participating countries has grown to 82, representing about 97 per cent of world trade in IT products. At the WTO Ministerial Conference held in Nairobi in 2015, participating members agreed to expand the Agreement to cover an additional 201 products valued at over $1.3 trillion per year. The list of duty free products in participating countries is now includes 404 IT products.

The role of ITA in promoting connectivity The ITA agreement reduces the costs of ICT products by removing tariffs. This has resulted in: lower cost & widespread availability of computers and mobile phones impact on access to the Internet-increased connectivity increasing global trade and investment in ICT; encouraging ICT adoption by cutting costs of ICT products. exports of ITA products more than tripled since 1996 to reach $1.7 trillion developing countries’ share in exports increased from 26 % (1996) to 63% (2015) This has resulted in: Removing tariffs on ICT products has made these products, and the potential of technology innovation associated with them, affordable to a growing number of people around the world, in particular the micro, small and medium-sized enterprises (MSMEs). Similarly, the and widespread availability of computers and mobile phones has had a particular impact on access to the Internet which has helped increase connectivity, including port connectivity. It has increased global trade and investment in ICT; and the reduced costs have encouraged use of ICT products. World exports of ITA products more than tripled since 1996 to reach 1.7 trillion US dollars in 2015. Developing countries’ share in world exports of ITA products increased from 26 per cent in 1996 to 63 per cent in 2015. Enlarged participation in the ITA will help to bridge this digital divide.

What can you do? Encourage your government to: take advantage of WTO membership by participating in talks implement the TFA Be aware of available support So what can you do to expedite connectivity in your country? Encourage your government to participate actively in the WTO. WTO Members are currently discussing e-commerce, how to improve the situation for micro, small and medium enterprises, and gender and trade. By taking part your government can help shape the outcome. Encourage your government to implement the Trade Facilitation Agreement in an effective manner and within reasonable time periods. Encourage your government to participate in the ITA Agreement. Be aware of the support that is available to WTO members and encourage your government to take advantage of it.

Thank you