1 A Comment on South to South Trade Development Xingmin Yin, China Center for Economic Studies Fudan University, Shanghai, China International Conference on Linkages between Trade, Development & Poverty Reduction Civil Society Organization & Aid for Trade: Roles & Realities Nairobi, Kenya, March 2007

2 1.LDCs and the Doha Development Round 2.LDC export profile and implications 3.Discussion on opportunities for LDCs: Case of China-Africa trade development 4.Aid for Trade: new practice 5.Suggestions for South-South trade capacity building

3 1. LDCs and the Doha Development Round  The Doha Development Agenda (DDA) is aimed at better integrating developing countries, especially least developed countries (LDCs), in the multilateral trading system.  By many accounts, LDCs face great challenges under the current system of trade rules.  LDCs need debt relief, aid, and trade to help them to alleviate poverty and achieve sustainable development.

4 A Comment on Ministerial Declaration Adopted on 18 December 2005, HK  Aid for Trade should aim to help developing countries, particular LDCs, to build the supply- side capacity and trade-related infrastructure that they need to assist them to implement and benefit from WTO Agreement and more broadly to expand their trade.  Aid for Trade cannot be a substitute for the development benefits that will result from a successful conclusion to the DDA, particularly on market access. However, it can be valuable complement to the DDA.

5 What Steps for the Doha Round?  The Doha Round should bring tangible benefits to LDCs in terms of enhanced opportunities for trade and business.  Key players in the Doha Round should start taking LDC demands seriously.  No doubt, the action is better than discussion for multilateral trade development.

6 2. LDC Export Profile and implications  Much has been made of the low share of LDCs in world trade. LDCs as a group accounted for only 0.6 per cent of world exports and 0.8 per cent of world imports.  In terms of market concentration, the EU (15) and the United States absorb the majority of LDC exports. In 1995 their share was almost 60 per cent. By 2004 this figure had dropped to 52 per cent, but the dramatic increase in LDC exports to China has resulted in the top three markets (China: 17.8%, EU: 29.2% and US: 22.7%) accounting for 69 per cent of total exports.

7 Share of Major Markets in LDCs Merchandise Exports,

8 Market Access Issues: Duty-free and Quota-free  Achieving duty-free and quota-free market access in developed country markets for all products originating from LDCs has been aspiration of the international community for some time.  According to WTO, Japan and the United States maintain positive duties on a significant share of LDC exports in contrast to other developed countries.  An interesting trend is the growing importance of developing countries, such as China, as markets for LDC products.

9 The Case of China  In September 2005, China announced new measures in favor of LDCs. The estimated impact of these measures is to increase the total duty-free figure from 93.3 per cent to 95.2 per cent, and non-oil figures rises from 48.4 per cent to 62.3 per cent.  ……  International debate on China ’ s trade policy to Africa

10 3. Discussion on Opportunities for LDCs: China-African Trade Development  China has become the third largest trading partner for Africa after the EU and the United States in 2005, and will be the second after the EU, at least, before the end of  The value of African trade to China in terms of the US dollar has more than tripled in both directions since 2002 and that China ’ s imports from Africa exceed its exports to Africa.  China has hoped to expand the trade with African countries to US$ 100 billion by 2010 more than double the 2005 year level of US$ 40 billion.

China-African Trade Growth US$ Million

12 New Trends  Sino-African trade amounted to nearly US$ 40 billion in 2005, up 35 per cent from the previous year. Fifteen years ago, bilateral trade was only US$ 1.66 billion.  Structure of trade: The product structure of Africa ’ s merchandise exports has always been strongly affected by price development.  China ’ s major trading partners in Africa can be calculated by country.

13 Top Import Partners of China in Africa, , US$ million RankPartners Angola South Africa Sudan Congo Eq. Guinea Gabon Libya Nigeria

14  China main import partners are African oil- producing countries except South Africa.  China ’ s imports of agricultural goods and manufacturing products accounted for 8.1 per cent and 6.9 per cent of total imports in 2005 respectively.  Is it possible to change the structure of trade between China and Africa? How to change?

15 Top Export Partners of China in Africa , US$ million RankPartners South Africa Nigeria Egypt Algeria Morocco Sudan Benin Ghana Togo Kenya

16  In terms of export accumulation, South Africa has remained the first rank of China ’ s exports to Africa during the period.  Nigeria, which had imported not so many goods from China, moved to the second position, next only to South Africa, in 2004 and  ……

Geographical Distribution of African Trade  Africa ’ s merchandise exports are largely destined to Europe, but Europe ’ s share has decreased markedly in recent years from one- half in 2001 to about 43 per cent in  Africa ’ s exports to Asia are estimated to have increased by 20 per cent with shipments to China rising by more than one-third.

18 African Exports to Major Partners US$ million

19 Geographical Features of African Trade  The EU-Africa trade: the ratio of four North African countries (Algeria, Tunisia, Morocco and Egypt) exports to the EU accounted for per cent; another major trading partner is South Africa, which accounted for nearly 24 per cent of Africa ’ s exports to the EU in  The United State imports from Africa are highly concentrated in Algeria (46.87%) and South Africa (29%) in  It seems hardly possible to apply this trade model since most African countries have a very limited access to the market of developed countries.

20 Growth Rates of African Exports to Major Partners YearChina % US % EU %Japan % ~ Unit: US$ Million.

China-Africa Trade in Regards to Regional Distribution  China ’ s major import partners are Asian countries (66.9 per cent) in  The ratio of China ’ s imports from Africa increased from 1.84 per cent in 2002 to 3.19 per cent in 2005, by increasing 70 per cent.  North America and Europe accounted for 8.51 per cent and per cent of China ’ s total imports, by decreasing 3 percentage points and 4 percentage points within period, respectively.  ……

22 Export Partners of African LDCs, , US$ million LDCsGNI p.c.PopulationChinaEUUS Benin a n.a Kenya b 149 Sudan n.a Zambia Ghana n.a Nigeria n.a Togo n.a Uganda Madagascar n.a Burkina Faso n.a a: no data of 2002; b: no data of GNI: Gross national income.

23 Discussion  Demand side: there is no strong evidence of the regional diversification for the developed country trade with African countries.  Supply side: many African countries remain highly dependent on the export of a small number of agricultural raw materials or commodities.  What is the choice for African countries?

24 4. Aid for Trade: New Practice  China would further open up its market to Africa by increasing the number of tariff-free products from 190 to 440.  China will establish five export-processing zones in Africa, and may expand these zones to more African countries.  What are implications of Chinese model of export-orientation to Africa?  What kinds of policy of Aid for Trade will be taken by China in the coming decades?

25 China ’ s Direct Investment in Africa Country Accumulation at the end of 2005 % Algeria Sudan Guinea Madagascar Nigeria South Africa Africa Unit: US$ million.

26 Areas for China ’ s Direct Investment  Mining  Commercial agricultural and agro-processing  Textile and garments manufacturing, and  Infrastructure development  More areas should be considered for China ’ s direct investment in African countries ……

27 5. Suggestions for South-to-South Trade Capacity Building  Economic growth: the gains from economic growth are much larger, whether as importer or exporter, and the gains as an exporter are dramatic.  The changes of development strategy from import-substitution to export-orientation for developing countries are urgently needed.  The importance of industry policy for LDCs ……  Special treatment for LDCs is required.  ……

28 GDP and Trade Development in Africa, China, GDP growth rate Merchandise Exports Imports China-Africa Exports Imports GDP growth rate Unit: Annual percentage changes.

29  How to build LDC capacity for exports under the Doha Development Round?  In contrary to Africa, Asia ’ s merchandise exports and imports expanded by 9.5 per cent and 7.5 per cent respectively. Asia ’ s trade developments and predominantly shaped by the performance of emerging economies: China ……  From the standpoint of balance of payments concerns, for LDCs, economic growth will translate into more exports than imports — with a significant part of gains resulting from the increased exports to emerging markets such as China, India ……

30 Thanks!