Lynette Gitonga

Value Addition of Soya Bean in Africa (Sossi)

noreply@blogger.com (Lynette Gitonga) — Tue, 23 May 2023 06:22:00 +0000

Brazil and the United States are the two largest exporters of soy bean accounting for over eighty percent of total annual global soybean in the world. Africa should be grateful for soya bean value addition by e.g. Promasidor a South African company and leading provider of processed food products across Africa.

Sossi which is processed soya bean is enjoyed in many African countries. It is high in protein, tastes just like meat and is 100% plant-based. It comes in both mince and chunk form similar to meat and contains all the essential amino acids similar to those found in meat. Sossi is also enjoyed as a valuable alternative to red meat by all age groups, the poor who cant afford meat and all health conscious individuals.

China remains the largest importer of soya bean accounting for about 61% of the total world imports. China is said to process soya bean into tofu since the second century B.C. even using a sea water precipitate to solidify the tofu. This process is still possibly used today. Interestingly Africa is also using its own method to add value to soya bean.

An Agricultural Unit is Core to AfCFTA's Vision and Aspiration

noreply@blogger.com (Lynette Gitonga) — Fri, 19 May 2023 12:23:00 +0000

It is in Agriculture that the AfCFTA's aspirations can be realized. There is a need to strengthen the capacity for food and agricultural processing for regional and continental markets. This will provide a solid foundation for African nations to boost regional and international trade. A possible area of consideration is an Agricultural Protocol/ policy or program to encourage the global private sector to increase new investment. There is need to add value to agricultural products, increase revenue, compete with imported agricultural goods and create jobs.

The AfCFTA Secretariat could consider a special session and advisory committee on agricultural trade to discuss the vision and strategic importance of this sector for the prosperity of Africa's future trade regime.

A committee on agriculture/protocol could consider all cross cutting issues relevant to this sector including NTBs, food security, standards, investment, transport, financing for the enhancement of agricultural trade and further development of strategic products.

A possible outcome of this exercise is a continental agricultural policy and an Agriculture Unit at the AfCFTA Secretariat.

Support for Agriculture related SMEs in the EAC

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 11:00:00 +0000

80% of the population of the EAC region live in rural areas and depend on agriculture for their livelihood. To unlock the potential of agriculture it is necessary to drive industrial growth, diversification and inclusive development, which can be accomplished by increasing intra-regional trade and exports of agro-based products. Agriculture is also labour intensive, generating much needed employment especially among women and potentially the youth.

Engaging young people across the agri-food chain is increasingly seen as a potential solution to youth unemployment, food insecurity, rural poverty and distress migration. Relevant support to by the EU to EAC SMEs with regard to commodity trade and export development can be found here.

EAC EPA Trade Portal

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 10:51:00 +0000

Useful to note the EAC Regional Information Trade Portal funded by the EU which is linked to national trade portals in Burundi, Kenya, Rwanda, Tanzania and Uganda. The portal presents national import and export procedures step-by-step and includes standards and related procedures.

Advisory Committees to Govemments and World Leaders

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 10:03:00 +0000

Trade advisory committees are public-private partnerships and a necessary component of all trade and related negotiations and useful to ensure that trade policy and trade negotiating objectives at national and sub national level adequately reflect public, private sector interests including developmental needs of the citizenry. The advisory committees should be permanent and advice government even on all emerging and strategic areas including the sectoral merits of trade and investment agreements.

The committees should cover key areas vital to the prosperity of every African economy and business including education and skills development.

Advisory committees could include issues being negotiated even at the level of the ACFTA such as digital trade, SMEs/ entrepreneurship, youth, women, and all agricultural value chains. Other critical areas include unemployment and job creation.

The Committees could also advice on negotiating objectives and bargaining positions before a government enters into trade agreements, the implementation of trade agreements once entered into, and matters arising in connection with their administration.

In addition, the Committees should always be guided by adequate research and studies on the merits and demerits of trade and investment negotiations.

The committees could include advisors placed in strategic overseas regions.

A relevant model for creating advisory committees and their legal frameworks can be found here, here and here.

Progress in AFCTA Negotiations

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 06:51:00 +0000

Please find below resources on the ACFTA negotiations which are expected to facilitate intra African trade payments and develop valuable regional value chains.

Please see related resources here

FTA Trade Support Databases

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 06:27:00 +0000

The United States currently has 14 Free Trade Agreements (FTAs) with 20 countries which are in force. Useful to note that the US also has a FTA Help Center and FTA Tariff tool which is useful even for Small and Medium Enterprises.

At the all Africa level a trade help center and tariff database is worthwhile for effective implementation of the ACFTA. In this regard please see here.

Also see full texts of all US FTAs here.

EACJ nullifies US-Kenya FTA negotiations

noreply@blogger.com (Lynette Gitonga) — Fri, 28 Apr 2023 04:13:00 +0000

The East African Court of Justice which is a regional court has nullified the Kenya-US FTA negotiations. See here for analysis of that ruling.

Digital transformation strategy for Africa

noreply@blogger.com (Lynette Gitonga) — Thu, 27 Apr 2023 20:35:00 +0000

The digital transformation strategy for Africa has been prepared by the African Union to leverage the continental strengths and address the lack of a common digital coordination framework. The AU Commission is coordinating the development and formulation of Africa's Digital Strategy to guide a common, coordinated digitalization agenda enhance synergies and avoid duplication of effort. Please see relevant document here

EAC-COMESA-SADC tripartite not ratified 7 years on

noreply@blogger.com (Lynette Gitonga) — Fri, 02 Sep 2022 21:07:00 +0000

The East African Community, Common Market for Eastern and Southern Africa and the Southern Africa Development Cooperation Tripartite Free Trade Area agreement has not been put into force despite member countries signing it 7 years ago.

According to a document seen by EABW NEWS, the delay in ratification is due to a slow response from member countries that have not yet signed the ratification treaty. “Most of the remaining countries indicate the process to ratify is still in progress.“ So, the process is on course but the pace is slow.

The EAC-COMESA-SADC Tripartite Free Trade Area agreement has a total of 29 member countries representing 53% of the African Union membership and more than 60% of the Africa Continent GDP ($1.88 Trillion) with a population of over 800 million people.

For more see here.

UAE, Kenya to commence talks over comprehensive economic partnership

noreply@blogger.com (Lynette Gitonga) — Fri, 05 Aug 2022 20:05:00 +0000

Source

ABU DHABI - Dr. Thani bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade, and Betty Maina, Cabinet Secretary, Ministry of Industrialisation, Trade and Enterprise Development of Kenya, signed a Joint Statement in Nairobi announcing the intention to begin negotiations towards a Comprehensive Economic Partnership Agreement (CEPA) between the UAE and Kenya.

Dr. Khalifa Al Rayssi, Charge d’affaires of UAE Embassy in Kenya, attended the signing.

The UAE-Kenya CEPA will be the first bilateral trade deal that the UAE seeks to sign with an African nation. Such an agreement will deepen trade and investment ties between Africa and the Middle East and boost the total value of UAE-Kenya non-oil bilateral trade, which grew to US$ 2.3 billion last year.

Through the CEPA, the UAE and Kenya aim to remove trade barriers on a wide range of goods and services, creating new opportunities for imports and exporters in both countries, and enabling Kenyan companies to leverage the value of the UAE’s geographic and logistical position.

"There is tremendous opportunity for closer economic integration between our two nations, especially in agriculture, tourism, infrastructure, technology and renewable energy," said Dr Thani Al Zeyoudi. "Announcing our intention to begin negotiations on the UAE-Kenya CEPA reflects our shared commitment to achieving greater economic progress through trade and investment. Our efforts to establish strategic economic partnerships worldwide through our CEPAs will fast-track our growth and prosperity for the next 50 years."

Kenya’s economy, the largest in East Africa, is forecast to grow 5.5 percent this year from 7.5 percent in 2021, with the modest slowdown reflecting headwinds pressuring global markets. Tourism and agriculture remain among its most dominant sectors, although the country has a fast-growing financial services industry coupled with competitive manufacturing and ambitious plans for green technology.

High-level UAE-Kenya CEPA talks will begin in the coming months. They will follow the completion of three CEPAs this year, namely India, Israel and Indonesia, under the country’s "Projects of the 50" initiative that aims to make the UAE a global business hub.

EAC common market scorecard falls short of expectations

noreply@blogger.com (Lynette Gitonga) — Sat, 30 Jul 2022 00:17:00 +0000

See source here

Non-tariff barriers and unharmonised rules and regulations have been the biggest impediments to the full implementation of the 11-year-old Common Market Protocol, stifling trade between partners of the EAC.

Currently, trade between partners is at 20 percent, lower than the expectations of leaders at the time of the launch. EAC members are trading more with countries outside the bloc than partner states, becoming importers of products and services that ideally should be sourced among them.

The low level of trade is attributed to private sector demands, bureaucracy by civil servants in charge of the process and partner states’ failure to cede sovereignty over the free movement of goods and services.

At the just-ended high-level retreat for the EAC Summit held in Arusha from July 20-22, varying economic development among partner states was said to have contributed to the slow implementation of the protocol.

The retreat provided a way forward on the Common Market post-negotiations that have been pending. Its launch was supposed to collapse national tariffs and other non-tariff barriers and pave the way for a harmonised process.

AfCFTA Country Business Index

noreply@blogger.com (Lynette Gitonga) — Wed, 27 Jul 2022 01:35:00 +0000

The Economic Commission for Africa (ECA) on Sunday, May 15, launched the first-ever comprehensive tool that measures how easy, or hard, it is to do business between African countries. The AfCFTA Country Business Index (ACBI) has three key objectives including assessing the perceived impact of the African Continental Free Trade Area on the private sector’s ability to trade and invest across African borders once the Area is operational. For more see here

Africa free trade area takeoff delayed by six states

noreply@blogger.com (Lynette Gitonga) — Fri, 24 Jun 2022 22:21:00 +0000

The East African

Six countries drawn from three regional economic blocs are yet to ratify the African Continental Free Trade Area (AfCFTA), delaying its implementation more than a year after it was formally launched in January 2021. For more see here

Wamkele Mene: AfCFTA must set agenda on intellectual property and subsidies

noreply@blogger.com (Lynette Gitonga) — Fri, 15 Apr 2022 17:55:00 +0000

Source: Africa Business

The removal of tariff and non-tariff barriers is as essential for the growth of African trade as creating better infrastructure and connectivity, says the AfCFTA’s Secretary-General.

The African Continental Free Trade Area (AfCFTA) is the world’s newest and most ambitious trade bloc. It is also, after the World Trade Organisation, its biggest, covering 1.2bn consumers in 55 countries that together generate annual GDP in excess of $3 trillion.

While the commencement of free trading under the agreement on 1 January 2021 was partially overshadowed by Covid-19, the elimination of barriers such as tariffs, quotas and duplicative regulations and the achievement of frictionless trade is expected to be an engine of growth on the continent for decades to come.

Wamkele Mene – the South African lawyer, civil servant and trade negotiator who two years ago was elected the first secretary-general of the AfCFTA – remains determined that the bloc will have a transformative long-term impact across the continent.

The AfCFTA is a long-term project

Speaking with African Business during a recent visit to London, Mene says there has been a remarkable level of progress and political agreement since negotiations first commenced in 2015, with 42 countries so far ratifying the AfCFTA. He says that the AfCFTA is a long-term project that will yield multiple benefits.

“What we are doing is not something that can be done in five to ten years. This is going to take decades but we will see the results, I believe. We will see the results in 20 to 30 years’ time in terms of competitiveness by investing in infrastructure, investing in productive capacity and then reducing and eliminating the legal barriers to trade.”

But it is precisely the project’s importance to development – and the potential to hamstring countries’ own progress if things go wrong – that Mene says accounts for any remaining difficulties in getting the finer points of the agreement over the line. Rules of origin – the criteria applied to products to determine which country or countries they originate from – have long been a sticking point in negotiations.

While agreements now cover 88% of all products being traded, Mene is frank; the remaining uncovered products – mainly in the textiles, automotive, sugar and fisheries sectors – are “really important… for any country’s economic export strategy.”

“We have to be very cautious… [because] these issues go to the heart of a country’s industrial development… Once you make the commitment, it’s a long-term commitment with far-reaching consequences. It’s perfectly reasonable that countries should take time to get a better sense of the implications of agreeing to this type of rule of origin, vis-à-vis that type of rule of origin, because that has an impact on economic activity.”

Towards a custom union

This pragmatism infuses Mene’s perspective on members negotiating their own trade agreements with third countries outside the AfCFTA process. Kenya, for example, signed a new bilateral agreement with the UK just weeks before trading under AfCFTA rules commenced.

For those who wish to see Africa speaking with one voice in trade negotiations, this undercuts the spirit of the project, but Mene points out that the AfCFTA is not yet at such a stage.

“The AfCFTA is a free trade area. It’s not a customs union yet. That’s the next step that we will take. For the moment, until we get to that point, countries still have the right to negotiate trade agreements individually. The agreement establishing the AfCFTA does make provision for that, it does allow for countries to negotiate with third countries under subject conditions.”

In any case, he adds, the AfCFTA rules require signatories to provide the same terms or better to the entire membership when negotiating new trade agreements with non-African countries.

“We, of course, will make an assessment and each member state will make an assessment of the benefits that are extended to a third country vis-à-vis what they are getting. If the benefits that are being extended to that third country are better, then subject to negotiations, they have to be extended to the entire AfCFTA…

“What the heads of states were very clear about is that where this happens, where countries negotiate with a third party, they must do so bearing in mind that the priority is to consolidate the AfCFTA. That’s the most immediate priority and that any other third country agreement should not undermine the implementation of the AfCFTA.”

The achievement of greater intra-African trade is not the only thing driving the AfCFTA.

As Cambridge economist Ha-Joon Chang argued in his 2002 book Kicking Away the Ladder, African countries have long suffered within an international trade regime dominated by powerful, developed countries that have benefited from unfair trade and industrial practices.

Mene reserves some of his sternest language for subsidies provided to European farmers under the EU’s Common Agricultural Policy, saying that they have had a “grossly distorting” effect on trade.

“If you are a cotton farmer in Mali, in Burkina Faso [for example] you are not in a position to compete globally because of subsidies. This is a question that I think should remain on the agenda of WTO negotiations.”

The AfCFTA, he says, has moved quicker and further than its competitors on such practices, and plans to bring this example to the WTO to pressure them to follow suit.

“The AfCFTA has moved much further than other fora around the world… to put forward reforms that we have advocated for since the Doha round began in the year 2000. On the strength of their reforms that we have introduced in the context of the AfCFTA we have to take these reforms to the WTO and demonstrate that actually it can be done.”

On intellectual property, another sticking point between Africa and wealthier nations, Mene wants “frank discussions”.

The Covid-19 pandemic has thrown into sharp relief inequities within the global intellectual property regime, with African countries largely barred by the WTO from domestically producing Covid-19 vaccines that were developed and patented in Europe and North America, even in the face of failures by developed countries to fulfil their promises of equitable vaccine distribution.

This has translated into highly uneven capacities to manage and bounce back from the pandemic. Compared to Europe, which has already boosted 75% of its population, the World Health Organisation reports that just 14% of Africans are fully vaccinated. For Mene, the implication is stark.

“Let us have the transfer of technology that is required to enable governments to take steps to save lives. When confronted with a public health crisis of this nature, we may want to say temporarily, “let’s place a hold on enforcement of rights under IPR and let’s focus on saving lives.”

Patents waiver is essential

Mene particularly urges support for a joint South Africa-India proposal to temporarily waive patents for Covid-19 vaccines. While detractors – among them Nobel Prize-winning economist Joseph Stiglitz – call for rejection of the proposal given it does not extend to tests and treatments and retains many onerous conditions, Mene calls it a “step in the right direction”.

“India and South Africa’s proposal which has been supported by over 100 countries now – that proposal is very pragmatic. It is narrow in scope, it is targeted during periods of public health crisis. It’s not a wholesale rejection of the TRIPS agreement [the Agreement on Trade-Related Aspects of Intellectual Property Rights, an international legal agreement between all the member nations of the World Trade Organisation] and the rights that are in it. It is a pragmatic approach that South Africa and India have had to take and I think that’s why a lot of countries have supported it.”

Mene says that intellectual property will continue to be a focus of talks.

“We have an opportunity [for] an intellectual property rights regime that… reflects the need for protecting public health.”

Moving forward

Meanwhile, Mene will look to oversee progress on multiple fronts, a challenge given the huge expectations.

Some commentators have suggested that the barriers to intra-African trade are not so much policies, but the lack of infrastructure, transport, communications and connectivity. Mene only partially agrees with such an outlook, stressing the equal importance of all these factors.

“You have to address the tariff barriers which are fairly easy to address as well as the non-tariff barriers. The rules, the regulations behind the border procedures and then the supply side capacity in infrastructure development, connectivity in terms of logistics and transports. All of these things go together. I would not share the view that if you saw off the challenges related to infrastructure, to connectivity, that necessarily the result will be increased trade because you will still remain with the tariff barriers and the non-tariff barriers.”

He emphasises the need for a complementary approach to solving the problem of low intra-African trade, highlighting that, if the goal is really to use trade as a vector of productivity, competitiveness and long-term development on the African continent, “you have to solve all of it together”.

How Africa should approach trade and industrialization

noreply@blogger.com (Lynette Gitonga) — Mon, 04 Apr 2022 19:44:00 +0000

Source: See here

The African Continental Free Trade Area is a positive step, but it is no panacea. If Africa is to overcome barriers to structural transformation and industrialization, a broader strategy, based on developmental regionalism, will be needed.

The African Continental Free Trade Area, launched on January 1, has been hailed as a “game changer.” By bringing together 55 countries – with a total population of 1.3 billion and a combined GDP of $3.4 trillion – in a single market, many believe the AfCFTA could fuel Africa’s recovery from the COVID-19 crisis, spur structural transformation, and drive rapid industrialization. The World Bank estimates that trade integration could raise Africa’s income by 7% by 2035, lifting 30 million people out of extreme poverty.

Those are lofty expectations. Unfortunately, lowering trade barriers alone will not enable Africa to fulfill them.

The AfCFTA will eliminate tariffs on 90% of goods and reduce non-tariff barriers. Liberalization, the logic goes, will lead to a sharp increase in continental trade, with production – especially of manufactured goods – rising to meet growing export demand. And higher exports would encourage longer-term industrialization, by bringing about more efficient allocation of resources and economies of scale.

But there is a fundamental flaw in this logic. Tariffs are not the main impediment to continental trade, faster industrialization, and structural transformation in Africa. In fact, trade tariffs are already low. Thus, much emphasis is placed on addressing non-tariff barriers, particularly infrastructure gaps and customs-related transaction costs.

AfCFTA-linked steps to streamline customs procedures and curb rent-seeking at borders will go some way toward boosting efficiency. But what is really needed is large-scale investment in physical customs infrastructure and modernization of information-technology systems. The continent’s real problem is its underdeveloped production capacity.

Africa’s fixed investment, share of manufacturing in GDP, and agricultural productivity lag behind other developing regions, albeit with considerable cross-country variation. Moreover, the continent’s persistently low share in global exports exacerbates the balance-of-payments constraint to structural transformation, which depends on rising imports, particularly of the capital goods needed to upgrade agriculture and manufacturing.

Likewise, the mismatch between what African countries export (chiefly commodities and semi-processed goods) and import (primarily consumer and capital goods) significantly impedes continental trade. Why would Ghana trade cocoa with Ivory Coast, if neither country can process it? Why would Zambia export its copper to the Democratic Republic of the Congo, which also produces – but does not process – copper?

Thus, at least as important as the AfCFTA’s trade-related provisions are macroeconomic and industrial policies that aim explicitly to accelerate structural transformation in agriculture and manufacturing and associated infrastructure investment. Some experts, including International Monetary Fund researchers, recognize that industrial policies are needed to make the most of the AfCFTA. But these measures are regarded as ancillary, rather than a prerequisite for progress that must be accompanied by broader investment in energy, water and sanitation, and transport infrastructure (roads, rails, and ports). Only then can intraregional trade really take off. Yet, as it stands, the African Development Bank estimates the continent’s annual infrastructure funding gap to be between $68 billion and $108 billion.

To be clear, Africa can achieve industrialization and structural transformation, despite what naysayers claim. In fact, since 1990, manufacturing’s share of employment has grown in a number of African countries (though it has been accompanied by only modest value-added growth). African countries can build on their accumulated manufacturing experience to seize opportunities to produce for one another and the rest of the world.

Heavy industries like basic metals, chemicals, and cement production can benefit from proximity to regional markets. There is considerable scope for processing agricultural output into food and beverage products for the region and beyond. Global shifts and shocks create opportunities for Africa to expand its participation in value chains, from apparel to automotive assembly and pharmaceutical products.

Structural transformation is not limited to manufacturing. As three eminent Africa scholars argue, the continent must also reverse its relative neglect of agricultural output and exports and close the agricultural productivity gap with other regions. This is essential to raise incomes in rural areas, where extreme poverty is concentrated, and to boost agricultural exports (thereby loosening the balance-of-payments constraint to growth).

In particular, high-value agriculture such as horticulture is labor-intensive and has the scope for the kinds of productivity gains traditionally associated with manufacturing. Ethiopia and Kenya have already proved this with their exports of fresh flowers and vegetables, and South Africa has done the same with citrus.

For any of this to work, however, African leaders must look beyond the trade-related elements of the AfCFTA and implement a broader strategy, based on developmental regionalism, that aims explicitly to upgrade productive capacity. Only then can Africa achieve the structural transformation it so badly needs and kick-start trade in the process

EAC eyes trade-in-services under AfCFTA Agreement

noreply@blogger.com (Lynette Gitonga) — Fri, 11 Mar 2022 23:26:00 +0000

The Citizen | 26 February 2022

Source By Zephania Ubwani

Arusha - The East African Community (EAC) is developing a strategy to boost trade-in-services.

This will position the bloc better in the negotiations of service liberalisation at the continental level.

The EAC’s secretary general, Peter Mathuki, revealed this on Thursday during a Webinar on trade-in-services under the African Continental Free Trade Area (AfCFTA) Agreement.

Dr Mathuki was the chief guest in the virtual meeting hosted by the East African Business Council (EABC).

Services account for 54 percent of Africa’s gross domestic product (GDP), and slightly below half of the GDP in East Africa.

The five priority services sectors being fronted by the African Union (AU) for liberalisation are financial services, communications, transport, tourism and business services.

Speaking during the opening session, EABC executive director John Bosco Kalisa said trade-in-services on the continent remained far below its potential level.

Africa, he said, accounts for only two percent of global service exports and African service exports are largely dominated by travel (42 percent of African service exports).

“Services account for 54 percent of African GDP and 75 percent of Greenfield Foreign Direct Investment (FDI) in our continent.

“In the East African Community, services account for slightly below half of the GDP,” he pointed out.

Mr Kalisa elaborated that stakeholders such as private service providers were crucial to informing the AfCFTA services negotiations with practical experience on the ground.

“It is imperative that non-state actors - such as firms in services sectors - be actively engaged in the preparations for the EAC schedule of commitment and regulatory framework negotiations of services under the AfCFTA,” he said.

Mr Million Habte of the AfCFTA Secretariat revealed that the deadline for finalisation of negotiation on liberalisation of trade in services is set for June 2022 by the Council of Ministers.

Already, 46 state parties to the AfCFTA have submitted their initial offers on liberalisation of Trade in Services/ Schedules of specific commitments.

State parties to the AfCFTA who have submitted their initial offers on service liberalisation but have not ratified the Agreement are expected to do so in good faith.

Agreement by consensus on negotiations by Regional Economic Communities and overlapping membership, Covid-19 pandemic are among the issues in negotiations of Trade in Services. Tanzania, Burundi, Uganda and Kenya have developed national offers with various commitments and the EAC Secretariat consolidated them into a draft regional offer.

“Limited participation of the private sector and knowledge on technical offers development hinders liberalization of services trade,” said Dorica Phiri Nkhata, a trade expert.

She argued for more audits and studies to be done to support comprehension of existing restrictions – laws and regulations on services in Africa.

Firms, the real traders in the AfCFTA and the EAC bloc together with the private sector were requested to analyse the service sectors of their interest to be liberalized under the AfCFTA - and reciprocate accordingly.

Prof Gerhard Erasmus, a member of Tralac Associates, said the EAC has deeper commitments of Customs Union and Common Market compared to the African Continental Free Trade Area.

Mr Tsotesti Makong said trade in services negotiations should take into consideration the evolution of services and technology in the 21st century such as tele-medicine and crypto-currency.

He explained that other services sectors are liberalised not within the context of trade in service such as the Comesa insurance scheme and mutual recognition of drivers license in Sadc member states.

He stated that such positive developments should be promoted under the trade in services negotiations at AfCFTA level. Mr Makong recommended that African countries should consider using the negative approach of a list of negotiations to boost services trade.

The EAC Offer on Trade in Services under AfCFTA is expected to be more liberal and should ensure the integrity of the commitments made under the EAC Common Market Protocol (CMP) is not lost.

According to UNCTAD in 2017 services accounted for only 22 percent of African trade and African exports remain highly concentrated on agriculture and primary goods.

China to further open services sector

noreply@blogger.com (Lynette Gitonga) — Sat, 19 Feb 2022 22:29:00 +0000

China Daily | 14 February 2022

By LIU ZHIHUA

As liberalization of trade in services and openness in the services sector are often at the core of high-level international economic and trade rules, China is expected to further open up the sector to the rest of the world to achieve its goal of basically establishing a new system for higher-level opening up of the economy during the 14th Five-Year Plan period (2021-25), industry experts said.

The nation’s openness commitments in the services sector under the Regional Comprehensive Economic Partnership agreement, which has taken effect in 11 of its members, will usher in a new era of liberalization in China’s services industry to uplift quality development of its services industry and bolster the nation’s overall expansion in high-level opening-up, they said.

Signed by 15 Asia-Pacific countries, composed of the 10 member states of the Association of Southeast Asian Nations and their five major trading partners, namely China, Japan, South Korea, Australia and New Zealand, the RCEP agreement forms the world’s largest free trade area that accounts for about one-third of global gross domestic product and population.

Removing tariff and non-tariff barriers, the treaty mandates that member countries fully open at least 65 percent of their services sector and ensure transparency of regulations, said a report by Ernst & Young Global Ltd.

It has already come into force in China, Japan, Australia, New Zealand, South Korea and six ASEAN member states, namely Brunei, Cambodia, Laos, Singapore, Thailand and Vietnam. It will become effective in Malaysia on March 18.

"China will definitely fully honor its RCEP commitments to open the market up and strengthen cooperation with other member economies," said Wang Tuo, an associate researcher at the Chinese Academy of International Trade and Economic Cooperation’s Institute of International Trade in Services.

"As the nation continues to expand high-level opening-up, it will deepen reforms and pursue greater institutional opening-up, including aligning domestic regulations, management and standards with high-level international ones. Free trade agreement commitments are part of such efforts," Wang said.

Under the deal, Japan, South Korea, Australia, Singapore, Brunei, Malaysia and Indonesia have adopted a negative list approach for services liberalization immediately. With a negative list approach, market access is open to foreign services suppliers unless exceptions have been applied.

Other members have adopted a positive list approach to the scheduling of specific services commitments and have promised to transit to a negative list approach within six years after the agreement enters into force.

China’s Ministry of Commerce said the nation’s services sector openness commitments under the RCEP are of the highest level among all the free trade agreements it has signed.

Huo Jianguo, vice-chairman of the China Society for World Trade Organization Studies, said the opening-up of the services sector is a key task for China to expand high-level opening-up because openness in the sector, especially in digital trade, is widely considered as an important new growth point worldwide.

The MOC said China’s actual use of foreign investment in 2021 surged by 14.9 percent year-on-year to about 1.15 trillion yuan ($180.72 billion), of which the services sector accounted for 906 billion yuan, or around 79 percent of the total.

Corporate data platform Tianyancha said China has about 45 million companies in the services industry, among which about 70 percent were founded within the last five years.

The annual growth rate of newly registered services-related enterprises remained above 15 percent since 2016, while the growth rate of newly registered foreign-funded services enterprises remained above 5.8 percent during the same period.

China’s application for joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which represents some of the highest levels of market openness, especially in the services sector, is another major move by China to pursue high-level opening-up, Huo said.

Wang with CAITEC said opening-up in the services sector has become a major focus of China’s efforts to expand high-level opening-up. For instance, the negative list for foreign investment has been downsized, especially in the telecommunications and financial sectors, he said.

"Already a major pillar for the national economy, the services sector has ample room for further transformation and upgrades," Wang said. "The fast-growing digital economy, together with the improvement of digital infrastructure, has provided a solid base for technology-driven development and output growth in the services sector, as well as for the expansion of international cooperation in services trade."

Development levels should guide rules of origin …as automotive industry prepares for free African trade

noreply@blogger.com (Lynette Gitonga) — Fri, 11 Feb 2022 19:48:00 +0000

By Maihapa Ndjavera

Namibia, Kenya, Botswana, Rwanda and Ghana need rules of origin that will allow participation and further development of the automotive industry by new players in the sector. This request was made recently during the eighth meeting of the African Continental Free Trade Area (AfCFTA) council of ministers responsible for trade in Ghana, where Namibia was represented by trade minister Lucia Iipumbu. According to the council briefing, a number of countries such as South Africa, Morocco, Sudan and Nigeria aim to include a higher level of value addition on a number of tariff lines under this chapter. The briefing noted that negotiators did not reach an agreement on a number of tariff lines under this chapter.

“A strict rule of origin will, therefore, allow few countries in Africa to dominate this sector and as a result, trade under this sector would be skewed. There is a need for the ministers to provide guidance that will allow countries with semi-knockdown automotive industries to trade under this agreement, and to be allowed sufficient time of between 10 to 20 years to move to a higher level of value addition,” stated the briefing. Providing her input, Iipumbu said negotiations and agreed rules of origin under this chapter should take into account the level of all players in the African automotive industry, and as such accommodate and consider various levels of industry development of member states involved in the manufacturing and assembling of automobiles.

Namibia thus proposed consideration of a sufficient transitional arrangement for those members states preparing for a relatively lower value addition so that they are given sufficient time to migrate to higher levels. Namibia has taken the stance that this agreement should not disrupt new industries, but enhance trade on the continent. It was further declared that senior officials should consider a number of flexibilities to accommodate all member states with appropriate transitional arrangements.

“For countries just starting, such as Namibia, the rules of origin should be at a 70%:30% ratio, but this should graduate to 60%:40% over a period of 15 years. For countries like Namibia, it is also important that the 30% be inclusive of items such as local labour remuneration, and it is important that the 30% be inclusive of bothregional and continental sourcing,” Iipumbu emphasised.

Currently, 87.7% of rules have been completed, while the outstanding rules of origin remain in the chapters relating to textiles and clothing, automotive, sugar and tobacco. According to the council, the work on origins will continue until December 2022.

Relief as Tanzania agrees to approve EU trade deal

noreply@blogger.com (Lynette Gitonga) — Fri, 11 Feb 2022 18:52:00 +0000

Business Daily | 7 February 2022

By GERALD ANDAE

The East African Community could finally sign the new Economic Partnership Agreement (EPA) with the European Union this month as a bloc after Tanzania changed its initial stance.

Josep Borrel, the EU Foreign Representative for Foreign Affairs and Security, says Tanzania has agreed to join the rest of the EAC countries in ratifying the deal that will see the region enjoy quota-free and duty-free access to the lucrative European market.

Mr Borrel in an interview with The East African said President Uhuru Kenyatta has indicated that Tanzania is ready to sign the deal following the change of leadership.

“President Uhuru Kenyatta told me that, finally, it seems that we could have an agreement for the whole region because the new government in Tanzania is accepting to sign the agreement,” said Mr Borrel.

Tanzania had refused to sign the EPAs deal in 2015 under the reign of former President the late John Magufuli.

Previously, it has been a prerequisite that the EPA agreement is endorsed by all EAC member states for it to become effective.

Nairobi and Kigali were the only two countries in the region to sign an EPA deal with Europe in 2016 under a special arrangement under a temporary pact with the EU to allow its goods to access the expansive market duty-free.

Normally, horticultural produce from Kenya, Uganda and Tanzania enjoy preferential terms, exempting them from paying taxes to access the EU market, making the goods more competitive.

But following the hesitation to sign the pact by some EAC members, Kenyan goods stood to attract higher taxes forcing it to seek a temporary arrangement with the EU to save the local farmers.

The signing of the EPA deal was delayed initially because some states wanted a provision for special export taxes in order to protect certain sectors they consider sensitive and to discourage the exportation of raw material to Europe.

Tanzania was cautious in signing the deal as they believed that cheap goods from European countries will flood their markets, affecting the locally-produced ones, especially in the agricultural sector.

Stakeholders in the horticulture sector want Kenya to be keen before endorsing the deal with the EU because there are new clauses that may restrict the access of Kenya’s produce to the European market.

For instance, the EU is introducing a Green Deal that would require Kenya to ban most of the pesticides in use, a move that.

“We want an EPA that is favourable to Kenya especially on agriculture so we are calling for a review of the Green Deal before it is signed,” said Ojepat Okisegere, chief executive Fresh Produce Consortium of Kenya.

Legal frameworks key for deeper integration

noreply@blogger.com (Lynette Gitonga) — Wed, 09 Feb 2022 23:47:00 +0000

February 4, 2022

SANF 22 no 04 – by Kizito Sikuka

The SADC Executive Secretary Elias Magosi has called on Member States to pass national laws to support regional integration as all legal instruments are critical in deepening integration and promoting sustainable development in the region.

The slow pace by some SADC Member States to advance these regional laws from being stated intentions to actual application has affected integration, resulting in most people failing to achieve maximum benefits of belonging to a share community in southern Africa.

The Executive Secretary emphasized this point in addressing a virtual meeting of the SADC Committee of Ministers of Justice/Attorneys General on 25 January, noting that the SADC Board of Auditors has already mentioned the slow pace at which Member States sign, ratify and accede to regional protocols and other legal instruments.

“All these instruments were developed and approved for a purpose, to move this region forward to achieve its goals under the SADC Common agenda, and I believe they still remain important and relevant,” said Magosi, who started his work as the new SADC Executive Secretary in August 2021.

According to SADC legal statutes, any signed regional protocol should be ratified by member countries for it to enter into force at national level in the 16 member states.

At least two-thirds of the Member States (10 of 16) are required to ratify a protocol for it to enter into force.

The process of approval of a regional legal instrument requires, first, signing, and then ratification – a process that differs from country to country, with some requiring approval of parliament.

Magosi said any obstacles that may hinder countries to advance regional laws from being stated intentions to actual application should be tackled head-on to ensure that SADC achieves its longstanding goals of a united, prosperous and integrated region.

“We all need to work doubly hard to remove bottlenecks and deal with challenges, including those with sovereignty considerations.”

Magosi said the Secretariat will not lose focus of the main goal of SADC, which is regional integration, adding that steadfast support from a legal standpoint will also strengthen the efficiency and effectiveness of the Secretariat.

The Secretariat is the principal executive institution of SADC responsible for strategic planning, facilitation and coordination and management of all SADC Programmes.

“One of the commitments I made in assuming the role of the Executive Secretary, is to ensure delivery of the RISDP towards attainment of the SADC Vision 2050, and if in the process to achieve this, there are processes or areas that need review to realise efficiency and effectiveness of the Secretariat, and that of Member States, we ought to work jointly to enhance these.

“Your support to the Secretariat in this regard, especially from the legal stand point, will be crucial.”

In their efforts to strengthen and promote a conducive legal framework to advance regional integration, SADC Committee of Ministers of Justice/Attorneys General at their meeting considered a number of draft legal instruments and recommended them for approval by the SADC Council of Ministers and subsequently, the SADC Summit of Heads of State and Government.

These instruments include the Draft Agreement Amending the SADC Treaty, which is intended to recognise the SADC Parliament as one of SADC Institutions under Article 9 (1) of the SADC Treaty.

The transformation of the SADC Parliamentary Forum into a regional parliament was approved by the 41st SADC Summit that met in August 2021 in Lilongwe, Malawi.

Its transformation will ensure broader citizen participation in regional affairs by facilitating more extensive debate on regional issues, and it is expected to accelerate the implementation of SADC protocols that need to be ratified and domesticated into national legislation.

Another important legal instrument that was recommended for adoption by the region is the Draft Memorandum of Agreement for the Establishment of SADC Humanitarian and Emergency Operations Centre (SHOC).

Based in the Nampula province of Mozambique, the SHOC will coordinate regional humanitarian efforts on natural disasters which are increasing and affecting all Member States.

The SADC Committee of Ministers of Justice/Attorneys General also considered and recommended that the Regional Customs Transit Guarantee Regulations made under Annex IV to the Protocol on Trade the Draft Agreement Amending the Protocol on the Development of Tourism in the SADC Region be approved.

The Regional Customs Transit Guarantee Regulations cater for a system that ensures that the guarantee issued in one country should be recognised across the region for purposes of securing the duties when the goods are in transit and thereby regarded as a trade facilitation tool meant to support the implementation of the SADC Free Trade Area (FTA).

The SADC Committee of Ministers of Justice/Attorneys General meeting was preceded by a meeting of Senior Legal Officials on 24 January 2022, and the committee’s main mandate is to provide legal guidance and coordination of legal issues for SADC. sardc.net

SADC operationalises protocol on trade in services

noreply@blogger.com (Lynette Gitonga) — Sat, 05 Feb 2022 00:51:00 +0000

By Oliver Kazunga, Senior Business Reporter

THE Southern African Development Community (Sadc) has operationalised the Protocol on Trade in Services after 11 countries of the 16-member bloc including Zimbabwe ratified the pact.

The Sadc Protocol on Trade in Services provides a framework for a preferential trade agreement covering all commercial and tradable services in any services sector.

The protocol aims to encourage increased intra-regional trade in services through the gradual removal of unnecessary or over-burdensome regulation affecting the cross- border supply of services within the region, a process known as progressive liberalisation.

In a statement last Thursday, Sadc said the protocol has entered into force.

This was announced by the Sadc executive secretary, Mr Elias Magosi, in his notification to the 16-member States of Sadc, in which he wrote:

“I have the honour and pleasure to inform member States that the Protocol on Trade in Services entered into force on 13th January, 2022.

“Eleven out of the 16 Sadc member States have deposited instruments of ratification while five member States – Angola, Democratic Republic of Congo, Madagascar and United Republic of Tanzania plus the Union of Comoros, are yet to ratify the protocol,” said the regional bloc.

Article 30 of the Sadc Protocol on Trade in Services provides that the protocol shall enter into force 30 days after the deposit of instruments of ratification by two thirds of the member states.

Barriers to trade in services are found in the way that nations regulate services, for example, through a country’s banking or transport laws, where measures may be found that limit the ability of foreign services suppliers to trade freely across borders.

The protocol offsets the general and specific obligations binding the ratifying or acceding member States to grant each other preferential market access and non- discriminatory (“national”) treatment for regional service suppliers.

The member states guarantee to extend to each other the best conditions for trade that they grant to one Sadc state party or a non-state party, including non-Sadc countries.

"In addiction, state parties guarantee that the same market access conditions for particular services and service suppliers, as set out in their accompanying sectoral commitments, will not be made more restrictive or discriminatory compared to their own ‘like’ (comparable) domestic services and service suppliers,” said Mr Magosi.

“The sectoral commitments, and any limitations thereto, are set out in national lists of commitments (similar to tariff schedules) for sectors that have been subject to negotiations.

“The lists of commitments differ between individual State parties, reflecting different levels of national development of the services sector and regulatory capability and/or experience,” he said.

The first round of such sectoral negotiations was concluded in 2019 covering communication, financial, tourism, transport, construction and energy-related services.

A second round of negotiations was approved by Sadc Trade Ministers in 2021, covering regional trade in the remaining sectors, namely: business services; distribution; educational, health and social services; environmental services; and recreational, cultural and sporting services.

The adopted first round lists of commitments/schedules comprise of commitments in the six priority sectors by all member States except for outstanding schedules by Mozambique (in relation to energy-related services), Madagascar (construction and energy-related services) and Angola and Comoros – yet to become party to the protocol (all six sectors).

Member States have agreed to negotiate the outstanding offers in the six sectors during the second round of negotiations.

“The adopted commitments have also been supported by Protocol Annexes containing some common trade-related regulatory principles in some sectors aimed at underpinning conditions for market access and national treatment.

“The annexes, which are equally binding on each state party, build on experience in the World Trade Organisation (WTO) as well as other preferential or regional trade agreements covering trade in services," said Sadc.

US removes Ethiopia, Mali and Guinea from AGOA trade programme

noreply@blogger.com (Lynette Gitonga) — Sat, 08 Jan 2022 01:27:00 +0000

See here

The United States has cut Ethiopia, Mali and Guinea out of a duty-free trade programme over alleged human rights violations and recent coups.

In a statement on Saturday, the US Trade Representative (USTR) said it terminated the three countries from the African Growth and Opportunity Act (AGOA) “due to actions taken by each of their governments in violation of the AGOA Statute”.

It said the US was deeply concerned “by the gross violations of internationally recognised human rights being perpetrated by the government of Ethiopia and other parties amid the widening conflict in northern Ethiopia”, as well as by “the unconstitutional change in governments in both Guinea and Mali”.

There was no immediate comment from the Washington embassies of the three African countries.

The AGOA trade legislation provides sub-Saharan African nations with duty-free access to the US if they meet certain eligibility requirements, such as eliminating barriers to US trade and investment and making progress towards political pluralism.

In 2020, 38 countries were eligible for AGOA.

In its Saturday statement, the USTR said Ethiopia, Mali and Guinea may still rejoin the pact if they met the statute’s provisions.

“Each country has clear benchmarks for a pathway toward reinstatement and the Administration will work with their governments to achieve that objective,” it said.

US President Joe Biden had announced in November that Ethiopia would be cut off from the duty-free trading scheme provided under AGOA due to alleged human rights violations in the country’s north.

The war in Ethiopia’s Tigray region broke out in November of 2020 amid a power struggle between the Tigrayan leadership and Prime Minister Abiy Ahmed Abiy. Tens of thousands of people have been killed in the 13-month-long conflict, while about 400,000 are facing famine in Tigray alone.

The conflict has also destabilised the region, sending tens of thousands of refugees into Sudan, pulling Ethiopian soldiers out of war-ravaged Somalia and using the army from the neighbouring nation of Eritrea.

The US decision to suspend Ethiopia’s trade benefits threatens the country’s textile industry, which supplies global fashion brands, and the country’s nascent hopes of becoming a light manufacturing hub.

It also piles more pressure on an economy reeling from the conflict, the coronavirus pandemic, and high inflation.

Ethiopia’s Trade Ministry said in November it was “extremely disappointed” by Washington’s announcement, saying the move would reverse economic gains and unfairly affect and harm women and children.

AfCFTA/China sign MoU on establishing Expert Group on Economic Cooperation

noreply@blogger.com (Lynette Gitonga) — Fri, 05 Nov 2021 19:48:00 +0000

The Africa Continental Free Trade Area (AfCFTA) Secretariat and the Ministry of Commerce of China, have signed a memorandum of understanding (MoU) on establishing an Expert Group on Economic Cooperation.

The virtual event, was signed between Mr Wamkele MENE, Secretary-General of the AfCFTA Secretariat and Mr Qian Keming, Vice Minister of Commerce of China.

Accordingly, with this MoU, the AfCFTA Secretariat and Ministry of Commerce of China agreed to establish an Expert Group to collaborate in the following areas such as experience-sharing on intellectual property rights, customs procedures, digital trade, competition policy and exchange concepts, policies and share progress on the Institutional capacity and implementation of the AfCFTA.

Mr Mene in his remarks noted that China and Africa shared common aspirations rooted in mutual cooperation and the need to build China-Africa comprehensive strategic cooperative partnership adhering to the principle of achieving shared growth and through discussion and collaboration.

"China is a strong partner to Africa and has provided Africa with significant development and investment support over the past decade," he said.

"China continues to invest in infrastructure and industrial projects in Africa via its Belt and Road Initiative, and has opened up its market of 1.4 billion consumers to African products."

He said since the establishment of the AfCFTA Secretariat in February 2020, following my election by the Assembly of Heads of State and Government of the African Union, China had been actively involved in the work of the Secretariat and provided financial assistance through the African Union to the Secretariat.

Mr Mene said the AfCFTA, therefore, provides the framework for them to continue the China-Africa collaboration.

"In this regard, we envision several opportunities for cooperation including intellectual property rights, customs cooperation, digital trade, and competition policy among others."

He said the MoU would enhance China’s support towards the building of the AfCFTA and support the AfCFTA Secretariat in execution of its mandate.

Mr Mene said the MoU would facilitate dialogue between the AfCFTA Secretariat, the AfCFTA State Parties and the relevant Chinese departments and institutions in collaboration with the AU Representative Office in Beijing.

"We believe that this MoU presents an important platform for strengthening our relations, thereby contributing to the achievement of the objectives of the AfCFTA," Mr Mene said.

"Indeed, the AfCFTA will produce new trading and investment opportunities for China in various economic sectors, including agro-processing, automobiles, and financial technology."

He said the signing of this Memorandum would chart the course for a stronger, closer and more longstanding partnership between the AfCFTA Secretariat and the Ministry of Commerce of China.

By Iddi Yire

FTAs need a cautious approach

noreply@blogger.com (Lynette Gitonga) — Fri, 10 Sep 2021 22:20:00 +0000

BusinessLine | 6 September 2021

by Ajay Srivastava

Going by the US sign-ups, they often drive the rich country’s agenda on IPRs, digital trade and re-manufacturing

A US government report has reignited the debate if free trade agreements (FTAs) are worth it, after all. The report, The Economic Impact of Trade Agreements, was released by the United States International Trade Commission (USITC) in June. US Congress commissioned it.

The report says that the trade agreements signed by the US had only a small positive impact on the US economy, trade, and jobs. Using 2017 as the base year, the report estimated a 0.5 per cent ($88.8 billion) increase in real GDP, a 0.3 per cent (485,000) increase in jobs, and slight growth in trade.

The findings provide insights for countries currently negotiating more than a hundred FTAs.

The US has 14 FTAs in force with 20 countries. But it does not have FTAs with major economies like the EU, China, Japan or ASEAN.

The share of FTA partners in the US merchandise exports is 43 per cent. The share becomes less than 13 per cent if trade with neighbors Mexico and Canada under the North American FTA (NAFTA) is excluded.

Low duties and complicated rules have increased trade costs and lowered FTA utilisation. Average import duties in the US are 3.7 per cent. Its FTA partners like Singapore allow duty-free imports of all products from all countries. Israel also allows duty-free import of over 60 per cent of products. Elimination of such low duties under an FTA gives little price advantage to exporting firms. Complicated FTA Rules of Origin take away even this little advantage.

Rules of Origin define conditions when a product becomes eligible for FTA concessions. The US has negotiated many complicated Rules of Origin to protect its industry.

Consider the export of a car from Mexico or Canada to the US under the USMCA (United States-Mexico-Canada Agreement). The carmaker must source at least 70 per cent of the steel and aluminium used from North America, pay factory workers wages exceeding $16 per hour. The car must use fewer imported parts to ensure at least 62.5 per cent local value-addition. The imported content cannot exceed 25 per cent after five years.

The rules are also strict for apparel. Under NAFTA, apparel-makers must use fabric and yarn made in the region. For most other US FTAs, the yarn forward rule applies. This means apparel makers must import yarn which must be woven into cloth for making the apparel.

The US uses FTAs to push its global trade agenda on intellectual property, e-commerce, old machinery, etc. The WTO’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) outlines the minimum IPR standards members must follow. The US pushes its FTA partners to take onerous TRIPS Plus obligations to ensure greater IPR protection for its pharma and technology firms.

The report says that the effects of such provisions are ambiguous. This contradicts most academic writings that say TRIPS has spurred trade in IPR-intensive sectors and TRIPS Plus provisions fare better.

On e-commerce, WTO members have agreed to charge no import duty on products transmitted electronically for the time being. It is a big issue at the WTO. The US FTAs include provisions to ensure partners do not renege from the promise at the WTO at a later date.

A big battle awaits the issue of disposal of outdated or old gadgets and machinery. Such products are ‘re-manufactured’ and pushed for sale in developing countries. Fearing the import of old technology, many countries have banned the import of such goods. At least 12 of the US FTAs contain provisions prohibiting partner countries from imposing such bans.

Many of the US FTAs include provisions requiring domestic policy changes in the partner countries. The US FTA with Korea restricts the support provided by the Korean government to pharmaceutical and medical devices.

Technical barriers

With average import duties already low, the US uses FTAs to harmonise standards and address technical barriers to trade. It also uses FTAs to drive its global agenda on IPRs, digital trade and re-manufacturing. But only the US can dictate terms. For all other countries negotiating FTAs, here are two pointers.

One, the outcome is dependent on the choice of the partner country. To understand, let us divide world trade in manufactured goods into two broad groups. Medium- to high-tech goods account for 70 per cent of world trade, and labour-intensive goods like shirts and shoes account for the remaining 30 per cent. Developed countries charge zero or low import duties on most medium- to high-tech goods. And high duties on shirts and shoes, manufactured by poor/developing countries. Now, what would happen when a poor country enters into an FTA with a developed country is easy to guess.

The poor country gets preferential access for its shirts and shoes in the developed country. In return, it has to remove duty on most products. The poor country gets additional market access in 30 per cent of products while the rich nation would get additional market access in 100 per cent of products. The resulting zero duty imports may disrupt any domestic programme to enhance manufacturing in medium- to high-tech sectors.

Two, appropriate MFN (most favoured nation) duty level is vital for trade. Consider, X, a country with high MFN import duty and a large market, enters into an FTA with Y. This may tempt countries like China to manufacture in Y to export to X.

Half the world trade happens at zero MFN Customs duty, and the FTAs account for less than a quarter of world trade. To grow trade and attract investments, countries must reduce MFN tariffs on critical inputs and lower the cost of inputs. The American study is a reminder that FTAs are just one of the many instruments for promoting trade.