Rising global trade tensions threat to African economies: WTO

24Oct 2018
Lucas Liganga
NAIROBI
Financial Times
Rising global trade tensions threat to African economies: WTO

THE World Trade Organisation (WTO), an organisation that deals with rules of trade between nations at global level, has warned that rising global trade wars are a threat to African economies.

The global trade wars have resulted in noticeable instability and lower economic growth is some African countries, says the global trade organisation.

Keith Rockwell, WTO’s Director of Information and External Relations Division, said the rising US dollar as a result of the trade tensions was also hurting African economies.

He said between 2013 and 2017, sub-Saharan African debt levels denominated in foreign currency were up 80 per cent, adding that in non-resource intensive countries the jump was about 18 per cent.

Rockwell was responding to the Financial Times that had requested him to explain the impact of the ongoing trade friction between the United Stated and China at the regional dialogue on Challenges for the Multilateral Trading System-Perspectives from East Africa held in the Kenyan capital Nairobi last week.

The dialogue was jointly organized by the Friedrich Ebert Stiftung (FES), a German organisation promoting democracy and good governance, social justice and globalization with a human face and the WTO.

“Per capita income growth remains sluggish. Rapid increase in the working-age population means that by 2035, the number of people in low-income countries reaching working age (15–64) will exceed that of the rest of the world combined,” he told the dialogue that brought together civil society organisations from Kenya and journalists from Tanzania, Kenya, Uganda, Rwanda and Ethiopia.

Rockwell recalled an African proverb that says: “When two elephants fight, it is the grass that suffers most”. “And when global economic powers are engaged in trade wars it is African countries that suffer,” he added.

Although there was no definition of a trade war, Rockwell quoted WTO Director General Roberto Carvalho de Azevêdo as saying: “Whatever the definition, the first shots have been fired.”

He said $413 billion in trade has been affected by tariffs and the WTO has recorded 16 dispute settlement cases arising from tension caused by trade wars in the areas of steel and aluminum (7), counter tariffs (5), intellectual property (2), China tariffs (2).

“WTO estimates that a full blown trade war, would cut trade by 17 per cent and GDP by 1.9 per cent,” said Rockwell.

Meanwhile, an official from the African Union headquarters in the Ethiopian capital Addis Ababa has brushed aside reports that African countries were reluctant to ratify the African Continental Free Trade Area (AfCFTA) agreement, a continental wide strategic effort to boost intra-African trade through trade in manufactured goods.

Prudence Sebahizi, Chief Technical Advisor and Head of AfCFTA Unit at the African Union’s Department of Trade and Industry, said many African countries have started the ratification process.

“To date, the AfCFTA agreement has 49 signatories and seven member states have ratified it,” Sebahizi told the regional dialogue.

Sebahizi added: “No country is reluctant to ratify the agreement but the delay could have been caused by national procedures to be undertaken before the ratification.”

 “When it comes to trade, we should ‘put Africa First’ and not destroy the future of our youth by clinging to trade patterns that do not create jobs,” said the official.

Sebahizi added: “African countries need coherent policies to help them overcome their inability to industrialize.”

According to him, Africa’s key task is to promote technological and labour-intensive industries for employment generation and efficient use of the continent’s diverse resources.

He said Africa’s industrialization and investment should target markets in Africa through AfCFTA and beyond and in both cases open markets will be critical.

The official said harnessing Africa’s demographic dividend was key, adding that Africa’s population has reached 1.2 billion and by 2050 Africa's population was projected to reach 2 billion.

“Trade and Investments are key in solving Africa's major challenges such as youth unemployment, thereby curbing migration and our people dying in the Mediterranean,” said Sebahizi.

He added that it should be emphasized that besides establishing the AfCFTA, the fundamental drivers of trade are development of productive capacity and industrial sophistication because a country cannot trade effectively unless it can produce and add value to its raw material endowments.

He said trade – related infrastructure and services along with other trade facilitation measures such as removal of non-tariff barriers, simplification of customs procedures and documentation, and flawless operations of Africa’s transport and transit corridors are also fundamental to Africa’s internal trade.

Sebahizi said given the imbalances in the levels of development in African countries, it would be a remise to talk about creating the AfCFTA without ensuring equitable outcomes for member states through compensation mechanisms to address adjustment costs to greater trade opening, and help smaller and weaker countries build their production and trade capacities.

Africa at Glance

  • As the world’s most fragmented region, it takes almost twice as long to trade across borders in Africa (particularly sub-Saharan Africa) than it does in other regions such as Latin America and the Caribbean and South-East Asia.

 

  • Despite, the challenges facing the continent, Africa’s future looks very positive.

 

  • As the second largest-continent in the world it contains 1/8 of the world’s population, characterised by a large and growing youth-bulge.

 

  • In addition, Africa accounts for:

 

    • around 60 per cent of the world’s uncultivated arable land;

 

    • over 50 per cent  of the world’s production of platinum, cobalt, tantalum & diamonds;

 

    • 11 per cent of the world’s oil, 6 per cent of the world’s natural gas and 4 per cent of the world’s coal, with more reserves being discovered at a rapidly increasing rate. (Mo Ibrahim Foundation, 2013).

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