ATPC DAILY DIGEST 6 AUGUST 2020
Today’s Topics:
WTO report draws attention to impact of COVID-19 trade disruptions on women- (WTO)
Nations to meet in Barbados to chart new path for post-coronavirus economic recovery – (UNCTAD)
Looking at LDCs, food and COVID-19 – (TradeforDevelopmentNews)
External debt complicates Africa’s COVID-19 recovery, debt relief needed – (Africa Renewal)
Advocating for the Accelerated Implementation of the African High-Speed Rail Project –(allAfrica)
The U.S. and Kenya Launch Negotiations on a Free Trade Agreement. Will They Succeed? – (Brookings)
Ethiopia Seeks to Expedite, Finalize Resumed GERD Tripartite Talks – (Ethiopian Press Agency)
Gov’t considers move to reopen air borders as proposal goes to President – (Ghana Web)
South Africa looks toward inclusive recovery to stabilise debt, boost growth - (tralac)
INTERNATIONAL
WTO report draws attention to impact of COVID-19 trade disruptions on women – Women make up a larger share of the workforce in the manufacturing sectors, such as textiles, apparel, footwear and telecommunication products, that have seen the largest falls in export growth during the first months of the pandemic, the paper notes. In the services sector, women also outnumber men in industries that have been directly affected by travel restrictions, such as tourism and business travel services. The paper estimates the risk posed by trade disruptions on men and women using employment data from the World Bank Enterprise Surveys, monthly merchandise exports data and statistics on the mode by which a service is supplied.
The paper furthermore notes that women are disproportionately present in the informal sector in developing and least-developed countries and in activities that cannot be done remotely. It also highlights how the existing gender gap in terms of income, education, information technology skills, access to finance, and childcare responsibilities put women at a further disadvantage during the pandemic. Maintaining open markets during the recovery period is key to building faster and more inclusive growth, the information note states, adding that this should be complemented by appropriate labour and education policies as well as legal and social reforms to support women workers, consumers and traders. The paper also points to the recently launched WTO-World Bank report "Women and Trade: The role of trade in promoting gender equality", which highlights ways to ensure women continue to benefit from trade during the economic recovery after the pandemic. The information note can be found here. (WTO)
Key Words: WTO Trade Policy, COVID-19
Nations to meet in Barbados to chart new path for post-coronavirus economic recovery - UNCTAD’s 15th quadrennial ministerial conference (UNCTAD15) to be held in Bridgetown, Barbados from 25 to 30 April 2021 will present the world with the first opportunity to align the sustainable development agenda with global efforts to recover from the COVID-19 pandemic. The Prime Minister of Barbados Mia Amor Mottley and UNCTAD Secretary-General Mukhisa Kituyi today signed an agreement for the hosting of UNCTAD15, officially setting off preparations for the landmark gathering of the organization’s 195 member States. “The COVID-19 global emergency and its extreme repercussions have exposed the need for a fundamental rethinking of many of the assumptions that previously underpinned the international economic order,” Prime Minister Mottley said during the signing ceremony held virtually. “In a sudden and unexpected way, the crisis has provided the UNCTAD membership with a unique opportunity to be at the forefront of the new thinking and radical policy corrections that the situation now requires,” she added. Dr. Kituyi said: “In a world overhung with the COVID-19 pandemic, UNCTAD15 is a first opportunity for the development community to give us a mandate aligning Agenda 2030 with the global new normal.” The UN’s 2030 Agenda for Sustainable Development and its Sustainable Development Goals (SDGs) are a universal call to action to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere, in line. (UNCTAD)
Key Words: UNCTAD, Trade Policy, COVID-19
Looking at LDCs, food and COVID-19 – Food products comprise around 17% of LDC merchandise imports – more than double the world average of 8%. 38 of the world’s 47 LDCs are net food importers [1], making them extremely vulnerable to disruptions to food production and supply networks caused by measures to contain the coronavirus, resulting in food security challenges. The Commonwealth’s 14 LDC members have significant intra-Commonwealth food trade by sourcing around 45% of food imports from other Commonwealth countries. As the world grapples to contain the novel coronavirus, another crisis of widespread hunger is looming in many developing countries, particularly the least developed countries (LDCs). Although there are currently no signs of a COVID-19-induced global food crisis, the World Food Programme (WFP) has warned of potential widespread hunger that could push an estimated 265 million people to the point of starvation. The effect is likely to be more pronounced in the world’s most impoverished nations, which depend on imported food products to ensure requisite food levels and maintain food security. Two Commonwealth LDCs, Bangladesh and Mozambique, are among the world’s 25 hunger hotspot countries.
LDC food import dependence - LDCs account for around 3% of global food imports, which is almost double their share of merchandise imports (1.45%). This import dependence makes LDCs extremely vulnerable to any disruptions in global food production and supply chains. Maintaining open and functional supply chains is therefore imperative to avoid shortages of essential food items. (TradeforDevelomentNews)
Key Words: LDCs, Global Trade, COVID-19
Mena: Trade Briefing – This report was compiled before the Covid-19 pandemic and therefore refers to patterns and trends based on data that was current at the time of writing in February 2020. The full impact of Covid-19 on trade is unknown, but the World Trade Organization estimates that trade will fall by anything between 13% and 32% globally during 2020. Alongside this, and ahead of any impact on trade, the Mena region was already being affected by the collapse in global oil prices, which happened in March and, again, was not factored into this report. However, the points in the report remain valid: that the region’s dependency on oil will have an impact on its trade and economic performance, greater in net oil exporting countries than in net oil importers.
There are other general concerns amongst trade finance professionals around the role of the trade credit insurance sector, which is now heavily exposed to the sharp downturn in global trade. Inventories are collapsing as just-in-time distribution models struggle to cope with restrictions on the physical movement of goods. This is affecting invoice payments and, while it is too early to say exactly how this will affect the recovery from the current crisis, it is undoubtedly the case that many businesses in supply chains worldwide will not survive. As a result, the role of government agencies at present is vital in supporting exporters. In addition to fiscal support, countries will also need clear and robust strategies to rebuild economically once lockdowns are lifted.
GTR: 2019 was a sluggish year for trade. How was Mena affected by this general climate of uncertainty?
Harding: Mena has had a tough few years and last year was not really any different. The combined effects of the trade war between the US and China, the UK’s exit from the EU and enduring intra-regional tensions, particularly between the US and Iran, made 2019 a poor year for trade. This follows five years of sluggish growth. A weak or volatile oil price over the period since 2013 to the end of 2018, which is where the data is actual rather than forecast, has meant that export revenues have dropped at an annualised rate of 6% in Mena – the highest decline of any global region (Figure 1). This has had a spill-over effect on the region’s economies as well, with imports falling back by nearly 3% annually over the period, suggesting weaker demand both within Mena and globally for the goods that are re-exported from the region. (GTR)
Words: MENA, Trade Policy, Investment
External debt complicates Africa’s COVID-19 recovery, debt relief needed - An African Union (AU) study on the economic impact of COVID-19 released in April 2020 showed that the continent could lose up to $500 billion and that countries may be forced to borrow heavily to survive after the pandemic. UN Secretary-General António Guterres in in June 2020 warned that an additional “50 million people risk falling into extreme poverty in 2020 owing to the pandemic.” Mr. Guterres has appealed for a “global response package amounting to at least 10% of the world’s Gross Domestic Product. For Africa, that means more than $200 billion as additional support from the international community.” Africa needs at least $100 billion to immediately resource a health and social safety net response, and another $100 billion for economic stimulus, including a debt standstill, the financing of a special purpose vehicle for commercial debt obligations, and provision of extra liquidity for the private sector, according to the UN Economic Commission for Africa (ECA). African countries’ lack of fiscal space to tackle the pandemic and its aftermath could be attributed to four challenges, according to the International Monetary Fund (IMF).
The first challenge is high debt-to-GDP levels, which are unsustainable. The second is that high fiscal deficits (gaps between spending and revenues) will force countries to explore alternative financing for development projects. Consequently, loans become a recourse, further exacerbating their debt burden. The third challenge is the high cost of borrowing, with interest rates between 5% and 16% on 10-year government bonds, compared to near-zero to negative rates in Europe and America. For sub-Saharan African economies, interest repayments constitute the highest expenditure portion— and fastest-growing expenditure—of budgets. Lastly, the depreciation of many African currencies against major international currencies has triggered inflation. For example, the Botswanan Pula and the South African Rand have lost about 8% of value against the US dollar and the euro since the outbreak of the pandemic. To recover better, Mr. Guterres has called for debt relief, while advocating for a transition to low-carbon, climate-resilient growth that will create millions of green jobs and ensure sustainable production and consumption. Addressing these challenges requires bridging inequalities based on income, gender and race, says Mr. Guterres. He continues to advocate for equity in global liquidity and has proposed a set of innovative solutions to financing post-pandemic recovery. (Africa Renewal)
Words: Africa, Trade Policy, Investment
Advocating for the Accelerated Implementation of the African High-Speed Rail Project – Participants at the webinar on the African High-Speed Railway Project which was held on 29 July, called on African Union and leaders of the continent to fast track implementation of the high-speed rail to support the implementation of the continental free trade area. Moderated by Mr Olawale Rasheed of the African Railway Roundtable, the webinar was organised by the African Union Development Agency-NEPAD (AUDA-NEPAD) and facilitated by the agency’s Project Advisor Louis Napo Gnagbe, with top railway and infrastructure leaders on the continent participating. Mr Raila Odinga, the AU High Representative for Infrastructure Development in Africa who chaired the event challenged the continent to walk the talk, stressing that, “If Europe and North America could transform their railway systems in the time they did, Africa can even do better now.”
Mr Odinga noted the many railway developments across Africa said the continent has spent a lot of time on planning and emphasised that now is the time to hit the ground running as the world will not wait any longer. Citing the new free trade area, the African Continental Free Trade Area (AfCTA), the AU High Representative said transport logistics and interconnectivity are critical to the success of the project, decrying the very low connectivity among Africans due to poor transport connection. The Director of Infrastructure and Energy at the AU Commission, Mr Cheikh Bedda noted the strategic importance of the high-speed rail to Africa's development. He informed the meeting participants that the Commission is set to push ahead with the implementation process. While noting the disruption occasional by the COVID-19 pandemic, Mr Bedda said the commission leadership is committed to transforming the pandemic into opportunity, stressing that the commission is open to credible collaboration and partnership to make the project a reality. (allAfrica)
Key Words: AU, COVID-19, Regional Integration
EAST AFRICA
The U.S. and Kenya Launch Negotiations on a Free Trade Agreement. Will They Succeed? – Despite the coronavirus pandemic, the Trump administration and Kenyan government launched trade negotiations in early July. Depending on the outcome of the negotiations, which were held virtually, the trade agreement could be the most significant development in U.S-Africa trade relations since the African Growth and Opportunity Act (AGOA) passed Congress in 2000. Indeed, according to the U.S. Trade Representative (USTR), Ambassador Robert Lighthizer, the U.S.-Kenya agreement will become a model for future trade agreements with other African countries. Then again, while the U.S. and Kenyan governments have a strong commitment to a successful outcome, the challenges cannot be minimized. Both sides have described what they hope to achieve in the negotiations. The U.S. objectives are predictably comprehensive. USTR has identified 24 chapters on which it plans to negotiate, including technical barriers to trade, intellectual property, digital trade, anti-corruption, good regulatory practices, and subsidies, among others. Kenya’s statement of objectives is equally fulsome if not quite as detailed. The Ministry of Industrialization, Trade, and Enterprise Development has identified 22 chapters it intends to negotiate with the U.S.
At this point, the political commitment to the negotiations of both leaders is of paramount importance. President Uhuru Kenyatta is one of the few African leaders to have established a positive rapport with President Trump and is the only African leader to have made two visits to the White House. In the wake of their second meeting in February, the U.S. Chamber of Commerce established a U.S.-Kenya Trade Working Group to build mutual trust and seek common ground between the parties on key trade priorities for the business community. While these negotiations are intended to produce the first bilateral trade agreement with a country in sub-Saharan Africa, negotiators will have to navigate a number of challenges including: Regional agreements. One of the most frequently asked questions is how a U.S.-Kenya Free Trade Agreement will impact efforts to implement the African Continental Free Trade Agreement (AfCFTA). (Brookings)
Key Words: Kenya, USA, AfCFTA
Ethiopia Seeks to Expedite, Finalize Resumed GERD Tripartite Talks – Ministry of Water, Irrigation and Energy disclosed that Ethiopia is committed to reach a speedy and win-win deal on the outstanding issues of the Grand Ethiopian Renaissance Dam (GERD). Talks on the GERD resumed on Monday after the negotiation which had started on 27 July 20202 was put on hold following Sudan’s request. The Ministry of Water Affairs of Ethiopia, Egypt and Sudan continued the tripartite negotiation under the African Union framework via video conference, according to the press released by the Ministry. Eng. Seleshi Bekele, Ministry of Water, Irrigation and Energy has reiterated Ethiopia’s resolve to expeditiously finalize the process with a win-win outcome and noted the progress made since the AU led process has started. The three countries also agreed on the procedure for the trilateral negotiation. The discussion of the three countries’ working groups is underway with regard to GERD outstanding issues. According to the press release, negotiation will continue for the coming two weeks, with a combination of trilateral ministerial meeting, expert working meeting and meeting with experts and observers. The Ethiopian Herald August 5/2020. (Ethiopian Press Agency)
Key Words: Ethiopia, GERD Talks, Regional Integration
WEST AFRICA
World Bank disburses $100mln to strengthen decentralized administration and improve mining sector management in Niger - Niger has secured $100 million in funding (both a loan and a grant) from the World Bank to improve its local government services and decentralized management of the mining sector. The information was reported in a press release published by the institution on August 3. Provided as part of the Governance of Extractives for Local Development Project and covid-19 Response Project, the financing will help strengthen and promote the implementation of policies, laws, and regulations on decentralization and sustainable management of mining. Specifically, it will increase access to decentralized basic services such as water, primary education, and health services, and improve budget execution at the municipal level. In addition to increasing and strengthening the management of revenues from extractive activities that are transferred to local governments, the funding will also increase the attractiveness of the mining sector for private sector investment, improve the monitoring of mining activities, and support the regularization and capacity-building of artisanal miners in good environmental and social practices.
“Given the unstable security context at the borders, the project will contribute to mitigating some of the drivers of fragility in the country. It will also contribute to building resilience by improving service delivery and strengthening local government capacity to manage resources and local development; including citizen engagement, mobilizing revenues from the extractive sector for the State and local governments, and creating jobs and livelihood opportunities for the communities, with a strong focus on women,” said Abel Bove, World Bank’s Senior Governance Specialist, and Task Team Leader for the project. (ecofin agency)
Key Words: West Africa, World Bank, Private Sector
Gov’t considers move to reopen air borders as proposal goes to President - The Ministry of Aviation would be sending a comprehensive proposal to the President this week on how it plans to reopen the nation’s air borders. The proposal has a detailed plan, recommending a number of scenarios, impact analysis and control mechanism that can be introduced to hugely mitigate the fear of importation of COVID-19 cases when the air borders are finally opened.
The B&FT has gathered that President Nana Addo Dankwa Akufo-Addo is seriously considering reopening the air borders in the Phase–2 of easing restrictions imposed due to COVID-19 but has emphasized that it would only happen when the nation is content with control mechanism to check the importation of cases. A number of control mechanisms have been presented in the proposal for government’s consideration. They include bilateral certification processes, mandatory quarantine among others.
“We want to have a firm grip on how we would manage the system here. These are ideas that are being shared globally and within Ghana as well. Generally, it is about how we reduce the rate of imported cases and reduce the risk from travelers. We are looking at bilateral relations and certification; that one has tested negative before travelling and how we are able to validate that certificate when they arrive in Ghana and what do we do when they arrive in Ghana,” Aviation Minister, Joseph Kofi Adda told the media recently. He added that: “it is not about Ghana but what happens in other countries that affect Ghana. Certainly, if we are going to open up the airport, there is a possibility that we are going to have more of the COVID-19 cases come in that we may not be able to manage and it would take a toll on the resources of the nation.” He explained that some financial considerations are also being critically looked at in order to strike a balance between how much the country would benefit from reopening its boarders and the risk it will pose on the health of citizens and the economy. “The health of the citizens would be key in decision making,” he stressed. (Ghana Web)
Key Words: West Africa, Regional Trade, COVID-19
CENTRAL AFRICA
Central Africa: industry-schools linkages, training centers and economic zones - vital for economic diversification – Inadequate skills development and low productivity are holding down the competitive and economic diversification potential of Central African countries. However, if they draw inspiration from the experiences of Ethiopia, Japan and South Africa, among others, these countries can retool their human resources to become more developed, prosperous and resilient to external shocks. This is the overarching message from international experts who participated in a videoconference on the theme: “Skills for Economic diversification in Central Africa: leveraging experiences from successful comparators and building partnerships” recently organized by the Sub-regional Office for Central Africa of the UN Economic Commission for Africa (ECA). The virtual event was the second segment in a series of interactive meetings leading up to the 36th session of the Intergovernmental Committee of Senior Officials and Experts (ICE) for Central Africa to be held later this year under the theme: “Skills for Economic Diversification in Central Africa”.
During the webinar, the experts examined models that could be adopted by countries of the sub-region in order to help bring about needed economic changes. Jean Luc Mastaki, Head of Section for Economic Diversification Policy and Reforms of the Central Africa Sub-regional Office of ECA elucidated on the characteristics of an efficient skills system. First, he said, such a system must be responsive to the demands of the market, including industry, businesses, the public sector, the private sector and employers. He argued that "knowledge production and innovation systems must converge with the needs of potential employers.” Another feature to consider is a fit for purpose skills supply base. He argued that a skills creation system must provide products ready for use which would match the layers of the division of labor of enterprises. According to the economist, other specific features of skills efficiency for economic diversification include "the inclusiveness of a system, its accessibility through affordable costs and its openness to the transferability of expertise in a context of free movement".(UNECA)
Key Words: Central Africa, Economic Diversification, SMEs
SOUTHERN AFRICA
South Africa looks toward inclusive recovery to stabilise debt, boost growth – In a conversation with IMF Country Focus, the Director-General of South Africa’s National Treasury Dondo Mogajane explains how the government has responded to the COVID-19 crisis, how IMF financing will help to stabilize the economy, and strategies for addressing debt and spurring growth. South Africa’s economic activity is projected to contract by 7.2 percent in 2020, according to the International Monetary Fund (IMF’s) staff report that accompanied the government’s Rapid Financing Instrument request.
Q: What has been the impact of COVID-19 on South Africa and what sectors have been hit the hardest?
A: COVID-19 brought many challenges: a decline of about 18 percent in employment between February and April; every third income earner in February did not earn income in April; job losses were felt most among women and manual labor. Those at the bottom of the income distribution have suffered a great deal. Based on our assessment, the most affected sectors are construction, personal services, trade, catering, hospitality, transport, storage, and communications. The crisis also brought manufacturing and mining to a halt. We are projecting a loss in government revenue of $18.2 billion this year.
Q: What measures are being taken to provide relief to households and businesses?
A: Our relief strategy has three phases. The first phase started in mid-March with measures to mitigate the immediate effects of the pandemic: child support grants were targeted to alleviate child hunger; the Unemployment Insurance Fund provided wage support; and we funded emergency procurement and streamlined rules to support the health sector. We also funded direct grants to small businesses, in particular to small tourism operators. A second phase is aimed at stabilizing the economy. This is driven by support from the IMF and others. Assistance comes through a $29.9 billion package announced by President Ramaphosa on April 21 that boosts healthcare spending, provides financial relief to municipalities, and temporarily expands the social grant payment system. The third phase will help drive the recovery and economic growth. Central to this recovery strategy will be measures that stimulate demand and supply through interventions such as infrastructure funding. (tralac)
Key Words: South Africa, COVID-19, Regional Economy
ECA-SRO-SA Supports the development of a financing model for MSMEs in the Kingdom of Eswatini – The United Nations Economic Commission for Africa (ECA, Sub-Regional Office for Southern Africa (SRO-SA) convened a one day virtual National Stakeholder meeting on the 3rd of August 2020 to provide an integrated and inclusive platform for the development of an effective financing model that could address the needs and challenges of Micro Small and Medium Enterprises (MSMEs) in the Kingdom of Eswatini. In his opening statement, the SRO-SA Officer in Charge, Sizo Mhlanga said that, “ lack of access to financial services is one of the key – if not the most important – barrier to the growth of MSMEs in the region and indeed the entire continent and Eswatini is no exception.” The Government of the Kingdom of Eswatini, through the Ministry of Commerce, Industry and Trade (MCIT), requested technical support from ECA in developing an inclusive financing model to cater for the needs of MSMEs in the country. “To address the issue, it is crucial to clearly understand the financing needs of MSMEs which will in turn help government, financiers, development partners and other private sector players to efficiently support the growth of the sector,” Mr Mhlanga noted.
The strategic importance of the MSME sector in the Kingdom of Eswatini is well recognized by the government, which has mainstreamed MSME development in its Vision 2022 and the National Development Strategy working in close collaboration with the United Nations family. Speaking on behalf of UN agencies, funds and programmes in the Kingdom of Eswatini, Nathalie Ndongo-Seh, UN Resident Coordinator, re-affirmed UN commitment to help the Eswatini government implement an effective financing model for MSMEs as a way to contribute significantly to, “ the achievement of the Sustainable Development Goals(SDGs) through economic growth and employment creation (SDG8); fostering innovation (SDG9); reducing waste through recycling (SDG12); poverty reduction (SDG1); food security (SDG2) and many other SDGs.” (UNECA)
Key Words: South Africa, MSMEs, UNECA
