Trade Facilitation from an African Perspective

The proposed agreement on trade facilitation is one of the key issues on the negotiators’ table in the run-up to the World Trade Organisation Ministerial Conference, to be held in Bali,Indonesia, from 3 to 6 December 2013. In this context, this paper provides a thorough analysis of key trade facilitation issues from an African perspective, highlighting what is at stake for the continent, thereby contributing to inform the opinions of African negotiators at a critical juncture. 

The premise of this analysis is that there is a consensus in the empirical literature, regardless of the methodology utilized, on the positive and significant impact trade facilitation could have for Africa’s trade performance (see Annex 1 Table 1). Against this background, the paper is admittedly not intended to assess the proposed agreement from a tactical negotiating perspective, nor does it address issues related to the “overall balance” of the deliverables that could be achieved in Bali. Taking some distance from the negotiations as such, it rather takes a technical stance and focuses on the four key aspects related to trade facilitation, as outlined below.

First, by analyzing relevant indicators from the World Bank Doing Business database, the paper compares red tapes and transaction costs (for what pertains to international trade) within Africa, as well as with the rest of the world. In light of the disproportionate magnitude of transaction costs by international standards, the analysis confirms how critical trade facilitation is for Africa. In addition, the reviewed evidence highlights the different incidence of transaction costs distinguishing between exports and imports flows, and underscores sub-regional and cross-country variability (with special reference to landlocked countries).

Secondly, the paper investigates the pattern of imports of African countries, focusing in particular on intermediate inputs. This analysis permits grasping the extent to which trade facilitation could boost exports not only by directly cutting transaction costs, but also indirectly through providing cheaper access to production inputs to be transformed domestically and then possibly re-exported.

Though currently this indirect effect appears to play a rather limited role, in view of Africa’s persistent dependence on primary commodities, it is certainly far from negligible. Moreover, such an indirect effect is set to gradually become more relevant, in so far as economic diversification advances and African firms successfully connect to regional and global value chains.