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Presentation to the World Bank. Course on Regional Integration. in Africa and EPAs ... 2005 11,000 containers - 2-4 weeks to clear - incur demurrage after 15 days. ... – PowerPoint PPT presentation

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Title: P1254325981GTSiX


1
Enhancing African Regional Integration Trade
Policy and Trade Facilitation Presentation to
the World Bank Course on Regional Integration in
Africa and EPAs Nairobi, Kenya 22-24 May
2006 Mark Pearson
2
  • Benefits of Trade


3
(No Transcript)
4
  • Regionalism or Multilateralism or both?

Economic theory supports trade liberalisation -
leads to more efficient allocation of resources
and higher growth. Regionalism is a stepping
stone to multilateralism as long as the regional
trade arrangement is not based on closed borders
- trade should not be liberalised at the regional
level at the expense of liberalising with the
rest of the world. Trade diversion (whereby
partner products replace more efficient, cheaper
world alternatives) represents a loss to the
countries involved (at least those importing) and
also to the world as a whole.
5
  • Rationale for Regional Integration
  • - Development objective is to reduce poverty and
    improve the populations quality of life.
  • - Achieved through economic growth.
  • - Economic growth depends to a large extent on
    foreign investment (low domestic capital low
    foreign aid high public sector borrowing)
  • - Attracting investment depends in part on-
  • larger markets
  • reduced costs and improved competitiveness
  • predictable business operating framework and
  • a stable and peaceful environment.

6
Stage Description
Preferential Trade Area Trade among countries is conducted on a preferential basis, with agreed rules of origin, with each country maintaining its own tariffs on goods imported from third countries.
Free Trade Area Tariffs and non-tariff barriers are eliminated between members of the FTA, in conformity with agreed rules of origin, with each country maintaining its own tariffs on goods imported from third countries.
Customs Union Member countries operate a common external tariff. Free movement of goods once they enter the customs union. Tariff revenues are either shared among member countries or allocated according to the destination of the goods.
Common Market There is free movement of goods, services, labour and capital, and the right of establishment and residency, between members of the common market
Economic Community In addition to common market conditions, the economic community has a single currency issued by one monetary authority and common monetary and fiscal policies.
7
e.g. - PTA / COMESA Timeline
1960
1970
1980
1990
2000
8
  • Tariff Reduction Effects

If tariffs are reduced government revenues will
fall ? NOT always true depends on Elasticity
of demand if demand for a good is sensitive to
its price, sales will go up if price goes down as
a result of a reduction in tariffs. Government
revenue lost as a result of a reduction in tariff
rates may be made up in increased VAT
receipts. Higher compliance levels if tariffs
are low the incentive to smuggle goods is less so
compliance will be higher, leading to increased
revenues from the lower tariff rates and VAT
being paid.
9
  • So, why the reticence?
  • Leap of faith Governments and private sector are
    asked to accept on faith that trade
    liberalisation will be beneficial remember
    structural adjustment on which everything was
    blamed.
  • Lag effects Governments work on variants of
    cash-based budgeting. Tariff reduction will have
    an immediate effect but adjustment measures will
    take a while to have an effect.

10
  • So, why the reticence?
  • Anti-competitive behaviour lack of effective
    national and regional competition policy means
    that larger firms operating regionally are able
    to limit the effectiveness of a PTA or a FTA.
  • Local pressure groups In any trade
    liberalisation the overall effect should be
    beneficial for the country and region but, within
    this effect, there will be winners and losers.
    The losers will be well entrenched with political
    clout and will be difficult to dislodge.

11
  • Customs Union what needs to be done?
  • Common Tariff Nomenclature
  • Divide up the Harmonised System coding (but first
    get every country in the grouping using the same
    HS) into categories raw materials, intermediate
    goods, finished goods, capital goods. Compromise
    necessary as goods have many different usages.
  • Common External Tariff
  • The group needs to agree a common external tariff
    for each category in the CTN. Need to consider
    phase downs and exclusions sensitive lines.

12
  • Customs Union what needs to be done?
  • Customs Procedures and Documentation A Customs
    Union needs harmonised procedures (valuation
    methods, risk assessments, code of ethics for
    customs officers, statistical systems, etc) and
    documentation (single administrative document).
    Ideally, all parts of customs are computerised,
    with all countries in the CU using the same
    system. All customs posts should be linked
    electronically to a national centre and the
    national centres to a regional centre.

13
  • Customs Union what needs to be done?
  • Revenue Sharing Systems CUs such as SACU have a
    revenue sharing system. Revenue from EU customs
    partly finances the EC. For a CU to work
    effectively customs revenues need to be collected
    at the borders of the CU with a third party. If
    this does not happen (i.e. if end-user collects
    revenue) border controls within the CU will need
    to be maintained, and RIB will apply, thus
    limiting the benefits of a CU. Implementation of
    a revenue sharing mechanism requires trust
    between countries that, in SSA countries, is not
    often present for obvious reasons.

14
  • Non-Tariff Barriers to Trade
  • 2004 WTO for most SSA countries share of
    transport costs in value of trade 5 times greater
    than duties paid. Increase in transport costs of
    10 - estimated result - 20 reduction in
    trade.
  • Africa suffers from poor infrastructure
    -condition of roads poor (2 billion kms 30
    paved), few railways, lack of interconnectivity
    and 3 gauges.
  • Admin problems also check points (UNECA report
    27 police controls Mombasa-Uganda border) delay
    transport and incur costs as do lack of
    harmonised transport systems, customs procedures
    (UNECA reports 12 days to clear customs in SSA, 7
    days in LA and 5.5 days in Asia), standards and
    SPS.

15
Estimated unit transport costs for container
Route Distance (km) Cost ( per km)
Dar-es-Salaam-Kigali 1650 3.0
Dar-es-Salaam-Bujumbura 1750 3.0
Doala-DJamena 1900 4.2
Lome-Ouagadougou 1000 2.6
Lome-Niamey 1234 2.6
Mombasa-Kampala 1440 2.3
Maputo-Johannesburg 561 1.4
Source UNECA
16
  • Selected EAC reported NTBs
  • Link between ASYCUDA and SIMBA.
  • Initial problems with SIMBA Ksh 15,000 for
    training and same annual access fee no
    operational manual system crashed regularly.
  • ASYCUDA in limited border posts (Dar and Malaba)
  • Limited customs opening hours.
  • Arbitrary use of Rules of Origin - goods
    classification
  • 100 verification of imports 24 of cargo at
    borders takes gt1 week to unload for inspection.
  • Immigration procedures and visa fees.
  • PSIs for standards international accreditation.

17
  • Selected EAC reported NTBs
  • Police checking commercial vehicles rent
    seeking leading to transit delays 12 of checks
    take gt1hr.
  • Delays at weighbridges.
  • Variations in axle load limits and GVM.
  • Delays in offloading and clearing cargo at Dar
    Sept 2005 11,000 containers - 2-4 weeks to
    clear - incur demurrage after 15 days. Lack of
    rail wagons.
  • Delays in clearing LCs average 30 days.
  • Import and export inspection and certification
    procedures involve duplication and high costs
    Tanzanian food exporter pays Tsh200,000/export
    and TBS certificate not always recognised by EAC.
  • Business registration and licensing procedures.

18
  • Trade Facilitation Instruments
  • Revised Kyoto Convention widely used as the basis
    for benchmarking the regional and national
    development of harmonised and simplified
    clearance and transit procedures and standards.
    Various instruments have been developed or exist
    to enhance this further, such as Single
    Administrative Documents (SADs), Time Release
    studies, the WCO Diagnostic and the WCO data
    model.

19
  • Trade Facilitation Instruments
  • Efficiency and Security Objectives Trade
    Facilitation is being discussed in WTO as part of
    the DDA as well as at the regional level. WCO is
    also very active in TF issues. In terms of
    customs procedures the emphasis is on security
    rather that revenue.
  • Border Administration Agencies would allow more
    efficient information processing at the border.
  • One Stop Border Posts reduces time taken at
    borders which reduces costs. Sharing of data and
    computerisation of other border post services.

20
  • Trade Facilitation Instruments
  • Carriers License - allows back-loads which
    reduces costs of transport.
  • Axle Load Limits and Vehicle Dimensions - allows
    trucks to operate with the same axle loads
    through-out the region.
  • RCBGS - speeds up transit and frees up money held
    in bonds.
  • 3rd Party Vehicle Insurance makes transiting
    easier and cheaper.
  • Removal of Visa requirements for business persons
    - Encourages cross-border trade.

21
  • Trade Facilitation Instruments
  • Air Traffic Liberalisation Yamoussoukro
    decision - reduces costs through competition and
    improves accessibility.
  • NTB monitoring system - Need to track non-tariff
    barriers, which are a moving target, eliminate
    those that are genuine NTBs and try to limit
    appearance of new ones initiatives from EAC,
    COMESA, SADC.
  • Harmonised trading standards and SPS - Difficult
    to have trade between countries of the standards
    and health and phytosanitary regulations
    incompatible.

22
  • A Note on Implementation

There are a number of initiatives and regional
organisations dealing with implementation of
trade facilitation instruments. (SSATP, PMAESA,
Transit Transport Coordination Authority TTCA,
Maputo Corridor, Regional Organisations, and,
indirectly, UNECA and World Bank). All of these
are involved in introducing trade facilitation
instruments. Challenge is to ensure no
duplication of effort and overlap of instruments.
23
Enhancing African Regional Integration Trade
Policy and Trade Facilitation Presentation to
the World Bank Course on Regional Integration in
Africa and EPAs THANK YOU
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