Intra-African Trade: Challenges and

Recommendations

Centrum für internationale Migration und Entwicklung (CIM)

11/23/2013

By Abebe Abebayehu

Outline q  Introductory Remarks q  Barriers q  Why for Intra-Africa

Trade? q  What should be

done? q  Conclusion

Introductory Remarks §  Africa’s share constitutes 2.7 % of global trade §  Top trading partner regions for Africa Are the European

Union, Asia and the United States §  Intra-trade among African countries is very low-

estimated at around 12% §  Intra-trade among EU members is about 70% § Trade among Asian countries is around 52% § Around 50% for North American countries

§  Africa’s integration into the World economy through WTO and EPAs with limited success

§  Consensus for enhancing intra-Africa trade

Barriers for Intra-Africa Trade §  Productive Capacity:

§  Africa’s economy overly dependent on production and export of primary products

§  No specialization, value addition or development of a chain production system between African countries

§  Very little diversification in terms of export products and markets §  Limited capacity in manufacturing sector

Barriers for Intra-Africa Trade

§  Inadequate Infrastructure: §  No internal networks to allow intra-Africa trade §  Limited networks of road, rail, air and waterways §  Transport costs in Africa among the highest in the world §  Low quality of transport networks limits interconnectivity and the

amount of trade countries can do with each other

Barriers for Intra-Africa Trade

§  Trade facilitation constraints: §  Complex customs and administrative procedures and

regulations, §  Inefficient and costly transit systems due to numerous informal

roadblocks along trade corridors §  Diverse rules of origin requirements- lack of harmonization §  Cumbersome documentation §  Sub-Saharan African countries impose more non-tariff barriers

on trade between themselves than on trade with third countries

Why for Intra-Africa Trade §  Low Investment and Competitiveness

§  Given the low level of intra-African trade and the high cost of doing business on the African continent, foreign investors have bypassed Africa

§  High Vulnerability to External Shocks §  High dependence on trade with the outside world increases

vulnerability to external shocks §  Missed Growth and Development Opportunity

§  The low-level of intra African trade is a missed growth and development opportunity for African countries

What should be done? §  Political Will

§  Strong and lasting political resolve to remove barriers to intra-African trade

§  Implementation of Agreed Reforms: §  Enhance implementation of agreed reforms at the national and

regional level §  Make use of the Multilateral Trading System to support intra-African

trade §  Increased Investment in Trade-Related Infrastructure:

§  Ports §  Rail §  Roads

What should be done? §  Create conducive environment for the growth of the private sector

§  Address trade facilitation constraints: §  Reduction of all unnecessary roadblocks §  Harmonization & simplifying customs & transit procedures,

documentation & regulations §  Establishment & operationalization of One Stop Border Posts §  Integrated Border Management §  deeper integration to boost intra-African trade

•  Improving Payment system •  Facilitate cross-border payments and address currency constraints

What should be done?

§  Improving the flow of information on market and business opportunities §  Provide easily accessible and timely information §  Bridging of information gap thus constitutes an important

component of any strategy for boosting intra‐African trade. There is no doubt that with adequate information, African countries can source within the continent some of the products and services for which they depend on external supply,

§  Eliminate barriers on cross-border movement of people: §  Create an environment conducive to facilitating the participation

of migrants, in particular those in the diaspora in the development of their own countries

§  Mobilize diaspora resources (remittances, technology and trade links) to boost intra-Africa trade

Conclusion §  Intra-African trade more diversified than trade with rest of the world §  Expanding intra-African trade could yield significant benefits to

African countries in terms of diversifying their production to non-traditional products especially manufactures

§  Trade facilitation key in deepening Africa’s market integration §  Mobilize diaspora resources §  “The entrenched view that Africa cannot trade with Africa is a

myth”

Thank You!