Tag Archives: Trade

A Trinity of Trade: Africa soon to Launch TFTA

Map of TFTA

By Otito Greg-Obi

Recently, African heads of state gathered together in Egypt to sign the Tripartite Free Trade Area agreement (TFTA) which will join the forces of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC).

Free trade is crucial to global economies because it reduces tariff barriers which in turn results in trade creation. The benefits of trade for developing nations in general are numerous. To name a few: first and foremost, trade allows for specialization meaning countries can build a comparative advantage by focusing on producing goods with low opportunity costs. Secondly, trade encourages healthy competition which incentivizes businesses to increase efficiency and cut costs. Lastly, trade can reduce dependence on existing markets and stabilize countries affected by seasonal changes in markets.

The TFTA agreement has been long awaited – negotiations began in 2005 and were expected to conclude in December 2013. Major components of the trade agreement include the promotion of socioeconomic development and the free movement of goods and services. A customs union is also in the works to be implemented at a future date. But, the TFTA addresses more than just trade, it promotes the upward mobility of business people and advances the cause of social justice.

Although the creation of the TFTA is an exciting development in the world of business, there are still hurdles to overcome during its implementation. Economic integration can be a slow, demanding process, especially since many African countries in this new trading bloc are at varying stages in economic development and trade activity. Furthermore, transportation costs pose a major impediment to the integration of TFTA. Connecting these 26 countries will be a difficult task because the land is vast and requires large infrastructure projects. It will be difficult to ensure that domestic African businesses reap substantial benefits from the new trade area. And lastly, some countries such as Swaziland, Uganda, Tanzania and Zambia are concerned about the loss of revenue that will come from customs unions.

The promotion of the free market is a major stimulant for economic development. However, in order for the free market to run smoothly, it is important for African countries to continue working on other important issue areas such as corporate governance, transparency, and public-private dialogue. CIPE has engaged with TFTA countries such as Ethiopia and Kenya on these issues. These issues must remain at the forefront so that the new TFTA can operate effectively and remain beneficial to all parties involved.

Challenges aside, there is still plenty for businesses and governments in the new African free trade area to look forward to. This trade powerhouse totals $1 trillion in GDP. This is big news for African businesses because it will enhance enterprise ecosystems in the region immensely. With the implementation of this new agreement, trade is expected to increase from 12 percent to 30 percent, meaning economic activity will reach more than 600 million people. This could be a major step towards a Continental Free Trade Area, which the African Union aims to complete by 2017.

Otito Greg-Obi is a CIPE intern for Knowledge Management. She is a rising junior at University of Pennsylvania. 

Libya or Tunisia: Who Needs the Other More?

March2015 Hiba

Hiba Safi is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Tahrir Institute for Middle East Policy

Diplomatic Ties

The Libyan conflict is not only causing tens of thousands of deaths, destroying a society, and wiping out a state. It also is spilling over into neighboring Tunisia, destabilizing its internal equilibrium, redefining cross-border interactions, and affecting all neighboring countries in the Maghreb.

Since the uprising against President Muammar Qaddafi in March 2011, Tunisia has seen a vast influx of Libyan refugees. Cars, decrepit vans, and trucks packed with families sitting among bundles of belongings, suitcases, and mattresses stream into Ras Jedir and Dhehiba – official border crossings in southern Tunisia.

According to the former Tunisian Minister of Commerce, the country hosts around 1 million Libyans—equal to nearly 10 percent of the Tunisian population. Libya’s crisis and the ongoing entry of Libyan refugees into the country has resulted in unprecedented social, economic, and security challenges to Tunisia. Despite these difficulties, Tunisia has thus far maintained an open border policy toward Libyans and Libya’s Egyptians seeking respite from the violence in Libya—a decision that’s been praised by UN officials and Western diplomats.

No effective regulatory framework defines the relationship between the two countries, “They don’t need [a] visa to enter Tunisia nor any particular authorization to reside [in Tunisia],”stated Tunisian Interior Ministry spokesman Mohamed Ali Aroui.

Tunisia bears the brunt of the economic and social spillovers of the Libyan civil war. The 43-mile border (Ras Jedir in Libya and Ben Guerdane in Tunisia) has become a smuggling route for goods, oil, and arms, but also for anti-regime armed groups and terrorists. Moreover, the conflict next door has exacerbated inter-communal conflicts raging within Tunisia domestically.

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China and Pakistan’s All-Weather Friendship

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Huma Sattar is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Heritage Foundation. This post originally appeared at The Diplomat.

Much to the befuddlement of the rest of the world – and as ironic as it is – Communist China and Islamic Pakistan are fast friends. It’s all hail to China in Pakistan and as other partnerships wither and die, these two countries continue to devote energy to strengthening their relationship. China has historically come to Pakistan’s rescue with economic, political, military and nuclear assistance and perhaps what was once a relationship founded on a mutual disillusionment with India has moved toward one with more aspirational intentions on both sides.

It would appear that Pakistan has been the greater beneficiary of this friendship – from military to economic assistance, China has stood by Pakistan, but is the friendship really that sustainable? Andrew Small from the German Marshall Fund certainly seems to think so. An Asia expert, Small recently published a book examining what he calls the unusual nature of the secretive relationship between China and Pakistan and argues that it is much more promising than Pakistan’s erratic ties with the U.S. And indeed, history supports this. On a visit to Pakistan earlier this year, China’s Foreign Minister Wang Yi assured Islamabad that China and Pakistan were in sync on all matters and have an “iron-clad” understanding between them, one that has taken years to hone and fortify.

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Trade Capacity Building and Private Sector Engagement

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By Kirby Bryan

For sustainable economic growth, developing countries must have the capacity to functionally interact with the global market. Much of the onus for building that capacity rests on a domestic commitment to reforms compatible with global trade. Many emerging markets have lofty aspirations that are unachievable given the current state of affairs, but are determined to rectify the situation. Access to foreign markets can cement reform efforts aimed at improving the local economy and sustaining economic growth.

In late February, the Center for Strategic International Studies (CSIS) released a report from their Congressional Task Force on Trade Capacity Building (TCB) on “Opportunities in Strengthening Trade Assistance.” While the report focuses primarily on US efforts to improve the effectiveness and relevance of its TCB programs, it signals a shift in international engagement and understanding of the role trade plays on the growth of a developing economy.

The shift is also indicative of a growing global development trend toward incorporating the voice of the recipient country from the beginning stages of negotiations through agreement ratification. What is interesting about the current TCB discussions is the recognition by major players in the development world of including the knowledge and expertise of the private sector. Ultimately, it is the private sector in the developing and developed countries that will bear the fruits of economic growth and trade.

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Pakistan and India: Irreconcilable or Just Stubborn?

Trucks_on_NH1,_waiting_to_cross_Wagah_border

Trucks wait at the India-Pakistan border. (Photo: Wikimedia Commons)

Huma Sattar is a CIPE-Atlas Corps Think Tank LINKS Fellow at the Heritage Foundation

Pakistan and India share a long, unyielding history. The past is marred with political and territorial conflict, militarization, and a general sense of mistrust on both sides.

Since 2003, trade between the two countries has grown seven-fold, with Indian imports into Pakistan taking 80 percent of the share, according to data reported by International Trade Centre. While formal figures report bilateral trade of U.S $2.3 billion for 2013, some estimates contend that a larger share of bilateral trade between Pakistan and India comes through indirect or informal routes. Trade is estimated to be double what statistics report with significant Indian imports coming through Dubai into Pakistan.

Many studies which have aimed to estimate potential bilateral trade between Pakistan and India have concluded consistently that there are enormous economic synergies that can exist between the two economies given their trade complementarity and geographic proximity. Mutually preferential cooperation would benefit both Pakistan and India.

However, Pakistan has still not granted Most Favored Nation status (MFN) to India despite talks that seemed to have made progress in the past few years. Judging by the recent statements made by officials from Pakistan, it seems the country will remain flummoxed by the idea of granting MFN to India, contending one or more of the following as reason for their reservations:

  • India gave MFN to Pakistan in 1996. For Pakistan, however, the trade deficit has only increased.
  • MFN to India will hurt the local economy of Pakistan.
  • Increasing trade with India has hardened India’s stance on Kashmir.

Unfortunately for Pakistan, the merits of these arguments are wearing thin. In fact, putting the Kashmir issue and trade on the same table ensures that neither side relents and both issues remain unaddressed. 

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How the Trade Facilitation Agreement Fights Corruption at the Border

Moving goods across borders is a source of corruption around the world.

The process of moving goods across borders is a major source of corruption around the world.

As the world commemorates International Anti-Corruption Day, renewed progress in the implementation of the Trade Facilitation Agreement (TFA) provides a reason for optimism in the fight against corruption.

Reached during last year’s World Trade Organization (WTO) accord in Bali, the TFA creates binding commitments across 159(+) WTO members to expedite movement, release and clearance of goods, improve cooperation on customs matters, and moreover, help developing countries effectively meet these obligations.

The TFA is also a potentially invaluable tool for tackling corruption as the simplification of customs procedures can greatly reduce opportunities for corruption. As the World Bank’s Customs Modernization Handbook sets forth, customs procedures are a key source of corruption, as officials and workers seek bribes in order to move goods in and out of the country.

Given the formidable barrier that corruption poses for both developed and developing countries, one may question how explicitly this agreement will challenge corruption, and what this will look like in terms of activities creating outcomes. In an Economic Reform Feature Service article released by CIPE today, Laura B. Sherman, senior legal adviser at Transparency International USA, breaks the larger TFA into its individual components and addresses in practical terms how each will translate into activities that prevent corruption.

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The Future of the U.S.-Africa Economic Relationship

africa-growth-drivers

Last week Washington hosted nearly 50 African heads of state at the first-ever U.S.-Africa Leaders Summit. Countless meetings and conversations that took place not just among government officials but businesses, international organizations, and non-profits (including CIPE and Freedom House) brought Africa into the spotlight. Yet the most important aspect of the Summit is still ahead: what did we learn and how can this knowledge guide the way forward?

One of the most informative outcomes of the Summit to me was the launch of a report Africa and the United States: A defining relationship of the 21st century at the U.S. Chamber of Commerce’s Presidential Plenary. The report was jointly produces by the U.S. Chamber and Investec Asset Management (IAM), a global investment management firm founded in 1991 in South Africa. Hendrik du Toit, Investec’s CEO, unveiled the report and discussed its findings with a panel of corporate leaders.

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