Africa's preferential access to EU the best deal for the continent's trade
New study into implications of WTO for African trade
The National Agricultural Marketing Council of South Africa, together with tralac, an NGO studying trade law, has released a study on African agricultural trade as it plays out on the world stage.
The conclusion of ‘WTO: Agricultural issues for Africa’ by Prof Ron Sandrey and his fellow authors, is that there are few agricultural sectors where Africa would benefit from WTO intervention and that the continent couldn’t do better than its current preferential access to the European Union. For South Africa, which is designated a developed nation under WTO rules (apparently a self-selected designation), the situation is more complex.
The WTO’s main value for Africa might lie in the area of trade with China, although it is blisteringly expensive to take a case to the WTO. A major limiting factor to trade in Africa, as has often been said, is the poor state of the infrastructure. Prof Sandrey refers to an African country that had to be alerted to the woeful state of its national port by a WTO report, instead of seeing themselves what was right outside the window.
According to Prof Sandrey, who was an economist for the New Zealand Ministry of Foreign Affairs before turning his focus on African trade: “Perversely, with respect to African access into the EU with the Economic Partnership Agreements (EPAs) the African interest is to limit a WTO agreement that would dilute the value of preferential access.” However, he emphasises that the value brought by a rules-based trading system is very large and that Africa – which comprises a third of the WTO should support the organisation for its wider benefits.
South Africa is the main African agricultural exporter, followed by Côte d’Ivoire, Morocco, Egypt, Ethiopia and Ghana. Africa’s export contribution to agricultural world trade has consistently been between 3.6% and 3.8% over the past few years.
The European Union is still the main trading partner of Africa with 39.8% of Africa’s exports going there and a further 17.2% is intra-African trade, although mostly flowing to South Africa. There is very limited intra-African trade but the rest of Africa is becoming an increasingly important export destination for South Africa.
Back: NAMC Acting CEO Zama Xolisa, NAMC Chairperson André Young;
Centre: Dr Simphiwe Ngqangweni, Dr Moses Lubinga of NAMC, Prof Ron Sandrey of tralac; Front: Bonani Nyhodo of NAMC, Dr Mmatlou Kalaba of BFAP and Pretoria University, Yolanda Potelwa of NAMC.
Agricultural production in Africa is on the rise, but not agricultural production per capita, which is concerning in the light of Africa’s population growth.
According to Prof Sandrey’s analysis and using South Africa as a benchmark, tariffs on fruit exports are in aggregate 2.4% for the EU, 1.4% for the United Arab Emirates and 3.5% into Russia. “Rates of 10% and above suggest that access into both India and China may be a problem.”
As for vegetables, Morocco and Egypt are the main exporters, primarily to the EU (44.7% in 2015), with tariffs for that market calculated at 6.37% and 8.63% for the Russian market (using Morocco as benchmark). Egypt’s vegetables go mainly to the duty-free market of Saudi-Arabia; South Africa’s vegetables go mostly to its neighbouring countries, some of whom have disruptive duty regimes, like Angola’s 50% duty, and Botswana that closes its borders to South African vegetables from time to time in apparent attempts to stimulate its own industry.
Agricultural protectionism declines in EU, but on the rise in China
“South Africa sits in the top group along with the generally accepted low agricultural protection countries of Australia, Chile, New Zealand and Brazil. What is unexpected is that both the United States and the EU are also now in this group. … [It] shows that protection has dramatically decreased in recent years. The EU decline is at a level much lower than what is the general perception of a highly protected agricultural regime,” writes Prof Sandrey, basing his analysis on figures from the Organisation for Economic Co-operation and Development. He notes that China and Indonesia are moving in the opposite direction to join the ranks of countries highly protective of their agricultural sectors – “the well-known culprits”, he calls them – like Turkey, Norway, South Korea, Switzerland and Japan.
In the case of the USA, he distinguishes between agricultural sectors that receive little protection (like the fruit, vegetable and nut industries) and those that are the focus of agricultural protection, like grains, oilseeds, cotton and dairy. “In general, subsidies globally are concentrated upon the so-called ‘rice pudding’ of rice, milk and sugar. Only sugar is of export interest to Africa; South Africa and Swaziland in particular for exports and Kenya for imports.”
“South Africa is becoming more protectionist and the country is standing back from the leadership role it ought to play in regional integration in Africa. That worries me,” says Sandrey. “I’m quite disappointed with South Africa. The only competitors it has to worry about are Kenya and Egypt. The WTO is unlikely to do anything in the intra-African trade environment.”
Regarding the outlook for South Africa-UK trade, he’s quite sceptical about the South African Minister for Trade and Industry’s recent assertion that it would be “business as usual” between the two countries. “How can it be? The quotas that were negotiated belong to the EU and the UK will be left out in the cold. It’ll be fun to see – it’s going to take a long time to resolve.”
For more information:
Prof Ron Sandrey
Tel: +27 21 880 2010
Dr Simphiwe Ngqangweni
National Agricultural Marketing Council
Tel: +27 12 341 1115
Publication date: 5/1/2017
Author: Carolize Jansen
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