Africa Agriculture Trade Monitor 2019, and to All Those Whose Work Made This Publication Possible

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Edited by Antoine Bouët and Sunday Pierre Odjo Editors University of Abomey CalaviUniversity of inBenin. | | International Food Policy Research Institute(IFPRI). Coordinator fortheRegional Strategic Analysis and KnowledgeSupport systemsforSouthern Africa (ReSAKSS-SA). (IFPRI) |Fousseini Traore, Research Fellow at the International Food Policy Research Institute (IFPRI) Zimbabwe.Albert Economicsat Makochekanwa,theUniversityof theDepartment | of Chairpersonof Contributors To viewthislicense, visithttps://creativecommons.org/licenses/by/4.0 This publication is licensedforuseunderaCreative Commons Attribution 4.0International License(CC BY 4.0). © 2019International Food Policy Research Institute(IFPRI). cid:[email protected] Copyright : Washington, DC:International Food Policy Research Institute(IFPRI). Bouët, Antoine, Recommended Citation : ISBN :978-0-89629-690-9 DOI :https://doi.org/10.2499/9780896296909 the authors, ReSAKSS, theInternational Food Policy Research Institute(IFPRI), ortheirpartners anddonors. The boundaries, names, anddesignations usedinthispublication donotimplyofficial endorsementoracceptanceby IFPRIor reflectReSAKSS. thepoliciesoropinionsof This publication hasbeenpeerreviewed. Any opinionsstated herein theauthor(s)anddonotnecessarily are thoseof agricultural andrural development institutionsandcommunitiesin ACP countries. by providing accesstoinformation andknowledge, facilitating policydialogueandstrengthening thecapacityof food andnutritionalsecurity, increase prosperity andencourage soundnatural resource management. Itdoesthis CTA isajoint ACP-EU institutionactiveinagricultural andrural developmentin ACP countries. Itsmissionistoadvance The Technical Centre for Agricultural andRural Cooperation (CTA) research grants, andsupports collaboration between African andinternational researchers. debate. AGRODEP economicmodelingtools, facilitates useof promotes accessto data sources, provides training and experts strategic asleaders developmentissuesin inthestudyof Africa andthebroader agricultural growth andpolicy The African Growth andDevelopmentPolicy ModelingConsortium (AGRODEP) aimstoposition African The African Growth andDevelopmentPolicy ModelingConsortium (AGRODEP) Planning andCoordinating Agency (NPCA), leading regional economiccommunities, and Africa-based CGIARcenters. ReSAKSS inpartnershipInstitute (IFPRI)facilitates theworkof withthe African UnionCommission (AUC), theNEPAD ducts tofacilitate CAADP benchmarking, review, andmutuallearning processes. The International Food Policy Research policy planningandimplementation. Inparticular, ReSAKSS provides data andrelated analyticalandknowledgepro- Strategic Analysis andKnowledgeSupport System (ReSAKSS) supports efforts topromote evidence-andoutcome-based Established in2006undertheComprehensive Africa Agriculture DevelopmentProgramme (CAADP), theRegional The Regional Strategic Analysis andKnowledgeSupport System (ReSAKSS) Antoine Bouët, (ISRA/BAME) Cheickh SadibouFall, Economistat InstitutSénégalais de Recherches Agricoles Bureau d’Analyses Macro-économiques | ChahirZaki is an Associate Professor Economics at the Faculty of Economics and Political of Science, Cairo University Research Fellow International Food Policy Research Institute(IFPRI)|BetinaDimaranan, SeniorResearch Coordinator, IFPRI Sunday Pierre Odjo, Cosnard, Sènakpon Fidèle Ange Dedehouanouiscurrently researcher andlecturer at theFaculty BusinessandEconomicsat of PhD student at University of BordeauxPhD studentat University of , | David Laborde DebucquetSeniorResearch Fellow at theInternational Food Policy Research Institute and Odjo, Sunday, (Eds). 2019. Africa Agriculture Trade MonitorReport 2019. Senior Research Fellow at theInternational Food Policy Research Institute(IFPRI). SeniorResearch Coordinator at theInternational Food Policy Research Institute(IFPRI). Sunday Pierre Odjo isaSeniorResearch Coordinator the inthe Africa Divisionof works oninternational trade andirreversibility inagricultural valuechains iii

Antoine Greenwell Matchaya,

Bouët, Senior

| Lionel |

Africa Agriculture Trade Monitor / Report 2019 MEASURING REGIONAL INTEGRATION...... REGIONAL INTEGRATION INITIATIVES IN AFRICA: WHERE DO WE STAND?...... INTRODUCTION...... CHAPTER 3 REFERENCES...... CONCLUSIONS ...... A LACK OFPRODUCT DIVERSIFICATION...... TRADING COSTS IN AGRICULTURE ...... IN AGRICULTUREWHERE AREAFRICA’SCOMPARATIVE ADVANTAGES? THE LEVEL OF AFRICAN INTRAREGIONAL AGRICULTURAL TRADE...... THE LONG-TERM PARTICIPATION OF AFRICA IN WORLD AGRICULTURAL TRADE...... INTRODUCTION...... EXECUTIVE SUMMARY FOREWORD ...... ACKNOWLEDGMENTS...... COUNTRY ABBREVIATIONS ACRONYMS LIST OFFIGURES LISTOF TABLES LISTOF APPENDICES Contents CHAPTER 2 CHAPTER 1 INTRA-AFRICAN TRADE INTEGRATIONINTRA-AFRICAN TRADE ...... AFRICA INGLOBAL AGRICULTURAL TRADE...... OVERVIEW BORDER-RELATED MEASURES...... COSTLY NON-TARIFF MEASURES(NTMS)...... DEFICIENT INFRASTRUCTURE...... LOW LEVELSOF TARIFFS...... TRADE COSTS INDICATORS...... THE CONTINENTAL FREE TRADE AREA ...... ECOWASNORTH AFRICA AND THE TRIPARTITE(TFTA)AREAFREE TRADE ...... v ...... 2 1 4 52 50 49 48 47 47 46 45 25 45 44 44 39 38 34 28 23 20 18 43 9 17

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Contents REFERENCES...... CONCLUSIONS ...... OVERVIEWOF AFRICAN AGRICULTURAL COMPETITIVENESS...... INTRODUCTION...... CHAPTER 4 INTRA-INDUSTRYFLOWS TRADE STRUCTURE OFINTRA-AFRICA AGRICULTURAL TRADE ...... TRADE FLOWS INDICATORS...... PRICES MATTER...... MAJOR MARKET EVENTSFORKEY VALUE CHAINSIN2016–2018...... CLIMBING THE VALUE CHAINLADDER...... COMPETITIVENESS OF AFRICANCOMPETITIVENESS AGRICULTURAL VALUECHAINS ...... MARKET SHAREDECOMPOSITION...... INTRA-INDUSTRYIN AFRICA’S TRADE AGRICULTURALMARKETS...... WORLD...... INTRA-INDUSTRYAFRICARESTBETWEEN OF THE AND THE TRADE COMPARATIVE ADVANTAGES...... SECTORAL DIVERSIFICATION...... TRADE DIVERSIFICATION ...... A NEW WAY OFMEASURINGREGIONAL INTEGRATION WITH CONSISTENT INDICATORS...... MEASURING TRADE INTEGRATION: CHALLENGES AND PITFALLS...... UNIT VALUES (INUSDOLLARS)...... REAL EFFECTIVE EXCHANGE RATE ...... GRAPES AND RELATED PRODUCTS...... COTTON AND RELATED PRODUCTS...... SUGAR AND RELATED PRODUCTS...... TEA AND RELATED PRODUCTS...... COFFEE AND RELATED PRODUCTS...... COCOA AND RELATED PRODUCTS...... DIFFERENTIATEDPATTERNS RECS ANDVALUE ACROSS CHAINS...... AFRICAN EXPORTS REMAINDOMINATED BY PRIMARY EXPORTS...... REVEALED COMPARATIVE ADVANTAGE: OVERVIEW GEOGRAPHICAL DIVERSIFICATION...... PURE PERFORMANCE ANDADAPTATIONPURE CAPACITY EVOLUTION OF AFRICAN MARKET SHARES...... REVEALED COMPARATIVE ADVANTAGE: FOCUSED VALUE CHAINS...... UNIT VALUES:OVERVIEW THE REAL EFFECTIVE EXCHANGE RATE: OVERVIEW UNIT VALUES:SPECIFIC VALUE CHAINS...... THE REAL EFFECTIVE EXCHANGE RATE: FOCUSED VALUE CHAINS...... vi ...... 66 65 63 62 61 75 75 74 60 58 58 58 56 54 54 73 76 78 78 77 85 85 82 89 86 85 96 96 95 95 95 95 94 92 91 90 89 87 QUANTIFYING POTENTIAL IMPACTS...... HISTORY OFREGIONAL TRADE AGREEMENTS INEASTERN AND SOUTHERN AFRICA INTRODUCTION...... CHAPTER 6 REFERENCES...... CONCLUSIONS...... INTRODUCTION...... CHAPTER 5 REFERENCES...... CONCLUSIONS...... SUMMARYCONCLUSIONS AND ...... ANNEX REFERENCES...... CONCLUSIONS...... REGIONAL MARKET VOLATILITY UNDER ALTERNATIVE POLICY SCENARIOS...... ALTERNATIVE SCENARIOS THE OUTLOOK FORREGIONAL CROSS-BORDER TRADE AND MARKET VOLATILITY UNDER THE SCOPE FORSPECIALIZATION AND REGIONAL TRADE EXPANSION IN AGRICULTURE ...... REGIONAL POTENTIAL FORSTABILIZATION OFDOMESTIC FOODMARKETS THROUGH TRADE...... THE IMPORTANCE OFINFORMAL CROSS-BORDER TRADE...... MEASUREMENT OF TRADE INTEGRATION BASEDON TRADE COSTS...... MEASUREMENT OF TRADE INTEGRATION BASEDON TRADE FLOWS...... MEASUREMENT OF TRADE INTEGRATION BASEDON TRADE COSTS...... REGIONAL TRADE INTEGRATION INEASTERN AND SOUTHERN AFRICA AFRICA?...... A GLOBAL TRADING SYSTEM IN TURMOIL: WHAT IS AT STAKE FOR HOW WILL AFRICA BEIMPACTED? . SESAME SEEDS...... CITRUS...... CASHEW NUTS...... PULSES LEGUMES AND TOMATOES AND RELATED PRODUCTS...... INTRA-COMESASHARES...... TRADE NON-TARIFF MEASURES...... TARIFFS...... APASSIVE AFRICA NEW OPPORTUNITIES FOR AFRICA?...... SECTORAL EFFECTS AND SPECIFIC VALUE CHAINSIMPACTED ...... GLOBAL MACRO EFFECTS...... A PROACTIVE STRATEGY FOR AFRICA ...... vii ...... 118 11È 115 112 112 119 134 127 126 125 110 133 109 99 99 97 97 97 96 96 178 173 135 173 172 170 168 163 161 151 148 148 148 147 146 146

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 List of Appendices of List Digitalization in Agriculture in Africa in Agriculture Box 2.1Digitalization Table A4.1 Box 4.1Newtrend invaluechainintegration: e-commerce ...... Table A3.3 Table customsdutiesonintraregional A3.2Level imports2015...... of Table African regional A3.1Membershipof trade agreements...... Table A4.2 Table A4.3 Table A4.5 Table A4.4Cocoa exports andshares in African regional economiccommunities(RECs), 2015–2017 ...... Table A4.6 Table A4.7 Table A4.8 Table A4.9 Table A4.10 Table A4.14 Table 4.13Citrusnutsexports andshares in African regional economiccommunities(RECs), 2015–2017 ...... Table 4.12Cashew nutsexports andshares in African regional economiccommunities(RECs), 2015–2017...... Table 4.11Legumes andpulsesexports andshares in African regional economiccommunities(RECs), 2015–2017 ...... Table A6.1 Table A5.2 Table A5.1 Exports and export shares of selectedcommodities,Exports andexport shares of 2005–2007and2015–2017...... Enterprise surveys(byyear)...... Correspondence betweenvaluechainandHS6(HarmonizedSystem 6-digit)lines...... Composition of each regionalComposition economiccommunity(REC)...... of Coffee exports andshares in African regional economiccommunities(RECs), 2015–2017...... Tea exports andshares in African regional economiccommunities(RECs), 2015–2017...... Sugar exports and shares in African regional economiccommunities(RECs), 2015–2017...... Cotton exports andshares in African regional economiccommunities(RECs), 2015–2017...... Grapes exports andshares in African regional economiccommunities(RECs), 2015–2017...... Changes in volatility and share of stapleexports underalternativescenarios,Changes involatilityandshare of 2008–2025...... Sectoral disaggregation...... Geographic disaggregation ...... Tomatoes exports andshares in African regional economiccommunities(RECs), 2015–2017...... Sesame seedsexports andshares in African regional economiccommunities(RECs), 2015–2017...... viii ...... 70 19 98 69 68 101 102 103 102 103 104 104 105 105 107 106 106 105 129 107 130 175 List of Tablesof List alternative scenarios(2008–2025)...... Table 6.11Changeinvolatilityintra-common market foreastern andsouthern Africa trade under Table 6.10Trade expansion indicators, average 2007–2011...... intheCommon Market forEasternandSouthern Africa, average 2007–2011...... Table 6.9The 20products withhighestnormalizedrevealed comparative advantageindex valuesincountries Table 6.8Borders monitored undertheFEWSNET program...... Table 6.7Intra-COMESA totaltrade bycountry(2008–2015) ...... trade asashare of Table each regional economiccommunityintheESA 6.6Membershipof region ...... Table thechangesinselectedregional blocsintheESA 6.5Summaryof region ...... Table overall RECsintheESA progress region 6.4Summaryof of ...... Table 6.3Experiencesinregional trade arrangements intheESA region from 1994to2018...... Table 6.2Regional trade arrangements inESA, 1960s–1993...... Table 6.1Regional trade arrangements ineastern andsouthern Africa regions ...... Table scenariosS3-NashandS4-AfCFTA 5.5Impactof onbilateral exports (%)—Value, 2020 ...... Table scenarioS2-TW2 5.4Impactof onagricultural value-addedinvolume(%), 2020 ...... Table scenariosS1-TW1 5.3Impactof andS2-TW2 onbilateral exports (%)—Value, 2020...... Table scenariosongross domesticproducts (%), 5.2Impactof 2020...... Table scenariosonreal householdincome(millionsUSD), 5.1Impactof 2020 ...... Table 3.2Border-related measures (byregion)...... Table 3.1AfricaRegional Integration Index...... Table 2.5Top African agricultural importsandexports ...... (2017) Table 2.4Top African agricultural importsandexports...... (2017) for allproducts andforagricultural products, by African country(percent) ...... Table importdutiesappliedtoimportsandfacedonexports, 2.3Average advalorem equivalent of for allproducts andforagricultural products, byregion, 2016...... Table importdutiesappliedtoimports, 2.2Average advalorem equivalent of anddutiesfacedonexports, Table 2.1Top revealed three agricultural comparative products advantageby intermsof ...... African country(2017) ix ...... 167 165 154 150 145 144 143 141 137 136 124 123 122 121 120 52 48 38 36 29 29 25 167

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure unitvalues percommodity...... 4.6Evolution of Figure unitvalues perregional economic community...... 4.5Evolution of Figure market share changes—countries ...... 4.4Decompositionof Figure market share changes—regional 4.3Decompositionof economiccommunities(RECs)...... Figure 4.2Revealed comparative advantagefor Africa’s valuechains,...... 2005–2017 Figure 4.1Revealed comparative advantageforagriculture for Africa’s regional economiccommunities, 2005–2017...... by regional economiccommunity, 2005–2017average...... Figure 3.17Intra-industry trade in Africa’s agricultural markets, highest country-levelGrubel–Lloydindex values Figure 3.16Intra-industry trade in Africa’s agricultural markets byregional economiccommunity, 2005–2017average...... Figure 3.15Grubel–LloydIndex byproduct category,...... 2005–2017 Figure 3.14Intra-industry trade in Africa’s worldtrade byregional economiccommunities, 2005–2017average...... Figure 3.13Globalsectorialdiversificationindex...... Figure 3.12Herfindahl–HirschmanIndex byproduct ...... Figure 3.11GlobalGeographical DiversificationIndex COMTRADE (2019)...... Figure 3.10Herfindhal–Hirshmanindexe—geographical diversification...... 2005-2017 Figure 3.9Regional Trade Introversion Index forallproducts foragricultural products 2005-2017...... Figure 3.8Regional trade introversion index forallproducts 2005-2017...... Figure intraregional trade 3.7Share foragricultural of products 2005-2017...... Figure intraregional trade 3.6Share forallproducts of ...... 2005-2017 Figure 3.5Percentage firmsidentifyingcustoms andtrade regulations asamajorconstraint ...... of Figure 3.4NTMsfacedbyselected African countries...... Figure infrastructure...... 3.3Qualityof Figure 3.2Infrastructure developmentindex...... Figure customsdutiesonintraregional 3.1Level imports, of 2015...... sectoral diversification index, average 2016–2017...... Figure agricultural exports, 2.9Sectoral equivalentmarkets diversification of andglobal numberof diversification index, average 2016–2017...... Figure equivalentmarkets agricultural andglobalgeographic trade: numberof 2.8Geographic diversificationof Figure allavailableexport andimportcostsinadvalorem 2.7Combination equivalents—agricultural products of only...... Figure 2.6Time andcosttoexport andto importbyregion, 2018...... Figure agricultural regional 2.5Evolution trade introversion of index...... Figure 2.4Africanagricultural netexports, selectedyears (billionUS$)...... Figure 2.3ShareAfrica inworldtrade of andgross domesticproduct...... Figure 2.2ValueAfrican agricultural of exports andimports(billionUS$, nominalvalue) ...... Figure 2.1Value trade index—African exports andimports(allproducts) of andworldtrade ...... List of FiguresList of x ...... 87 86 81 79 77 77 64 64 63 62 61 60 60 59 58 57 55 55 53 51 50 50 49 37 35 33 32 24 22 22 21 20 Figure A6.3 Changesincountry export share andvolatilityunder 10% increase incrop yields compared tobaseline...... barriers compared tobaseline...... Figure cross-border A6.2Changesincountryexport share andvolatilityunderaremoval trade of Figure A6.1Changesincountryexport share andvolatilityunder10%reduction intrade costscompared tobaseline ..... Figure 6.16Changesincountryexport shares andvolatilitycompared tobaselinetrends...... Figure 6.15Changesinintraregional exports by2025resulting from three costandyieldscenarios...... Figure 6.14Regional exports outlook, baseline, 2008–2024...... Figure 6.13 Trade overlapindicators, average 2007–2011...... and southern Africa, 2007–2011 ...... Figure trading patterns amongcountriesinthecommonmarket 6.12Similarityof foreastern for eastern andsouthern Africa, 2007–2011 ...... Figure production patterns amongcountriesinthecommonmarket 6.11Similarityof market foreastern andsouthern Africa (1980–2010)...... Figure production correlation coefficients 6.10Distributionof betweencountriesinthecommon and southern Africa (1980–2010)...... Figure 6.9Cereal production instabilityincountriesthecommon market foreastern Figure informalagricultural trade 6.8Evolution (invalueandinshare)...... betweenUgandaandneighbors of Figure Uganda’s 6.7Comparison of formalandinformalexports andimports–trade withneighbors–allgoods...... Figure 6.6Border points monitored...... Figure 6.5Informalcross-border maizeexports intoSADC...... Zimbabwe, andSouth Africa intoSADC/COMESA Figure 6.4Informalandformalmaizeexports byMalawi, Mozambique, Tanzania, Zambia, Figure 6.3Borders monitored byFEWSNET Figure 6.2Intra-COMESA totalexports (2005–2017)...... Figure 6.1Frequency index andcoverage ratios bycountry(percentage)...... Figure 5.7Commodity priceindex fuelandnon-fuel priceindiceschangesfrom March 2018projections...... Figure 5.6Commodity Price Index (2005=100)...... Figure 5.5Changesfrom March 2018projections in%...... Figure China’s 5.4Growth inthevolumeof trade in%...... Figure 5.3Difference betweenMarch 2018andMarch 2019growth projections ...... Figure 5.2GDPgrowth projections in2019 ...... Figure 5.1USimportsfrom Chinacovered byspecial protection, bysector, 1980–2018...... Figure processed products 4.13Shares forselectedvaluechains: theworld ...... of Africa versustherest of Figure processed products 4.12Shares byexporters of ...... Figure 4.11 African agricultural processing exports bydestinationmarket andstageof Figure 4.10 processingAfrican revealed...... comparative advantagesbystageof Figure real 4.9Evolution effective of exchange rate forselectedvaluechains ...... Figure real 4.8Evolution exchange of rate for African regional economiccommunities...... Figure real 4.7Evolution exchange of rate for Africa, agriculture andnon-agriculture ...... xi ...... 177 177 175 171 170 168 167 165 164 163 162 161 160 158 156 154 149 147 116 116 115 114 113 112 111 94 93 92 155 91 90 89 88

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 HS HIC High-Income GIZ GDP Countries FRICH FDI FAO EU European ECOWAS ECCAS Union ECA EC EBA EAC DFID CTA COMESA CMS CIF CFAF CET CES CEPII CAADP BMZ BACI AU African ATOR AMU Union AMIS AECF ADB AATM Acronyms

Harmonized System Deutsche Gesellschaft fuerInternationale Zusammenarbeit Gross DomesticProduct Food Retail IndustryChallenge Fund Foreign direct investment Food and Agriculture Organization theUnitedNations of Economic CommunityWest of African States CentralEconomic Community of African States United Nations EconomicCommission for Africa European Commission Everything but Arms East African Community Department forInternational Development Technical Centre for Agricultural andRural Cooperation Common Market forEasternandSouthern Africa Constant Market Share Cost, Insurance, andFreight West African CFA francs Constant Elasticityof Transformation Substitution Constant Elasticityof Centre d’EtudesProspectives etd’Informations Internationales ComprehensiveProgramme AfricaAgricultureDevelopment Bundesministerium fürwirtschaftliche Zusammenarbeit undEntwicklung International Trade Database at theProduct Level Annual Trends andOutlookReport Arab Maghreb Union Agricultural Market Information System Africa EnterpriseChallengeFund African DevelopmentBank Africa Agriculture Trade Monitor xii WTO WITS World WEF UNEP Trade UNDP UNCTAD Organization TSR TOI TEI TBT STDF SSA SPS SAFEX SADC SACU RTAs ReSAKSS RECs RCA PAE OLS OECD NES NEPAD NCC LARES KPMG KACE ITC IFPRI ICTs Revealed Comparative Advantage

World Integrated Trade Solution World EconomicForum United Nations Environment Programme United Nations DevelopmentProgramme United Nations Conference on Trade and Development Trade Status Report Trade OverlapIndicator Trade ExpansionIndicator Technical Barriersto Trade Standards and Trade DevelopmentFacility theSahara Africa southof Sanitary andPhytosanitaryMeasures South African Futures Exchange Southern African DevelopmentCommunity Southern African CustomsUnion Regional trade and investmentagreements Regional Strategic Analysis andKnowledgeSupport System Regional EconomicCommunities Public Agricultural Expenditure Ordinary Least Squares Organization forEconomic Co-operation andDevelopment Not Elsewhere Specified New Partnership for Africa’s Development National Cotton CouncilAmerica of Laboratoire d’Analyse Régionale etd’Expertise Sociale Klynveld Peat MarwickGoerdeler Kenya Agricultural Commodity Exchange International Trade Center International Food Policy Research Institute Information andCommunications Technologies xiii

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 KEN GNQ GNB GMB GIN GHA GAB ETH ERI EGY DJI CPV COM COG CMR CIV CAF BFA BEN BDI AGO Country Abbreviations

Kenya Equatorial Guinea Guinea-Bissau Gambia Guinea Ghana Gabon Ethiopia Eritrea Egypt Djibouti Cape Verde Comoros theCongoRepublic of Cameroon Côte d’Ivoire CentralRepublic African Burkina Faso Benin Burundi Angola xiv ZWE ZMB COD UGA TGO TCD SYC STP SLE SEN SDN RWA NGA NER MWI MUS MOZ MLI MDG LIB

Zimbabwe Zambia Democratic Rep. theCongo of Uganda Togo Chad Seychelles São Tomé andPríncipe Sierra Leone Senegal Sudan Rwanda Nigeria Niger Malawi Mauritius Mozambique Mali Madagascar Liberia Chapter 1 - Overview

Acknowledgements

The International Food Policy and Research Institute (IFPRI) and the Technical Centre for Agricultural and Rural Cooperation (CTA), as well as the editors of this volume, Antoine Bouët and Sunday Pierre Odjo, would like to express their sincere gratitude and heartfelt thanks to everyone who contributed to the preparation of the Africa Agriculture Trade Monitor 2019, and to all those whose work made this publication possible. The editors would like to express their particular appreciation for the intellectual leadership and guidance provided by Ousmane Badiane for this project.

Above all, we acknowledge the hard work and painstaking efforts of all the authors who contributed their research and analysis to this volume, and their conscientious efforts to address comments and feedback from reviewers.

We also acknowledge the contribution of Jonathan Hepburn, who acted as editorial coordinator for the volume, reviewing draft chapters and ensuring coordination between the editors, the team of authors, and external reviewers.

We are especially grateful to all those who contributed to the review process for the publication, including Judith Fessehaie, Edwini Kessie, Johann Kirsten, Csilla Lakatos, Cristina Mitaritonna, Abdessalam Ould Ahmed, Ahmed Sadiddin, Mustapha Sadni Jallab, and Luca Salvatici. The report has also benefited from comments by colleagues atDeutsche Gesellschaft fuer Internationale Zusammenarbeit (GIZ).

The Africa Agriculture Trade Monitor has been supported by several partners and donors whose funding and support has made the report possible: The United States Agency for International Development (USAID), the Technical Centre for Agricultural and Rural Cooperation (CTA), and the Germany’s Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (BMZ).

Finally, we would like gratefully to acknowledge the contributions of all those who worked tirelessly behind the scenes to ensure that this volume was produced on time and to the quality that IFPRI requires, including among others Anatole Goundan for data preparation and statistical analysis, Hawa Diop, Nabou Tall, Pamela Stedman-Edwards and her team, for editorial support.

While the editors and authors are grateful to all those who submitted comments and feedback on the draft chapters, any errors and omissions remain their own responsibility. Africa Agriculture Trade 2019 Monitor / Report Trade Africa Agriculture

1 Foreword

Trade is key to Africa’s long-term sustainable economic growth and transformation. Boosting intra-African agricultural trade can help generate jobs for women and youth in agricultural value chains, raise incomes, and improve food security and nutrition. Recognizing the enormous potential benefi ts offered by trade, African leaders reaffi rmed their commitment, through Agenda 2063 and the Malabo Declaration, to promoting greater intra-African trade. They have committed to raising the level of trade-related investments and to improving trade infrastructure, policies, institutions, and trade facilitation. Agenda 2063 calls for fast-tracking the establishment of a continental free trade area while the Malabo Declaration calls for tripling intra-African trade in agricultural commodities and services by 2025.

In a show of their strong commitment to advancing regional trade and economic integration on the continent, 44 African Heads of State and Government signed the African Continental Fee Trade Area (AfCFTA) agreement in March 2018. The agreement aims to eliminate tariff and non- tariff barriers on most goods, accelerate regional and continental integration, improve customs and trade facilitation, develop regional and continental value chains, foster industrialization, and eventually create a single market for goods and services with free movement of labor and capital. The agreement, which has now been signed by 54 out of 55 African Union member states and ratifi ed by 27 member states as of July 2019, is a game changer that is expected to signifi cantly boost intraregional trade within an African market of 1.2 billion people.

The rapidly growing demand for food in Africa fueled by rising population and faster economic growth presents greater market and trade opportunities for domestic agriculture. The value of Africa’s food market is expected to more than triple to US$1 trillion by 2030 which would unlock enormous opportunities for farmers, food processors, and agribusinesses alike, particularly through domestic trade. In fact, as the 2018 Africa Agriculture Trade Monitor (AATM) shows, Africa’s agricultural trade has increased signifi cantly over time including intraregional agricultural trade, while African exporters gained competitiveness in intraregional markets. Although Africa’s intraregional trade is still low compared to other regions of the world, it has great potential to expand, especially with investments in trade-related infrastructure and improvements in policy to facilitate greater private sector participation in regional markets.

This second AATM takes a closer look at the effectiveness of efforts to increase regional trade integration and intra-African trade and evaluates the potential impact of broader integration on Africa’s trade performance in light of emerging trade protectionism in the global economy. The 2019 AATM fi nds that while growth in Africa’s agricultural imports has continued to outpace export growth, the agricultural trade defi cit has been on the decline since 2012. Meanwhile, Africa has continued to play a minimal role in global agricultural trade—its share of world agricultural trade grew only marginally from 4.3 percent to 5.0 percent between 2005 and 2017. And despite the strengthening of the continent’s comparative advantage in agricultural products in recent years, its advantage has largely been limited to unprocessed

/ Report 2019 / Report and semi-processed products. The report also fi nds non-tariff barriers to present the biggest impediment to Africa’s trade performance, and to a lesser extent the lack of agricultural product diversifi cation and high trading costs. Africa Agriculture Trade Monitor Trade Africa Agriculture

2 Implementation of the AfCFTA is expected to enhance agricultural product diversifi cation toward more processed goods, particularly through investments in agro-industrialization. The 2019 AATM notes that greater regional integration envisioned under the AFCFTA could also strengthen Africa’s ability to take advantage of new trade opportunities while protecting the continent from external trade shocks, including from the emerging protectionist tendencies seen in some major global economies.

With the recent launch of the operational phase of the AfCFTA during the African Union Summit held in Niger in July 2019, there is need for concerted effort to provide timely and relevant trade data and analysis to guide ongoing AfCFTA negotiations and implementation modalities, to examine the benefi ts and challenges of implementing the AfCFTA, and to track implementation progress and outcomes. The recently launched Trade and Regional Integration Expert group, as part of the African Growth and Development Policy (AGRODEP) Modeling Consortium, is a welcome initiative that will provide much needed analytical support to the AfCFTA.

The next issue of the AATM will present an in-depth ex ante analysis of the impacts of the implementation of the AfCFTA on the agriculture sector. This will be in addition to assessing emerging and long-term trends that explain Africa’s agricultural trade performance in terms of global trade, intra-African trade, and intraregional trade.

In keeping with the objectives of the fi rst AATM, the 2019 AATM aims to provide policymakers and development practitioners with access to accurate and reliable data and analysis on intra- African agricultural trade and to help advance their efforts to boost intra-Africa agricultural trade and transformation on the continent.

Michael Hailu Ousmane Badiane Director Director Africa CTA IFPRI / Report 2019 / Report Africa Agriculture Trade Monitor Trade Africa Agriculture

3 Executive Summary

The 2019 Africa Agriculture Trade Monitor is being published at a critical moment for both international trade relations and African trade integration. At the global level, protectionist tensions are high and could have signifi cant consequences for the world economy and for Africa in particular. Their impact is already evident in the current slowdown in the global economy. At the same time, African governments are multiplying initiatives in support of greater regional integration. The African Continental Free Trade Area is a particularly important initiative. Launched in Kigali, Rwanda, in March 2018, the agreement aims to create the largest free trade area in the world—with 1.2 billion people in 55 countries and a GDP of US$2,500 billion. In July 2019, 54 countries signed this agreement.

These historic developments give this report a special signifi cance. There is a particular need today to mobilize the most detailed statistical knowledge and technically robust tools and methods to study Africa’s trade integration and identify the most important barriers to further integration, to identify which African regional trade agreements have worked and which have failed, and to determine which sectors in Africa are most competitive and examine the characteristics of its specialization. It is also necessary to assess the possible consequences of a more protectionist global economy for Africa. Finally, clear policy recommendations are needed for current trade integration efforts on the continent. It is in this spirit that this report was designed.

The report comprises six chapters, with Chapter 1 providing a general overview of the report. Chapter 2 is devoted to Africa’s trade performance in world markets, Chapter 3 focuses on measuring regional trade integration, and Chapter 4 looks at the competitiveness of African agricultural value chains. Chapter 5 focuses on the featured topic of the 2019 report, namely the potential effects on African economies of ongoing disruption to the global trading system, and Chapter 6 examines trade integration in the featured region of Eastern and Southern Africa.

The main obstacle to improving Africa’s trade integration is non-tariff measures (NTMs), with an important role played by customs formalities. Africa has a trade defi cit in agriculture, but this has fallen since 2012 and Africa’s share of global agricultural GDP has grown. High trading costs and lack of diversifi cation are two important factors explaining Africa’s relatively poor trade performance in world markets. While diversifi cation of trade partners is satisfactory, product diversifi cation is weak. Across African countries, the agricultural commodities most frequently identifi ed as having the highest revealed comparative advantage are cocoa, cotton, fi sh and fi sh products, fruits, legumes, and tea. More generally, Africa as a whole has a revealed comparative advantage on global

/ Report 2019 / Report markets in unprocessed products. Weak trade performance is due less to tariff barriers than to the prevalence of NTMs, with an important role played by customs formalities. Demographic changes and economic growth are leading to rising demand in African markets, reinforcing the rationale for deepening economic integration across the continent, which is also important for the diversifi cation of production and value addition in Africa. Africa Agriculture Trade Monitor Trade Africa Agriculture

4 Intraregional trade in Africa is low as a proportion of total trade, especially when compared to other regions: this is the result not only of poor integration, but also (and especially) of lower GDP levels in Africa. There is a long history of Regional Trade Arrangements (RTAs) in Africa, dating back forty years. Recent efforts give priority to broader continental integration than offered by current Regional Economic Communities (RECs). Indeed, the overlapping country membership of these RECs makes the tasks of harmonizing and coordinating policies and regulations within the RECs more complex. Moreover, the costs of trading in Africa remain high, even within RECs. Three initiatives appear promising: the Tripartite Free Trade Area (TFTA); the initiative concerning ECOWAS and North Africa; and the continental free trade area. In all RECs, agricultural trade is more introverted than extraverted, that is, the level of regional trade as a share of total trade is relatively high. This might seem paradoxical because intraregional trade in Africa is low as a proportion of total trade when compared to other regions—in 2016, the share of intraregional trade of African countries in their total trade was about 13 percent, while it was over 60 percent in Asia and over 67 percent in Europe. However, this low share is mainly the result of lower GDP levels in Africa: trade depends on the levels of trade costs and on economic activity. Most RECs are diversifi ed in geographical terms (trade partners), but less so in terms of sectors (traded products). To increase trade integration, it is important to address NTMs and trade facilitation, including increasing technical assistance and improving transparency: this will help fi rms to trade more easily across national borders.

Africa’s comparative advantage in agriculture has strengthened in very recent years; however, Africa is competitive mainly in unprocessed and semi-processed products and not in processed products. Africa has a comparative advantage in agriculture overall, but this primarily refl ects the strong competitiveness of agriculture in certain RECs, such as the Economic Community of West African States (ECOWAS), the Southern African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA)—the Arab Maghreb Union (AMU) and the Economic Community of Central African States (ECCAS) exhibit much weaker performance. Although on global markets Africa is competitive mainly in unprocessed and semi-processed products, on intra-African markets the continent’s processed products are also competitive. African exporters are adaptable, demonstrating an ability to shift their product mix and move to new markets. Finally, non-African demand for unprocessed and semi-processed products has been primarily responsible for driving growth in African agricultural exports since 2005–2007. / Report 2019 / Report Africa Agriculture Trade Monitor Trade Africa Agriculture

5 The current trade conﬂ ict between major global trading blocs may create an opportunity for African countries to increase their exports, particularly to the United States and China; but Africa will register a net loss in exports if the global trade wars intensify. In the summer of 2019, the trade war between China and the United States is burgeoning. What will be its impact on Africa? On one hand, at the global level, world GDP will be negatively affected, leading to lower demand for raw materials, including those exported by Africa, and lower prices. As China is a major partner for Africa, the impact could be substantial. In addition, competition in third-country markets, particularly between US and African exporters, may increase. On the other hand, new opportunities may emerge for African countries as China makes new supply chain decisions. The overall impact on Africa of the global trade turmoil is, therefore, uncertain. The use of a global economic model shows that African countries could benefi t from the bilateral tensions between the United States and China, especially if the continental free trade area is effective. However, African countries could be adversely affected if protectionist approaches to trade policy spill over and are adopted by a wider range of countries. If the trade turmoil affects business confi dence—for example, through impacts on investment—the impact on Africa could be even worse.

Informal cross-border trade is an important part of total trade and plays a critical role in poverty alleviation, food security, and household livelihoods in Africa. The fi rst of Africa’s RTAs was initiated in the Eastern and Southern Africa region at the end of the 1960s. Prior to 1994, the regional blocs often performed weakly as they were set up more for political than economic reasons. Country membership in multiple RECs has also hampered progress on economic integration. COMESA lags behind other African RECs both in terms of trade costs indicators (including tariffs and NTMs) and trade fl ow indicators of regional integration. There are interesting experiences of monitoring informal cross-border trade (ICBT), including intergovernmental initiatives (e.g., the Famine Early Warning Systems Network – FEWSNet) and national initiatives (e.g., the Uganda Bureau of Statistics – UBOS) in the COMESA region. These initiatives show that ICBT plays a critical role in poverty alleviation, food security, and household livelihoods in southern Africa. ICBT can be an important part of total trade: UBOS reports that ICBT fl ows are equal to between 25 percent and 40 percent of formal intraregional trade fl ows. Information on the scale and characteristics of informal trade remains scarce, but clearly ICBT deserves more attention.

Strengthening regional integration in Africa can bring considerable economic beneﬁ ts,but will require ambitious reforms. / Report 2019 / Report New regional integration initiatives, such as the continental free trade area, are interesting for several reasons.

First, multilateral trade liberalization (Doha Round) is at a standstill, and the gains for Africa from previous multilateral rounds are not obvious. The same applies to preferential regimes granted by rich countries to the African continent such as the Everything But Arms (EBA) agreement Africa Agriculture Trade Monitor Trade Africa Agriculture

6 Chapter 1 - Overview

and the African Growth Opportunity Act (AGOA). These forms of trade liberalization have not succeeded in transforming Africa’s place in world trade: African countries remain specialized in raw and semi-processed products and for more than 10 years their share of world exports of goods has remained at about 3 percent (that of agricultural products has increased slightly).

Second, the creation of a large continental market could bring economic benefi ts: giving access to a larger market for competitive African producers, generating economies of scale and increasing the degree of product differentiation, expanding value-added chains to allow specialization in processed products, and diversifying exported products to reduce the impact of price volatility for the few commodities in which Africa is today specialized.

To achieve these objectives, however, the proposed regional integration initiatives must be successful. This would require not only eliminating tariffs on all continental trade, but also and above all tackling NTMs. Reforms in customs formalities (trade facilitation) are particularly important in this respect. Other necessary steps will improve transport and communications infrastructure, determine simple rules of origin, increase technical assistance, simplify sanitary and phytosanitary standards, and reduce technical barriers to trade. Strengthening regional integration in Africa can bring considerable economic benefi ts, but only if ambitious reforms are undertaken. / Report 2019 / Report Africa Agriculture Trade Monitor Trade Africa Agriculture

Overview Africa Agriculture Trade Monitor / Report 2019 delivered theanticipated gains. Arms (EBA)agreement andthe African Growth andOpportunity Act (AGOA), likewise havenot barriers.tariff Trade preferences forLeast DevelopedCountries, suchastheEverything But Round Agreement wereany, weak if andlowertariffs haveoften beenoffset byrisingnon- the worldasalternative trade negotiation systems. The gainsfor Africa from theUruguay Second, multilateral trade liberalization seems to be at a standstill while RTAs proliferate around growth, foodsecurity, andpoverty alleviation benefi tsforindividual Africancountries. to 52percent by2022, asexpected by the African UnionCommission, promises signifi cant intra-continental, on average. A intra-continental trade successful expansion of share from 10 emphasizes that overthepast decades onlyabout10to12percentAfrica’s of trade hasbeen and USdestinations representing allexports 50 percent outsidethecontinent. of The report continental destinations accountforasmuch80percentAfrica’s of totalexports, withEU room forexpanding intra-continental trade (UNECA 2010). The report indicates that extra- the African Union Commission and the African Development Bank suggests that there is First, acollaborative report bytheUnitedNations EconomicCommission for Africa with attaining higher economic development and shared prosperity among African countries. There are tangiblereasons topromote continent-widetrade integration asameans of 2028. viewed asthebuildingblocks foran African EconomicCommunity that isdueto take shapein with thecreation several Regional of Trade Arrangements (RTAs), whichpoliticalleaders have builds onlong-standingefforts todeepenregional integration onthecontinent, beginning lead toa52percent increase inintra-African trade by2022(AfricanUnion2016). This initiative which isduetobeoperational from July 2020, andwhich, the African Unionestimates, will Government metinNiamey, Niger, tolaunchthe African Continental Free Trade Area (AfCFTA), escalating tradeand China in the context tensions.of In July 2019, State African and Heads of system isfacingnewthreats, suchastheprotectionist measures imposedbytheUnitedStates The pushfordeeperintegration in Africa isgainingmomentumat atimewhentheglobaltrade this2019 AATMof onregional integration. trade haspotentialtostabilizedomesticfoodmarkets andincrease resilience. Hence, thefocus intraregional markets. More notably, the2018report predicted that expanded intraregional its potential. African countrieshavelostcompetitivenessinglobalmarkets butgainedin trade defi cit. The report alsoshowedthat intraregional trade isincreasing but remains below increased overtime, withfastergrowth inimports contributingtothecontinent’s growing agricultural tradeof among African countries. Itrevealed that Africa’s agricultural trade has The fi rst report, released in2018, shedlighton key advancesandtheuntapped potential (RECs). including emerging andlong-term trends anddriversbehind Africa’s trade inagricultural products— and the Technical Centre for Agricultural andRural Cooperation (CTA). The acollaborativepart initiative of betweentheInternational Food Policy Research Institute (IFPRI) ThisAgriculture isthesecondannual Africa TradeMonitor (AATM), afl agshippublication that is Introduction global trade, intra-African trade, andtrade withinregional economiccommunities 10 Chapter 1-Overview reports assess Overview trade-related shocks. better new trade positionthemselvestotake opportunities advantageof orwithstandexternal case, deeperregional integration through the AfCFTA couldhelp countriesonthecontinentto and imposingothertrade-restrictive measures, African countrieswouldstandtolose. Ineither become more widespread globally, barriers with other countries similarly adopting new tariff patterns inglobalagricultural markets. However, protectionist theywarnthat tendencies if that the resultingAfrican countriescouldbepoisedtotake changesintrade advantageof the conditionthat current tensionsremain confi nedtothesemajorplayers, evensuggesting phenomena mean for African countries. cautiousoptimismon The authorssoundanoteof signifithe riseof canttensionsbetweentheUnited States andChina, and examine what these in particular newprotectionist totheemergence tendenciesinmajoreconomies, of especially for complacencyabout Africa’s future intoday’s globaltrade policyenvironment. They point Nonetheless, Bouët, Traoré, and Laborde remind readers in Chapter 5 that there is no room deepen economicintegration across thecontinentasa whole. the the entryintoforceAfCFTA of 2019markinganimportant milestoneinefforts inMayof to always beensmooth, Odjo, Traoré, andZaki showinChapter3that itsdirection isclear, with Africa CustomsUnion(SACU), substantiallypredate theseinitiatives. While thejourneyhasnot consolidatedAction—although someblocs, inthe1980LagosPlanof suchastheSouthern to accelerating thisprocess. Efforts tobringtogethercountrieswithin African regions were thecontinentintoregionsAfrica (UNECA) withaview historicallychampionedthedivisionof in EasternandSouthern Africa, andshowhowtheUnitedNations EconomicCommission for regional integration that beganinthe1960s. The theseefforts authorstrace theevolutionof As changing policyenvironment Africa’s agricultural trade ina 6 focusingontheexperience witheconomicintegration intheseregions. emergingtrade performance inthecontext protectionism. of broader integration(2) assessthepotentialimpactof onthecontinent’s integration andintra-African trade; and (1) examine regional theeffectiveness trade of initiatives inboosting Agriculture theAfrica This Trade issueof Monitor aimsto: goods. climb thevaluechainladder, reducing dependenceontheproduction primary andexport of imported goods, particularly essentialgoods, byincreasing competition;andhelpproducers increase markets that thesizeof are accessibletocompetitiveproducers; reduce thepriceof Third, regional trade integration is viewed as a good development strategy. Regional trade can This year’s report also includesaspecialfocusonEasternandSouthern Africa, withChapter Makochekanwa andMatchaya showinChapter6, 11 Africa hasbeenonalongjourneytoward Chapter 1-Overview Overview

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 to make aconcrete, timely, andpolicy-relevant contributioninthisrespect. the continent, aswellthetrends anddriversshapingeconomicoutcomes:thisreport seeks these challenges. To doso, however, policy-makers willrequire aclear farmtrade picture on of African countriestodesignregulatory frameworks that willprovide anadequate response to The authorsargue consistentlythat thenewagreement creates animportant opportunity for associated witheconomicintegration andagricultural trade that African countriesfacetoday. The report makes itclear that the AfCFTA iscentral thepolicychallenges toaddressing manyof agricultural trade. the phenomenon, and design appropriate responses to public policy challenges related to collectingadequate andaccurateimportance of data so that policy-makers can understand informal trade, thediffi aswellsomeof cultiesindoingso effectively. They underscore the examine thisissueinsomedepth, lookingat efforts todate to understand andmeasure characteristics, informaltrade. includingtheprevalence of Makochekanwa andMatchaya The report showsthat agricultural trade otherparticular in Africa continuestoexhibit anumberof these issuesbeproperly addressed inthe AfCFTA. overcome ensuringthat theseobstacles—althoughtheauthorsalsohighlightimportance of Greater transparency, alongwithothermeasures tosupport trade facilitation, couldhelpto currently require fi rmsto expend considerable timeandmoneyforprocedures at theborder. Makochekanwaas wellthoseof andMatchaya inChapter6. The report fi ndsthat NTMs a fi nding that reinforces the conclusions reached by Bouët, Cosnard, and Fall in Chapter 2, barriers toeconomicintegration, alongwithotherdefi cienciessuchasweak infrastructure, The sameauthorsfi ndthat measures non-tariff (NTMs)are among themostsignifi cant remaining trade, withaviewtoproviding policy-makers withanaccurate picture. integration, anapproach andargue that infavorof benchmarks integration across allworld the methodologiesusedbydifferent analyststocalculate regional thedegree economic of more introverted (that is, more heavily intraregional) than extraverted. The authors examine Chapter 3, Odjo, Traoré, andZaki nonethelessfi ndthat, across allRECs, agricultural trade is Progress inregional integration alsovariesconsiderably across thecontinent’s RECs. In chain, theauthorsconclude. trade agreement couldhelptodiversifyproduction andhelpproducers tomoveupthevalue products, suchascoffee andgrapes, competitivenessisdeclining. The newcontinentalfree strong incertain valuechains, suchasinsesameseedsandlegumespulses. For other although substantialdifferences exist amongtheRECs. African competitivenessisparticularly fi ndthat Africa’s comparative advantagesinagriculture havestrengthened in recent years, build ontheircompetitivestrengths. InChapter4, Dedehouanou, Dimaranan, andLaborde African countriestoaddvalueproducts theyalready produce, create employment, and Indeed, throughout thereport, theauthorsfi ndthat closereconomicintegration wouldallow 12 Chapter 1-Overview Overview the production base, andhelping African producers tomoveupvaluechains. spur growth through intraregional trade expansion, thusimproving foodsecurity, diversifying economic andpolicycontext. Byreducing alltrading costs, the AfCFTA hasthepotentialto Overall, thisreport the highlightstheimportanceAfCFTA of project andplacesitinabroader thereport.Chapter 2of between blocs, sometimesfrom variouscontinents. This issueisdiscussedingreater depthin is often measured intraregional by the share of trade in total trade, and this share is compared may beinconclusive. For example, trade thedegree aregional integration of trading of bloc trade policies.design of Someindicators may bemisleading, whileothers taken individually Another criticalfi nding usingalternativerelates indicators totheimportance toinformthe of trading costs along formal trade routes continue to justify recourse to informal trade corridors. include informaltrade fl ows. informal,The prevalence of unmonitored high trade willpersistif (fully) monitortheircross-border trade fl owsanddata reported toUN-COMTRADE doesnot intra-Africanshare trade, of inparticular foragricultural commodities. Many countriesdonot integration forboostingtrade within Africa. Informalcross-border trade represents asignifi cant cross-border trade fl regional thefullpotentialof owsiscriticalforasoundappraisal of It alsoemerges from thereport amonitoringsystemforinformal that theimplementation of thisreport.of ahigh-qualitytrade database wasconsideredestablishment of essentialduringthepreparation Africa, where international statistics are reported poorquality. tobeof For thisreason, the without reliable andaccurate statistics. This isparticularly trueforagricultural trade issuesin impossible, foreconomistsandgovernmentstomake goodeconomicpolicyrecommendations statisticsThe isafundamentalissueforeconomicpolicy. qualityof Itisobviouslydiffi cult, not if 2005 to2017. database providing information onbilateral trade countriesfrom for195countriesorgroups of ratio that are appliedtoexport declarations. explanatory variables. From thegravity equations, the theauthorsderiveHS2-levelestimates of equation that includes distance, contiguity, common offi cial language, andcolonial origin as the partner toexpress allvaluesonaCIFbasis. The CIF/FOBratio isobtainedfrom agravity cost insurance freight (CIF)/free onboard (FOB)correction totheexports’ valuesreported by data on exports from their partners is used to fi llthe gap. For consistency, the authors apply a than exports declarations. imports declarations. There isabroad consensusthat imports declarations better are quality of trade in estimate of Africa. They start withafi thedatabase that includes only rstversionof Database (UN-COMTRADE), data treatments theyconductedaseriesof toprovide anaccurate Policies, Institutions, and Markets, andbased on theUnitedNations Commodity Trade Statistics Using ananalyticaldatabase, theCGIARResearch developed withthesupport of Program on thisreportThe authors of have worked intensively on developing appropriate statistics. methodology Issues concerningdata and basis, whileinBACI everythingis expressed onanFOBbasis. For more detailsonthemethodology, seeGaulierandZignago (2010). 2 - The authors useaprocedure theBACI comparable databasebuiltbyCEPII. tothetreatment of The difference isthateverythingexpressed onaCIF 1 -For instance, duetocustomsdutiescollection, importsare monitored with care 1 For countriesthat donotdeclare imports foragivenyear, mirror 2 The fi nalproduct isadisaggregated (HS6-level) 13 Chapter 1-Overview Overview

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Enhancing Intra-African TradeEnhancing .UNECA. AddisAbaba,Ethiopia: and AfDB (AfricanDevelopmentBank). 2010. AssessingRegional Integration in Africa IV: UNECA (UnitedNations EconomicCommission for Africa), AUC (AfricanUnionCommission), CEPII WP 2010-23, CEPII, Paris, France. Gaulier, G., andS. Zignago. 2010. “BACI: International Trade Database at theProduct-level,” https://au.int/en/speeches/20160222 Commissioner for Trade andIndustry, at theFirst CFTA Negotiating Forum Meeting. African Union. 2016. OpeningStatement byH.EFatima Haram Acyl, African Union References future policytrajectory inthisarea. and CTA believethat itwillprovide ausefulandtimelyinputtothedeliberations on Africa’s evidence andacarefully considered approach totheanalyticalmethodology. As such, IFPRI emerging economictrends inagricultural trade, thebestavailableempirical onthebasisof provide policyactorswith thetoolstheyneedtoposition Africa effectively inthecontext of and fortheglobaltrading systemforfoodandagriculture. Ourhopeisthat thisreport will For allthesereasons, thefi ndingsinthechaptersthat followcome at acriticaltimefor Africa report. integration initiatives onthecontinent. This this maybethemostimportant policymessageof Recent protectionist trends havefurther underscored thevalueandsignifi economic canceof 14 Chapter 1-Overview Overview Africa in Global Agricultural Trade 2

Africa in Global Agricultural Trade

Antoine Bouët, Lionel Cosnard, and Cheickh Sadibou Fall Africa Agriculture Trade Monitor / Report 2019 agriculture are nowsignificant(Box 2.1). countries (Bourgoin, Diop, Dia2017, 2019);and(2)efforts tointegrate digitalization in African large-scaleemergence agricultural farmsto boost exports of commodities to developed of (1) inmany African countries, foreign direct investment(FDI)isincreasingly orientedtothe The attractiveness the African agricultural of sectorcanbeillustrated bytwogeneral trends: could play a great role in global food markets, given Africa’s rich natural resource endowments. Agriculture isakey sectorin thelaborforceAfrican economies:itemploysamajorpart and of investment inmarkets andtrade infrastructure” (AUC 2014, 5). area andacontinentalcommonexternal tariff. Itsobjectiveisalso“toincrease andfacilitate 2025. This acontinentalfree trade commitmentpackagetrade includestheestablishmentof at Malaboin2014totriplingintra-Africa trade inagricultural commoditiesandservicesby growth andtopoverty alleviation. themainreasonsThis isoneof why African leaders committed It iscommonlyagreed that trade integration economic cancontribute totheacceleration of 2 Introduction 3 http://www.benagri.com 2 http://www.benagri.com/fr/. and artificialintelligence. 1 Digitalizationforagriculture bringstogetherdigitaltechnologies, digitalinnovations, informationandcommunicationstechnologies, easily andtopublicizetheirproducts allovertheworld. enabled certain actorsintheBeninagricultural andagri-foodvaluechaintotrade more project istopromote local products andmake themaccessible to all. BenAgri has thus systematic information onthelocalmarkets foragricultural products. this The objectiveof committed to use the potential of digitalization committed tousethepotentialof in January 2019. Duringthat important event, 74nations theagriculture ministersof thelastGlobalForumDigitalization wasafocusof forFood and Agriculture heldinBerlin In Benin, theBenAgri information andcommunication technology. have experienced substantialimprovements inrecent years withtherapid developmentof agricultural products were limitedtoplatforms dedicated topriceinformation systems. These such as climate information, access to financial services, etc. Efforts with respect to trade in years ago. digitalization Initiallythefewattempts observedthere of focusedmore onareas Efforts tointegrate digitalization and facilitate trade. reduce production costs, information improve throughout theavailabilityof thefoodsystem, animal welfare-oriented production, increase agricultural products, thequality andsafetyof Box 2.1Digitalization in Agriculture in Africa

3 websiteandmobileplatform aimstoreduce this gapbyproviding 2 intoagriculture in Africa are quiterecent, starting about10 18 1 tosupport environmentally soundand Chapter 2-AfricainGlobal Agricultural Trade

3 http://www.benagri.com 2 http://www.benagri.com/fr/. and artifi cialintelligence. 1 Digitalizationforagriculture bringstogetherdigitaltechnologies, digitalinnovations, informationandcommunicationstechnologies, agriculture are nowsignifi cant(Box 2.1). countries (Bourgoin, Diop, Dia2017, 2019);and(2)efforts tointegrate digitalization in African large-scaleemergence agricultural farmsto boost exports of commodities to developed of (1) inmany African countries, foreign direct investment(FDI)isincreasingly orientedtothe The attractiveness the African agricultural of sectorcanbeillustrated bytwogeneral trends: could play a great role in global food markets, given Africa’s rich natural resource endowments. Agriculture isakey sectorin thelaborforceAfrican economies:itemploysamajorpart and of investment inmarkets andtrade infrastructure” (AUC 2014, 5). area andacontinentalcommonexternal tariff. Itsobjectiveisalso“toincrease andfacilitate 2025. This acontinentalfree trade commitmentpackagetrade includestheestablishmentof at Malaboin2014totriplingintra-Africa trade inagricultural commoditiesandservicesby growth andtopoverty alleviation. themainreasonsThis isoneof why African leaders committed It iscommonlyagreed that trade integration economic cancontribute totheacceleration of 2 Introduction easily andtopublicizetheirproducts allovertheworld. enabled certain actorsintheBeninagricultural andagri-foodvaluechaintotrade more project istopromote local products andmake themaccessible to all. BenAgri has thus systematic information onthelocalmarkets foragricultural products. this The objectiveof committed to use the potential of digitalization committed tousethepotentialof in January 2019. Duringthat important event, 74nations theagriculture ministersof thelastGlobalForumDigitalization wasafocusof forFood and Agriculture heldinBerlin In Benin, theBenAgri information andcommunication technology. have experienced substantialimprovements inrecent years withtherapid developmentof agricultural products were limitedtoplatforms dedicated topriceinformation systems. These such as climate information, access to fi nancial services, etc. Efforts with respect to trade in years ago. digitalization Initiallythefewattempts observedthere of focusedmore onareas Efforts tointegrate digitalization and facilitate trade. reduce production costs, information improve throughout theavailabilityof thefoodsystem, animal welfare-oriented production, increaseagricultural products, thequalityandsafetyof Box 2.1Digitalization in Agriculture in Africa 3 websiteandmobileplatform aimsto reduce this gapby providing 2 intoagriculture in Africa are quiterecent, starting about10 1 tosupport environmentally soundand countries) accounted for about 10 percent of thecontinent’scountries) accountedforabout 10percent of totaltrade…. This isfarbelowthe this conclusion, pointingoutthat, in 2009, “intra-African trade (that is, trade among African World Bankpublication. Inan African DevelopmentBankpublication, Barka (2012)confi rms for Western European trade. This conclusionisconfi rmedbyBrenton andIsik(2012)ina African nations. This statistic isabout 40percent forNorth American trade and63percent past decades, onlyabout10percent–12 percentAfrican trade of takes placeamongother Commission andthe African DevelopmentBank(UNECA, AUC, AfDB 2010)considerthat, over regional trade.of The UnitedNations EconomicCommission for Africa, the African Union viewalsodiffer here.of Many international institutionsagree about Africa’s relatively low level The secondaspectdiscussedintheliterature regional (within-Africa)trade. isthelevelof Points income, andaverage distance from otherworldregions. countries in other regions. Rodrik (1999) shows that African trade is in linewith country size, trade, concludethat intheearly 1990s Africa actuallyovertraded compared withdeveloping predicted trade, or even overtrading. Coe and Hoffmaister (1998), using agravity equation of However, arelatively well-developedliterature argues that Africa hasbeen trading inlinewith strong inFrancophone Africa. Africa hasbeendisintegrating from theworldeconomyandthat thistrend hasbeenparticularly a fallingmarket share fortraditional goods. Subramanian and Tamirisa (2001)concludethat loss in world trade is signifi cant and refl ects a failure to diversify into new products as well as (1997) concludethat Africa hasmissedoutonglobalization. For the World Bank(2000), Africa’s global trade. For someauthors Africa’s participation inworldtrade islow. Sachsand Warner thistopic.which focusesontwoaspectsof The fi rstistheparticipation Africancountriesin of theparticipationTheAfrica inworldtrade of issueof hasbeenwell debated intheliterature, agricultural trade. other regions. Africa inworld thischapteristoassesstheperformanceof The mainobjectiveof In addition, since2013, the African region hasexperienced anagricultural trade defi citwithall Despite itshighpotential, theparticipationAfrican agriculture of inworldtrade remains low. 19 Chapter 2-AfricainGlobal Agricultural Trade

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 2016. the 2008–2009crisis. World trade thenstagnated until2014before fallingsignificantlyuntil During 2005–2012, worldtrade hadbeengrowing thevolumeof continuously except during Africa inworldagricultural trade The Long-term participation of product diversification.costs; and(2)thelackof two potential reasons for Africa’s relatively trading poor performance: (1) the high level of African comparative advantagesinagriculture canbefound. Inthelasttwosectionsweidentify integration in Africa, withaspecificfocusonagricultural trade. Insection4we identifywhere divergence intheconclusions reached intheliterature regional withrespect tothelevelof section 2andconcludethat performancehasbeenrelatively poor. Insection3weexplain the We the examineAfrican share thelong-termevolutionof in(agricultural) worldtrade in (2010) support theconclusionthat Africa’s regional trade isrelatively high. between theworld.African countriesandtherest of Along thesamelines, Iapadre andLuchetti lower than in other regions, trade intensity is substantially higher among African countries than differentially low. Yang andGupta(2007)concludethat, intraregional evenif trade in Africa is and Pritchett trade Sahara within (1993)concludethat (SSA)are flowsof AfricaSouthof not However, theacademic literature comestoadifferent conclusion. For example, Foroutan respectively)” (Barka 2012, 2). intraregionallevels of trade achievedinLatin America and Asia (22percent and50percent, 4- This evolutionhasbeenlargely documented:seeforexample Hoekman, 2015orFerrantino and Taglioni, 2014. Note: 2010=100 Source: COMTRADE (2019)andauthors’calculations. Figure 2.1 Value trade index—African exports andimports(allproducts) of andworldtrade 2005-2017 particularly ontheexport side(Figure2.1).

Value of Trade Index, 4 Constant 2010 USD African imports and exports developed in a similar way with a stronger amplitude, 100 150 50 0 2005 2006 All Goods 2007 2008 African Exports 2009 20 2010 Year 2011 African Imports 2012 Chapter 2-AfricainGlobal Agricultural Trade 2013 World Trade 2014 2015 2016 2017 growing onlymarginally from 4.3percent to5.0percent. during the period, from 2.3percent to 2.7percent, with its share inworldagricultural trade also to 12.0percent in2017. However, Africa’s participation inworldtrade increased only slightly remarkable inagriculture, where itsshare inworldGDPincreased from 10.0percent in2005 2005–2017 (Figure 2.3), from 2.6percent to3.0percent. This positiveevolutionfor Africa is The shareAfrica inworldgross of domesticproduct (GDP) increased slightlyduringtheperiod Source: COMTRADE (2019)andauthors’calculations. TheAfrican agricultural valueof trade goods, andexcludes fish, fish products, andforestry products. 5 - Agriculture isdefinedhere according tothe World Trade Organization (WTO) standard: itincludes raw, semi-processed, andprocessed agricultural Figure 2.2 Value African agricultural of exports andimports(billionUS$, nominalvalue)2005-2017 period (Figure 2.2). important asintra-African trade hasincreased lessthanextra-African trade overthe2005–2017 considering thecreation the African continentalfree of trade area (AfCFTA). This isallthemore continue toincrease incomingdecades. This isanimportant element to keep inmindwhen activity in Africa duringthisperiod. The domesticmarket ispotentiallylarge andshould of economic is asignificantaugmentation:of thedemography it and reflects thedynamism Globally, African agricultural imports increased by102percent between2005and2017. This 2017. 2017, reducing from thetrade deficitbyhalf roughly US$40billionin2011toUS$20 imports decreased2011 whilethevalueof from US$100billionin2011toUS$80 2014, thendecreased significantly. Indeed, agricultural exports thevalueof stabilizedfrom 2008). The African trade deficitinagriculture thengrew until2011. Itstabilizedfrom 2011to imports, whiletheagricultural trade deficit wasstable between2005 and2009 (except for It showsanupward trend forbothimports andexports, withamore prominent increase for

Value of Trade, Constant 2010 Billion USD 100 125 25 50 75 0 2005 2006 Agricultural Goods 2007 2008 2009 5 between2005and2017ispresented inFigure 2.2 African Exports 2010 Year +102% +71% 2011 21 2012 Chapter 2-AfricainGlobal Agricultural Trade African Imports 2013 2014 +81% 2015 Intra-African Flows 2016 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure 2.4 African agricultural netexports, selectedyears (billionUS$)2005-2017 from 2013(Figure 2.4). global deficitmainly results from Africanagricultural adeclineinthevalueof imports observed As in 2013, themaincontributor to Africa’s trade deficit is Latin America. This reduction inthe while the bilateral deficit with Asia, Europe, and North America was also markedly reduced. (Figure 2.4). However, by2017, theworldwas thedeficitwith reduced by30percent,rest of Since 2013 Africa hasexperienced anagricultural trade deficitwithallotherworld regions Source: COMTRADE (2019)andauthors’ calculations. GDP=gross domesticproduct. Figure 2.3ShareAfrica inworldtrade of andgross domesticproduct 2005-2017 Note: LAC =Latin America andtheCaribbean. Source: COMTRADE (2019)andauthors’calculations. -35000.00 -30000.00 -25000.00 -20000.00 -15000.00 -10000.00 10000.00 -5000.00 0.0 5000.00 10 12 14 0 2 4 6 8 Asia 2005 Europe 2006 Share of ShareAfrica in of World Agricultural Trade Share of ShareAfrica in of World trade 2005 2007 LAC 2008 North America 2009 22 2010 2009 2011 Oceania Share of Africa in Share of World Agricultural GDP Africa in Share of World GDP 2012 Chapter 2-AfricainGlobal Agricultural Trade World 2013 2014 2013 2015 2016 2017 2017

trade introversion index. However, thislastindicator hasotherflaws. Therefore, weuseanotherindicator: the regional without comparisontoanothercountryorregion. regionalnorm that trade allows to conclude if is high or low for a specific country or region Cheong, andHamanaka (2010)dividethisshare bytheshare inworldtrade. This definesa total trade ishighorlow:thiswhy, forexample, Iapadre andLuchetti (2010)andPlummer, regional integration.of There regional theshare trade isnobenchmarktoevaluate of if in This iswhythere isalarge economicliterature unflawedmeasurement aboutthedesignof countriescanprovidecountry orasinglegroup information. of same period of timewillbeflawed, same periodof intraregionalof trade intotaltrade countriesat betweentwocountriesorgroups the of MaliandBurkinaFaso.larger thanthoseof We shouldremember shares that acomparisionof countries is traderelatively betweenthefirstpairof highbecausetheirGDPsthe levelof are Faso ontheother. integration countriesmaybe,Whatever betweeneach thelevelof pairof For example, France considerthecaseof andGermanyononeside, MaliandBurkina andof trade partnersof andgeography. trade depends on trade barriers between countries, but also on other factors such as the GDP based onit. This is because thisratio is notbenchmarked: regional the share trade of intotal over 67percent inEurope. However, thisindicator is flawedandapolicyconclusioncannotbe countries intheirtotaltrade wasabout13percent, whileitwasover60percent in Asia and countriesastheirindicator.group of Indeed, in2016, intraregional theshare of tradeAfrican of integration islow, intraregional usingthesharea of tradeacountryorof inthetotaltrade of Both UNECA, AUC, and AfDB (2010) and Barka (2012) conclude that, in Africa, regional agricultural trade TheAfrican intraregional levelof over theirsum. trade shares are compared withtheregion’s theworld. share intrade withtherest of thedifferenceWe canthen calculatearatio inthesetwoindexes of 7 - twoindexes—theThe modifiedintra- idea and istostartwiththedesignof extraregional intensityindexes—for whichintraregional and extraregional considerably, whereas trade integration isaslarge inbothcontinents. kilometers. 99.5percent regional forEurope trade and0.8percent intotaltrade for Simplecalculationgivesashare of of Africa. So, theseratios differ kilometers (asitisbetweenBurkinaFaso andMali); andthatthedistancebetweeneitherFrance orGermany, andeitherBurkinaFaso or Mali, is5,000 France BurkinaFaso andGermany are US$3,000billionandthoseof andMaliare US$20billion;thatthedistancebetween France andGermany is1,000 only transportation costs;letusalsosuppose thatallelasticitiesare unitary. Imaginethattheworldconsistsinonlythese fourcountries;thattheGDPs of iandjdividedbythedistancebetweenthem. theGDPscountries iandjistheproduct of of Let ussupposehere aworldwithouttrade barriersandwith 6- The gravity equationisausefulandbroadly recognized methodforestimatingtrade betweentwocountries. Initssimplestform, thetrade between introverted, ranking third amongthesixcontinentsin2017after Europe andOceania. that Africa hasapositivetrade introversion inagriculture: Africa’s trade appears toberelatively Figure theagricultural regional 2.5showstheevolutionof trade introversion index. We cansee (Iapadre andLuchetti 2010;seealsoChapter3). region, anditincreasesintraregional onlyif trade grows more quicklythanextraregional trade 7 the This thesizeof indicator hasmanyvirtues: itisindependentof 6 while the evolution over time of thisindicator forasingle while theevolutionovertimeof 23 Chapter 2-AfricainGlobal Agricultural Trade

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure agricultural regional 2.5Evolution trade introversion of index 2005-2017 introverted. African countries, andreinforces theviewthat African regional trade inagriculture isrelatively that informaltrade inagricultural commoditiesislarge. tradeThis takes typeof placebetween higher thanofficial trade (Bouët, Pace, andGlauber2018). All theabovesurveysalsoshow numerous surveyscarriedoutonthecontinentconfirmitsimportance, anditissometimes To total informal trade, our knowledge there the size of is no systematic evaluation but of Uganda 2014).Bureau Statistics andBankof of Roy 2012), trade insmallquantities, orintheform of tolerated bycustomsauthorities (Uganda misclassified topayfewertaxes (Fisman and Wei 2004; Jean andMitaritonna 2010;Bouëtand b), trade passingthrough intheformof official customspostsbutbeingundervaluedor smuggling (i.e., goodsavoidingofficial customsposts(Bensassi, Jarreau, Mitaritonna2016a, is notincludedinofficial statistics. Informaltrade isimportant in Africa, eitherintheformof African trade isrelatively introverted. To informaltrade, thismustbeaddedtheissueof which Unbiased indicators based oninternational merchandise flows, therefore, showthat regional theworld. region of regional thesharetarget trade of intermsof totaltrade basedonacomparisonwithanother while improving regional trade integration istherightobjective for Africa, it iswrong toseta (both intra- andextraregional) forallproducts issignificantlylow. We canalsoconcludethat, countries, particularly in agricultural products. In fact, African participation in international trade because—as wewilldemonstrate—there are manybarrierstointernational trade between African Can trade integration weconcludethat thelevelof withinthe African continentishigh?No, Note: LAC =Latin America andtheCaribbean. Source: COMTRADE (2019)andauthors’ calculations. 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0 2005 200620072008200920102011201220132014201520162017 Africa Asia Europe 24 LAC North America Chapter 2-AfricainGlobal Agricultural Trade Oceania weakness in terms of acountry’sweakness intermsof exports. to identify, basedonrecorded trade flows, levelsof whetheraproduct isastrength ora The Revealed comparative advantageindicator introduced byBalassa(1965)makes itpossible agricultural products foreach countryare indicated in, 153products. whichidentifiesatotalof African country(2017) Table 2.1 Top three agricultural revealed products intermsof comparative advantageby fish products, fruits, legumes, andtea. categories identified. The commodities most frequently identified are cocoa, cotton, fish and also notethat all55countrieshaveanRevealed comparative advantageintheeightmain The horticultural products includefruits(15), vegetables (9), andfloriculture (4). We should tobacco (7), andlegumes(7). products (18), cocoa and its derivatives (15), cotton and related products (8), sesame (8), agricultural products:of horticultural products (28), fishand related products (28), livestock the153products identifiedinOf Table 2.1, 78percent canbegrouped intoeightcategories advantage (RCA) in2017hasbeencalculated for55 African countries. This sectionfocuseson Africa’s comparative advantagesinagriculture. Revealed comparative comparative advantages? Where inagriculture are Africa’s (or less than)1, itisconcludedthat thiscountryhasacomparative advantage(ordisadvantage) inthisproduct. same product inworldexports orinareference group’s exports (here weusetheworldreference). theRevealed comparative advantageisgreater If than 9- The Revealed aproduct’s comparative advantage iscalculatedbydividingtheshare exports of inacountry’s the exports of total exports bytheshare of Swaziland), Lesotho, Namibia, andSouth Africa. 8 - That is, 50countries and theSouth Africa CustomUnion(SACU). fivecountries:Botswana, The SACU iscomposedof Eswatini(formerKingdomof Burkina Faso Country Algeria Angola Benin not chemicallymodified) Vegetable fats, oilsnes(fractions, combed) Cotton (notcarded orcombed Sesamum seeds refined Cotton-seed orfractions simply solid residues Cotton seedoil-cake andother Cotton-seed oilcrude Fish nes(frozen, whole) modified Fish oilsexcept liver, notchemically whole) Sardines, brisling, sprats (frozen, pure sucrose) Refined sugar(insolidform, nes, Locust beans, locustseeds Dates (fresh ordried) Top 3Revealed comparative advantage products

9 Madagascar Mauritania 25 Country Malawi Mali Chapter 2-AfricainGlobal Agricultural Trade Sheep (live) Bovine animals(live, forpure-bred Cotton (carded orcombed) breeding) Fish-liver oils(fractions, notchemically Octopus (frozen, dried, salted, orin Salmonidae, nes(frozen, whole) Tea, black(fermentedorpartly) in Tobacco (unmanufactured, stemmed, Tobacco refuse Fruits andnuts, provisionally Cloves(wholefruit, cloves, and Vanilla beans modified) brine) packages >3kg) or stripped) preserved nes stems) Top 3Revealed comparative advantage products 8 The three top-ranking

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Congo, Rep. Cabo Verde Congo DR Cameroon Comoros Republic Burundi Country Central African Chad or roasted) Cocoa beans (wholeorbroken, raw Wheat bran, sharps, otherresidues perfume, insecticideusene Plants &plantparts, pharmacy, Essential oils, nes Vanilla beans stems) Cloves (wholefruit, clovesand residues Groundnut oil-cake andothersolid Sesamum seeds Gum arabic or chilled) Beans (shelledorunshelled, fresh Carrots andturnips(fresh orchilled) spermaceti Beeswax, otherinsectwaxes, and Cocoa shells, husks, skinsandwaste or roasted) Cocoa beans (wholeorbroken, raw defatted) Cocoa paste(whollyorpartly Tunas nes(frozen, whole) bellied bonito(frozen, whole) Skipjack, stripeSkipjack, stripe- not minced) Mackerel (prepared orpreserved, packages >3kg) Tea, black(fermentedorpartly) in Coffee substitutescontainingcoffee Bovine skins(whole, raw) sam, not gum arabic Natural gum, resin, gum–resin, bal- maize, wheat, ricrice Cereal bran, sharps, residue except plaice/sole, whol Flatfish, (fresh/chilled) nothalibut/ Top 3Revealed comparative advantage products

26 Ascension and Mozambique Saint Helena, Sao Tome and Prin- Mauritius Tristan da Country Morocco Rwanda Nigeria Cunha cipe Niger Chapter 2-AfricainGlobal Agricultural Trade Beans (shelled or unshelled, fresh or (shelled orunshelled, fresh or Beans Sardine, brisling, sprat (prepared/ Anchovies (prepared orpreserved, chilled) chilled) preserved, notminced) not minced) Tobacco (refuse) or stripped) Tobacco (unmanufactured, stemmed shelled) Leguminous vegetables(dried, (non-food) Fish, shellfish, andcrustaceans otherwise processed) True hempfiber(notspunbut preserved, notminced) Tuna, skipjack, bonito(prepared/ Tuna (yellowfin)(frozen, whole) Fish nes(frozen, whole) (frozen) Rock lobsterandothersea crawfish leguminous plants Bran, sharps, andotherresidues of Bovine skins(whole, raw) Bovine hides, raw, nes or roasted) Cocoa beans (wholeorbroken, raw Sesamum seeds ne/sheep/goat/reptile Raw hide/skinsexcept bovine/equi - salted) Bovine hides(whole, fresh, orwet- and sagopith Arrowroot, salep, etc. (fresh ordried), Sesamum seeds Top 3Revealed comparative Pepper thegenusPiper of (who- Coconuts (fresh ordried) Cocoa beans, (wholeorbroken, le) raw orroasted) advantage products Egypt,Rep. Arab Guinea-Bissau Côte d‘Ivoire Gambia, The Equatorial Ethiopia Djibouti Country Guinea Guinea Gabon Ghana Eritrea whole) Sardines, brisling, sprats (frozen, Salmonidae, nes(frozen, whole) Cashew nuts(fresh ordried) Peaches, nectarines(fresh) Coffee substitutescontainingcoffee Eggplant (fresh orchilled) Cocoa paste(notdefatted) or roasted) Cocoa beans (wholeorbroken, raw fatted) Cocoa paste(whollyorpartly de- mangosteens (fresh ordried) Guavas, mangoes, and Sole (frozen, whole) Cashew nuts(fresh ordried) Rattan (primarilyforplaiting) Palm kernel orbabassuoil(crude) smoked) Cod dried(saltedornot, butnot Cuttings andslips, notrooted Sesamum seeds Castor oilseeds (dried, shelled) Kidney beans andwhitepea beans stems) Cloves (wholefruit, cloves, and Pepper thegenusPiper of (whole) steens (fresh ordried) Guavas, mangoes, andmango- animal carcass (non-food) Animal products anddomestic or roasted) Cocoa beans (wholeorbroken, raw Olives (provisionally preserved) Truffles (fresh orchilled) Globe artichokes (fresh orchilled) Oil seedsandoleaginous fruits, nes Ornamental fish(live) Cane molasses fatted) Cocoa paste(whollyorpartly de- Cocoa paste(notdefatted) or roasted) Cocoa beans (wholeorbroken, raw Top 3Revealed comparative advantage products

Custom Union South African South Sudan Sierra Leone 27 Seychelles Country Tanzania Senegal Somalia Uganda Tunisia Sudan Togo Chapter 2-AfricainGlobal Agricultural Trade Sheep (live) balsam, notgumarabic Natural gum, resin, gum–resin, Goats (live) Coffee substitutescontainingcoffee Sardine, brisling, sprat (frozen, whole) Cocoa (shells, husks, skins, andwaste) Tuna nes(frozen, whole) whole) Skipjack, stripe-belliedbonito(frozen, Tuna (yellowfin)(frozen, whole) cooked) Groundnut (inshell, notroasted or Groundnut oil(crude) Fish liverandroe (fresh orchilled) Cotton (carded or combed) shelled, nes) Beans (dried, Roses worked, humanhairwaste) Hair, human(un Dates (fresh ordried) Globe artichokes (fresh orchilled) concentrated) Milk andcream nes(sweetenedor Sesamum seeds Cotton seeds Cashew nuts(fresh ordried) Onions (dried, notfurther prepared) Coffee substitutescontainingcoffee Sheep (live) Gum arabic residues) Groundnut (oil-cake andothersolid Oats Sesamum seeds Gum arabic Oranges (fresh ordried) wool) Sheep orlambskins(pickled, without Custom Union Grapefruit (fresh ordried) Top 3Revealed comparative advantage products

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 (3) Africa istheregion that faces thelowesttariffs intheworldonproducts itexports worldwide. region protection, that applies the highest levels of globally and in the agricultural sector; and Note: RCA =revealed comparative advantagenes=notelsewhere specified. Source: COMTRADE (2019)andauthors’ calculations, classification. computedattheHS6levelof 10 This pointiswelldocumented intheliterature. See Jean etal. 2019;Guimbard etal. 2009. products,other typesof andthisistrueforallorigins andalldestinations; We shouldnotethat: (1)agricultural products barriersthan stillfacesignificantlyhigher tariff faced bycountriesontheirexports worldwide. countries applyontheirimports, while“Average dutyonexports” estimates theaverage duty columns ontheleft). “Average import protectionism duty”estimates theaverage that levelof the right)andaverage customsdutiesfacedbyexports advalorem (thetwo equivalentof the average different theworldin2016, regions of forallproducts andforonlyagricultural products. Itshows Table2.2 worldwideprotection presents withtheaverage anoverviewof import dutyforsix Trading costsinagriculture Country Liberia Kenya Libya equivalent of customs duties applied on importsad valorem (the two columns on equivalent of Fish (live), except trout, eel, orcarp carded orcombed) Greasy wool(otherthanshorn;not out wool) Sheep orlambskins(pickled, with- carded orcombed) Greasy wool(otherthanshorn, not maize, wheat, rice Cereal bran, sharps, residue except or roasted) Cocoa beans (wholeorbroken, raw (fresh orchilled) Legumes except peas &beans tobacco substitute Cigars, cheroots, cigarettes, with packages >3kg) Tea, black(fermentedorpartly, in Top 3Revealed comparative advantage products

28 Zimbabwe Country Zambia Chapter 2-AfricainGlobal Agricultural Trade Tobacco refuse stemmed, orstripped) Tobacco (unmanufactured, Reptile skins(raw) residues Cottonseed oil-cake andothersolid Reptile skins(raw ) Maize bran, sharps, otherresidues Top 3Revealed comparative advantage products 10 (2) Africa isthe faced onexports, forallproducts andforagricultural products, byregion, 2016 Table 2.2 Average import advalorem dutiesappliedtoimports, equivalentof andduties on exports, forallproducts andforagricultural products, by African country(percent) 2016 Table 2.3 Average import advalorem dutiesappliedtoimports equivalentof anddutiesfaced and Algeria (38.54percent). countries it is above 16 percent: Guinea-Bissau (16.82 percent), Mozambique (18.19 percent), subject toaverage 10percent customstariffs or more of ontheiragricultural exports. For three aroundthan theworldaverage 11percent. of Nearly 33percentAfrican countriesare of Average tariffs facedonagricultural exports by African countriesare around 9percent, lower and tobaccoproducts. cashew nuts, while Kenya and Malawi have an Revealed comparative advantage in tobacco on products that are highlyprotected elsewhere intheworld:Guinea-Bissau mainlyexports high tariffs ontheirexports. This their isspecificallyowingtotheconcentrationexports of 57 listed, onlythree countries(Guinea-Bissau, Kenya, andMalawi)are subjecttorelatively countries are natural mainly exporters resources of such as oil, gas, gold, and copper. the Of less than 1percent Congo)Republic faceanaverage on theirexports. of of tariff these Most of 3 percent. Several countries(Angola, Chad, Equatorial Guinea, Eritrea, Gabon, Libya, andthe 57 African countries. Taxes facedby African exports are relatively low, onaverage, at around Table protection inagriculture thelevelof 2.3provides andinallproducts anoverviewof for LAC =Latin American countries. Agric. = Agriculture Note: Tariffs are weightedfrom theHS6levelaccording tothereference group method(seeBouëtetal. 2008). Source: Authors’ calculationsfrom MAcMapHS6, 2016(CEPII2011). Botswana Benin Angola Cabo Verde Burundi Burkina Faso Algeria Country Oceania North America LAC Europe Asia Africa Region 2.75 6.11 1.34 7.85 3.22 0.68 1.26 All 4.77% 3.74% 4.66% 3.94% 3.74% 3.09% All Average dutyfacedonexports Average dutyfacedonexports 2.95 14.56 3.74 11.91 5.01 7.95 38.54 Agriculture 14.08% 9.16% 11.87% 11.19% 9.16% 9.07% Agric. 29 Chapter 2-AfricainGlobal Agricultural Trade 7.68 11.42 10.6 7.43 10.61 9 11 All 2.28% 4.68% 5.81% 2.53% 4.68% 9.03% All Average import duty Average importduty Agriculture 11.3 22.61 14.39 8.7 14.39 18.45 17.01 2.36% 13.34% 12.23% 7.74% 13.34% 18.01% Agric.

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Rwanda Nigeria Niger Namibia Mozambique Morocco Mayotte Mauritius Mauritania Mali Malawi Madagascar Libya Liberia Lesotho Kenya Guinea-Biss. Guinea Ghana Gambia Gabon Ethiopia Eritrea Equ. Guinea Egypt Djibouti Côte d’Ivoire Congo, Rep. Congo DR Comoros Chad Cent. Afr.Rep. Senegal S. Tome &Pr. Saint Helena Cameroon Country 5.48 3.3 1.68 13.38 2.01 0.59 1.07 7.53 11.63 15.88 2.63 2.89 3.11 0.89 2.47 0.92 0.89 5.42 3.01 4.36 0.75 2.12 4.13 0.57 3.93 2.49 5.5 3.16 2.18 6.27 1.27 3.25 7.88 4.81 4.37 8.85 All Average duty facedonexports 7.85 7.85 4.22 15.62 3.17 9.79 2.41 11.12 15.25 16.82 9.47 5.1 5.06 8.78 3.52 5.03 4.47 12.73 3.83 4.57 4.21 6.23 4.91 1.46 8.78 3.72 8.24 1.97 1.88 12.76 7.79 10.09 11.96 18.19 7.57 12.56 Agriculture 30 Chapter 2-AfricainGlobal Agricultural Trade 0.85 9.43 10.61 9.85 7.99 0 9.92 7.43 12.23 10.61 9.38 8.79 14.09 14.26 13.55 6.78 14.52 9.81 20.44 8.76 10.44 10.39 14.75 15.58 15.18 15.4 8.75 10.43 NA 9.78 10.93 10.61 7.43 7.68 5.95 6.94 All Average import duty Agriculture 2.83 10.58 14.4 14.01 9.63 0 12.56 8.7 26.37 13.1 13.88 15.37 17.34 18.81 17.1 9.38 19.79 36.71 12.61 14.81 13.87 12.02 8.58 19.1 20.75 23.09 14.72 10.66 NA 18.61 14.16 14.38 8.7 10.79 20.61 6.16 duty onimports greater than30percent. range. Egyptistheonlycountryin Africa that protects itsagriculture withanaverage applied protect theiragriculture withanaverage applieddutyonimports inthe20percent–30 percent (Burundi, Cameroon, Central African Republic, Kenya, Morocco, Sudan, Tanzania, andUganda) African countriestax agricultural imports at more than 12percent. Inaddition, eightcountries agricultural imports,In termsof theworldaverage isaround 12percent. About 65percent of than 20percent. at lessthan5percent. Ontheotherhand, onlyDjiboutitaxes itsimports more at anaverage of data are available, onlythree (Libya, Mauritius, andSeychelles)apply anaverage customstariff compared totheworldaverage (around 5percent). Indeed, amongthe53countriesforwhich As farasimports are concerned, African countrieshaverelatively protection highlevelsof S. Tome &Pr. =Sao Tome andPrincipe; West. Sahara = Western Sahara. Congo, Rep. =Congo Republic; Equ. Guinea =Equatorial Guinea; Guinea-Biss. =Guinea-Bissau; (see Bouëtetal. 2008). Cent. Afr. Rep. =Central African Republic; Congo DR=Congo Democratic Republic; Note: NA =data notavailable. Tariffs are weightedfrom theHS6levelaccording tothereference group method Source: Authors’ calculations from MAcMapHS6, 2016(CEPII2011). Zimbabwe Zambia West. Sahara Uganda Tunisia Togo Tanzania Swaziland Sudan South Sudan South Africa Somalia Sierra Leone Seychelles Country 7.19 2.22 9.63 5.82 3.58 4.25 4.87 7.89 6.79 8.08 3.93 3.34 2.12 4.18 All Average duty facedonexports 15.97 13.01 14.88 7.47 8.31 7.16 8.2 11.97 9.9 11.33 12.75 3.72 7.26 4.18 Agriculture 31

Chapter 2-AfricainGlobal Agricultural Trade 12.32 11.13 NA 10.06 7.12 8.75 11.98 7.43 18.54 NA 5.68 NA 13.64 2.64 All Average import duty Agriculture 18.74 15.81 NA 21.78 18.5 14.69 27.01 8.7 27.88 NA 8.8 NA 16.45 5.96

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 different theworldin2018. regions of These twoelementsinclude, amongothers: Figure 2.6provides information onthecostandtime needed toexport andimport goodsin Note: OECD=Organisation forEconomicCo-operation andDevelopment;USD=USdollars. Source: DoingBusiness2019(World Bank2019). Figure 2.6 Time andcosttoexport andtoimportbyregion, 2018 advantage is identified and the country of destination is the largest purchaser of thisproduct. destinationisthelargest purchaser of advantage isidentified andthecountryof For allcountries, containerizedautopartsfrom thatcountry’s importsare shipmentsof natural partner. For exports, aproduct thatrepresents comparative goodstoandfrom the economy’s exporting andimportingaspecificshipmentof money of maintrading partner. This excludes tariffs and border taxes. specialistsinthearea,11 -Basedoninterviewsof DoingBusiness 2019(World Bank2019)constructsindicatorstomeasure thecostinbothtimeand America andtheCaribbean, andOECD high incomecountries. in Africa thantheyare forimporters inEast Asia andPacific, Europe and Central Asia, Latin and inOECDhigh-incomecountries. Ontheotherhand, theyare muchhigherforimporters are in East Asia and in the Pacific, Europe and Central Asia, Latin America, and Caribbean, income countries. Documentarycompliancecostsare higherin Africa forexporters thanthey Central Asia, andinOrganisation forEconomicCo-operation andDevelopment(OECD)high- costs are higherforimports thantheyare forexports inallregions, except forEurope and documentary compliance, forbothimports andexports. Italsoshowsthat border compliance Figure 2.6showsthat costsrelated toborder complianceremain higherthanthoserelated to OECD highincome East Asia&Paciﬁc 3. 2. 1. Time toimport:Documentarycompliance(hours) Time toexport: Documentarycompliance(hours) Cost toimport:Documentarycompliance(USD) Cost toexport: Documentarycompliance(USD) administrative harassment bypoliceorgendarmerie, etc.). domestic transport (transport timefrom thecapitaltomainport, road congestion, customs compliance(inspectionsandobtainingauthorizations from customs); and destination); of for transport; administrative originandthecountry authorizations inboththecountry of documentary compliance(obtaining, preparing, andsubmitting documentsrequired Time toimport:Border compliance(hours) Time toexport: Border compliance(hours) Cost toimport:Border compliance(USD) Cost toexport: Border compliance(USD) South Asia Europe &Central Asia 0 32 100 Sub-Saharan Africa Latin America &Caribbean 200 Chapter 2-AfricainGlobal Agricultural Trade 300 400 11

Middle East&North Africa 500 600 700 products of 55 productsAfrican countries. of Figure 2.7gathers allavailabletrading costsasadvalorem equivalentsfortheagricultural barriers onimports. timefordocumentation cost,of ADAI = Average dutyappliedonimports, AVE_NTB = Ad valorem equivalentnon-tariff compliance, AVE Cost Border = time for borderAd valorem cost, equivalent of AVE Cost Doc = Ad valorem equivalent timeforbordervalorem compliance, equivalentof AVE Time Doc= time fordocumentationAd valorem equivalentof Note: ADFE = Average dutyfacedonexports, XTax = Ad valorem average taxation onexports, AVE Time Border = Ad (World Bank2019);MacMapHS6(2016);Kee, Nicita, Olarreaga (2009);andLaborde, Estrades, Bouët (2013). Source: Authors’ calculations usingdata from BACI (GaulieretZignago2010), DoingBusiness2019 —agricultural products only Figure allavailableexport andimportcostsinadvalorem 2.7Combination equivalents of 3.1 percent foragricultural products. spends intransit. between0.6percent and2.1percent, Each dayintransitof isequivalenttoanadvalorem tariff and thisfigure cangouptoasmuch as giveninDoingBusiness 2016(World Bank2016), werefer toHummelsandSchaur(2012), whoevaluate thecostassociated withthetimeaproduct exports andimportsfrom BACI togetanadvalorem equivalent. To evaluatethecostsassociated withthetimeforborder anddocumentary compliance, those quantitiesbythecostspercontainer availableinDoingBusiness 2016(World Bank2016)anddividethewholebycorresponding valuefortotal exported and imported in a “container unit, equivalent” using the BACI (Base pour l’Analyse du Commerce International) database. We then multiply a15-metric-ton container,costs forborder anddocumentarycomplianceare computedfor theequivalentof products wecomputethetotalquantityof from border DoingBusiness anddocumentarycompliance into advalorem 2016(World equivalents. Bank2016)on the costsandtimeof Becausethese 12 - The methodologyispresented indetailBouët, Cosnard, andLaborde (2017). the Theresults mostdifficult elementtocalculateistheconversionof Ascension and Tristan daCunha ADFE Central African Republic Sao Tome andPrincipe Equatorial Guinea Egypt, Arab Rep. Western Sahara Guinea-Bissau Saint Helena, Mozambique Burkina Faso Cote d'Ivoire Sierra Leone Gambia, The Madagascar Congo, Rep. South Africa XTax Cabo Verde Mauritania Seychelles Zimbabwe Cameroon Export costs Import costs Swaziland Botswana Mauritius Comoros Tanzania Namibia Morocco Ethiopia Mayotte Burundi Djibouti Senegal Somalia Rwanda Uganda Lesotho Zambia Nigeria Malawi Guinea Algeria Angola Tunisia Liberia Gabon Ghana Eritrea Sudan Kenya Benin Niger Libya Chad Togo Mali AVE TimeBorder 0% 10% 20% AVE TimeDoc 30% 40% 12 AVE CostBorder 50% 60% 70% AVE CostDoc 80% 33 90 Sao Tome andPrincipe Central African Rep. Equatorial Guinea Congo Dem. Rep. Egypt, Arab Rep. Guinea-Bissau Chapter 2-AfricainGlobal Agricultural Trade Mozambique ADFE South Sudan Burkina Faso Cote d'Ivoire Sierra Leone Gambia, The Madagascar Congo, Rep. South Africa Cabo Verde Mauritania Seychelles Zimbabwe Cameroon Swaziland Botswana Mauritius Comoros Tanzania Namibia Morocco Ethiopia Mayotte Burundi Djibouti Senegal Somalia Rwanda Uganda Lesotho Zambia Nigeria Malawi Guinea Algeria Angola Tunisia Liberia Gabon Ghana Eritrea Sudan Sudan Kenya Benin Niger Libya Chad Togo Mali XTax 0% AVE TimeBorder 100% 200% AVE TimeDoc 300% 400% AVE CostBorder 500%

600% AVE CostDoc 700%

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 performance of Africa inagriculturalperformance of trade. barriers, non-tariff the impactof astheseappear tobeanimportant theweak explanation of high. Somemayargue that politicaleffort shouldbespentinfacilitating trade andreducing 2.7 and Table 2.3, barriersis wecanseethat barriersandnon-tariff thegapbetweentariff timefordocumentationthe advalorem compliance. equivalentof When comparingFigure duty faced on exports (ADFE), time for border the ad valorem compliance, equivalent of and thecoststructureThe indicates decompositionof that thelargest components are theaverage exportsThe doesnotexceed totalcostof 40percent the55countriespresented. forat least 41of compliance, whichappears tobeamajorhindrance agricultural totheimport products. of imports timeforborder seemstobedrivenbytheadvalorem high costof equivalentof countries presented inFigure 2.7, more wenoteatotalimport than100percent. costof This In general, import costsare muchhigherthanexport costs. Indeed, the formore than40of compliance anddocumentarycompliance). and documentarycompliance), andthecostassociated withthetimetaken toexport (border duty facedbyexports, theaverage export tax, theaverage costtoexport (border compliance barriersonimports. non-tariff equivalent of Ontheexport side, thesecostsare theaverage time taken toimport (border complianceanddocumentarycompliance), andtheadvalorem to import (border complianceanddocumentary compliance), thecostassociated withthe On theimport side, thesecostsare theaverage applieddutyonimports, theaverage cost the smallerindex is. theworld. trade intherest of Inotherwords,of themore different acountry’s trade, trade isfrom theworldwidedistributionof geographic allocationof is closelylinked toasmalltrading country. onecountry’sThe GGDIindicatorassesses thedistancebetweendistribution of trade andthedistribution partner. Thus, there isnodifference betweenasituationinwhichcountrytrades intensivelywithamajortrading countryandoneinwhicha everypotential trade flowswithabenchmark thatdoesnotaccountfortheactualsizeof with thisindicatoristhatitcompares the actual distributionof diversificationasthe oneobserved. thesamesizethatwouldgive thesamedegree of markets However,markets of computesthenumberof onelimitation destinationsorproducts,varies from closeto0(aninfinityof each insmall quantity)to1(auniquedestinationorproduct). So, equivalent thenumberof theHerfindahlindex13 - (HHindex). equivalentmarkets istheinverseof The numberof themarket shares thesquares and of The HHindex isthesum of index (GGDI). Iapadre, equivalentmarkets andtheglobalgeographic 2012): thenumberof diversification export side, considered asthebestindicators intheacademicliterature (DeLombaerde and agricultural trade. For each diversification dimensionwecalculate onthe twoindicators of In thissection, diversification—geographic weillustrate andsectoral—for bothdimensionsof exports is, therefore, afundamentalissue. et al. (2011), Carrère (2013), Funke andRuhwedel (2001). product The diversification issueof of capita income. This relationship has been empirically verified: Imbs and Wacziarg (2003), Cadot therefore indomesticactivity. Suchconcentration isevenassociated withlowergrowth andper one orafewproducts volatility inexport haslongbeenassociated withariskof earnings and can mean better integration andgreater resilience. The acountry’s concentration of exports on productshaving more partners traded andinthenumberof diversification inthenumberof acountry’sThe qualityof trade integration diversification. dependsonitsdegree of Indeed, productA diversification lackof Somalia, South Sudan). partners andontheotherside, countrieswithalowdiversification (Eritrea, Namibia, Niger, high (Algeria, Ethiopia, Ghana, Kenya) theiragricultural diversificationexports of in termsof is contrasting between on one side, countries with a high (Egypt, South Africa) or a relatively the bottomaverage graphicGGDIbetween2016 and2017. istheworldmapof The picture The topgraphic inFigure 2.8 13

is the world map of average number of equivalentmarkets; average number of istheworldmapof 34 Chapter 2-AfricainGlobal Agricultural Trade

European Unionisless, sinceonlyFrance appears inthelist. represent around total 52percentAfrican agricultural of imports: here, the thesignificanceof others are China, the USA, and India. The agricultural 10 main exporters products of to Africa African agricultural exports, which are from 7of theEuropean Union(with28countries). The 3 The 10mainimportersAfrican agricultural of products represent around total 51percent of Table 2.4showstheranking the10mostimportant andtheshare trading of partners for Africa. EquivalentMarkets; GGDI=globalgeographicNote: NEM=Numberof diversification index.. Source: COMTRADE (2019)andauthors’calculations. diversification index, average 2016–2017 equivalentmarketsFigure agricultural andglobalgeographic exports: numberof 2.8Geographic diversificationof 35 Chapter 2-AfricainGlobal Agricultural Trade

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 much by the rest of theworld.much bytherest of exports showsthat most African countriesexport some commoditiesthat are notexported countries that commodities. are dependent on a small number of TheAfrican low GSDI of 2016 and2017. agriculturalWe diversificationexports of inall canseethelowlevelof African sectoral markets, andthebottomaverage graphicGSDIbetween displaystheworldmapof The top graphic in Figure equivalent average number of 2.9 displays the world map of theworld. of acountry’ssectoral distributionof exports exports andthesectoral intherest distributionof observed. The globalsectoral diversification index (GSDI)measures thedistancebetween same sizethat diversification wouldgivethesamedegree inproducts of astheoneactually equivalentsectoral markets numberof the measures productsindicator of of thenumberof We present the same indicators with respect to sectoral diversification: onthe export side, the Source: COMTRADE (2019)and authors’ calculations. Table 2.4 Top African agricultural imports andexports (2017) Belgium Italy India United Kingdom China Germany United States Spain France Netherlands Top African importerof agricultural products 3.26 3.52 3.96 4.38 4.49 4.65 5.28 5.66 6.98 8.58 agricultural exports (%) Share of African of Share 36 Ukraine Malaysia China Indonesia United States India France Argentina Russian Federation Brazil Top agricultural exporter to Africa Chapter 2-AfricainGlobal Agricultural Trade 3.33 3.44 3.73 4.19 4.39 4.77 5.77 5.87 7.04 9.24 agricultural imports(%) Share of African of Share

oils andrelated products, sugar, tobacco, livestockproducts, andfish and related products. more diversifiedcontent:processed food, cereals, fruits, milkanddairyproducts, vegetable percent). The 10mostexported products represent around all exports, 21percent of witha oil andrelated products (8.33percent), sugar (7.83 percent), andmilk and dairyproducts (2.03 totalagriculturalpercent imports, of withaconcentration incereals (23.75percent), vegetable agricultural products. The 10 most imported agricultural products account for around 42 Table 2.5highlightstheranking the10mostimportant andtheshare traded of African Note: Moy. NEex. equivalentmarkets; Moy. =numberof GSDI=globalsectoral diversification index. Source: COMTRADE (2019)andauthors’calculations. diversification index, average 2016–2017 Figure agricultural exports, 2.9Sectoral equivalent markets diversificationof andglobalsectoral numberof

37 Chapter 2-AfricainGlobal Agricultural Trade

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 mining commodities. legumes, andtea. Many African countriesalsohaveacomparative advantageinenergy and these are generally raw orunprocessed: cocoa, coffee, cotton, fishand products, fruits, On theexport side Africa hascomparative advantages intraditional agricultural products, but the localmarket. tripling intraregional agricultural trade makes sensewhenweare thedynamismof aware of increasing rapidly. The creating prospect of afree trade area throughout the continentand on that continent. It is, therefore, not surprising that agriculturalAfrican imports goods are of theworldandeconomicgrowthis growing therest issteadily fasterthanthat of higher of This deficithastobelinked tothedemographic andeconomicsituation: Africa’s population global agricultural GDPhasbeensteadily increasing since 1995. sector. This deficithas, however, been significantly reducedsince 2012, and Africa’sof share natural resources that are particularly favorable toagriculture, Africa hasatrade deficitinthis This chapterhasattempted tocharacterize Africa’s placeinworldagricultural trade. Despite Conclusion Note: nec=notelsewhere classified. Source: COMTRADE (2019)and authors’ calculations Table 2.5 Top African agricultural imports andexports (2017) solid residues Soybean oil-cake andother not degummed Soybean oilcrude, whetheror sweetened <1.5%fat Milk andcream powderun- nec), pure sucrose Refined sugar(insolidform, milled Rice, semi-milledorwholly Raw sugar, cane Maize except seedcorn refined) Palm oilorfractions (simply Durum wheat and meslin Wheat except durumwheat agricultural products imported Top 10 Share of agricultural Share of 1.73 1.82 2.03 3.76 4.05 4.07 4.4 4.78 5.2 10.1 imports (%) 38 Shrimps andprawns (frozen) pared (preserved notlive) Fowl, duck, goose, offal, pre - except livers(frozen) Fowl cuts&offal, domestic, Cigarettes containingtobacco Raw sugar, cane solid residues Soybean oil-cake andother processed, orblue-veined Cheese except fresh, grated, fresh ordried Bananas, includingplantains, Maize except seedcorn Food preparations nec agricultural products exported Chapter 2-AfricainGlobal Agricultural Trade Top 10 Share of agricultural Share of 1.44 1.5 1.62 1.65 1.76 2.03 2.1 2.39 2.66 3.61 exports (%) References able toparticipate fullyinworldtrade, inawaythat itsnatural reflects therichnessof resources. barriers. thesenon-tariff theseare itaddresses addressed, theissueof If if then Africa willbe comparison, barriersare tariff relatively low. This means that the AfCFTA willbesuccessfulonly cost spentoncustomsformalitiesisclearly excessive for African importers andexporters. In barriers,is non-tariff withanimportant role playedbyadministrative barriers:thetimeand barriers to trade.the multiplication of The main obstacle to improving Africa’s trade integration participation inworldtrade, whetherintra- orextraregional. This poorperformance isrelated to This doesnotmean that trade iswellintegrated within Africa. Africa performspoorlyintermsof required, andconfirmsthat Africantrade ismore introverted than extraverted. barriers, butalsoongeography, economicactivity, andsoon. This iswhyabenchmark We demonstrate that intraregional theshare of trade intotaltrade dependsnotonlyontrade continents, studiesdefinesabenchmarkthat whilethefirstgroup considersallworld trade. of studiescomparessecond group intraregional theshare of of trade different intotaltrade of 2012; Brenton and Isik, 2012). This is essentially due to the benchmark used in each study. The 2017), institutionalpublications (UNECA, butcontrary tothoseof AUC, and AfDB, 2010;Barka, identical tothat reached inseveral academicstudies(Iapadre, 2006;Bouët, Cosnard, Laborde, We intra-African trade alsoshowedthat thelevelof appears relatively high:thisisaconclusion earnings. by diversifyingproduction bases(involvingarisealongvaluechains)andstabilizingexport characterized bylowbarrierstointernational trade, AfCFTA couldremedy theseweaknesses be specialized, are often low-value-added stages. By creating a large domestic market, export revenues; valuechains, andtheearly stagesof inwhich African countriesappear to products,number of whichare often raw orsemi-processed. This mayimplyvolatility in So, astrikingfeature African trade of exports isahighconcentration inarelatively of small Bouët, A., Y. Decreux, L. Fontagné, S. Jean, andD. Laborde. 2008. “Assessing Applied Bouët, A., L. Cosnard, andD. Laborde. 2017. Measuring Trade integration in Africa. ——— 2016b. Informal Trade inBenin, Togo, andNigeria:Determinants ImpactsonPrice Bensassi, S., J. Jarreau, andC. Mitaritonna. 2016a. Cross-border Determinantsof Informal Barka, H. B. 2012. Border Posts, Checkpoints, andIntra-African Trade: Challengesand Balassa, B. 1965. “Trade Liberalization andRevealed Comparative Advantage.” AUC (AfricanUnionCommission). 2014.Declarationon Accelerated Malabo Agricultural ProtectionWorld.” Acrossthe Discussion Paper 01667. Washington, DC:International Food Policy Research Institute. Transmission. AGRODEP Technical Report, IFPRIDakar. Trade: The Benin. Case of AGRODEP Technical Report, IFPRIDakar. Solutions. Abidjan, Côte EconomistComplex, d’Ivoire: Chief African DevelopmentBank. org/10.1111/j.1467-9957.1965.tb00050.x. EconomicandSocialStudiesThe 33:99–123. ManchesterSchoolof https://doi. Ethiopia. Growth and Transformation forShared Prosperity and Improved Livelihoods. AddisAbaba, Review of International Economics16(5):850–863.Review of 39 Chapter 2-AfricainGlobal Agricultural Trade

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Iapadre, L., andF. Luchetti. 2010. Trade Regionalisation andOpennessin .Africa EUI Iapadre, L. 2006. “Regional Integration Agreements andtheGeographyWorld of Trade: Hummels, D., andG. Schaur. 2012. Time asa Trade Barrier. Working Paper 17758. Hoekman, B., ed. 2015. The Global Trade Slowdown: A NewNormal . VoxEU.orgeBook. Guimbard, H., Laborde, D., andC., Mitaritonna, 2009, A Picture of Tariff Protection Across Gaulier, G. andZignago, S., 2010. BACI: international trade database at theproduct-level Funke, Michael, Ruhwedel, andRalf 2001, “Export varietyandexport performance: Foroutan, F., andL. Pritchett. 1993. “Intra-Sub-Saharan African Trade: IsIt Too Little?” Fisman, R., andS.-J. Wei. 2004. “Tax Rates and Tax Evasion: Evidence from MissingImports Ferrantino, M. J., andD. Taglioni. 2014. “Global Value ChainsintheCurrent Trade De Lombaerde, P., andL. Iapadre. 2012. “Globalization Indicators: Ways Forward.” In COMTRADE, 2019, https://comtrade.un.org/, accessedon April, 1st, 2019. Coe, D. T., and A. W. Hoffmaister. 1998. “North-South Trade: Is Africa Unusual?”IMF Carrère, C. 2013. UEMOA, ?, CEMAC: QuellePerformance enMatière deCommerce Cadot, O., C. Carrère, and V. Strauss-Kahn. 2011. “Export Diversification: What’s Behind Brenton, P., andG. Isik. 2012. De-fragmenting Africa. WashingtonDC: World Bank. ———. 2019. Bourgoin, J., D. Diop, andD. Dia. 2017.RéalitéetEnjeuxdel’Acquisition Massivedes Bouët, A., andD. Roy. 2012. Trade protection andtaxevasion:Evidence from Kenya, Bouët, A., K. Pace, and J. W. Glauber. 2018. University Institute, Florence. Working Paper, RSCAS 2010/54, Robert Schuman Centre for Advanced Studies, European Regional Integration, pp. 83–103. Routledge. Statistical Indicators andEmpiricalEvidence.” In Cambridge, MA, US:National Bureau EconomicResearch. of London: CEPRPress. Paris, CEPII. the World in2004MAcMap-HS6, Version 2, CEPII Working Paper, N°2009-22, septembre, (the 1994-2007version), CEPII Working Paper 2010-23. empirical evidencefrom East Asia.” Asian Economics 12.4(2001):493-505. Journal of jae.a036775. African Economies2(1):74–105.Journal of http://dx.doi.org/10.1093/oxfordjournals. in China.” Political Journalof Economy112(2):471–496. Slowdown.” World BankEconomicPremise 137:30. Antwerp, Belgium:Garant. Macroeconomics andBeyond, editedbyErreygers, G., andM. Vermeire, 159–174. Working Paper No. 98/94, Washington DC, IMF. Revue d’économiedudéveloppement, 1(21):33–60. EconomicsandStatisticsthe Hump?”Review 93.2: 590–605. of Focus surlaZone duDeltaFleuveSénégaletLacdeGuiers, Atlas SIRENA, Paris, IRD. du LacdeGuiers. Les NotesPolitiques del’ISRA-BAME, Février, n. 6, Dakar, ISRA-BAME. Terres parl’Agroindustrie auSénégal:Focus surlaZone duDeltaFleuveSénégalet (2): 287–320. Mauritius, andNigeria. Food Policy Research Institute. Much? Why? Impact? DiscussionPaperAnd What 1783. Washington, DC:International Dynamique Spatiale etInsertion Territoriale del’Agro-industrie auSénégal: The International Journal of Trade &EconomicDevelopment 21 40 Informal Cross-border Trade in Africa: How Assessment and Measurement of Assessment andMeasurement of Chapter 2-AfricainGlobal Agricultural Trade Yang, Y., and S. Gupta. 2007. “Regional Trade Arrangements in Africa: Past Performance ———. 2019. DoingBusiness2019: Training forReform, Washington,DC: World Bank ———. 2016. DoingBusiness2016:Measuring Regulatory QualityandEfficiency. Washington, World Bank. 2000. Can Africa Claimthe21stCentury? Washington,DC: World Bank. UNECA (UnitedNations EconomicCommission for Africa), AUC (AfricanUnionCommission), Uganda.Uganda Bureau Statistics andBankof 2014. of The InformalCross-Border Trade Subramanian, A., and N. Tamirisa. 2001. Africa’s TradeRevisited. IMF Working Paper 01/33, Sachs, J. D., and A. M. Warner. 1997. SlowGrowth “Sources in of African Economies.” Journal Rodrik, D. 1999. The NewGlobalEconomyandDevelopingCountries: MakingOpenness Plummer, M. G., D. Cheong, andS. Hamanaka. 2010. MethodologyforImpact Assessment of MAcMapHS6, 2016, http://www.cepii.fr, accessedon April 1, 2019. Laborde, D., C. Estrades, and A. Bouët. 2013. “A theEconomicEffects Global Assessment of Kee, H. L., A. Nicita, andM. Olarreaga. 2009. “Estimating Trade Restrictiveness Indices.” Jean, S., andC. Mitaritonna, C. 2010. DeterminantsandPervasiveness theEvasion of of Jean, S., Guimbard, H., and J.-C. Bureau. 2019. “Agricultural Trade Liberalization in the 21st Imbs, J., andR. Wacziarg. 2003. Diversification.” “Stages of The American EconomicReview 8268.2007.00169.x. and the Way Forward.” AfricanDevelopmentReview 19(3):399–431. doi:10.1111/j.1467- DC: WorldBank. Intra-African TradeEnhancing .UNECA. AddisAbaba,Ethiopia: and AfDB (AfricanDevelopmentBank). 2010. AssessingRegional Integration in Africa IV: Survey Report 2014. Kampala: UBOSandBoU. IMF, WashingtonDC. Economies 6(3):335–376. African doi:10.1093/oxfordjournals.jae.a020932.of Work. Washington, DC:Overseas DevelopmentCouncil. Free TradeAgreements . Manila: Asian DevelopmentBank. Export Taxes.” of Economic Journal Custom Duties. Working Paper 2010-26. Paris: CEPII. Century:Agricultural HasitDonetheBusiness?”Journalof Economics70(1):3-25. 93:1 63–86. The WorldEconomy 36(10):1333–1354. 119: 172–199.

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Africa Agriculture Trade Monitor / Report 2019

Intra-African Trade Integration

Sunday Odjo, Fousseini Traoré, and Chahir Zaki Africa Agriculture Trade Monitor / Report 2019 free trade areas; and AMU hasyettoform afree trade area (ECA 2016). market. ECOWAS hasacustomsunion. COMESA, SADC, andECCAS haveonlyestablished economic communityby2028. However, onlyEAC hasreached having acommon thestageof to creating acontinentalcustomsunion by2019, acommonmarket by 2023, andan African the coordination systemsamongRECswithaview andnon-tariff tariff andharmonization of unions shouldbeestablishedintheRECsby2017. These measures were intendedtoenable barriersaffectingnon-tariff intra-community trade by2007;andfree trade areas andcustoms into force in1994, thedifferent RECsshouldhavecompletedagradual and tariff removal of According tothe Abuja Treaty State signedby in1991andwhich enteredAfrican Heads of COMESA. SADC, theEast African Community andallmembersof (EAC)—except for Tanzania—are part of the Arabmembers of Maghreb Union(AMU). Further, SACU are all5membersof part of theSouthern (SADC),Africa CustomsUnion(SACU), the5membersof the5 1of and1of 3 ECCAS theSouthern members,Africa Development Community the15members of 8of Common Market forEasternandSouthern Africa (COMESA) comprises20membersincluding the Centralmembers of African Economic and Monetary Community (CEMAC). Similarly, the CentralEconomic Community of African States (ECCAS) has11 members, which6are also of Union (WAEMU), 15ECOWAS where 8of memberstates form WAEMU. InCentral Africa the West African States (ECOWAS) the West overlapswiththat of African EconomicandMonetary themainRECs.countries of In West Africa, theEconomicCommunity of themembershipof coordinating policiesandregulations withintheRECsmore complex. Table 3A.1liststhemember (RECs). these RECsoverlaps,The harmonizingand membershipof makingthetasks of Africa encompassesseveral RTAs, whichare alsoknownasregional economiccommunities Africa: Where dowestand? Regional integration initiatives in findings inSection5. geographical andsectoral levels, aswellinitsintra-industry trade. We concludewithour Section 4examines thediversification African of regional economiccommunities(RECs) at tradingpresents in thecostof Africa andanalyzestowhat extent trading blocsare integrated. developments brought recently totheefforts toward creating broader integration. Section3 thischapterreviews Section 2of Africa’s regional integration initiatives andfocusesonnew trade integrationand determinantsof (Bouët, Cosnard, andLaborde 2017). examine several indicators, sinceonesingleindicator cannotcapture themultipledimensions arrangements (RTAs) have been in promoting intraregional trade in Africa. To do this we a continental free tradethe form of area. This chapter explores how effective regional trade are pushingforbroader integration torealize thelong-helddesire forpan-Africanunityin scale.and facilitate economiesof This trend isnowbeingaccelerated as African policymakers regulationsit is believed that the harmonization of and policies will help reduce trade costs thisquestforintegrationmost clearly stated istoexpand objectiveof intraregional trade, as Regional integration arrangements haveproliferated across Africa overthelast40years. The 3. Introduction 44 Chapter 3-MonitoringRegional Trade Integration (political, economic, thisrequest before etc.)of endorsingit. request inprinciple, studieshassincebeeninitiated toexamine allimplications andasetof officially requested tojoinECOWAS talks. after a series of ECOWAS acceptedMorocco’s StateMeanwhile, andGovernment, Heads of during the51stSummitof in June 2017, Morocco for ratification inDecember2018. agreement, whichalsoprovides peopleandinvestment, forfree movementof wasauthorized trade liberalization schemeandcommitted toapplythecommonexternal(CET). tariff The association agreement withECOWAS in2017. Indoingso, MauritaniaacceptedtheECOWAS the finalagreement wassignedbyMauritaniainSeptember2018. Mauritaniasignedan between MauritaniaandECOWAS, andtheEuropean Union, were completedin2014and 2000 before comingbackin2017. The economicpartnership agreements (EPAs) negotiated ECOWASDespite beingafoundingmemberof in1975, Mauritanialeft thecommunityin Morocco tojointhecommunity. anassociation agreementextension: thesigningof withMauritaniaandthewillexpressed by Two eventsoccurred recently inthe West Africa region, launchinganewera forECOWAS ECOWAS andNorth Africa 27 countriesbelongingtothethree RECs. The TFTA isafree trade agreement amongthree RECs:COMESA, SADC, andEAC. Itcovers The TripartiteFree TradeArea(TFTA) initiatives haveemerged, shapinganewpanorama, andwefocushere onthethree mainones. There havebeensignificantchangesinthe regional integration landscape recently. Many memberships across RECs. developments inregional integration that overlapping mayhelpovercome thedilemmaof thesetwoRECs.their membercountrieswillhavetochooseoneof This sectionreviews new and EAC, giventhat COMESA andSADCaimtoformacustomsunionthat someof There are COMESA, criticalissuesassociated withtheoverlappingmembershipsof SADC, 2 - Just behindthe African continentalfree trade area. Mauritius, Mozambique, Namibia, Rwanda, Seychelles, South Africa, SouthSudan, Sudan, Swaziland, Tanzania, Uganda, Zambia, andZimbabwe. 1 - Angola, Botswana, Burundi, Comoros, Djibouti, Congo, Democratic Republic of Egypt, Eritrea, Ethiopia, Kenya, Lesotho, Libya, Madagascar, Malawi, in Africa, and ratified. The TFTA, fullyimplemented, if will represent thesecondlargest free trade area the agreement, theseonlyEgypt, andof Kenya, South Africa, andUgandahavebothsigned discussions on tariff offersdiscussions ontariff underPhase Inegotiations (TRALAC 2019). This phase, whichshouldhavestarted in June 2016, ongoing hasbeendelayedbecauseof (such as competition, cross-border investment, and intellectual property rights) will be covered. trade remedies, origin. andrulesof DuringPhaseII, trade inservicesandtrade-related areas The TFTA negotiations havetwophases. PhaseInegotiations concessions, concerned tariff (AfCFTA). expected that the TFTA willconstituteastrong basisforthe African continentalfree trade area and atotalgross US$1.2trillion(MoldandMukwaya2017). domesticproduct (GDP)of Itis 2 comprising almost half of 683millionpeople African countrieswithapopulation of of comprising almosthalf 1 However, the27membershavesigned only22of 45 Chapter 3-MonitoringRegional Trade Integration

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 European Union) instead of being a collection of smallregions.European beingacollectionof Union)instead of it allows Africa tobeasignificantpartner inglobaltrade negotiations (e.g., withChinaandthe AfCFTA isimportant tothecontinentforthree reasons: (1)althoughnotyetacustomsunion, policy, investment, andintellectualproperty. African countries. imports lines andaccountfornomore from tariff thevalueof than10percent other of of products that couldbeexcluded from liberalization shallnotrepresent nomore than 3percent summit inDecember2018andare nowknownasthe“Cairo Package.” Negotiators agreed that protected. The modalities regarding theseproducts were theselectionof clarified at the Cairo will be liberalized the process, at a later stage of and other “excluded” products will remain it wasdecidedthat trade 90percent willbeliberalized, of whilesome“sensitive”products and phytosanitarymeasures), origin, rulesof andtrade facilitation. DuringPhaseInegotiations and coversmarket access, barriers(suchastechnicalto trade, non-tariff andsanitary services, anddisputesettlement. The firstprotocol, ongoods, iscurrently beingnegotiated two phases. DuringPhaseI, three protocols willbenegotiated: trade ingoods, trade in which targets a customsunionandsinglecurrency astheultimate goal. The process involves AfCFTA isamilestoneinthe African integration process asspecifiedinthe1991 Abuja Treaty, The agreement entered intoforce inMay30, 2019. ratification thetheir instrumentof AfricanUnion withtheChairperson of Commission (AUC). signatories to49. To date 54countries the African Union of Assembly held in Mauritania in July 2018, bringing the total number of summit, 5additionalcountriesendorsedtheagreement duringthe31stOrdinary Session 55 countries, GDP. withUS$2.5trillionintermsof Initiallysignedby44countriesat theKigali to create thelargest free one of trade areas intheworld, involving1.2billionpeoplecovering AfCFTA isaveryambitiousinitiative andwaslaunchedinKigali, Rwanda, inMarch 2018. Itaims The Continental Free Trade Area observer sinceNovember2017. expressed their willingness to participate more actively in ECOWAS. Tunisia has been an It isworth notingthat, as AMU isnotworkingasexpected, Tunisia and Algeria havealso 2020. Whether ornotMorocco iswillingtojointhisproject discussion. isalsoamatter of concern.is alsoamatter of Finally, ECOWAS planstohaveacommoncurrency, starting in tradeMorocco agreements hassignedasignificant numberof withother regions andcountries theprivateIn additiontothereluctance sectorinsomeECOWAS of countries, thefactthat accession request byconsensus, byunanimity, memberstates. orbyaqualifiedquorum of put inplacetosupervisethestudiesandguidedecisiononwhetherapprove the states fromA heads of Côte committee d’Ivoire, of Ghana, Guinea, Nigeria, and Togo hasbeen the membershipbid. Nigeria) theECOWAS commissionisstillperformingin-depthstudiestoassesstheimpactof Since Morocco’s request is being challenged by the private sector in some countries (such as 5 - these importsistobedeterminedbyeitherthe 2014–2016average orthe2015–2017 average. The valueof 4 - The agreement ratification. wassettoenterintoforce 30daysafter the22ndcountrydepositeditsinstrumentof This happened on April 29, 2019. Union inNiameyon July 7–8, 2019. Eritrea istheonlycountrythat hasnotyetsignedtheagreement. the StateAfrican andGovernmentof Heads NigeriaandBeninaddedtheirsignatures of atthe12thExtraordinary3 -Representatives Summit of of 5 Phase IInegotiations willcover three additionalprotocols: competition 3 havesignedtheagreement and27havedeposited 46 4

Chapter 3-MonitoringRegional Trade Integration (referring totheso-calledshallowintegration) within each REC. that trade integration byEAC, COMESA, and AMU isthehighestcompared tootherdimensions regional infrastructure. A closer look at the integration dimensions by REC (Table 3.1) shows integration (i.e., hasaregional valuechain), financialandmacroeconomic integration, and the region has reachedof relatively trade integration higher levels of compared to productive most integrated, COMESA istheleast integrated; and(2)thesubcomponents showthat most Two remarks are worth makingabouttheaggregate index: (1)whileEAC andECOWAS are the foundation, hasnobenchmark, anditsinterpretation remains ambiguous. usually required from atrade integration indicator. Indeed, itdoesnothaveatheoretical several dimensions for each REC in a comprehensive way, it does not satisfy three conditions Economic Commission for Africa (UNECA). While thisindex triestotake intoconsideration Table 3.1 presents Africa’s regional integration index constructed by the United Nations products. this sectiondisentanglesthedifferent coststhat affect African trade andespeciallyagricultural and make itsexports lesscompetitiveinbothregional andinternational markets. This iswhy this isparticularly truein Africa. Infact, highcostsincrease acountry’s thepricesof imports between countriesare generally higherindevelopingcountries thanindevelopedones, and those associated withtrade facilitation andcustomsinefficiency). movinggoods The costsof user inthedomesticcountry;and(4)costsduetoadministrative barriersorred tapecosts(i.e., and Technical Barriersto Trade (TBT));(3)localdistributioncostsfrom foreign producer tofinal barriers(suchasquotas,associated andnon-tariff withtariff SanitaryandPhyto-Sanitary (SPS), traded(including distance)andinsurance goods;(2)costsinducedbytrade of policies trade costsmaybedividedintofourcategories: (1)transaction costsrelated totransport policy barriers and even between apparently highly integrated economies” (2004, 691). Such Anderson andvan Wincoop (2004) argue that “trade costsare large, evenasidefrom trade Trade Costs Indicators Measuring regional integration Africa andtheEuropean Union. up theECOWAS theEPAs customsunion:todampenthenegative impactsof between West diversion effects. themainreasonsThis isoneof whygovernments accelerated efforts toset Better integration in Africa before theseagreements enterintoforce islikely toreduce trade The EPAs betweenRECs andtheEuropean Unionare thisphenomenon. agoodillustration of continent. many countriesandregions are stillnegotiating trade agreements the withpartners outsideof agreements with different origins, rules of which increases trade costs for operators; and (3) by majoreconomies;(2)itaddresses overlappingtrade theso-called“spaghetti-bowl of effect” (TPP) andthe Transatlantic Trade andInvestmentPartnership (TTIP), whichare beingnegotiated It is, therefore, aresponse to mega-regional agreements suchasthe Trans-Pacific Partnership 6 - Despite a low level of intraregional trade in 6 -Despitealowlevel of AMU, itstrade integration index ishighthanks to verylowcustomsdutiesonintraregional imports. 47 Chapter 3-MonitoringRegional Trade Integration 6

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 harmonized consumer priceindex). 11 -Financial nationalcurrencies andmacroeconomic andinflation integrationrate differential includesregional convertibilityof (basedonthe RECmembercountrieswhosenationalsarewhose nationalsdonotrequire issued with avisaonarrival. avisaforentry;andproportion of RECmembercountries persons;proportion of theRECprotocol onfree10 -Free movementof people includesratification (ornot)of movement of amemberstateinan REC). exports of importsandshare of between share of intermediate goodsimports(%totalintraregional thedifference importsgoods);andmerchandise trade complementarity index (totalabsolutevalueof 9 -Productive intraregional integration intermediategoodsexports includestheshare (%totalintraregional intraregional of exports goods);share of intraregional flights;total roaming. water andsanitation);proportionregional electricitytrade of (net)percapita;andaverage cost of 8 -Regional infrastructure includestheinfrastructure developmentindex (transport; electricity; informationandcommunicationstechnology; intraregional goodsimports(%GDP), totalintraregional goodstrade. andshare of 7 - Trade customsdutiesonimports, intraregional integration includesthefollowing indicators:levelof goods exports share (%GDP), of share of owing todeficientinfrastructure andbehind-the-borders barriers. at theintraregional level; however, defacto, thesecountriessuffer from otherimplicitbarriers preferential tariffs maynotbefullycaptured. Suchliberalization should, dejure, boosttrade chiefly onindustrialproducts. This, however, maybeduetothefactthat updated data on to 5.6 percent in ECOWAS. These continue to impose sizable protection on intra-REC trade, intraregional imports. Ingeneral, thelatter are verylow, ranging from 1.6percent forECCAS Figure 3.1 confirms this, appliedtariffs comparing the weighted average versus tariffs of on We observethat mostRECsin levelsontheirintraregionalAfrica donothavehightariff imports. Low L measurement toaggregate thedata. scalingresults fromof 0(least )to1(best). That includes astandardization theresults togetthesameunityof of theindicators inadimension. theaveragescores of usingthesumof The index usesthestandard minmaxmethod Note: The dimension theindicators isgivenequalweightinthecalculation index isconstructedasfollows:each of of Source: Constructed bytheauthors usingthe Africa Regional Integration Index. Table 3.1 Africa Regional Integration Index 2015 measures, non-tariff reduction of aswillbeshownlater. differentof free trade agreements infrastructure butare stilllaggingintermsof integration or Hence, onecanexpect that levelsthanks thesecountrieshavelowtariff totheimplementation people. for thefree movementof integrated at thefinancialandmacroeconomic levels, andEAC andSADChaveahighindex By contrast, other RECs display deeper integration, since ECCAS and ECOWAS are deeply Index Average Financial ¯o integration Free people movementof Productive integration Regional infrastructure Trade integration evels of Tariffsof evels 7 9 8 10 11 0.41 0.34 0.27 0.45 0.44 0.57 COMESA 48 0.45 0.6 0.4 0.29 0.45 0.53 ECCAS 0.46 0.4 0.53 0.35 0.5 0.51 SADC Chapter 3-MonitoringRegional Trade Integration 0.46 0.2 0.49 0.48 0.49 0.63 AMU 0.51 0.61 0.8 0.27 0.43 0.44 ECOWAS 0.54 0.16 0.72 0.55 0.5 0.78 EAC 0.39 0.54 0.40 0.47 0.58 Average

most of theRECsare sufferingmost of from below-the-world-average infrastructure. thelogisticsperformance index (LPI)and the Worldof EconomicForum (WEF), showingthat transport, electricity, ICT, andwater andsanitation) andFigure 3.3, whichcompares the indices infrastructure developmentindex (developedbythe African Development Bankandincluding 2016). These empiricalresults are confirmedin Figure 3.2, the whichshowsthelowlevelof manufacturingvaluechainsandinhibitsdiversification (Storeygard,keepsAfrica outof mostof 1.5percentage pointsonallimporting-countrya cutof tariffs). goodinfrastructure Lackof also that a1-dayreduction ininlandtravel timesleads toa7percent increase inexports (similarto in transport costswillincrease trade by25percent. Moreover, Freund andRocha (2010)argue Regarding theeffect ontrade, Limaoand Venables (2001)estimate that a10percent decrease higher inlandlocked countriesthaninother, non-landlocked countries. countries. MacKellar, Wörgötter, and Wörz (2002)suggestthat thecostsare three tofourtimes in Southeast Asia. A well-developedinfrastructure matters, particularly forsmallorlandlocked proved road that transport theunitcostsof are 40percent–100 percent higherin Africa than transportto asignificantlyhighercostof andthusprices. Indeed, Rizetand Gwet (1998) restrictions. Sinceinfrastructure isdeficient, transport in Africaisoften unpredictable, leading In general, transport costsrepresent ahighertrade barrierthanimport tariffs orothertrade Deficient Infrastructure ECOWAS. a changeinthesecustomsduties. For example, there are nolongeranycustomsdutiesontrade ingoodswithin This figure average illustrates tariffs thelevelof onintra-REC trade in Africain2015. Sincethat date, there hasbeen CommunityWest of African States. ECCAS Central forEconomicCommunity of African States, EAC forEast African Community, ECOWAS forEconomic Eastern andSouthern Africa, SADCforSouthern Africa Development Community, AMU for Arab Maghreb Union, Note: Intra-imp represents theintra-regional imports and All istotalimports. COMESA forCommon Market for Source: Authors’ elaboration usingCOMTRADE (2019). Figure customsdutiesonintraregional 3.1Level importsandonall2015 of 10 12 0 2 8 4 6 1.9 COMESA 6.9 3.8 SADC 3.8

2.6 UMA Intra-imp. 6.9 49 1.6 ECCAS All Chapter 3-MonitoringRegional Trade Integration 11.4 8.4 EAC 5.6 ECOWAS 11.2

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 developing countries. these three regions are: 10.5percent forECOWAS, 84.5 percent forOECD, and5percent for are imposed by other developing countries. This may explain trade why the shares with of Organization forEconomic Cooperation andDevelopment (OECD) countries and 15.9percent NTMsarepercent imposedbyECOWAS of countries, whileonly18.3 percent are imposedby NTMs incountries belonging tothe sameREC. For instance, firmsinGuinea report that 65.9 and NTMsfacedbyfirmsindifferent destinations. Several firms report that theyfacemore by theInternational Trade Center (between2010and2011)reports trade theshare of (Gillson andCharalambides 2012), andinhibitsregional trade. Figure 3.4isbasedonasurvey phytosanitary measures and technical barriers to trade—is tariffs much higher than that of measures non-tariff sanitaryand showsthaton thecostof theircost—and especiallythat of Numerous measures non-tariff are facedbyexporters inmost African countries. The literature Costly Measures Non-tariff (NTMs) African Community, ECOWAS forEconomicCommunityWest of African States Community, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, EAC forEast al standards). COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development port infrastructure,Quality of WEF (1 = extremely underdeveloped to 7 = well developed and efficient by internation- Note: (i)Logistics trade andtransport-related performanceindex: Qualityof infrastructure (1=lowto5high;)(ii) (2019). Source: Constructed bytheauthors usingLogistics Performance Indicators (2019)and World EconomicForum Figure infrastructure 2018 3.3Qualityof States Centralnity of African States, EAC forEast African Community, ECOWAS forEconomicCommunityWest of African SADC forSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS forEconomicCommu- Note: This index ranges from 0(least) to100(best). COMESA forCommon Market forEasternandSouthern Africa, Source: Constructed bytheauthorsusing African DevelopmentBankInfrastructure Index. Figure 3.2Infrastructure developmentindex 2015 ECOWAS COMESA 0.0 0.5 1.0 1.5 2.0 3.0 2.5 3.5 4.0 ECCAS SADC AMU EAC COMESA 2.4 0.0 3.4 10.0 2.5 SADC LPI-Quality Infra. 3.6 15.8 20.0 16.8 16.9 50 2.3 AMU 3.5 30.0 WEF-Quality Infra 28.4 2.2 ECCAS 29.8 Chapter 3-MonitoringRegional Trade Integration 2.8 40.0 2.3 EAC 3.2 50.0 49.0 ECOWAS 2.2 3.5 60.0

Figure 3.4NTMsfacedbyselected African countries extent, forbothMadagascarandMauritius. total NTMs,percent of respectively). The same conclusion holds for COMESA, but to a lesser d’Ivoire and Guinea face more NTMs imposed by ECOWAS members (36 percent and 66 Kenyan exporters and 31 percent by Tanzanian exporters are imposed by EAC members. Côte thesameRECisrelativelymembers of high. For instance, theNTMsfaced by 24percent of In general, NTMsfacedby theshareAfrican exporters of andimposedbycountriesthat are Economic CommunityWest of African States, NTMforNon-Tariff Measure. Union, ECCAS Central forEconomicCommunity of African States, EAC forEast African Community, ECOWAS for Market forEasternandSouthern Africa, SADCforSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Note: Data presented are thelatest availableyear foreach country(between2010 and2011). COMESA forCommon Source: Constructed bytheauthorsusingInternational Trade Center BusinessSurveys(2019). (e) (c) (a) Côte d’Ivoire, 2011 Madagascar, 2010 Share of NTMsfacedby Share of NTMsfacedby Share of NTMsfacedby Share of Kenya, 2011 51 (b) (d) (f) Chapter 3-MonitoringRegional Trade Integration Share of NTMsfacedby Share of Share of NTMsfacedby Share of Share of NTMsfacedby Share of Mauritius, 2011 Tanzania, 2011 Guinea, 2010

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Border-related Measures 9 percent. 14 percent. This exerts anegative livingincreases effect onpoorhouseholdswhosecostof by African foodstuffsof (especiallyriceandothercereals, meat, sometypesof andedibleoils)by prove that, owingtonon-compliance, sanitaryandphytosanitarymeasures increase theprice that are likely toaffect trade, particularly that inagriculture. Indeed, Cadot andGourdon (2014) From apolicyperspective, thisisparticularly important sincemostRECs failedtotackleNTMs African States CentralCommunity of African States, EAC forEast African Community, ECOWAS forEconomicCommunityWest of Africa, SADC forSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS forEconomic compliance (hours);n.a. standsfornotavailable. COMESA forCommon Market forEasternandSouthern bord. standsfor Time toimport, border compliance(hours); Time imp. doc. standsfor Time toimport, documentary and ismeasured inhours; Time exp. doc. standsfor Time toexport, documentarycompliance (hours); Time imp. scheduled orexpected time(1=lowto5high); Time exp. bord. standsfor Time toexport, border compliance shipments standsforLogistics performanceindex andisthefrequency withwhichshipments reach consignee within Note: Time clear exp. standsforaverage timetoclear exports through customsandismeasured indays;LPI Source: Constructed bytheauthorusingDoingBusiness(2019)andLogistics Performance Indicators (2019). Table 3.2Border-related measures (byregion) 2018 hence theirexporters andimporters donotreport customsregulations asanobstacletotrade. are alsoaffected bythefactthat somecountries(suchasEritrea) donottrade agreat deal, and South Africa and Eritrea. It is, however, important to note that such perception-based indices from 51percent inMali, 45percent inCôte d’Ivoire, 20percent inEgypt, and2percent in (whereas at the world level only 17 percent do). A large variance can be observed, ranging the surveyed firms identify that customs and trade regulations are a major constraint to trade why the World BankEnterpriseSurveys(Figure 3.5)indicate that, onaverage, 26percent of All African RECs, however, havelongerexport timescalesthan their Asian counterparts. This is exported toothermarkets, withfasterclearance. This isslightlylowerforECOWAS andSADC. time toallowconsumption. Additional costsare duetothefactthat theseproducts couldbe nature, losses will bemore important since suchproducts willnot be soldat anappropriate borders anddocumentarycompliance. exported products If are perishableorhaveaseasonal border anddocumentation compliance). An exporter inECCAS hastobear 234hoursbetween Table 3.2presents thetimetoclear exports through customsandtimetoexport (bothfor that canberepeated andmultipliedfrom onestage toanother. goods (OECD 2002). The most serious problem error induced by such complexity is the risk of products). traded these barriers accounts for 2 percent–15 The the value of percent cost of of are lengthy, timeconsuming, andextremely costlyforperishableproducts (suchasagricultural barriersthatThe affects lasttypeof trade in African countriesisborder-related measures; these COMESA ECOWAS EAC ECCAS AMU SADC Region Time clear exp. 12.8 n.a. 6.7 n.a. 4.7 6.3 LPI shipments 2.8 3.3 2.7 2.9 3.0 2.9 Time exp. bord. 100.6 68.0 145.3 57.2 81.8 71.7 52 Chapter 3-MonitoringRegional Trade Integration Time exp. doc. 76.0 65.0 89.1 60.6 64.4 69.1 Time imp. bord. 120.7 204.6 197.8 127.1 94.7 115.7 Time. Imp. doc. 108.8 133.5 142.7 85.2 58.0 90.0

Note: Surveyshavebeenconductedat different years; theyare listedin Appendix A3.3. Source: Constructed bytheauthorsusing World BankEnterpriseSurveys(2019). Figure 3.5Percentage firmsidentifyingcustomsandtrade regulations asamajorconstraint of infrastructure, manyNTMs imposedat theintraregional level, andcostlyborder measures. In anutshell, despite significantliberalization, Africancountriesare suffering from deficient Middle East&North Africa Central African Republic Sub-Saharan Africa Congo, Dem. Rep. Egypt, Arab Rep. Guinea-Bissau Mozambique South Sudan Burkina Faso All Countries Côte d'Ivoire Sierra Leone Gambia, The Madagascar Congo, Rep. South Africa Cabo Verde Mauritania Zimbabwe Cameroon Botswana Mauritius Tanzania Namibia Morocco Eswatini Ethiopia Burundi Djibouti Senegal Rwanda Uganda Lesotho Zambia Nigeria Malawi Guinea Angola Tunisia Liberia Gabon Ghana Eritrea Sudan Kenya Benin Niger Chad Togo Mali 00 1.9 2.0 10 5.7 8.6 9.3 10.2 11.3 13.1 13.4 13.5 20 14.1 15.8 17.1 17.4 17.6 17.7 18.1 19.3 19.4 53 20.1 20.5 21.1 21.8 21.9 30 25.0 25.1 25.3 25.6 25.6 Chapter 3-MonitoringRegional Trade Integration 26.8 27.2 27.4 27.6 27.9 29.3 30.9 31.9 40 35.1 35.6 35.8 35.8 37.0 38.8 39.6 42.1 42.2 42.6 50 45.4 45.9 50.8

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 (SIT trade that takes placebetweenitsmemberstates. For region R, intraregional theshare of trade and interpret. For aparticular region (aRECforinstance), itmeasures theregion’s theshare of intraregionalwhich isdefinedasthe ratio of trade flowsovertotal trade flows, is easytocompute without ambiguity. Yet, analystshavelongrelied onintraregional trade shares. This indicator, there shouldbeabenchmark tocompare with;and, third, itshouldmeasure trade integration progress toward more integration. Itmustfirsthaveathorough theoretical foundation. Second, a regional integration conditionstounambiguouslymeasure indicator mustfulfillaseriesof (e.g., Iapadre and Luchetti 2009; Bouët, Cosnard, and Laborde 2017) have highlighted that theirunderlyingpropertieswithout athorough discussion of andlimitations. Manyauthors The indicators weusetotrack progress toward regional trade integration are often presented Measuring Trade Integration: ChallengesandPitfalls Trade flowsindicators observe anincreasing trend. ECOWAS isthemostvolatile region from year toyear. trade integration isstablefortheperiodunderconsideration, except forCOMESA, inwhich we to totaltrade. This isparticularly thecasewithSADCandCOMESA. agriculturalThe levelof the entire period. For allRECs, weobservemore integration foragricultural trade compared shares forbothtotaltrade andagricultural trade. AMU andECCAS havethelowestlevelsover SADC, ECOWAS, andCOMESA appear tobetheregions withthehighestintraregional trade Fall 2018). in the Americas to75percent intheEuropean Unionforagricultural products (Goundan and 50 percent fortheEuropean Union(Bouët, Cosnard, andLaborde 2017)andfrom 40percent low compared tootherregions, where trade shares range from 30percent inNorth America to RECs range from 1percent (ECCAS in2005)to18percent (SADCin2017). This isparticularly and agricultural trade overtheperiod2005–2017. The intraregional trade shares forthemain Figures 3.6and3.7showtheintraregional trade shares forthemainRECsin Africa fortotaltrade and X where r,s iscountries;Rregion R(mainlyRECs); X

R ) isgivenbyEqn3.1: . (∙,r) is total imports of countryr.(∙,r) istotalimports of 54 Chapter 3-MonitoringRegional Trade Integration . (r,∙) countryr; istotalexports of

(3.1)

Economic Community of Economic CommunityWest of African States Community, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, ECOWAS for Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development Figure intraregional trade 3.7Share foragricultural of products 2005-2017 Economic CommunityWest of African States Community, AMU for Arab Maghreb Union, ECCAS Central forEconomic Community of African States, ECOWAS for Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development Source: Authors’ elaboration usingCOMTRADE (2019). Figure intraregional trade 3.6Share forallproducts of 2005-2017 Source: Authors’ elaboration usingCOMTRADE (2019). 0.02 0.04 0.06 0.08 0.12 0.14 0.16 0.18 0.05 0.15 0.25 0.35 0.1 0.2 0.1 0.2 0.3 0 0 2005 2005 2006 2006 COMESA COMESA 2007 2007 2008 2008 ECCAS ECCAS 2009 2009 2010

2010 ECOWAS ECOWAS 2011 55 2011 Chapter 3-MonitoringRegional Trade Integration 2012 2012 2013 SADC 2013 SADC 2014 2014 2015 AMU 2015 AMU 2016 2016

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 indicator isgivenbyEqn3.3: function of theregion’sfunction of totaltrade, anditisnotsymmetricaround 1. However, thisindicator alsosuffers from twoshortcomings: itsmaximumvalueisadecreasing 3.2: where: world trade). This newindicator, theintraregional trade intensityindex (IRTI (2009) propose somerefi nementstocreate aproper the benchmark(theshareregion in of To overcome theshortcomings related intraregional totheshare of trade, Iapadre andLuchetti Consistent Indicators New Way Measuring Regional Integration of with therefore, better suited formonitoringonesingleRECthrough time. the sameGDPsizebutwith fewer countries. The intraregional share of trade intotal trade is, one to fi ndmore integration inan RECwith manysmall countries compared to another with and Norheim 1993; Frankel 1997; Iapadre and Luchetti 2009). Indeed, the measure would lead countriesunderconsideration,size of particularly whencomparingdifferent RECs(Anderson intraregionalshortcoming of trade thismeasure shares isthesensitivityof tonumberand competitivenessinexternal markets lossof (Walkenhorstthey maybeasignof 2013). Onefi nal intraregional trade shares donotnecessarilymean there ismore regional integration: indeed, subsection 3.4.1.of For instance, there isnobenchmarkforcomparison. Inaddition, higher The indicator indeedfailstocomplywiththethree conditionsmentionedinthebeginning shortcomings,from aseriesof andthesecanbiasanalysiswhencomparingdifferent RECs. One should, however, becautiouswiththesefi gures astheintraregional trade shares suffer 12 -Itranges from 0to1(1being geographic neutrality) andfrom 1toinfi nity. intraregional intensity index (MIRTI introversion index theypropose fi xes theseissues. Itisbasedonamodifiof the edversion R ) andtheextraregional intensity index (MERTI 56 Chapter 3-MonitoringRegional Trade Integration

(3.5) (3.3) 12 The regional trade

R ) isgiveninEqn

( 3.2) R (3.4) ). This Figure 3.8Regional trade introversion index forallproducts 2005-2017 divergences amongitsmemberstates. this organization hasfaceddifficulties in realizing its objectives, political mainlybecauseof represents trade aregion introversion. withalowlevelof Indeed, sinceitscreation in1989, in contrast towhat theSIT suggests. SIT, thepotentialbiasof Despitethecorrection of AMU introverted region, whileECCAS nowappears more introverted thanECOWAS andCOMESA, pattern isquitestableovertheentire period. For agricultural products, SADCremains themost 2013, drivenmainlybynon-agricultural products. Indeed, forthislatter products, group of the introverted. The ECCAS introversion degree of hasincreased, of particularly intheperiod2006– SADC, ECOWAS, andCOMESA stillappear asthemostintroverted RECsand AMU theleast differences intraregional observedwiththeshares of trade (SITs) are nowlimited, although total trade andagricultural trade islesspronounced. When restricted tototaltrade flows, the extraverted, withquiteastablepattern, except for AMU. Inaddition, thedifference between period 2005–2017. Oneinteresting feature isthat allfiveRECsare more introverted than RECs studied in Figures 3.6 and 3.7 for both total trade and agricultural products over the Figures the regional 3.8 and 3.9 present trade the evolution of introversion index for the five values between0and+1indicate that theregion ismore introverted thanextraverted. between −1and0reflect thefactthat the region ismore extraverted thanintroverted, and of Centralof African States, ECOWAS forEconomicCommunityWest of African States Development Community, AMU for Arab Maghreb Union, ECCAS forEconomicCommunity Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Source: Authors’ elaboration usingCOMTRADE (2019). Since bothMIRTI 0.2 0.4 0.6 0.8 0 1 2005 2006 R and MERTI 2007 COMESA 2008 R are positive, RTI 2009 ECCAS 2010 2011 ECOWAS R necessarilyfallsbetween−1and+1. Values 57 2012 Chapter 3-MonitoringRegional Trade Integration 2013 SADC 2014 2015 AMU 2016 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Economic Community of Economic CommunityWest of African States Community, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, ECOWAS for Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development average valuesovertheperiod2005–2017. eachthe exports RECwillbe. of Since there isverylimitedvariabilityovertime, wefocusonthe on aHerfindhal–Hirshman(HH)index (Figure 3.10). The highertheindex, themore concentrated To determinetowhat extent African RECsare diversified at thegeographical level, we rely first Geographical diversification Trade Diversification Trade Structure Intra-Africa of Agricultural 2017). The actualindicators thesenon-recorded wouldimprove if flowswere considered. dominate transactions that gothrough customsbutremain unrecorded (Traoré and Mitaritonna time constituted a large transactions part in of Africa (Egg and Herrera 1998) and tend to (particularly trade in small quantities, but not exclusively) between neighbors have for a long administrations. For agricultural products, informal trade flows going through unofficial routes provided bynational statistical institutes, whichinturnare basedondata provided bycustoms for agricultural products in Africa. Indeed, databases are basedalmostexclusively ondata used here mayunderestimate actualtrade flowstoalarge extent. This isparticularly thecase Whatever theregional trade integration indicator selectedfortheanalysis, theofficial data Source: Authors’ elaboration usingCOMTRADE (2019). Figure 3.9Regional Trade Introversion Index forallproducts foragricultural products 2005-2017 0.2 0.4 0.6 0.8 1.2 0 1 2005 2006 2007 COMESA 2008 2009 ECCAS 2010 58

2011 ECOWAS 2012 Chapter 3-MonitoringRegional Trade Integration 2013 SADC 2014 AMU 2015 2016 2017 diversified, andSADCistheleast diversified. diversified since, onaverage, theGGDIforagricultural products isaround 0.5. AMU isthemost Figure 3.11presents theGGDIbyREC. At thegeographical levelmostregions are moderately trade,worldwide distributionof thesmallerindex. the index isequalto1. The more thecountry’s trade geographic differs allocation of from the trade,its trade astheworldwidedistributionof each terminabsolutevalueisequalto0and with thesamenotation system. acountry rhasexactly thesamegeographic allocation If of one country’s trade theworld(Eqn3.6): trade intherest andthedistributionof of Finger–Kreinin similarity. index of This index evaluates thedistancebetweendistributionof (GGDI), each commercial whichisbasedontheweightof partner inworldtrade usingthe and Bouët, Cosnard andLaborde (2017)usedtheglobalgeographic diversification index depends heavily onamajorpartner oronasmallone. This iswhyDeLombaerde etal. (2012) everypotentialpartner,of sincetheydonotdistinguishbetweenasituation where acountry Yet, mosttrade indices(includingtheHHindex) donottake intoconsideration theactualsize India, China, andtheEuropean Union, respectively. the firstgroup with15.4percent, 30.2percent, theirtotal and58percentexports goingto of age 0.06), someare more concentrated thanothers. ECOWAS, ECCAS, and AMU belongto While allRECsare relatively theirdestination (theHHindex isonaver diversifiedintermsof West Statesof African CentralEconomic Community of African States, EAC forEast African Community, ECOWAS forEconomicCommunity and Southern Africa, SADCforSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS for Note: Figures are calculated asanaverage overtheperiod2005–2017. COMESA forCommon Market forEastern Source: Authors’ elaboration usingCOMTRADE (2019). Figure 3.10Herfindhal–Hirshmanindex—geographical diversificationaverage 2005-2017 0 0.010 0.020 0.030 0.040 0.050 0.060 0.070 0.080 0.090 0.100 0.035 EAC 0.038 SADC COMESA 0.049

59 ECOWAS 0.065 Chapter 3-MonitoringRegional Trade Integration 0.086 AMU

( 3.6) 0.095 ECCAS -

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure 3.12Herfi ndahl–HirschmanIndex byproduct average 2005-2017 exports being39.4percent, 39.7percent, and42.6percent, respectively). ECOWAS, ECCAS, and AMU are concentrated in fuel and natural resources (their share in total Figure 3.12showsthat, whileEAC, SADC, andCOMESA are more diversifi ed, exports from Sectoral Diversifi cation West Statesof African CentralEconomic Community of African States, EAC forEast African Community, ECOWAS forEconomicCommunity and Southern Africa, SADCforSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS for Note: Figures are calculated asanaverage overtheperiod2005–2017. COMESA forCommon Market forEastern Source: Authors’ elaboration usingCOMTRADE (2019). Figure 3.11GlobalGeographical Diversifi cationIndex average 2005-2017 of West States.of African CentralEconomic Community of African States, EAC forEast African Community, ECOWAS forEconomicCommunity and Southern Africa, SADC forSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS for Note: Figures are calculated asanaverage overtheperiod2005–2017.COMESA for Common Market forEastern Source: Authors’ elaboration usingCOMTRADE (2019). 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.07 EAC SADC 0.43 SADC 0.12 COMESA 0.47 COMESA 60 0.18 0.49 EAC ECCAS Chapter 3-MonitoringRegional Trade Integration ECCAS 0.50 0.42 ECOWAS 0.51 ECOWAS 0.43 AMU 0.54 AMU 0.45 trade theworldusingEqn3.7: intherest of acountry’sbetween the sectorial distribution of totaltrade andthesectorial distribution of theGGDI,of results are relatively similarformostRECs. Indeed, thelatter measures thedistance Yet, whenweusetheglobalsectoral diversifi cation index (GSDI), whichisthesectoral equivalent product bycountryinmarket andyear as inEqn3.8: and intra-African markets. The imports index andexports measures overlapof of theextent of countries, considered individuallyorasagroup intheirRECs, andtheirtrade partners inworld measure intra-industry raw trade versus processed of agricultural products between African thesameindustrybetweentwo tradeproducts partners. of The Grubel–Lloydindex isusedto integration in Africa. Intra-industry trade referstwo-wayexchange fl totheexistence of owsof This intra-industry regional section investigatestrade the magnitude of as an outcome of Intra-industry TradeFlows West States.of African CentralEconomic Community of African States, EAC forEast African Community, ECOWAS forEconomicCommunity and Southern Africa, SADCforSouthern Africa DevelopmentCommunity, AMU for Arab Maghreb Union, ECCAS for Note: Figures are calculated asanaverage overtheperiod2005–2017. COMESA forCommon Market forEastern Source: Authors’ elaboration usingCOMTRADE (2019). Figure 3.13Globalsectorialdiversifi cationindex average 2005-2017 products, withEAC beingtheleast andECCAS themostdiversifi ed. Figure diversifi 3.13showsthat allRECshavealmostthesamelevelof cation foragricultural 0.34 0.36 0.38 0.40 0.42 0.44 0.46 0.48 SADC 0.39 COMESA 0.40 0.40 EAC 61 ECCAS Chapter 3-MonitoringRegional Trade Integration 0.42

ECOWAS 0.42

(3.8) ( 3.7) AMU 0.46

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 versus processed agricultural products Figure 3.14presents theaverage Grubel–Lloydindex raw valuescalculated forthetrade of World Intra-industry Trade Between the Africa andtheRest of offset imports byothercountriesinthesameREC. the REC’s respective membercountries, suggestingthat exports bysomecountriestendto Grubel–Lloyd index valuesare significantlyhigher at anREClevelcompared totheirvaluesfor agriculturalexchanges products of thanin Africa’s agricultural trade the world. withtherest of products. The results alsoindicate intra-industry that trade theextent of islarger inintra-Africa worldissignificantlybroader forprocessedof agricultural products than for raw agricultural The results intra-industry trade suggestthat thescopeof by African countries withtherest partners inworldmarkets, andthenconsideringintra-Africa trade flows. below in3.6.1and3.6.2, firstwith respect totrade flowsbetween Africancountriesand their Harmonized Commodity DescriptionandCoding System (HS6)andtheresults are presented intra-industry trade) inexchange flows. the The index iscomputed at the6-digitlevelof The index variesbetween0(denotingnointra-industry trade) and1(corresponding toonly African Community, ECOWAS forEconomicCommunityWest of African States. Union, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, EAC forEast Community, CEMAC forCentral African EconomicandMonetaryCommunity, SACU forSouthern African Customs Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development Source: Authors’ elaboration usingCOMTRADE (2019). Figure 3.14Intra-industry trade in Africa’s worldtrade byregional economiccommunities, 2005–2017average products. and 2017. The index valuetendstodecrease overtimebutmore markedly forprocessed trade index forprocessed versusraw products hasremained unchangedbetween2005 raw products itis0.50and0.48, respectively. Figure 3.15showsthat thehigherintra-industry from SACU andSADC, where forprocessed products itis0.57and0.58, respectively, andfor index is0.56forprocessed products and0.43forraw products; it islowerforallRECsapart in ECCAS, whileSADChasthehighestvalues. For thewhole Africa’s trade flows the average for processed products compared toraw products. The lowest valuesintheindex are found 2005 to2017. Across allRECs, except forECCAS andCEMAC, intra-industry trade ishigher 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0 ECCAS CEMAC AMU Raw products ECOWAS

between Africa’s theworld from RECsandtherest of 62 EAC Processed products Chapter 3-MonitoringRegional Trade Integration COMESA AFRICA SADC SACU

Figure 3.15Grubel–LloydIndex byproduct categoryforthewhole Africa, 2005–2017 other countrieswithinthesameREC. in its individual member countries, some countries may be offset as imports by exports of of respectively. This intra-industry suggests a broader trade scopeof inagriculture inanRECthan thisRECare only0.12,among themembersof 0.13, and0.14forGhana, Senegal, and Togo, 0.52 forECOWAS trade inintra-Africa markets, whilethehighestcountry-level index values the countrylevel(Figure 3.17). For instance, intra-industry trade theindex of inagriculture is countries withintheREC, suggestingthat trade overlapismore likely at theregional thanat theindexThe foranRECismuchhigherthanthehighestvaluesobservedindividual valueof trade inintra-Africa markets, while thehighestlevelisattained intheSADCregion. with non-Africanpartners. As inworldmarkets, ECCASintra-industry shows thelowestlevelof agricultural products is larger inthe REC’s trade with other African partners than inits trade Figure 3.16showsthat forevery REC, except CEMAC, intra-industry flows of thescope of 3.6.2 Intra-industry Trade in Africa’s Agricultural Markets Source: Authors’ elaboration usingCOMTRADE (2019). 0.4 0.5 0.6 0.7 0.1 0.2 0.3 0 2005 2006 2007 2008 Raw products 2009 2010 63 2011 Processed products Chapter 3-MonitoringRegional Trade Integration 2012 2013 2014 2015 2016

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Economic Community of Economic CommunityWest of African States. Community, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, ECOWAS for Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development Source: Authors’ elaboration usingCOMTRADE (2019). regional economiccommunity, 2005–2017average Figure 3.17Intra-industry trade in Africa’s agricultural markets, highestcountry-levelGrubel–Lloydindex values by munity, ECOWAS forEconomicCommunityWest of African States. AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, EAC forEast African Com- munity, CEMAC forCentral African EconomicandMonetaryCommunity, SACU forSouthern African CustomsUnion, Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa DevelopmentCom - Source: Authors’ elaboration usingCOMTRADE (2019). average Figure 3.16Intra-industry trade in Africa’s agricultural markets byregional economiccommunity, 2005–2017 Grubel-Loyd index 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0 1 COMESA Grubel-Loyd index 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Kenya 1 Uganda ECCAS

Zambia CEMAC ECCAS Cameroon Intra-African markets

Rwanda Intra-African markets AMU Burundi

64 ECOWAS ECOWAS

Togo Senegal COMESA World markets World markets Ghana Chapter 3-MonitoringRegional Trade Integration

South SADCAfrica EAC

Namibia

Tanzania SACU

AMU Tunisia SADC Morocco

Algeria transparency trade-related of information, andto strengthen public–private dialog. and mediumenterprisestoexport more. This isanonlineplatform toimprove thequalityand a globaltrade helpdesk—arecent ITC, initiative of UNCTAD, and WTO—will helpmicro, small, cost impliedbyNTMsandthuslead toeasier andmore efficient implementation. For instance, It iscrucialtomake rulesandprocedures more transparent oncustomswebsitestoreduce the exported productsof goodsthat andintheproduction are of up tointernational standards. (5) assist companiesincomplyingwithinternational standards. This isvitaltoimprove thequality and mediumexporters) from bothgovernmentandinternational donorsisindispensable to different RECs. (4) The technicalassistancetodifferent provision of firms (inparticular small trade originandstandards, in Africa byharmonizingtherulesof products, andnormsof in deficiency. (3)Itisalsonecessarytoaddress measures non-tariff toboostintra-and extraregional products are perishableandcanbequicklyaffected bycustomsinefficiency orinfrastructure and facilitating trade procedures are important toboosttrade inagriculture, sincethese comprehensive approach isnecessaryfordeeperintegration. Indeed, improving infrastructure measurestariff that are stillhinderingtrade in Africa. negotiations, (2) At thelevelof amore and EAC. Itis, however, important totake intoconsideration bothborder-related andnon- trade integrationof withinEAC and peoplewithinECOWASAMU andfree movementof (1) Trade agreements haveresulted inarelatively goodperformance, inparticular interms From apolicyperspective, several issuesmustbeconsidered withrespect to Africa’s integration. exported theworld. totherest of agricultural products, thelatter are sincemostof concentrated inoilandminerals, whichare agricultural products are more characterized by intra-industry trade compared to non- them exportingthe sectoral either fuel or agricultural level (with some of products). Finally, diversification,of mostRECsare diversified atthegeographical level, butlessdiversified at addition, thedifference betweentotaltrade andagricultural trade islesspronounced. Interms are more introverted thanextraverted and—apart from AMU—have arelatively stablepattern. In COMESA. Regarding different thetrade orientation of RECs, onecanconcludethat allfiveRECs introversion foragricultural trade thanfortotaltrade. This isparticularly thecasewithSADCand over theentire period. At theproduct level, weobserveforalltheRECsthat there ismore bothtotaltrade andagriculturalterms of trade. AMU andECCAS are, however, lessintroverted we seethat SADC, ECOWAS, ECA, andCOMESA appear tobethemostintroverted RECsin thecompanyconcerned.indices ortheperceptions of When different RECsare compared, and lengthyborder-related measures are verycostlywhethertheyare measured byobserved Our mainfindingsshowthat, despitelowtariffs, measures, thenon-tariff deficientinfrastructure, intra-industry trade. theseRECs at boththegeographicaldiversification andsectoral of levelandcomparingtheir trade coststhat aretypes of likely tohindertheirintegration; and(3)byassessingthe examining their integration their intraregional through an analysis of trade and the different differentand comparison of RECs in Africa since their proliferation in recent decades; (2) by This chapterexamines regional integration in Africa inthree ways:(1)byproviding anoverview Conclusions 65 Chapter 3-MonitoringRegional Trade Integration

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Mold, A., andR. Mukwaya. 2017. the Tripartite “ModellingtheEconomicImpactof Free Trade Ökonomie in Theorie undPraxis. Berlin:Springer. MacKellar,L., A. Wörgötter, A.,and J. Wörz.2002. Logistics Performance Indicators, 2019. https://lpi.worldbank.org/, Costs.” World BankEconomicReview 15(3):451–479. Limao, N., and A. J. Venables. 2001. “Infrastructure, Geographical Disadvantage and Transport intracen.org/home International Trade Center BusinessSurveys. Accessed April 1, 2019. https://ntmsurvey. Report onDevelopment, European UniversityInstitute, Florence. Iapadre, L., andF. Luchetti. 2009. “Trade Regionalisation and Opennessin Africa.” European Report, editedby Goundan, A., andC. S. Fall. 2018. “Regional Trade Patterns.”Agricultural InAfrican TradeStatus Southern Africa. Gillson, I., andN. Charalambides. 2012. Addressing BarriersonRegional Non-tariff Trade in 2010–07, ERSD, World Bank, Washington D.C. Freund, C., andN. Rocha. 2010. What Constrains Africa’s Exports? StaffworkingpaperNo. Institute forInternational Economics. Frankel, J.1997. subsaharienne, v. 6. IRDEditions Egg, J. and J. Herrera. 1998. ÉchangestransfrontaliersetintégrationrégionaleenAfrique Innovation, Competitiveness andRegional Integration.ECA. AddisAbaba: ECA (EconomicCommission for Africa). 2016. AssessingRegional Integration in Africa VII: Doing Business. Accessed April 1, 2019. Quantitative andQualitative Methods. New York: Routledge. De Lombaerde, P., R. Flores, L. Iapadre, andM. Schulz. 2012. The Regional Integration Manual: COMTRADE. Accessed April 1, 2019. https://comtrade.un.org/ Africa.” African Economies23(4):425–463. Journalof Cadot, O., and J. Gourdon. 2014. “Assessing thePrice-Raising Measures Non-tariff Effect in of Economic Integration 32(4):937–977. Bouët, A., L. Cosnard andD. Laborde. 2017. “Measuring Trade Integration in Africa.” Journalof 691–751. Anderson, J., andE. van Wincoop. 2004. “Trade Costs.” EconomicLiterature Journalof 42: Europe’s Intra- andExtra-regional Trade.” Weltwirtschaftliches Archiv 129:78–102. anderson, K., andH. Norheim. 1993. “From Imperial to Regional Trade Preferences: Its Effect on References Washington, DC/London: The World Bank/CEPR, 225-247. O. Badiane andS. Odjo. IFPRIandCTA: Washington and Brussels, pp. 24-49. Regional Trading Blocs in The World Economic System. Washington,DC: https://www.doingbusiness.org/ 66 Economic Growth of LandlockedEconomic Growth Countries. of Chapter 3-MonitoringRegional Trade Integration accessedon April 1, 2019. World EconomicForum. Accessed April 1, 2019. https://www.weforum.org/ 1, 2019. World BankEnterpriseSurveys, 2019. https://www.enterprisesurveys.org/, accessedon April Practice Working Paper Series(1). Washington, DC: World Bank. Walkenhorst, P. 2013. Indicators toMonitorRegional Trade Integration in Africa.Africa Trade Paper 01618, International Food Policy Research Institute, Washington, DC. Traoré, F. andC. Mitaritonna. 2017. “ExistingData toMeasure African Trade.” IFPRIDiscussion and Policy Documents. https://www.tralac.org/resources/by-region/cfta.html. TRALAC (Trade LawCenter). 2019. African Continental Free Trade Area (AfCFTA) Legal Texts Sub-Saharan Africa.” Storeygard, A. 2016. “Farther onDowntheRoad: Transport Costs, Trade andUrbanGrowth in Sécurités 60:68–88. Prix duCamionnage – Afrique, Asie duSudEst, Amérique Centrale.” Recherche–Transports– Rizet, C., andH. Gwet. 1998. “Transport deMarchandises: UneComparaison Internationale des FINAL, August. Matsudaira, T., andE. Mosé, Working Party the of Trade Committee, TD/ TC/ WP(2001)21/ OECD (2002)“Avantages pourlesEntreprises delaFacilitation desEchanges”, prepared by African Trade of Journal 3(1–2):57–84. Area: Southern, ItsImplications fortheEconomicGeography of EasternandNorthern Africa.” The EconomicStudies 83:1263–1295. Review of 67 Chapter 3-MonitoringRegional Trade Integration

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table African regionalA3.1 Membershipof trade agreements Appendix Algeria Benin Angola Niger Namibia Mozambique Morocco Mauritius Mauritania Mali Malawi Madagascar Libya Liberia Lesotho Kenya Guinea-Bissau Guinea Ghana Gambia Gabon Ethiopia Eritrea Equatorial Guinea Egypt,Rep. Arab Djibouti Côte d’Ivoire Congo, Rep. Congo Dem. Rep. Comoros Chad CentralRepublic African Cameroon Cabo Verde Burundi Burkina Faso Botswana Country ECOWAS 1 0 0 1 1 1 1 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 1 0 1 0 0 0 0 0 0 0 1 0 0 0 1 EAC 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 68 ECCAS 0 0 0 0 0 0 0 1 0 0 1 0 0 0 1 1 0 1 1 1 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 Chapter 3-MonitoringRegional Trade Integration CEMAC 0 0 0 0 0 0 0 1 0 0 1 0 0 0 1 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 COMESA 0 0 1 0 0 0 0 0 1 1 0 1 1 0 0 1 1 0 0 0 0 1 0 0 0 0 0 0 0 0 1 0 0 1 1 1 0 SADC 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 1 0 1 1 0 1 0 0 1 1 0 0 SACU 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 AMU 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 1 0 1 0 0 0 1 0 Table customsdutiesonintraregionalA3.2 Level of imports 2015 and MonetaryCommunity, SACU forSouthern African CustomsUnion. African Community, ECOWAS forEconomicCommunityWest of African States, CEMAC forCentral African Economic Community, AMU for Arab Maghreb Union, ECCAS Central forEconomicCommunity of African States, EAC forEast Note: COMESA forCommon Market forEasternandSouthern Africa, SADCforSouthern Africa Development Guinea Cabo Verde Benin Burkina Faso Mali Niger Ghana Guinea-Bissau Togo Sierra Leone Côte d’Ivoire Senegal Nigeria Country Average Gambia Nigeria Sierra Leone Seychelles Senegal Sao Tome andPrincipe Saint Helena Rwanda Zimbabwe Zambia Uganda Tunisia Togo Tanzania Swaziland Sudan South Sudan South Africa Somalia Country ECOWAS 3.0% 0.8% 0.7% 0.4% 0.4% 5.6% 16.7% 13.5% 11.2% 6.9% 5.7% 5.5% 4.9% 4.8% 3.3% ECOWAS 0 0 0 0 1 0 0 0 0 0 0 1 0 1 0 0 0 1 Comoros Uganda Swaziland Sudan Seychelles Rwanda Mauritius Malawi Madagascar Libya Kenya Ethiopia Egypt Djibouti Burundi Country EAC 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 1 0 ECCAS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 69 0.7% 1.3% 0.6% 7.3% 0.4% 0.0% 0.0% 0.0% 0.0% 1.2% 10.0% 0.1% 12.5% 0.3% 0.0% COMESA Chapter 3-MonitoringRegional Trade Integration CEMAC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 COMESA 1 1 1 0 0 0 1 1 1 0 0 0 1 0 0 0 1 0 Average Zimbabwe Zambia Tanzania Swaziland South Africa Seychelles Namibia Mozambique Mauritius Malawi Madagascar Lesotho Botswana Country SADC 1 1 0 0 0 1 1 0 0 1 0 0 1 0 0 0 0 0 SACU 0 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 3.8% 24.0% 0.1% 9.6% 0.0% 0.0% 12.2% 0.0% 1.6% 0.0% 1.6% 0.3% 0.0% 0.0% SADC AMU 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table A3.3 Enterprisesurveys(byyear) Source: COMTRADE (2019). Source: Constructed bytheauthors. Average Tunisia Morocco Mauritania Libya Algeria Country Economy Mozambique Mali Madagascar Lesotho Liberia Kenya Guinea-Bissau Gambia Guinea Ghana Gabon Ethiopia Eritrea Cabo Verde Congo, Rep. Congo, Cameroon Côte d’Ivoire CentralRepublic African Botswana Burkina Faso Benin Burundi Angola 2.6% 0.5% 0.0% 8.6% 0.0% 3.9% AMU 2018 2016 2013 2016 2017 2018 2006 2018 2016 2013 2009 2015 2009 2009 2009 2016 2016 2011 2010 2009 2016 2014 Year 2010 Average Zimbabwe Zambia Country 70 Economy Tunisia Morocco Egypt,Rep. Arab Djibouti Congo, Dem. Rep. Zimbabwe Zambia South Africa Uganda Tanzania Togo Chad Eswatini South Sudan Sierra Leone Senegal Sudan Rwanda Nigeria Niger Namibia Malawi Mauritius Mauritania 1.9% 0.2% 0.0% COMESA Chapter 3-MonitoringRegional Trade Integration Country Average Sao Tome &Principe Rwanda Gabon Congo Chad CentralRep. African Cameroon 2013 2013 2016 2013 2013 2016 2013 2007 2013 2013 2016 2018 2016 2014 2017 2014 2014 2011 2014 2017 2014 2014 2009 2014 Year 1.6% 5.3% 0.1% 0.3% 5.3% 0.0% 0.0% 0.2% ECCAS

4 Competitiveness of African Agricultural Value Chains

Fidele Dedehouanou, Betina Dimaranan, and David Laborde Africa Agriculture Trade Monitor / Report 2019 2015–2017 (Table2015–2017 in Appendix). A4.1 these commodities, ranging from 4.4percent forgrapes to59.4percent forsesameseedsin tomatoes. These were selectedbecause Africa hassignificantshares intheworldmarket for cotton, sugar, andtea. We alsoincludecitrus, grapes, legumesandpulses, sesameseeds, and selected forouranalysis. thetraditional cashcrops, Of weincludecashew nuts, cocoa, coffee, oriented commodity value chains that are highly significant for the Africancontinent are and offensive interests. Next year’s report willfocusondefensive interests. Several export- In thisyear’sAgriculture Africa TradeMonitor (AATM) report, wefocuson export performance period, 2015–2017. based onaverages computedbetweenthe3-year period2005–2007, andthemore recent The quantitative analysisisbasedondata from thepast 13 years. Comparisons are made eachaffect valuechainintheworldmarket. theperformanceof examine thevarious macroeconomic factors, especially the real effective exchange rate, that commodity forthevaluechainsthat are mostsignificantfor Africa’s trade. We the worldandamong each other. We value chains by alsoanalyzethecompetitiveness of Africa’scomparing thecompetitivenessof regional economiccommunities(RECs)with macroeconomic drivers, andimpact. We Africa’s discusstheevolutionof competitiveness, illustrate competitiveness through all three means mentioned above: microeconomic drivers, This chapterusesastatistical approach toexplore African agricultural competitiveness. We twocommoditiesproduced intwodifferentthe pricesof countries). (e.g., production per capita) while the former refers to a relative metric, (e.g., comparison of productivity,to that of itshouldbenotedthat thelatter conceptrefers toanabsolutemetric productdegree differentiation. of Finally, competitiveness is often related while the notion of a productexports relative of to other countries. Producers can compete on price, quality, and studied through itsimpacton, forexample, acountry’s economicvariablessuchasthelevelof or macroeconomic drivers (trade costs, exchange rates, institutions, etc.), but it can also be studied through itsmicroeconomic drivers(laborcosts, inputcosts, productivity, etc.)and/ Fontagné 2003, 8;thisdefinitionisbasedonEuropean treaties). Competitiveness canbe employmentandsocialcohesion”(Debonneuil and toprovide themwithahighlevelof as the“capacity itsinhabitants acountry tosustainablyimprove livingof thestandard of of in twodifferent places. Competitiveness canalsobeappliedinageneral waytoanation, the same commodity produced prices of understood in the narrow sense as the comparison of Economists agree that competitivenessisparticularly difficult todefine. Competitivenesscanbe the agricultural andagri-foodsectors. limitations, theMalaboDeclaration aimstorestore African nations thecompetitivenessof in pointing totheoverall stagnation in African competitiveness(AfDB2017). To address these Development Bankrecently released areport African countries, onthecompetitivenessof is 47(Mauritius), thecontinentare ranked andallothercountries of 67or below. The African for example, thisconcept. ranks 137countriesintermsof The highestranked African economy manyofficial of reports: The GlobalCompetitiveness Report (Schwab and Sala-i-Martín 2017), competitiveness is regularlyThe at notion of economic debate the heart and is the subject of 4. Introduction 74 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Comparative Advantages global markets. shares onworldmarkets todiscriminate betweencountryperformanceandthedynamicsof to thisissue. We thenprovide ausefulapproachAfrican export todecomposetheevolutionof imperfect indicators (discussed inBouët, Cosnard, andLaborde 2017), are astandard approach through itsimpactontrade performance. Revealed comparative advantages, although There are different measuring acountry’s waysof competitiveness. We start byassessingit Competitiveness AfricanAgricultural of Overview agricultural e-commerce in Africa andtheirimpactsonsomevaluechains. these markets. Conclusions are offered insection4.6. Box 4.1presents recent developmentsin theselectedcommodityvaluechainsin2015–2017andtomore recentof developmentsin exports4.5 isdevotedtotheexamination andmarket of shares for Africa andthe RECs foreach ourselectedcommodityvaluechainsthrough thevaluechainladderinsection4.4.of Section the realvalues and the evolution of exchange rates over the period. We trace the transformation competitiveness,we focusonhowpricesmatter intheassessmentof unit through ananalysisof revealed comparative advantage andthrough market share decomposition. Inthesection4.3, primaryvaluechainsthrough RECsandof In section4.2weexamine thecompetitivenessof reflecting thesignificant growth inintraregional trade overtheperiod. African countrieslostcompetitivenessinglobalmarkets butgainedinintraregional markets, they achievedeitherreduced competitivenessorsmallgains. Finally, thestudy alsofindsthat in thestudy. For traditional valuechaincashcrops, includingcocoa, coffee, cotton, andtea, theprimaryagriculturalcompetitiveness inglobalmarkets commoditiesconsidered inmostof are confirmedinthischapter. export commodities, Intermsof African exporters increased their Development Community (SADC)countriestendedtolosecompetitiveness. These key trends markets, whiletheEconomicCommunityWest of African States (ECCAS) andSouthern African States (ECOWAS) countrieswere themostsuccessfulinincreasing competitivenessinglobal 1998–2013 period, OdjoandBadiane(2018)findthat Economic Community of West African products. African agricultural the competitiveness of exports In their analysis of over the theRECsandtoprogressof primarycommoditiestohigher-value inthetransformation of competitiveness, theevolutionof wepayparticular attentionIn ouranalysisof totheperformance has nearly doubledinthelast10years. African of commodities have become more important over the last decade. For example, the share for legumesandpulsesto15.3percent forcocoain2015–2017. Lastly, these several of Their shares in total African agricultural exports are also significant, rangingfrom 1 percent practice, wecanmeasure Revealed comparative advantage. It isabi-ratio two (oraratio of or economyisbestat producing, relative tootherthingsitcouldproduce andtoitspeers. In export potential. Comparative what advantageisatheoretical a particular producer concept of Measures revealed of comparative advantage (RCA) have been used to help assess a country’s cashew nutsintheworldmarket, aswellintotalagricultural exportsAfrica, of Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 75

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 where X world specialization pattern. theirexportsshare inoilandminerals, of are notspecializedinagriculture compared tothe and Communauté EconomiqueetMonétaire d’Afrique Centrale (CEMAC), havingalarge ECOWAS hasbecomemore specializedinagriculture. ECCAS, Arab Maghreb Union(AMU), among Africa’s RECs, andthisspecialization hasincreased further since2012. Similarly, in agriculture compared theworld. totherest of COMESA ismostspecializedinagriculture the last decade for most of Africa’sthe lastdecadeformostof RECs(Figure 4.1). Revealed comparative advantagesandspecialization inagriculture havebeenincreasing in Revealed Comparative Advantage: Overview RCA in thecountry’s exports inrelation toitsshare inworldtrade (Eqn4.1): Revealed countryiforproduct comparative jismeasured advantageof bytheproduct’s share available, we use the Revealed comparative advantage index defined byBalassa (1965), the exported successfully. While different definitionsfor Revealed comparative advantageare on products that are comparatively uniqueinworldmarkets andwhichmight, therefore, be advantage measures, product estimated at disaggregation, highlevelsof if canfocusattention bilateral trade intensities, unlessintra-industry trade isinvolved. Revealed comparative Countries withsimilarRevealed comparative advantageprofiles are unlikely tohavehigh prospects withnewpartners. same product inworldexports. Itisoften usedtoprovide information aboutpotentialtrade ratios) andcompares oneproduct theshare inacountry’s of totalexports the totheshare of product j, andwhere X gives anadvantagetolocalproducers. either accesstotechnology, ortoaccessspecificendowments, oradomesticpolicythat from observedtrade flows, withoutconsideration foran explanation: competitivenessdueto support and/orexport subsidies. Put differently, thisindicator reveals acomparative advantage case that acomparative advantage, asrevealed bythis indicator, onlyexists duetodomestic from beingexported, maizewillnotberevealed asacomparative advantage. Itmayalsobethe comparative advantage in, for example, maize production, export bans prevent but if maize a countryinthecurrent policyenvironment. Itmaybethecasethat acountryhasstrong We notethat theRevealed comparative advantagereflects thecomparative advantageof comparative advantageintheproduct. in the product. Similarly, if the index exceeds unity, the country is said to have an Revealed A valueoflessthanunityimpliesthatthecountryhasarevealedcomparativedisadvantage ij = (X ij andX ij /X it ) /(X wj arethevaluesofcountryi’sexportsproductjandworld wj /X wt ) it

and X and wt (4.1) refer to the country i's total exports and world total exports. refer 76 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

Africa, asacontinent, ismore specialized Figure 4.2Revealed comparative advantagefor Africa’s valuechains, 2005–2017 but increasing forsugarandtomatoes, steady forgrapes, anddecliningforcoffee. cotton, andtea over2005–2017. Overthesameperiod, revealed comparative advantageislow and pulses. Itsrevealed comparative advantagehasbeenfairlysteady forcashewnuts, cocoa, chains. Africa hassignificant revealed comparative advantageinsesameseedsandlegumes In Figure 4.2, weexamine Africa’s specialization theselectedcommodityvalue inexports of RevealedComparative Advantage:Focused valuechains Community, SACU =Southern Africa CustomUnion, AMU = Arab Maghreb Union. ECOWAS =EconomicCommunityWestern of African States, SADC=Southern African Development Market forEasternandSouthern Africa, ECCAS =EconomicCommunity forCentral African States, Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Source: COMTRADE (2019)and authors’ calculation. Figure 4.1Revealed comparative advantageforagriculture for Africa’s regional economiccommunities, 2005–2017 Source: COMTRADE (2019)andauthors’calculation. Revealed Comparaivet Advantage Revealed Comparative Advantage RECs

Log Scale 100 200 300 400 0 1024 2048 128 256 512 Val 6 2005 4 u e Africa Cashew nuts Cha 2 0 0 ins 5 2006 Suga r CEMAC 2007 2 0 0 7 2008 G Citrus rapes COMESA 2009 200 9 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

2010 ECCAS Year Yea L Coc 2011 eguminous &P 77 r o 201 a 1 2012 ECOWAS ulse 2013 s 201 3 Coffee 2014 SACU 2015 S 201 e s a SADC 5 m e 2016 See Cot ton d s 2017 AMU 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 d’Ivoire, Ghana, andSenegal). (Gambia, Guinea-Bissau, andSierra key Leone) exporters andthegoodperformanceof (Côte a relative increase18percent, of smallercountries boostedbythestrong performanceof percent to5percent, belowthecontinentalaverage; Figure 4.3), while ECOWAS hasseen COMESA and UMA have seen minor increases in their global shares (relative increases 3 of This average performancehidesvariation inoutcomesacross RECsandacross countries. the sameperiod. thesedifferentof drivers. Figure 4.4showsthesamedecompositionfor African countriesover specialization (initialandevolutive), andcompetitiveness. Blackdotsindicate theneteffects the fivedrivers:twoforgeographical specialization (initialand evolutive), twoforsectoral the percentage changeinworldmarket share andeach barindicates thedecompositionby products for Africa and African RECsover theperiod2005–2017. The vertical axismeasures theearly 1990s.of Figure globalmarket agricultural share 4.3showsthedecompositionof of previous decadethat wasassociated withastrong rebound after theveryweak performance percent (Table A 4.1). While thisisanotableincrease, itismore limitedthantheevolutionin During thisperiod, Africa hasslightlyimproved itsglobalmarket share, from 4percent to4.3 EvolutionAfrican market of shares country’s performance and the underlying factors. African countries’globalmarketof shares overthe2005–2017 periodtoevaluate each (2014) and in Odjo and Badiane (2018). With this methodology we provide a decomposition We useamethodologythat issimilartothat usedinBouët, Laborde Debucquet, andDeason negative (Cheptea, Fontagné, andZignago2014). increased positiveanddecreased to betheresult of competitivenessif competitiveness if that isnotattributable toincreases insectoral orgeographic demand. This residual isassumed underperformed. Here, themarket thedomesticperformanceisportion share of growth This approach definesabenchmarkforcountry’s progress, ithasover- andassessesif or individual performance. benefiting from apro-growth trend duetoitssectoral orgeographical specialization), or analyze what drivestheperformance:goodgeographical orsectoral specialization (i.e., market sharesAfrican RECsandcountries, of both, toevaluate theperformanceof and to 2005–2007 and2015–2017usingmarket share decomposition. We decomposetheglobal This subsectionprovides how anevaluationAfrica’s of competitivenesshasvariedbetween Market Share Decomposition products anddestination markets, tocopewiththesechanges. our analysisonhow African countrieshaveadjustedtheirexport strategy, bothintermsof globaltrade,of inconstantUSdollars, in2008and2015–2016. For thisreason, wefocus responses that havedisruptedworldmarkets. These events ledtotworeductions in thelevel episodes), the 2008 financial crisis triggering the Great Recession, and various trade policy very tumultuousperiodassociated withtwofoodpricecrises(the2007–2008and2010–2011 1995–2007 evolution, thisperiod. whileouranalysisstarts at theendof Therefore, itincludesa a movinginternational landscape. Indeed, BadianeandMakombe (2016)focusedonthe on amore recent period, andthefocusonadaptationAfrican economiesto capacityof previous exercises anupdated comefrom andimproved theuseof trade database, thefocus 78 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

The main differences compared with 1. We explain thesemarket share changeswithfivedrivers: Congo,of Equatorial Guinea, Chad, Namibia, Central African Republic, andBotswana. markets), butinrelative termstheworst performersare Gabon, Djibouti, Cabo Verde, Republic have suffered some minor setbacks, such as South world Africa (which lost 0.057 percent of increases inmarket shares are notableforsmallerexporters suchasMauritius. Othercountries Mozambique, Nigeria, Rwanda, Senegal, Somalia, Tanzania, andUganda. Otherlarge relative for Algeria, Benin, Côte d’Ivoire, Egypt, Ethiopia, Ghana, Guinea-Bissau, Madagascar, Morocco, blackdotsonFigureof 4.4), theworldmarket 0.05percent withthelargest of absolutegainsof Overall, 31 African countrieshaveincreased theirglobalmarket shares (indicated bythelocation AMU = Arab Maghreb Union. Western African States, SADC=Southern African Development Community, SACU =Southern Africa CustomUnion, Southern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =EconomicCommunity of CEMAC =Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market forEasternand the period. Note: Blackdotsindicate theneteffect; that is, therelative changesinmarket anREConworldmarkets share over of Source: COMTRADE (2019)and authors’ computation. Figure market share changes2005-2017—regional 4.3Decompositionof economiccommunities(RECs) earlier in thischapter(seesubsection4.2.1). therevealedevolutions are consistent withtheevolutionof comparative advantagesdiscussed especially theCEMAC block), haveseenaslightdeterioration intheirexport positions. These In contrast, theotherregions (SADC, Southern Africa Custom Union (SACU), andCentral Africa,

such asBolivia, Chile, Paraguay, Peru, and Uruguay. Increasing demand alsooriginated in the Philippines, Thailand, and Viet Nam); andmedium-sizedLatin American countries include numerous Asian countries such as Cambodia, China, Malaysia, Myanmar, Nepal, market share withoutan actualgainincompetitiveness. Markets withstrong growth initially specializedinmarkets withstrong growth couldexplain anincrease inglobal geographical export market specialization hascontributedtotheexport dynamics. Being The initialgeographical exports. pattern of This drivershowshowtheinitial(2005–2007) Market share growth rate - 0.8 - 0.6 - 0.4 - 0.2 0.0 0.2 0.4 0.6

Africa Components C Initial P ompetitivenes

CEMA r oducts SpecializationChangesinGeogr C s InitialGeogr C OMESA RECs Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

aphical SpecializationChangesinP ECC AS 79

EC OW AS aphical Specialization

SA CU r oducts Specialization SADC

AMU

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 the result of increasedthe result of competitiveness. not attributable toincreases in eithersectoral or geographic demand andthat isassumedtobe Thus, market thedomesticperformancefactorisdefinedasportion share of growth that is 5. 4. 3. 2. (competitiveness). The anexporter’s residual of performanceisattributed todomesticperformance exported initially). as theextensive margin new products theperiodthat (theexport were at of theendof not changes in intensive margins (increased specialization high demand) as well in products of The changesinproduct specialization overtheperiod. This factorcaptures boththe Chinaintheirexports). of have shifted from traditional markets togrowing ones(forexample, byincreasing theshare The changesingeographical pattern overtheperiod. exportersThis allowsustodetectif cotton sectorfacesthemostadversedemandconditions. salted poultry meats, on the other hand, has declined. For traditional African exports, the been among the strongest. Demand for wool products, processed tobacco products, and African production, thesweetpotato andgroundnut (processed orshelled)markets have decade forspecificcocoaproducts (e.g., cocoaspreads) andbeer. traditional Intermsof others), andvanilla. With respect totheprocessed sectors, weseehigherdemandinthelast growth, followedbynuts(pine, pecans), spices(ginger, turmeric, cloves, cardamom, and products (variousfruitsand vegetables). Avocados, inparticular, havehadhighdemand specialization hascontributedtoexport growth. Sectorsinhighdemandincludehorticultural The initialsectoral exports. pattern of This drivershowshowtheinitial(2005–2007)sectoral growth from some African countrieswillbeachallengefortheirregional partners. African economies (Burundi, Chad, Eritrea, Gambia, and Liberia). The limited demand (political crises), North Korea (embargo), Cuba(external accountconstraints), andseveral find countrieswithstagnantordecreasing import demand, suchas Syria and Venezuela limited growth, except forsomeSADCcountries. thespectrumwe Ontheothersideof the Arab Gulf, especiallyfrom Saudi Arabia andQatar. African markets currently display 80 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Figure market share changes—countries2005-2017 4.4Decompositionof share of aregionalshare economic communityonworldmarkets of over theperiod). is themainexplanation (anexport-specific story). Black dots indicate the net effect (i.e., therelative changes inmarket under-measurementpotentially becauseof inthe baseperiod. For thesethree countries, thecompetitivenessdriver Note: Lesotho, LiberiaandMauritaniaare excluded from thegraph owingtoaverylarge increase inmarket share, Source:computation. Authors’ C entr Components

São Countries C al Equatorial Guine ongo -Br C Compe African R T ongo -Kinshasa- omé &P Initial Prod Guine Mozambique- Burkina F C Sierr Madagascar South ôte d’Ivoir C Seychelles- Zimbabwe- C Swaziland- ape Botswana- Mauritius- amer C T Namibia- Mor azzaville- t Ethiopia- a-Bis Burundi- Djibouti- Senegal- Somalia- R Uganda- Gambia- anzania- a L i omor epublic- Z Nigeria- Malawi- Guine Angola- T Algeria- ríncipe- tiven wanda- Gabon- Ghana- Eritr ambia- K unisia- Benin- V Egypt- Africa- Niger Libya- Chad- eone- enya- T er Mali- occo- oon- ogo- sau- aso- Market s ucts de- e os- e e- a- a- a- - - s s Spe - 2 cializ hare growthrateb a Initial Ge t i o n - 1 ogra etween 2005-2007and201 p h C ical han 0 Spe Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains g e s cialization

i n Produc 81 1 ts Sp e c C i 5-20 aliza han 2 g 1 t i e 7 o s n

i n Ge ogra p hic a l Spe c ial i z a t i o n

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 increase, thisleads toa reduction intheirstructural competitiveness. while the RECs (and their members) display higher adaptation capacity for a given market share competitiveness.into account when discussing the concept of In our quantitative framework, allowing themtointegrate intoworldmarkets. This dynamicbehaviormust beproperly taken in adynamicenvironment. Product flexibility hasbeen atraditional strength Asiancountries, of (intensive margins). Beingflexible inthe product spaceisessential to promote growth, especially a pointconfirmedby Carrère, 2013)andthat goodinitialspecialization canbestrengthened especially in cotton. This demonstrates that new markets canemerge (extensive trade margins; This was the case for CEMAC, which was able to phaseout growth-adverse specialization, On theotherhand, exports changingtheproduct hasbeenveryfavorable mixof forallRECS. (e.g., Nigerhasincreased itsrelative trade withChina, whileBurkinaFaso hasdecreased it). have remained stable, theactualmemberstates deliveringtoindividualmarkets havechanged countries (China, India, andEuropean partners, especiallyGermanyand theNetherlands)may However, thishidesgreater changesat thecountrylevel. aRECtospecific While theexport of Overall, weseeverylimitedgeographical reallocation across theperiodat theREClevel. was stronger effect forCEMAC). to othermarkets around theworld, beingextraverted wasactuallyastructural advantage (there Indeed, becausedemandgrowth in African markets hasremained relatively limitedcompared specialization, whileCEMAC andECOWAS hadfavorable initialgeographical specializations. measure forallRECs. Inparticular, UMA andSACU benefitedfrom promising initialproduct However, they did not achieve their expected potential, leading to a negative competitiveness to expectations that Africa anditsRECswouldoutpacetheaverage growth inworldmarkets. Favorable products specialization andmarkets intermsof inthe2005–2007baseperiodled Pure performanceandadaptation capacity seize better opportunities inachangingworld. RECs havemanagedtoreshuffle theirproduct specialization and/ordestination markets to we discussthebestandworstperformers, andalsofocus our analysisonwhichcountriesand individual productsAfrican countriesbetween2005–2007and2015–2017. of Insection4.2.2.2, Similarly, Figure the global market agricultural shares 4.4shows the decomposition of of productive resources toreplace imports, notmonitored here). in domesticabsorption(domesticdemandlimitingpotentialexport surplus, orredirection of competitiveness (includingreal exchange rate effects discussedinsection4.3.2)andincreases with care, sinceitcaptures elements:changesinproductivity alarge andprice numberof “competitiveness” 22percent.a lossof of competitivenessmustbeinterpretedThis lossof 40percent (13+20+52),by thisfullpotentialof +18percent shows itsactualperformanceof reallocation indestination markets (+2percent). However, growing instead itsexport of share percent) hasbeenreinforced bypositivesectoral readjustment (+5percent) andsomeminor by 13percent) andmarkets (theinitialpattern willhaveledtoamechanicalincrease20 of productsits initialgoodspecialization (demandfortheseproducts intermsof hasincreased For ECOWAS, forinstance, whileitsglobalmarket share hasincreased by18percent in10years, and sectoral specialization (lightblueandlightgreen), andthecompetitivenessfactor(ochre). geographical andsectoral specialization (darkblueanddarkgreen), changesgeographical in worldmarket share, andeach barshowsthedecompositionalongourfivedrivers:initial presented in Figure 4.3 for each African REC. The vertical axis measures the percentage change The results are computedforeach exporter intheworld, at thecountrylevel, andare also 82 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains countries faced counter-current changes inproduct specialization: Lesotho (increasing role of (expanding fresh orchilledvegetablesandgroundnuts, whilereducing cotton exports). Only 7 freshAfrican Republic (expansionfruitswhile phasingoutcotton), of Cabo Verde (rum), Senegal items, including“niche”products suchascommunionwafers), Niger(sesameseeds), Central Gabon (reducing tobacco-related exports of products whileexpanding various processed vanilla), theComoros (strengthening exports inspicesanddeveloping vanillaproduction), their export shares in pro-growth products. This effect is particularly true for Madagascar (spices, However, drawn bygrowing demand, African economies(44)haveincreased thevastmajorityof world markets thanotherlivestockproducts. goat exports andgoat-relatedowing totherole of of products, whichwere lessattractive to impacted byitsspecialization incashewnuts. Somaliaalsofacedadverseinitialspecialization also negatively impactedbyits initialspecialization ingumarabic, andBeninwasnegatively impacted were the“cotton” economies(Chad, BurkinaFaso, Benin, andMali). Chadwas (cocoa and coffee). We find that 19economies were inthe reverse situation, andthose most Botswana (bovinemeat), Burundi(coffee, tea, beer), Rwanda (coffee andtea), andGuinea specialization pattern, especially Tunisia (oliveoil, dates), theComoros (spices, essentialoils), Regarding sectoral specialization, 33 African economieshadapro-agricultural trade growth with limitedimport demand, especiallyKenya, intheiroverall export pattern). countries suchasRwanda andBurundi(whichhavestrengthened trade withregional partners and Thailand toIndiaand Viet Nam, whichhadweak import demandgrowth); andEast African Egypt);BeninandBurkinaFasoStates infavorof (reallocation within Asian partners from China has noticeable impactmainlyforEritrea (reduction inexports share toEurope andtheUnited their export performanceunderminedby negative reallocation. This effect isstilllimitedand and Switzerland), andZimbabwe(exports toChina). Ontheotherhand, 16countrieshaveseen and toChina), Liberia(exports totheMalaysiaandNetherlands), Gabon(exports toCanada Chile, China, andPeru), countries, Somalia(exports toGulf especially OmanandSaudi Arabia, notable forNiger(increased export shares toChina, Malaysia, and Thailand), Angola (exports to While remaining limited, geographical reallocation hasbeenbeneficialfor27countries, butis export growth intheCentral and West African economies. Somalia.of Limiteddemandfrom other African economies(e.g., Chad)negatively impacted Niger, andSomalia. Specific exports to Yemen and Syria negatively impactedthe export growth African countrieshaddisadvantageousinitialgeographical specialization: Angola, Gabon, (Benin, BurkinaFaso, andGuinea-Bissau) benefitedthemostfrom thiseffect. However, four demand in Asia, especiallyfrom China, India, andMalaysia. Chadand West African countries platforms orprocessing centers, especiallyinEurope (theNetherlands);andcontinuous in thebaseperiod. Two channelsexplain thiseffect: strong demandfrom globalre-export the48 African countriesbenefitedfromMost of pro-export growth geographical specialization economies are reviewed inFigure 4.4. REC aggregates may hideheterogeneity at thecountrylevel. The results forour55 African including knowledgeandmachinerythat isnolongerrelevant totheneworaltered markets. forces localvaluechains toadapt, andsometimestodisappear. Farmers facesunkcosts, specializationpattern inamarket of hasdomesticadjustmentcosts:achangeinspecialization to diversifyandinnovate. At thesametime, wealsoshouldacknowledgethat changingthe economies (inparticular Europe), whichwere reducingAfrican exporters theincentivesof inherited from thecolonial era andworsened bythetrade policypreferences developed of African performanceonworldmarkets wasconsidered suboptimalspecialization, theresult of theagriculturalchanges andpart transformation of process. Indeed, foralongtime, poor Nevertheless, wecouldconsiderthat goodadaptation capacityisapositivefeature structural of Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 83

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 beneficial for African exports trade andtobeasource creation of rather thantrade diversion. make sure that African markets are openandgrowing (notstagnant andprotected) tobe growth. Inthiscontext, the African Continental Free Trade Area (AfCFTA) negotiations should agricultural export strategyAfrican economiestoward of intra-Africa trade willlead toslow the region the world. the rest outpace the growthdynamics of of of Otherwise, reshaping the regionalthe role markets of forlocalproducers, theimport willmake demand senseonlyif integration policyforces at stake. Indeed, thepoliticalwilltoincrease intraregional trade, and driver isparticularly important forthefutureAfrican export of strategy, dynamics, andthepro- contribution is0.2for theworld.Africa and0.3fortherest of The geographical reallocation contribution is0.1for theworld,Africa and0.11for the rest of whiletheregional adjustment theworld.is notlaggingbehindandonaparwiththerest of The average sectoral adjustment adaptation African economies, of confirm thecapacityof especiallyintheproduct space. Africa Indeed, pure whileourassessmentisslightlymore performance, pessimisticintermsof we in theproduct andcountryspaces. originated pure inoursplitbetween the effects competitivenessandtheadaptation of strategy lower performanceandexperienced overall export slowdown. These results, however, also 2018). Compared toit, wefindthat Djibouti, Egypt, Ethiopia, Ghana, andNigeriahavehad This lastresult wasalsoconfirmedbythe AATM 2017 report (Badiane, Odjoand Collins associated withanegative competitivenesstrend. competitiveness measures. Incontrast, Central African countrieshaveremained structurally performing countrylist. West Manycountriesof Africa havemovedfrom negative topositive (Somalia); orfrom West Africa, withnumerous countriesfrom thisregion represented inour newcomers in thelastdecade, even including economiesrecovering from traumatic events performer listforthelast20years (e.g., Rwanda and Tanzania), butthere havealsobeenmany performance and their benchmark. Some countries have managed to stay on this top- remains thesame, African countriesmanagingtobeat withaminorityof theaverage market countries (Ethiopia, Malawi, andGabon, Africa asawhole). andof Still, thebroad picture (documented inBadianeandMakombe 2016), many withaslowdownintheperformance of The periodbetween 2005–2007 and 2015–2017 differ markedly withtheprevious decade are strong growth enginesonagri-foodmarkets. horticultural markets, withsignificant export links withboththeNetherlandsandChina. These but hasincreased itbelowitspotential:thiscountryiswellpositionedonthecoffee and has managedtoincrease itsworldmarket share slightly(from 0.155percent to0.16percent) have operated belowtheirexport potential. This isthecaseforEthiopia, forinstance, which The countriesinthislast category are notalwaysbadperformersinabsoluteterms, butthey Swaziland, Togo, Tunisia, Uganda, Zambia, andZimbabwe). Mauritius, Morocco, Namibia, Niger, Nigeria, Sao Tome andPrincipe, Seychelles, South Africa, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Ghana, Guinea, Kenya, Libya, Malawi, Mali, Chad, Comoros, Congo, Republic of Democratic Congo, Republic of Côte d’Ivoire, Djibouti, (Angola, Botswana, BurkinaFaso, Burundi, Cameroon, Cape Verde, Central African Republic, countries have underperformed compared their trade pattern totheexpected outcomes of Bissau, Madagascar, Rwanda, Senegal, Sierra Leone, Somalia, and Tanzania), while38other outperform theirstructural advantageordisadvantage(Algeria, Benin, Gambia, Guinea- The residual competitivenessmeasure ispositivefor10countriesthat havemanagedto coffee and/orcocoa). in export fruits);andRwanda, shares of Burundi, andGuinea (decrease intherelative role of sugarcane processed whiletherole cocoaproducts of hasdecreased); Seychelles(reduction wool); Sierra Leone (relative decrease incocoaexports); Swaziland(increasing export shares of 84 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains preferences givento African countries. preferentialactual capture of rents byexporters, forgoodssoldonmarket withhightariffs, and and cashews. Beyondqualitydifferentiation, higherunitvaluesmayalsobeassociated with true whenwecompare average unitvaluesforspecificvaluechainssuchastomatoes, cotton, agricultural goods, quality differentiation sothisissueof islessinfluential. This isespecially reflect differences inpricecompetitiveness. Itshouldbenoted, however, that weare studying persistent price differences may reflect differences in quality, while temporary differences the lowest-pricedgoodshouldwinentire market. We can, therefore, concludethat two goodshaveexactly thesamequalityandare offered onthemarket at different prices, to anotheronthegoodinquestion or differences inquality. Economicanalysisshows that if seen. These differences oneeconomyin mayreflectrelation eitherapricecompetitivenessof How tointerpret pricedifferences forthesamegoodbetweentwocountriesremains tobe heterogenous. (e.g., tons)whenthegoodsare reasonably similar(e.g., maize)orasanindex when goodsare the recordedThese quantities. unitvaluesare expressed inmonetaryunitperphysicalunits economic analysis rely on unit value: the ratio trade flows divided by between the value of tradedneed tocapture itemsintoanharmonizednomenclature. thevalueof For thisreason, Price seriesforalltraded goodsforallworldeconomiesare notavailable. Inaddition, we thesamegoodsproduced bynon-Africaneconomies.the pricesof Let agricultural us start goodsproduced by comparing the prices of by African economies with Unit Values (inUSdollars) we constructandanalyzereal effective exchange rates insection4.3.2. by macroeconomic factors suchastheexchange rate. To address theexchange rate asafactor, competitors’goods(section4.3.1). itstraded goodsandthepricesof Itcanalsobeaffectedof value chains. An economy’s competitivenessisdeterminedbythecomparisonbetweenprices African economiesinseveralIn thissectionweexamine thepricecompetitivenessof agricultural Prices Matter Africa orinan theworld. African RECthanintherest of agricultural 110 means goodsis 10 percent that thebundleof An index more of expensive in goods is as expensive in bundle of Africa or in an the world.African REC as it is in the rest of thesamebundleexported the World. bythe Restof of We assumethat “100”means that the and byREC. For them, each of theaverage unitvalueiscompared totheaverage unitvalue Figure relative 4.5showstheevolutionof unitvaluesforallagricultural commoditiesfor Africa the CEMACcalculated bundle. usingtheweightsof the unit valuetotheRestWorld of unitvalueiscalculated, the theRestWorld of unit value is aggregation) butonly from differences in prices. For example, the CEMAC when the ratio of averages cannotresult from compositioneffects (that is, indifferences intheweightsusedfor theworld,to therest of theyare harmonized insuchawaythat differences betweenunit value insurance andfreightcost of (CIF). When bundlesare composedforregions andcompared We builtatrade database where trade flowshavebeenharmonized. Allflowvaluesinclude Unit values:overview Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 85

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 reflecting ageneral gaininpricecompetitivenessagriculture. tea, sugar, sesameseeds, andcocoa. Overthe13-year period, thetrend decreases globally, world. cotton, priceinthevalue chainsof Africa appears tobeverycompetitiveintermsof Figure 4.6compares the average the unitvalue percommodityin therestAfrica tothat of of Unit values:specificvaluechains schemes. capacitytosellontheEUmarketsreflecting through highercostsbutalsothelackof preferential competitiveness betweenUMA theworldissystematically andtherest larger of than50percent, contrast, UMA, SADC, andSACU appear tobenotcompetitive:inparticular, thegapinprice 10 percent and25percent. The mostprice-competitive RECsare ECOWAS andECCAS. In goods compared theworld(Figure totherest of 4.5):thegapinaverage pricesvariesbetween At thisveryaggregate level, agricultural theprice of Africa appears tobecompetitiveintermsof AMU = Arab Maghreb Union. Western African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa CustomsUnion, and Southern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =EconomicCommunity of Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market forEastern Source: COMTRADE (2019)and authors’ calculation. Figure unitvaluesperregional economiccommunity2005-2017 4.5Evolution of 100 150 200 250 50 0 2005 Africa 2006 2007 CEMAC 2008 COMESA 2009 2010 86 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains ECCAS 2011 2012 ECOWAS 2013 2014 SACU 2015 SADC 2016 2017 AMU Figure unitvaluespercommodity2005-2017 4.6Evolution of agriculture sectorsthaninits agriculture sectorsinrecent years. since 2012. This indicates amuchgreater improvementAfrica’s inthecompetitivenessof non- agriculture in Africa hasexhibited greater volatility during the periodbuthasdeclinedsharply large agricultural exporters, suchas Argentina andBrazil. The real exchange rate fornon- African agriculture. However, thisistempered bythe deterioration some inthecurrencies of steady depreciation observedsince2015 hascontributedtotheincreased competitiveness of exchange rate compared agricultural tootherexporters products of from 2008 to2015. The in Africa from 2005to2017. Overall, African economiesexperienced anappreciation thereal of Figure thereal 4.7showstheevolutionof exchange rate foragriculture versusnon-agriculture become more expensive, signifyingagain incompetitiveness. or depreciation inthe The real effective exchange rate, exports becomecheaper andimports expensive andimports becomecheaper, signifyingalossincompetitiveness. With adecrease With an increase or appreciation in the The real effective exchange rate, exports become more and theinflation beingaccounted forbythegross domesticproduct (GDP) deflator. ing theexports (invalueandfortherelevant each products)exporter of totheworld, thebilateral realof exchange countries, acountryorgroup rates of of theweightsbe- counted for. Thus, the The real effective exchange rate isdefinedastheweightedsum ative currencies, toabasket of while“real” means that differences inpriceinflation are ac- petitiveness. Here, “effective” means thatAfrican currencies thevalueof iscalculated rel- The real effective exchange rate (REER)isoften viewedasameasure acountry’s of com- The real effective exchange rate: overview economies. African of This subsection accounts for macroeconomic factors that can affect the price competitiveness Real Effective Exchange Rate Source: COMTRADE (2019)and authors’ calculation. Value Chains Relative Unit Value Base 100 = Rest of the World 100 125 150 25 50 75 2005 Sugar Cotton Cashew nuts 2007 Tea Grapes Citrus 2009 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Year 87 2011 Tomatoes Leguminous &Pulses Cocoa 2013 2015 Coffee Sesame Seeds 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 COMESA hasanon-consistentpattern, thisgroup. perhapsduetothesizeanddiversityof declining revealed comparative advantage:CEMAC, ECCAS, ECOWAS, SADCandUMA. Only advantage, meaning that the The real effective exchange rate appreciation isassociated with their Thehave consistentevolutionof real effective exchange rates andrevealed comparative also experienced areal depreciation, byabout20percent. At thisaggregated level, mostRECS South Africa’sevolution of rand, whichappreciated until2010then collapsedin2011. UMA has exchange rate in SACU exhibited significant fluctuation during the period, due largely to the in 2015 has contributed to its improved competitiveness in agriculture. The The real effective Ethiopia until2010. The The real effective exchange rate depreciation inCOMESA beginning several countriesintheregionof appreciated, including EgyptandSudanupto2012 real effective exchange more rate than50percent of from 2005to2015, asthecurrencies agriculture from 2005to2017. COMESA experienced strong real appreciation the of The Figure 4.8showsdifferences thereal amongRECsintheevolutionof exchange rate for Figure real 4.7Evolution exchange of rate for Africa, agriculture andnon-agriculture 2005-2017 Source: COMTRADE (2019)and authors’ calculation. Real Exchnage Rate Base 100 = 2005 100 110 120 80 90 2005 2007 Sectors 2009 88 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Agriculture 2011 2013 Non-Agriculture 2015 2017 real depreciation intheseregions. which comeprimarilyfrom southern Africa, havebecomemore competitive, benefitingfrom over theperiod. Citrus, whichisexported mostlybysouthernandNorth Africa, andgrapes, exchange rates forcotton, cashew, and sugar, ontheotherhand, havebeenrelatively stable legumes andpulseshavealsobecomelesscompetitive duringtheperiod. The The real effective them(section4.2.1).comparative advantageforsomeof From Figure 4.9, weconcludethat in these traditional cash crops, and perhaps contributing to the decline in continental revealed and cocoa have appreciated over the period, signifying a decline in Africa’s competitiveness and whichare itsmaincompetingexporters abroad. The real exchange rates fortea, coffee, thesecommoditiesareeach influencedbywhichcountriesare of themain exporters in Africa aggregated levelforthewholeagricultural sector. The The real effective exchange rates for rate for Africa’s majorvaluechaincommoditiesfrom 2005to2017thanisobservedat the Moving toamore granular level, weseegreater differences thereal intheevolutionof exchange The real effective exchange rate: focusedvaluechains Custom Union, AMU= Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. Figure real 4.8Evolution exchange of rate for African regional economiccommunities2005-2017

Real Exchange Rate Base 100 = 2005 Africa 100 120 140 160 40 60 80 2005 CEMAC 2007 COMESA 2009 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 2011 Year ECCAS 89 2013 ECOWAS 2015 SACU 2017 SADC AMU

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 advantages beyond the primary stage of production (Figureadvantages beyondtheprimarystageof 4.10). activities. However, Africa appears tostrugglediversifyitsexports anddevelopcomparative at thefarmlevelwilldisplacelaborforce, whichcouldbeusedinfarmdownstream that African countriesdeveloptheiragri-businesssectors. Indeed, increasing laborproductivity agriculture discussedinsubsection4.2.1 as agrowth andjob-creation engine, itisessential To fosteragricultural transformation, andtousethe African comparative advantagesin Climbing thevaluechainladder Source: COMTRADE (2019)and authors’ calculation. Figure real 4.9Evolution effective of exchange rate forselectedvaluechains2005-2017 Real Exchange Rate

Value Chains Base 100 = 2005 100 120 140 60 80 2005 Sugar Cotton Cashew nuts 2007 2009 Tea Grapes Citrus 90 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Year 2011 Tomatoes Leguminous &Pulses Cocoa 2013 2015 Coffee Sesame Seeds 2017 commodity boards have an incentive to track) and by destination countries (which tend to have cash crops, andregistered fullybothbyexporting countries(where potential taxation and therefore poorlyregistered. Incontrast, primaryproducts targeting worldmarkets are mainly Chapter 6). Staple agricultural products are often liberalized withinregional agreements, and trade. Informalandunregistered trade are COMESA animportant issue(seethe caseof in goods are likely more impacted thanotherproducts bymeasurement error andunregistered There are multiplereasons forthishighlydifferentiated pattern. Unprocessed agricultural originshouldbelimited. limiting rulesof AfCFTA negotiations products through excluded listsof from theliberalization schemeand should notlimitthispotential:intheagri-business sector, protectionist pressures withinthe diversification andprogress alongthevaluechain. Italsoimpliesthat thepolicyframework regional exports willlead toahigherdividendthantraditional export patterns intermof commits totriplingintra-Africa the trade) andtheimplementationAfCFTA. of Increasing increasedimportant inthecontext of regional trade followingtheMalaboDeclaration (which intraregional trade isassociated withprocessed products (Figure 4.11). This feature isrelatively semi-processed products, thesituation withrespect toregional of markets isbalanced:half While African exports tonon-African markets are dominated (90percent) byprimaryor Africa trade. has notevolved. However, weseeaverydistinctpattern between intra-Africa trade andextra- increased between 2005 and 2017, the relative processed role and unprocessed of products 2017, only12US$billionare classifiedasprocessed goods. Whiletotal exports haveindeed agricultural productsalong thevaluechains. the62US$billionof exported Of by Africa in The current export structureAfrican countries (Figure of 4.11) illustratesprogress the lack of African Exports Remain Dominated byPrimary Exports Source: COMTRADE (2019)and authors’ calculation. Figure 4.10 processingAfrican revealed 2005-2017 comparative advantagesbystageof Revealed comparative advantage 100 150 200 50 0 2005 Value Chains 2007 Processed 2009 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Unprocessed &semi-processed 2011 Year 91 2013 2015 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 products inregional trade. continental level relatively soon, strengthening the case for expanding processed the share of the AfCFTAelements of negotiations, weexpect that thesebarriersmay beremoved at the originmay remain barriers todiversification.and specificrulesof Sincetheseissues are key such assanitaryandphytosanitaryregulations, technicalregulations (e.g., package labelling), suffer from thisproblem, at least inOECDmarkets. However, measures othernon-tariff (NTMs), most world economies, African exporters (through unilateral or bilateral preferences) do not chain. While thisisstillanimportant feature themostfavored nation structure of (MFN)tariff in Tariff escalation progress isoften citedtoexplain thelackof indiversification alongthevalue Source: COMTRADE (2019)and authors’ calculation. Figure 4.11 African agricultural processing exports bydestinationmarket 2005-2017 andstageof cocoa, coffee, cotton, andtea) are produced onlyfor worldmarkets. large-scalepatterns processing andthelackof facilities, somostprimary commodities(suchas Finally, demand for primary cash crops within Africa remains limited owing to similar production legislation, andare easier markets topenetrate, especiallyforsmallandmediumenterprises. markets consumerpreferences within Africa tendtohavemanysimilaritiesintermsof and appetite for, orlimitedaccessto, African processed products. Ontheotherhand, regional drivers are actuallyquite important. Consumers inadvancedeconomiescurrently havelimited intra-Africa trade inprimaryproducts butwillnotmake theobservedbiasvanish. The demand very significantpattern. unregisteredThe availableestimates of trade willincrease theshare of good statistical systems). While thisstatistical biasshouldnotbeneglected, westillobservea share of processedshare products of wasrelatively stableoverthe2005-07/2015-17 period, at about the continentalaggregate, the World andtheRest of (allnon-Africancountries). For Africa, the Figure processed 4.12displaysthe share products of toalldestinations forthedifferent RECs, Differentiated Patterns Across RECsand Value Chains African Exports Million USD 20000 40000 60000 80000 2005 2007 Extra-Africa-Processed Intra-Africa-Processed 2009 92 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Intra-Africa-Unprocessed &semi-processed Extra-Africa-Unprocessed &semi-processed 2011 Export Flows Year 2013 2015 2017 average”. World, products classified asprocessed of intotal exports inthisvalue chain for2015-2017on Figure 4.13showsforeach value chain, exports, theshare of by either the Africa ortheRest of the vanillavaluechainismore limitedinprocessing opportunities thanisthedairyvaluechain. stage, rather thanastructural inaptitudeinprocessing theprimaryproduction. For instance, reflect thespecialization invaluechainsthat are structurally processing more limitedintermsof strong compositioneffects. Inotherwords, unprocessed thehighshare products of could Any aggregate numbersmayhidedifferentiation at thevaluechainlevelbutmay alsoreflect weigh heavily intheseaggregates. crops suchascocoa(West Africa), cotton (Central Africa), andnumerous fruits(e.g., banana) most dominated byprimaryproducts withaprocessing share below10percent. Key cash The otherregions, West andCentral Africa, havenotregistered majorchangesandare the COMESAsituation of hasimproved, and theblochascaughtupwithcontinentalaverage. to someextent, inMorocco. This decliningtrend hasalsoimpactedSADC. Incontrast, the had strong expansion inprimaryexports, from 25percent in2005to42percent in2017, and period, fallingbelow30percent in2017. This majorchangesfor istheresultTunisia, of which a similarlevel as SACU, itsawalarge reduction processed in itsshare products of over this economicstructure)While UMA wasinitiallyat (thesecondmostadvancedblocintermsof itsdistributionandsupermarketalso contributetotheexpansion networks of (Campbell 2016). at about40 percent. This region isboosted by South African foodprocessing industries, which SACU processed countrieshaveamuchhighershare exports of thecontinent, thantherest of Custom Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. Figure processed products 4.12Shares byexporters of 2005-2017 pattern across regions within Africa. this justifies the concerns raised in subsection 4.4.1, we canalso observe awell-differentiated 20 percent, alittle more the World’s theRest thanone-third of of share (55percent). While Share of processed Products in Total Exports 10 20 30 40 60 70 0 2005 RECs 2007 Africa SACU ECCAS 2009 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 93 2011 Year SADC ECOWAS CEMAC 2013 Rest oftheWorld AMU COMESA 2015 2017

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 African exporters. Inaddition, quantitative information isprovided fortheRECsinappendix. This provides theopportunity topoint to recent market developmentsthat are relevant for 4.2, 4.3, and4.4, inthissectionweprovide additionalnarratives forourselectedvaluechains. While long-termtrendsAfrican economies’competitivenesshavebeenanalyzedinsections of value chainsin2016–2018 Major market events forkey Source: COMTRADE (2019)and authors’ calculation. 2015-2017 Figure processed products 4.13Shares theworldaverage forselectedvaluechains: of Africa versustherest of themore efficientassuming theadoptionof Asianprocessors. technologies of sugar anddairyproducts). Processing appears tobeamore realistic target forcashewnuts, agri-businesses incocoa, processing sincethelater require stagesof variousinputs(including between theworldstructure andthe African structure. Itisrelatively difficult todeveloplarge 40 percent. Several valuechains, includingcashewnutsandcocoa, displayextreme gaps Only that forgrapes, thanks inparticular toSouth African juiceandwineindustries, exceeds However, Africa systematically processing displaysalowrate initsexports of forallvaluechains. for grapes (includingjuicesandwines), whileitislimitedto20percent forcoffee andtea. significantly at theworldlevel. It reaches 80percent forcocoaproducts andderivatives and We canseethat, interest, forour11valuechainsof processed theshare products of varies Share of Procesed Products in the Value Chain Exports 20 40 60 80 0 Cashew nuts

Citrus

Cocoa

Coffee Selected ValueChains 94 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

Grapes Leguminous & Pulses

Sesame Seeds

Africa Sugar Exporter Rest oftheWorld

Tea

Tomatoes Nam, Indonesia, Malawi, Uganda, and Tanzania. to remain thesame, withKenya beingthelargest exporter followedbySriLanka, India, Viet 820,921 tonscompared to743,384tonsfor Africa. The majorexporting countriesare expected for both Africa and Asia. However, by 2023, export volumes for Asia are projected to reach are projected to reach 1.67 million metric tons in 2023, with similar growth rates projected world tea market, throughout 2016–2018. According to FAO (2015) forecasts, black tea exports steady in2018. A steady increase wasobservedforSADC, whichcaptured the 2.5percent of between 2017and2018whilethosefrom ECCAS declinedfrom 2016to2017andremained other RECs. Inmore recent developments, tea exports from COMESA andECOWAS declined exports. Aside from COMESA andECCAS (6.4percent), tea isnot a significant export for thisiscontributed byCOMESA,of forwhichtea totalagricultural accountsfor7.8percent of Africa captured theworldmarket one-fifth fortea of exports in2015–2017(Table A4.6). Most Tea andRelated Products local currency, andongoingmarketing efforts (USDA 2018a). including therecent governmentreforms tothecoffee marketing system, the devaluation of Coffee exports inEthiopiaare projected toincrease factors, in2019owingtoacombination of legislative actions, includingaUS$15millionsubsidyprogram, tosupport affected farmers. measures targeting thecoffee subsector. For example, Kenya isimplementingaseriesof dollar. Inaneffort toalleviate thecurrent theeffects crisis, of several countrieshavetaken held bythemajorcoffee roasters; anddepreciation theBrazilian real of againsttheUS developed countries;technologicaladvancesincoffee processing; excess market power capacity inthemainproducing globalconsumption, countries;slowgrowth of especiallyin 2011. Among thepotentialreasons forthisdeclineare production therapid expansion of index) hadfallenabout14percent theirvaluesince from 2017andhadlostclosetohalf prices (asmeasured bytheInternational Coffee Organization (ICO) compositeprice (8 percent), butalsoforECCAS (11percent) andCEMAC (5percent). In2018, worldcoffee (Table A4.5). Coffee isasignificant agricultural export product, not onlyfor COMESA coffee, world exportsAfrica supplies 6 percent of of largely driven by exports from COMESA Coffee andRelated Products Cocoa Organization, 2017). practices that willnotonlyboostproduction, butalsoenhancetheirlivelihoods(International by investingindisease-control measures andproviding incentivestofarmersadhere to commercialization thecocoa. of InGhana, thegovernmentaimstorevamp thecocoaindustry the 2018/19season, coupledwithlowinternational prices, havecreated somedifficulties in 2016/17, compared totheprevious season. However, alarge theprospects production of for region. Mildseasonal harmattan windshelpedincreased cocoaoutputforCôte d’Ivoire in 2016/17 season helpedcrops across themaincocoa-growing countriesinthe West African agriculturaland 34percent exports, of respectively. Favorable weather conditionsinthe is alsoasignificantagricultural export for CEMAC andECCAS, accountingfor42percent ECOWAS, where cocoarepresents totalagricultural 48percent exports of (Table A4.4). Cocoa the cocoaworld market,Africa corners21percent of owing largely to cocoa exports from Cocoa andRelated Products Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 95

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 UMA leadstomatoes, theRECsinexports of witha5.7percent theworldmarket share of Tomatoes and Related Products tablegrapesproducer intheworld, of withanestimated 4.1percent share in2017/18. of (TDCA) betweenSouth Africa andthe European Union. South Africa isthetenth-largest access totheEuropean Unionthrough the Trade DevelopmentandCooperation Agreement South Africa andEurope, whichspansoveracentury. South Africa also haspreferential market freshexports grapes of toEurope. This maybeowingtothelongtrading relationship between related products. In 2016, theEuropean totalSouth Unionaccountedfor95percentAfrican of exports, respectively. South Africa leads the continent in production grapes and exports and of (Table A4.9). Grapes represent 14.8percent SACU’s and8.8percent of andSADC’s agricultural SACU andSADCeach captured theworldmarket 3.8percent forgrapes of in2015–2017 Grapes andRelated Products expanding cropped area. Burkina Faso are thelargest producers andare forecast tohaverecord crops, drivenbyan are projected tosurpasstheprevious year’s record, drivenbyrecord production. Maliand opted for greater supplies from West Africa over Central Asia. West Africa exports for 2018/19 growth inconsumptionforbothregions. Bangladesh, theworld’s largest importer, hasrecently and merchants. SouthandSoutheast Asia are thepredominant robust destinations becauseof the region, signifyingthepivotalrole that foreign demandplaysfor West African producers Markets and Trade” (2018), nearly all West African cotton isexported, asthere are fewmillsin from 2016 to 2018. According to the USDA Foreign Agricultural Service website “Cotton: World (10 percent), andECOWAS (7.8percent). Cotton exports from ECCAS andECOWAS declined agriculturalsizable share exports of forseveral RECs, includingCEMAC (13percent), ECCAS ECOWAS worldtrade whichaccountedfor10percent (Table of A4.8). Cotton represents a Africa captured the worldexport 14.9percent market of forcotton in2015–2017, led by Cotton andRelated Products expected tofallinMauritiusdueless-than-ideal weather conditions(FAO 2019). South Africa, Ethiopia, andMozambiqueare anticipated toharvestlarger crops, whileoutputis opportunities intheregion. Sugarproduction isforecast toincrease further in2018/19. Egypt, over thepast10years, drivenbyinvestmentinirrigation andpriceincentivesoffered bytrade In Mozambique, sugarproduction hasexpanded byanannualaverage 10percent rate of recently, aslabordisputesandlandreform challengeshavelimitedanysignificantincrease. and to build new factories. Sugar output in South Africa has expanded at a moderate rate Six sugarmillsare nowoperational inthecountry, withplanstoexpand theircurrent capacity projects undertaken bythegovernment, withadeclared achievingself-sufficiency. strategy of in 2018. InEthiopia, substantial thesignificantboostinsugaroutputisexpansion result of for sugarduringtheperiod. More recently, sugarexports from COMESA andSADCincreased SACU (5.1). These RECs contribute to Africa’s abilitytocapture the worldmarket 4.9percent of 2017 (Table A4.7). This includes COMESA (7.4 percent), UMA (6.9 percent), SADC (6.8), and Sugar exports accountformore agricultural than5percent several exports RECsfor2015– of of Sugar andRelated Products 96 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

by 82percent since2013. Prices sesameseedsintheinternational market of strongly depend in volumeand3percent invaluesince2013, andMozambicansupplieshaveincreased sharply market. EthiopiansuppliestoEurope haveexperienced 8percent significantannualgrowth of 2017. EthiopiaandMozambique are sesameseeds totheEuropean alsoimportant suppliersof sesame seeds to Europe,supplier of both Sudan and Nigeria became significant exporters in theworldmarket,of respectively (Table A4.14). Although Indiaistraditionally thelargest largely by ECOWAS, COMESA, and SADC, which capture 21 percent, 28 percent, and 9 percent sesame seedsin2015–2017,Africa accountedfornearlyworldexports 60percent of of driven Sesame Seeds expanded area (USDA 2019). recovered from 2015/16, thedrought conditionsof as wellastofavorable weather andan attributable to an increase in South Africa’s production from the main growing regions that top market, accountingforover40percent in2018. The increase oranges inexports is of the mosttototalcitrusproduct exports inSouth Africa; theEuropean Unionremained the exporter intheregion, theworldmarket accountsfor9percent share. of Oranges contributed from COMESA, SADC, SACU, andUMA (Table A4.13). SADC, withSouth Africa asthetopcitrus Citrus exports from theworldmarket,Africa accountforalmost16percent of comingprimarily Citrus cashewsby94percent (COMMODAFRICAprice of 2018). 2017/18, Tanzania andthenewpolicyof (themainexporter inSADC), whichincreased the cashew exports fellby40percent from 2017to2018. This wasduetothepoorharvestin invest inplantations (COMMODAFRICA 2019). Incontrast to West Africa, East African raw trade withits development of Asian neighbors, especiallyCambodia, where the Vietnamese the desireViet of Namtoreduce itsdependenceonthe African continent, whichinvolvesthe Viet Nam’s cashewnutimports from Cambodia rose 64percent. This evolutionis inlinewith d’Ivoire (themainECOWAS exporter) fellby12percent from 2017to2018. At thesametime, percent inSADC. More recently, exports to Viet Nam(theworld’s largest processor) from Côte agricultural exportsshare products of of in theseRECs, at 11.3percent inECOWAS and2.6 world market in2015–2017, respectively (Table A4.12). Cashew nutscompriseasignificant due largely toexports from ECOWAS andSADC, whichcaptured the 15.6and4.2percent of theworldmarketAfrica accountedforbetween20and25percent forcashewnuts. of This was Cashew Nuts percent theagricultural and4.8percent COMESA exports of of andUMA, respectively. proportion total agricultural (less than 1 percent) exports of in other RECs, they account for 1.3 worldexports.accounts for30.5percent of While legumesandpulsesare anegligible percent theworldmarket, and14.7percent of respectively (Table A4.11). Africa asawhole COMESA andUMA are Africa’s largest legumesandpulses, exporters of accounting for 13.3 Legumes andPulses Egypt, and Tunisia are thetopthree African exporters, contributingthemosttothistrend. (Table A4.10). Tomatoes allagricultural accountfor13percent exports of fortheregion. Morocco, Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 97

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 African countriestocapture alarger theexport share of market (Okeke 2018). high crop prices. However, production increased in Africa, stabilizingprices, whileallowing Unfavorable climate conditionsin Asia since2015decreased sesameproduction andledto sesameseeds,a constraint ontheglobalavailabilityof whichputspressure onworldprices. on theannualvolumesproduced inIndiaandChina. Any delayorfailure inChinesecrops puts Box 4.1Newtrend invaluechainintegration: e-commerce 2018): companies using mobile technology to addressexamples challenges in the value chain(Kariuki of constraints that smallholderfarmers faceisbecomingareality. The followinglistincludessome Although itisprogressing rather slowly, agricultural valuechainstoovercome digitalization of the perishable products and theexchangestrategic large and processing information. amountsof of agricultural valuechainsischallengingin Management of Africa, particularly whendealing with supply variations, andstringentfoodsafetysustainabilityrequirements (Verdouw etal. 2016). that this improves support for food companies in dealing with perishable products, unpredictable enables supply chainactors to manage business processes remotely and in real time. Itisexpected agricultural supplychainsinvolvingproducts that are sensitivetotimeandtemperature. Virtualization The ICT integration of facilitiesisimportant inagricultural thecomplexity of trade becauseof value chains(OECD2019). easier connectionbetweenbusinessesandconsumers, thecoordination global andfacilitation of of international tradethe complexity isalleviated of through thetransaction costs, theminimization of marketing, goodsandservicesbyelectronic means.” saleordeliveryof Byadoptingdigitalization, (ICT) facilities. It is defined by the World Trade Organization (WTO) as the “production, distribution, Electronic commerce (e-commerce) istrade usinginformation andcommunication technology nearby smart tractor ownersthrough text messagingandmobile money. that allowsfarmerstoconvenientlyrequest, schedule, andprepay fortractor servicesfrom accesstoinputsandmodernmachinery:Hello • Lackof Tractor isanUber-like tractor service vehicles tosupplyanddeliver produce directly from farmersto urbanretailers. and modernmarkets. Itsmobileplatform bringstogether foodproducers, packhouses, and readyof buyersforthebestprice. Twiga Foods islinkingfarmersandvendors tofair, trusted, crops, using pricetrends. Oncetheproduce isready, M-Farm connectsfarmerswiththousands buyers across Kenya. Italsooffers important information todeterminethebesttimeplant accesstofair,• Lackof trusted, andmodernmarkets: M-Farm matches farmerswithlocal practices, andaccesstocredit and otherfinancialfacilities. and financialservices, includingdiscountedproducts, customized information onbestfarming a Safaricomplatform that information provides smallholderfarmerswithaccesstoasuiteof information viaSMS, withouttheinternetandhavingtoleave theirfarms. Digifarmis other knowledgepartners. WeFarm isafree peer-to-peer servicethat enablesfarmerstoshare market information, andfarmingtipsdevelopedincollaboration with African governmentsand the bestcrops toplant, pestgrowth alerts, adverseweather notices, preferred harvestingtime, mobile phonesviashort messageservice(SMS)andvoiceplatforms, includinginformation on in Africa tohelpfarmersimprove crop yieldsandincrease income. Farmers receive insightson For example, Techno Brain andtheMicrosoft Corporation launchedaDigital Agriculture Platform information: startups are usingmessagingappstoconveytheneededinformation tofarmers. agri-related• Lackof information suchasweather forecasts, market demand, pest-related 98 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains medium term:theseare strategic choicesthat African actorswillhavetomake quickly. producers tomoveupvaluechains. Someproducts appear more promising thanothersinthe base andsomake agricultural transformation astrong job-creation engine, byallowing African integration agenda. This isaprerequisite for African economiesto diversifytheirproductive that strong regional import demandwillallow African exporters tobenefitfrom the regional tariffs barriers, andnon-tariff origin, includingproper rulesof a success, animportant anddynamiclocalmarket. itmustallowthedevelopmentof Removing All this analysis, therefore, leads to interesting conclusions for economic policy. For AfCFTA to be 5. African exporters havethecapacitytoshift theirproduct mixandtomovenewmarkets. driven bynon-Africandemandforunprocessed andsemi-processed products. 4. A strikingfindinginouranalysisisthat theincrease in Africanagricultural exports ismainly is declining. seeds, and legumes and pulses, while the African comparative advantage in coffee and grapes 3. We alsonoteaveryhigh African competitivenessinsomevaluechains, includingsesame exports are balancedwithinthecontinent. chain. However, intra-Africa trade isquitedifferent, andprocessed andunprocessed products for SACU, where countries like South Africa have made significant progress along the value processed products. This is especiallytrueforCEMAC andECCAS, althoughmuchlessso 2. Africa is competitive mainly in unprocessed or semi-processed products and not in extractive sectors(UMA, CEMAC, orECCAS) donotdisplaythistrend. as ECOWAS, SADC, orCOMESA haveacomparative advantage. Otherregions withstrong 1. This comparative advantageisnotafeatureAfrica. thewholeof of Primarily, RECssuch years, butseveral remarks mustbemadeaboutthis: We findthat Africa’s comparative advantageinagriculture hasstrengthened in very recent average unitvalueratios, andmarket share decomposition. and methodstodothis:Revealed comparative advantage, The real effective exchange rates, theperiods2005–2007and2015–2017.using comparisonsof We usedifferent indicators This competitivenessinkey chapterexamines commodityvaluechainsin theevolutionof Africa, Conclusions imports.“ aproduct.the nationalsource of Their importanceisderivedfrom thefactthatduties andrestrictions inseveral casesdependuponthesource of 1- According tothe WTO definition (https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm), originare thecriterianeeded todetermine „Rules of Report. Washington, DC:IFPRI. Strategic Analysis and KnowledgeSupport System (ReSAKSS) Annual Trends and Outlook Economies forSustained Growth withRisingEmploymentandIncomes.” In2014Regional Badiane, O., and T. Makombe, eds. 2016. “BeyondaMiddle-Income Africa: Transforming Economic Forum. African Development Bank. 2017. References The African Competitiveness ReportGeneva: World 2017. Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 99 1 willbekey toguaranteeing

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Production. Okeke, A.2018. OECD. 2019. Trade intheDigitalEra. OECDGoingDigitalPolicy Note. Paris: OECD. DC: IFPRI. Agriculture Trade Monitor2018, editedbyO. Badiane, S. Odjo, and J. Collins. 50–84. Washington, Odjo, S., andO. Badiane. 2018. “Competitiveness in African Agricultural Exports.” InAfrica com/@harriet436/digitalizing-agricultural-value-chains-in-africa-2c0daf43299a. Kariuki, H. 2018. “Digitalizing Agricultural Value Chainsin Africa.” Medium. https://medium. 2016/2017. http:\\www.icco.org International Cocoa Organization. 2017. Cocoa Statistics Quaterly Bulletinof 43(1), Cocoa year fao.org/3/ca4526en/ca4526en.pdf. ———. 2019. Food Outlook: Biannual Report on Global Food Markets. Rome: FAO. FAO. 2015. World Tea Production and Trade: Current andFuture Development. Rome: FAO. CAE, Paris, Conseil d’Analyse Economique. Debonneuil, M., andL. Fontagné. 2003. COMTRADE. Accessed April 1, 2019. https://comtrade.un.org/ louest-1er-fournisseur-et-transformateur-en-progres. progres. ———. 2019. Marché ducajouen2018:l’Afrique del’Ouest1erfournisseur ettransformateur en cajou-et-licencie-le-patron-du-board. Board. http://www.commodafrica.com/30-10-2018-la-tanzanie-augmente-de-94-le-prix-des- CommodAfrica. 2018. La Tanzanie augmentede94%leprixdescajouetlicenciepatron du Economics 150(1):25–58. Cheptea, A., L. Fontagné, andS. Zignago. 2014. “European Export Performance.” World d’Économie duDéveloppement 21(1):33–60. Carrere, C. 2013. “UEMOA, CEMAC: Quelleperformanceenmatière decommerce?” Thematics:A Journal1(5):709–725. TWQ Campbell, M. 2016. “South African Supermarket ExpansioninSub-Saharan Africa.” 4–16. Washington, DC:IFPRI. Annual Trends andOutlookReport 2013. EditedbyO. Badiane, T. Makombe, andG. Bahiigwa, and Growth Outlook.” InPromoting Agricultural Trade toEnhanceResilience in Africa: ReSAKSS Bouët, A., D. Laborde Debucquet, and L. Deason. 2014. “Global Trade Patterns, Competitiveness, Economic Integration 32(4):937–977. Bouët, A., L. Cosnard andD. Laborde. 2018. “Measuring Trade Integration in Africa.” Journalof School 33.2: 99–123. Balassa, B. 1965. „Trade Liberalisation and“Revealed” Comparative Advantage.“ DC: IFPRI. Badiane, O., S. Odjo, and J. Collins. 2018. Africa Agriculture Trade Washington, Monitor2018. http://www.commodafrica.com/31-01-2019-marche-du-cajou-en-2018-lafrique-de- ” HackingAfrica. https://hackingafrica.com/development/3289/ “Open Sesame: African Countries MajorPlayersinGlobalSesameSeed Compétitivité. LaDocumentation française, Rapport du 100 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains The Manchester http://www. Third World Revue dataset/world-development-indicators World Development Indicators. Accessed April 1, 2019. Chains withtheInternetof Things.” Food Journalof Engineering176:128–136. Verdouw, C. N., J. Wolfert, A. J. M. Beulens, and A. Rialland. 2016. Food “Virtualization of Supply usda.gov/data/citrus-world-markets-and-trade ———. 2019. Foreign Agriculture Service-Citrus: World Markets and Trade. https://www.fas. usda.gov/data/cotton-world-markets-and-trade ———. 2018b. Foreign Agriculture Service - Cotton: World Markets and Trade. usda.gov/data/cotton-world-markets-and-trade. USDA. 2018a. Foreign Agriculture Service-Coffee: World Markets and Trade. https://www.fas. World EconomicForum. Source: COMTRADE (2019)andauthors’calculation. Table A4.1 Exports andexport selectedcommodities, shares of 2005–2007and2015–2017 Appendix Schwab, K., and X. Sala-i-Martín. 2017. All agricultural goods Tomatoes Tea Sugar Sesame seeds Legumes &pulses Grapes Cotton Coffee Cocoa Citrus Cashew nuts Commodities Value millions 438 746 1859 477 513 1617 2179 1742 4776 1819 464 32870 US$ Africa Share in world markets 4.4 15.7 6 42.1 39.6 5 17.5 8.9 19.7 12.4 11.7 4 2005–2007 The Global Competitiveness Report 2017–2018. Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Product share 1.3 2.3 5.7 1.5 1.6 4.9 6.6 5.3 14.5 5.5 1.4 100 (%) in African (%) agricultural exports 101 https://datacatalog.worldbank.org/ 1079 1697 2408 1803 622 2032 1993 2307 9265 3493 2458 60369 millions Value US$ Africa share 7.2 20.8 5 59.4 30.5 4.4 14.9 6 20.7 15.8 22.8 4.3 2015–2017 in world markets https://www.fas. Product share 1.8 2.8 4 3 1 3.4 3.3 3.8 15.3 5.8 4.1 100 (%) in African (%) agricultural exports Geneva:

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table each regionalA4.3 Composition of economiccommunity(REC) Note: nafornotavailable Table A4.2 Correspondence betweenvaluechainandHS6(HarmonizedSystem 6-digit)lines Cashew nuts ECOWAS Africa RECs Tomatoes Tea Sugar Sesame Seeds Legumes &Pulses Grapes Cotton Coffee Cocoa Citrus Value chains ISO3 CODE TGO GNB, LBR, MLI, NER, NGA, SEN, SLE, BEN, BFA, CIV, CPV, GHA, GIN, GMB, ZMB, ZWE SYC, TCD, TGO, TUN, TZA,UGA,ZAF, SEN, XAF, SLE, SOM, SSD, STP, SWZ, MWI, NAM, NER, NGA, RWA, SDN, LSO, MAR, MDG, MLI, MOZ, MRT, MUS, GIN, GMB, GNB, GNQ, KEN, LBR, LBY, DZA, EGY, ERI, XAF, ETH, GAB, GHA, CIV, CMR, COD, COG, COM, CPV, DJI, SAC, AGO, BDI, BEN, BFA, BWA, CAF, . 200210, 200290, 200950, 210320 210120 170410, 170490 151550 110610, 230250 220430 200969, 220410, 220421, 220429, na 210111, 210112 180690 180610, 180620, 180631, 180632, 200929, 200931, 200939 200911, 200912, 200919, 200921, 200819 Processed 102 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Country Name Mali, Niger, Nigeria, Senegal, Sierra Leone, Togo Ghana, Guinea, Gambia, Guinea-Bissau, Liberia, Benin, BurkinaFaso, Côte d’Ivoire, Cabo Verde, Zambia, Zimbabwe Togo, Tunisia, Tanzania,Uganda,Africa,South Tomé andPrincipe, Swaziland, Seychelles, Chad, Cunha, Sierra Leone, Somalia, SouthSudan, São Senegal, SaintHelena, Ascension and Tristan da Malawi, Namibia, Niger, Nigeria, Rwanda, Sudan, gascar, Mali, Mozambique, Mauritania, Mauritius, Kenya, Liberia, Libya, Lesotho, Morocco, Mada- ea, Gambia, Guinea-Bissau, Equatorial Guinea, Western Sahara, Ethiopia, Gabon, Ghana, Guin- Djibouti, Algeria, Egypt, Arab Rep., Eritrea, Dem. Rep., Congo, Rep., Comoros, Cabo Verde, Republic, Côte d’Ivoire, Cameroon, Congo, Benin, BurkinaFaso, Botswana, Central African South African CustomsUnion, Angola, Burundi, Unprocessed &semi-processed 70200 090210, 090220, 090230, 170112, 170113, 170114, 120740 070810, 070820, 070890 080610, 080620 520100, 520210, 520291, 090111, 090112, 090121, 180100, 180200, 180400, 080510, 080520, 080540, 080131, 080132 090240 170290, 170310, 170390 170240, 170250, 170260, 170219, 170220, 170230, 170191, 170199, 170211, 520299, 520300 090122, 090190 180500 080550, 080590, 081400 2015–2017 Table A4.5 Coffee exports Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. economic communities(RECs), 2015–2017 Table A4.4 Cocoa exports valuesandshares in African regional Africa UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Africa Exporter UMA SADC SACU CEMAC ECCAS COMESA ECOWAS ECCAS COMESA CEMAC Exporter DZA, LBY, MAR, MRT, TUN TZA, ZAF, ZMB, ZWE MOZ, MUS, MWI, NAM, SWZ, SYC, SAC, AGO, BWA, COD, LSO, MDG, SAC, BWA, LSO, NAM, SWZ, ZAF CAF, CMR, COG, GAB, GNQ, TCD GAB, GNQ, RWA, STP, TCD AGO, BDI, CAF, CMR, COD, COG, SDN, SSD, SWZ, SYC, UGA, ZMB, ZWE KEN, LBY, MDG, MUS, MWI, RWA, BDI, COD, COM, DJI, EGY, ERI, ETH, Value US$million Value US$million 1,687.7 2,306.7 302.6 204.1 8,212.5 9,265.1 78.6 167.7 656.2 270.4 621.8 34.2 73.4 values andshares in African regional economiccommunities(RECs), REC share inworldmarkets (%) REC share inworldmarkets (%) Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains Algeria, Libya, Morocco, Mauritania, Tunisia Zimbabwe land, Seychelles, Tanzania, South Africa, Zambia, zambique, Mauritius, Malawi, Namibia, Swazi- Congo, Dem. Rep., Lesotho, Madagascar, Mo- South African CustomUnion, Angola, Botswana, Namibia, Swaziland, South Africa South African CustomUnion, Botswana, Lesotho, Rep., Gabon, Equatorial Guinea, Chad Central African Republic, Cameroon, Congo, cipe, Chad Equatorial Guinea, Rwanda, São Tomé andPrin- eroon, Congo, Dem. Rep., Congo, Rep., Gabon, Angola, Burundi, Central African Republic, Cam- Zambia, Zimbabwe South Sudan, Swaziland, Seychelles, Uganda, Madagascar, Mauritius, Malawi, Rwanda, Sudan, Egypt, Arab Rep., Eritrea, Ethiopia, Kenya, Libya, Burundi, Congo, Dem. Rep., Comoros, Djibouti, 0.2 0.8 0.5 4.4 6.0 18.3 20.7 103 0.1 0.2 0.4 1.5 0.6 1.4 Product share intotal agricultural exports (%) Product share intotalagricultural exports (%) 10.6 5.3 1.7 8.2 3.8 34.0 41.7 47.4 15.3 0.5 0.6 0.8 1.3

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. 2015–2017 TableA4.6 Tea exports Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =Economic Community forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. 2015–2017 Table A4.7 Sugarexports valuesandshares in African regional economiccommunities(RECs), Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. SACU Africa UMA SADC Exporter COMESA CEMAC Africa Exporter UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Exporter UMA SADC SACU ECOWAS ECCAS Value US$million Value US$million Value US$million 1,376.5 1,500.0 2,408.0 1580.1 1697.2 447.0 611.2 121.7 202.7 40.2 242.9 15.4 37.8 8.1 6.5 30.4 30.7 0.3 6.3 values andshares in African re gional economiccommunities(RECs), REC share in worldmarkets (%) REC share inworldmarkets (%) REC share inworldmarkets (%) 104 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 19.4 20.8 0.1 0.2 0.5 1.5 2.5 0.1 0.1 0.6 0.0 0.0 0.1 0.9 1.3 2.9 3.1 5.0 0 Product share intotalagricultural exports (%) Product share intotalagricultural exports (%) Product share intotalagricultural exports (%) 0.2 0.3 6.3 7.7 2.8 0.5 0.3 1.2 0 0 1 0.4 0.4 0.2 7.1 5.2 6.9 7.3 4.0

(RECs), 2015–2017 Table A4.10 Tomatoes exports valuesandshares in African regional economic communities Customs Union, AMU= Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. (RECs), 2015–2017 Table A4.9 Grapes exports valuesandshares in African regional economiccommunities Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. economic communities(RECs), 2015–2017 Table A4.8 Cotton exports valuesandshares in African regional ECCAS COMESA CEMAC Exporter Africa Exporter UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Exporter SADC SACU ECOWAS Africa Africa CEMAC COMESA ECCAS ECOWAS SACU SADC UMA Value US$million Value US$million Value US$million 1,349.0 1,992.5 2,032.3 1,736.9 1,749.3 1078.8 235.0 194.4 305.9 194.2 233.5 134.8 55.1 43.6 33.1 31.0 55.4 0.8 1.4 1.7 6.5 5.1 3.6 REC share inworldmarkets (%) REC share inworldmarkets (%) REC share inworldmarkets (%) Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains 10.1 14.9 105 0.0 0.2 0.2 0.4 0.4 1.8 1.4 2.3 1.4 0.9 7.2 4.4 0.0 0.5 0.0 0.0 3.7 3.8 0.1 0 0 Product share intotal agricultural exports (%) Product share intotalagricultural exports (%) Product share intotalagricultural exports (%) 10.1 13.0 14.8 0.0 0.2 0.3 0.5 1.2 1.5 7.8 3.3 3.4 0.1 1.1 0.1 0.0 8.8 0.7 0.3 0.2 0.3 0.7 1.8

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Community of CommunityWestern of African States, SADC=South Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. communities (RECs), 2015–2017 Table A4.11 Legumes andpulsesexports valuesandshares in African regional economic Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation. (RECs), 2015–2017 Table A4.12 Cashew nutsexports valuesandshares in African regional economiccommunities Africa CustomsUnion, AMU = Arab Maghreb Union. UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Exporter Exporter UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Africa Exporter UMA Africa Value US$million Value US$million Value US$million 299.5 270.9 621.9 1,927.1 2,457.5 854.3 49.8 32.2 518.1 6.0 4.7 0.8 14.7

0.3 0.3 7.3 2.7

REC share inworldmarkets (%) REC share inworldmarkets (%) REC share inworldmarkets (%) 106 Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

ern African DevelopmentCommunity, SACU =Southern 17.8 22.8 14.7 13.3 30.5 0.0 0.0 0.1 0.1 4.8 0.0 0.3 0.2 0.0 2.4 1.6 5.7 Product share intotalagricultural exports (%) Product share totalagricultural exports (%) Product share totalagricultural exports (%) 11.1 13.6 0.0 0.0 0.1 0.1 2.6 4.1 0.0 0.1 0.2 0.1 0.3 0.2 4.8 1.3 1.0 Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC = Communauté Economique etMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)and authors’ calculation. (RECs), 2015–2017 Table A4.14 Sesameseedsexports valuesandshares in African regional economiccommunities Customs Union, AMU = Arab Maghreb Union. CommunityWestern of African States, SADC=Southern African DevelopmentCommunity, SACU =Southern Africa Eastern andSouthern Africa, ECCAS =EconomicCommunity forCentral African States, ECOWAS =Economic Note: CEMAC =Communauté EconomiqueetMonétaire d’Afrique Centrale, COMESA =Common Market for Source: COMTRADE (2019)andauthors’calculation (RECs), 2015–2017 @Table A4.13 Citrusnutsexports valuesandshares in African regional economiccommunities Africa UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Exporter UMA SADC SACU ECOWAS ECCAS COMESA CEMAC Africa Exporter Value US$million Value US$million 2,037.3 1,975.8 3,493.1 1,803.0 649.7 832.4 282.9 633.4 842.5 18.1 24.2 24.2 1.8 1.4 0.9 0.7 REC share inworldmarkets (%) REC share inworldmarkets (%) Competitiveness of AfricanAgricultural Valueof Chapter 4-CompetitivenessChains

20.9 27.8 59.4 0.0 0.0 0.8 0.8 9.3 15.8 0.0 0.0 0.1 2.9 3.8 9.2 8.9 107 Product share totalagricultural exports Product share totalagricultural exports (%) (%) 0.0 0.0 1.3 1.6 1.4 3.7 4.1 3.0 10.3 10.3 16.9 0.1 0.1 0.1 4.1 5.8

Africa Agriculture Trade Monitor / Report 2019

5 A Global Trading SystemOverview in Turmoil: What is at Stake for Africa?

Antoine Bouët, Fousseini Traoré, and David Laborde Africa Agriculture Trade Monitor / Report 2019 focus ontheUnitedStates (Amitietal. 2019;Fajgelbaum etal. 2019). America in particular. trade warfare, the same type of Other studies assess the effects of but with a be “free riders”whichbenefitfrom theclosure Americanborders of toChineseproducts, Central welfare orgross domesticproduct (GDP). China’s lossesare systematic butlimited. There may China andMexico. Undernocircumstances doestheUnitedStates gainsignificantlyintermsof protectionist policies initiated(CGE) modeltostudy18scenariosof bytheUnitedStates against view.empirical pointof BouëtandLaborde (2018)useastatic computablegeneral equilibrium protectionist policies initiated bytheUnitedStates hasoften beenassessedsince2017 from an alarge countrycanwinatradeif waragainstasmallcountry(Johnson 1953). the The impactof been shownthat, atrade war, in the caseof welfare, generally allcountriesloseintermsof even The academiceconomicliterature haslooked at trade wars. From view, atheoretical pointof ithas has againexerted trade retaliation. US importsas 100 percent from of China are expected to be affected by special protection. China previously targeted exports worth US$325billion. theselatter threats If are implemented, asmuch Chinese goods, anddeclared itsreadiness 25percent toimposeadditionaltariffs onChina’s of not from 10percent to25percent onabout5,700products, representing imported US$200billionof its exports toChinamaycauseripple effects. InMay2019, theUnitedStates againincreased tariffs USindustrialexports.of Giventhat theUSislargest farmgoods, globalexporter of thelossof USagricultural86 percent targeted exports of products, inthelistof compared toonly37percent agricultural sectorquicklycameto beat theretaliation theheart of process, withChinaincluding January 2017andDecember2018after moresteady decline(Figure than35years of 5.1). The special protection increased sharplyfrom lessthan10percent tomore than50percent between protection on products from China. In total, US imports the share from of China impacted by thenewadministration,Since thebeginningof theUShasparticularly increased itscustoms Mexico orCanada maybefacingnewUStariffs, againstwhichtheyare certain toretaliate. has beennofurther move inthat direction yet, itisnottobeexcluded that theEUandpossibly the US and China are threatening to further restrict trade between the two countries. While there US. Chinareacted tothenewUStariffs byimposingitsowntariffs onselectedUSproducts. Both would besubjectedtotariffs shouldseveral trading partners failtoreach newagreements withthe importedtariffs products, onafirstsetof otherpotentialproducts anddraw anindicative that listof new USgovernmenthasmovedtorenegotiate theNorth American Free Trade Agreement, impose While theUK separation, governmentandtheECare still workingonfinalizingthemodalitiesof the policies directed towards emerging economiesaswellotherindustrialcountries. 8, 2016, protectionism, theUSvotedforaplatform openlyinfavorof promising restrictive trade UK’s referendum onEuropean Unionmembershipoptedtoleave thebloc. Then, onNovember some donothesitate todescribeasdisruptions. First, on June 23, 2016, votersinthe amajorityof Over thepastthree years, theworldtrading systemhasbeensubjecttoprofound upheavals, which Introduction Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 110 Figure 5.1:USimportsfrom Chinacovered byspecialprotection, bysector, 1980–2018 this benefitisevengreater theyestablishacontinentalfree trade if area. diversion effects. We conclude that African countries can benefit from this trade war, and that countries that couldpotentially import African products) andthesubstitutioneffects ortrade countries (section5.2), inparticular thetrade theincome effects warontheGDPof (impact of atrade warbetween ChinaandtheUnitedStatescould explain theimpactof on African The chapterisstructured asfollows. First, wediscusstheeconomicmechanismsthat potentially protectionist isanattractive strategy for Africa. would fallsignificantly. Moreover, deeperintegration in Africawhiletheworldbecomesmore effect andanincomeeffect. However, amultilateral trade inthecaseof war, African exports the trade war.depending on theintensityof This isrelated to twoeffects, atrade diversion China, Africa willregister anetgainorlossinGDPandexports totheselarge countries Our mainconclusionisthat withtheseincreasing trade tensionsbetweentheUnitedStates and thistradeon theeffects war. of trade flows(section5.3). trade integrationWe alsostudytheimpactof onthe Africancontinent thetariffs actuallyimposedbythesetwomajortradingimpact of partners ontheirrespective disaggregation that includesalargeAfrican countries. numberof We studythepotential involved, weuseadynamicmulticountryandmultisectoral CGEmodel, usingageographical the United States on African countries. To do this, countries and sectors given the number of bilateral trade war. We thetrade focushere warbetweenChinaand onthepotentialimpactof “freeThe riders”isinteresting, issueof asthere a maybecollateral victimsorbeneficiariesof in turmoil. other players in the world economy. This is why the global trading system appears to be today effects. Trade tensionsmayalsobecomeevenmore important andmaypotentiallyconcern and itisexpected that thesetensionswillnegatively affect third countriesthrough spillover importers). Consequently, increasing trade tensionsbetween thesetwogiantsare amajor stake world economy(i.e., thetwocountrieswithlargest GDPs, andthe largest exporters and The trade warbetweentheUnitedStates andChinainvolvesthetwolargest playersinthe Source: Bown2019. Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 111

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure 5.2GDPgrowth projections in2019for2019-2023 between theUnitedStates andChina. revision, which is larger the IMF, than that of takes into account the May 2019 increase in tariffs trade growth for2019byonefullpercentage point:from 3.6percent to2.6percent. This revised downglobalgrowth to2.6percent (0.3percent belowprevious projections) andworld same vein, the World Bank’s June 2019GlobalEconomicProspects report (World Bank2019) revised downby−0.2and−0.10percentage pointsfor2019and2020, respectively. Inthe major consideration (IMF2019b). For theSahara, Africa southof growth forecasts havebeen countries suchasGermany, higheruncertainty, etc.), US–Chinatrade tensionsconstitutea monetary policiesinadvancedeconomies, developed difficulties inindustrialsectorsof this downward revision (macroeconomic issuesin Argentina and Turkey, tightercredit and −0.15 percentage points, respectively. Although numerous factors are mentioned to explain in 2020which, compared to2018projections, represents adownward −0.62and revision of 2019, respectively. World GDPisprojected togrow at 3.32percent in2019and3.61percent the forecasts in April 2019andthedifference between thoseissuedinMarch 2018and April Figures 5.2and5.3provide International Monetary Fund (IMF)GDPprojections, illustrating Global Macro Effects overall theglobalturmoilis, impacton Africa of therefore, ambiguous. opportunities may emerge for African countries with newsupplychaindecisionsbyChina. The third markets, particularly betweentheUSand African exporters. Ontheotherhand, somenew impact could be substantial. accrued competition in Another potential impact is the risk of materials comingfrom Africa andlowerprices. As Chinaisamajorpartner for Africa, the First, at thegloballevel, worldGDPwillbenegatively affected, duetolowerdemandforraw war betweenthetwogiants. This sectionwillshowdifferent thesetrade tensions. impactsof (especially Africa). Yet Africa islikely tofacebothpositiveandnegative outcomesfrom atrade been lessdebate abouttheextent towhichthird countriesandregions couldbeaffected theUS–Chinatrade disputehasbeenmuchanalyzed,While theglobalimpactof there has How Will Africa beImpacted? SSA for Africa, Sahara. Southof Note: MENA forMiddleEastandNorth Africa; EUforEuropean Union;EDA forEmerging andDeveloping Asia; Source: IMF(2019a). 1 2 3 4 5 6 7 8 2019

W 2020 orld Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? EU 112 2021 ED A MENA 2022 SSA 2023

In areview usingthree models measures are accompanied byafallininvestorconfidence. could increase theretaliation warscenariobutfallby1.1percent slightlyunderthefulltariff if investment), withlosses across allregions, while globalexports fall by3percent. African exports 1.7 percent whencombinedwithadeclineininvestorconfidence(scenariodrop in between ChinaandtheUnitedStates. They findthat globalincomewoulddeclineupto Freund surcharges tariff etal. aseriesof onproducts (2018)assesstheimplications of traded expected tobenefitmostfrom thesedifferent trade warscenarios. total exports from theSahara increaseAfrica southof slightly. Central American countriesare decrease between2.7percent to7.7percent involumeacross thedifferent scenarios, while Chinesereprisals.and Chinabymodifyingtheintensityof Total USexports are estimated to Bouët andLaborde trade (2018)evaluate several warbetweentheUnitedStates scenariosof SSA for Africa, Sahara. Southof Note: MENA for Middle EastandNorth Africa; EUforEuropean Union;EDA forEmerging andDeveloping Asia; Source: IMF(2019a). Figure 5.3Difference betweenMarch 2018andMarch 2019growth projections for2019-2023 with entryandexit ‚à laMelitz‘(Caliendo et al. 2017). 1 - The global integrated monetaryandfiscal(GIMF)model, theGlobal Trade Analysis Project (GTAP) model, andamultisectorheterogenous-firm model owing tothehighUSmarket share intotalChineseexports. model). Chinaisestimated tobemuchmore affected thantheUnitedStates war bythetariff run impact;thenegative effect isbasedontheglobal integrated monetary andfiscal(GIMF) the world would registerthe rest a loss ranging of from −0.05 percent to +0.10 percent (long- range from −0.3percent to−0.6percent, andforChinafrom −0.5percent to−1.5percent, between −0.1 percent and −0.2 percent. While the annual real GDP losses for the United States increase intariffs affecting allUS–China trade, theIMF(2019b)findsthat worldGDPwouldfall -2.5 -2 -1.5 -1 -0.5 0 0.5 2019 1 2020 to analyze a hypothetical scenario of a25percentage-point toanalyzeahypotheticalscenarioof Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? W orld EU ED 2021 A 113 MENA SSA 2022 2023

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Source: IMF(2019a). GDPfornon-resource-intensive−1.1 percent of exporters to−1.9percent foroilexporters. world trade andconcludesthat theimpactinmediumterm(3years) wouldrange from a1percentAfrican DevelopmentBank(AfDB2019)evaluates contraction theimpactof in by upto0.4 percent. Inarelated study usinga global vectorautoregressive (VAR) model, the from increased exports to the United States China, at the expense of with real exports increasing variation areof similartothoseinBouëtandLaborde 2018). The theworldwouldbenefit rest of percent, andUnitedStates exports wouldbecutby−4percent to−6.3percent (theseranges With respect totrade flows, real exports forChinawoulddecrease by−3.6percent to−5.5 those estimates, variationshowntendstoindicate thattheyare notsignificant. andthe range of 2 - the TheAfDB modelshould, results of however, beanalyzed withcaution. Indeed, thegraphs donotexplicitly indicatetheconfidenceintervalsaround Figure China’s 5.4Growth inthevolumeof trade in%2019-2023 the UnitedStates. be negative, giventhe closertrade relations betweenthecontinentandChinacompared to While thedisaggregation theresults doesnotinclude of Africa, itislikely that theneteffect will previous flowsfrom China, exports toChinawoulddecrease (upto−2.8percent) forallmodels. the worldwouldbenefitfrom more exports totheUnited States (upto6percent), replacing China’s exports totheUnitedStates tofallby71.3percent intheworstcase. While therest of export projections havebeenreduced by1.8percentage points. The IMF(2019b)projects to 2018. Import forecasts havebeenrevised downby2.3percentage pointsin2019, while forecasts. For bothexport andimport flowsthere isasignificantdownward revisioncompared growth China’s rate of trade in2019 aswellthedifference betweenthe2018and2019 China’spercent of oilimports camefrom Africa. Figures 5.4and5.5present theprojected also result inlowerexports for African countriesthat are China. large suppliersof In2017, 20 countries, especially to China. Indeed, a decrease in Chinese exports to the United States could economies is through lower demand for commodities and raw materials exported by African The mainchannelthrough whichUS–Chinatrade tensionsare expected toaffect African 0 1 2 3 4 .5 .5 .5 .5 .5 0 1 2 3 4 5 2019

2020 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 114 Imports 2021 Exports 2022 2023 2

Figure 5.5Changesfrom March 2018projections in%, 2019-2023 prices for2019and2020. to 2018projections, recent tensionshaveledtheIMFtoproject anintensification inthefall 4 years. Oilandseveral 2018. mineral priceshadalready of Compared falleninthesecondhalf commodity prices in the comingyears. From the 2018 peak, a decline is expected over the next that havestrong linkages withChina. Figures 5.6and5.7highlighttheprojected evolutionfor trade effects,these negative termsof themostaffected countriesbeingcommodityexporters growth slowdownforecast theSahara in in2019and2020maybeattributedAfrica southof to for thecommoditiesunderconsideration. According totheIMF(2019c), the of more thanhalf consequence willbelowerquantitiesexported by African countriestoChinaandlowerprices particularly in China, at theexpenseAfrican exporters. of As demandcontracts, the main Subsection 5.2.1showsthat trade tensionsare likely tocauseglobaldemandcontract, Sectoral Effects and Specific Value ChainsImpacted Source: IMF(2019a). - - - 1 0 2 0 .5 .5 .5 - - .5 2 1 0 1 2019

2020 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? Imports 2021 Exports 115 2022

2023

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 2019-2022 Figure 5.7Commodity priceindex fuelandnon-fuelpriceindiceschangesfrom March 2018 projections, Source: IMF(2019a). Figure 5.6Commodity Price Index (2005=100)2019-2023 Source: IMF(2019a). 112 114 116 118 120 122 124 126 128 130 -7 -6 -5 -4 -3 -2 -1 0 1 2019 2019 2020 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 2020 116 2021 2021 2022 2022 2023 exports toChina. Analysis bytheIMF(2018)and AfDB (2019)shows that 21countries from oilexports toChina, while60percentAngola’s of oilandminerals exports consistof be mostaffected. A countrysuchasSouthSudanacquires itsforeign 95percent revenue of minerals, andmetals), African countriesthat are thosegoodswould themainexporters of to 7percent (IMF2016). Since70percentAfrica exports of toChinaare commodities(oil, metalsandfuelpricestoChina’selasticity of industrialproduction ranges from 5percent process willbethemost affected bythenegative shock. Previous estimates showedthat the in industrialproducts. Therefore, raw materials andinputsusedintheindustrialproduction The literature showsthat contraction inChineseproduction andtrade willbeconcentrated 3 -IncludingZimbabwe, Guinea, Gabon, andDRC, exports are forwhichmore destinedforChina(Devermont andChiang2019). than40percent of seemingly begun to happen, as China has started buying soybeans from Rwanda, Ethiopia, its imports from Brazil, Africa couldbenext. This shift insupplynetworks has, infact, already USexports.in theworldandabsorbing two-thirds of Although Chinahasstarted increasing is targeting thisproduct witha25percent tariff, despitebeingthelargest soybean importer impacts on Africa. soybeansThe isaninteresting suchaphenomenon. caseof example of China The trade warislikely toprompt newsupply chaindecisionsinChinathat couldhavesignificant and citrus, themaingainsare secured evenif by Australia (Kohnert 2018). China.new suppliers of South Africa and Egypt are potential winners from war for wine tariff tariffs on USproducts may bring new opportunities to African exporters that could become other sectorsare likely tobenefit from thetrade dispute. In agriculture inparticular, rising at the2018SeptemberBeijing SummitonChina–Africacooperation. Inadditiontoenergy, Middle Easterncountries. This strategy was stated byChineseauthoritiesandeconomicactors more oilfrom Africa toreplace imports from theUnitedStates andreduce thedependenceon for Africa, despite thenegative effects mentionedabove. First, Chinacouldstart importing The trade tensionsbetweentheUnitedStates andChinacouldconstitutenewopportunities New Opportunities for Africa? destination of South destinationAfrica’s of carexports after theUnitedKingdom. threat to raise tariffs on imported vehicles, given that the United States is the second largest exports to the 2017 level (Kohnert 2018). A similar outcome is expected regarding the looming since theUnitedStates turneddowntheoffer madebySouth Africa tovoluntarilyrestrict its States in2017, jobsinthesteelindustryare itisestimated that at thousandsof risk, especially steel exports aluminumandUS$950millionworth totheUnited US$375 millionworthof of industry, sincetheUnitedStates hasdecidednottogrant anexemption tothiscountry. With The tariffs imposed by the United States on steel and aluminum could hurt South Africa’s steel a fewcountriesexporting intheUSmarket aswell. This couldbethecaseforSouth Africa. from China, theprotectionist measures introduced bythe Trump administration couldaffect African exportersWhile wewouldexpect themajorityof tobehurt bylowerdemandcoming through metalsandminerals exports (IMF2019c). of secure thesecommoditiesbychannelinginvestmentsbackintoChina theprovision of especially inmetalsandenergy. The goalfollowedbyChinawiththisstrategy isseeminglyto last twodecadesChinahasinvestedsubstantiallyinresource-intensive countriesin Africa, China’s direct investmentinto Africa isalsolikely tobenegatively affected. Indeed, over the vulnerable, themhaveyettorecover from asmanyof the2015–2016pricebust. commodity exporters are likely tobeimpacted. The thosecommodityexporters situation is of Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 117 3 that are

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 those inLatin America. potential dumping)asUSexporters displacethosewithinthesouthern Africa region aswell suppliers forSouth Africa (ACET 2014). There is, therefore, increased ariskof competition(and America. However, insouthern Africa, aregional market exists withZambia andZimbabweas Community (SADC) region (especially South Africa), withimports comingmainlyfrom Latin Regions withgrowing needsincludeNigeria, Senegal, andtheSouthern African Development Europe, Africa isanetimporter withgrowing demandboostedbyadynamicpoultrysector. would likely beredirected tonewdestinations, toavoidlowdomesticprices. Along with tons)thatthe UnitedStates willendupwithasurplus(potentiallyequivalenttomillionsof the soybean sector, isnewreallocation USexports to of Africa. Indeed, escalation, withthetariff (Laborde andSmaller2018). likely tohappeninthenear futureAfrican countriesdonotundertake if appropriate reforms addition tobuyingfrom Africa, newinvestmentdecisionswithpotentiallandacquisitionsare function is an aggregate constant elasticity of substitution (CES) function of all goods.function isanaggregate substitution(CES)functionof constantelasticityof version weuse, themodeliscalibrated withtheGTAP10 database. known asMIRAGRODEP, hasalready evaluation. beenusedtocarryoutthistypeof trade war. To dothis, weuseamulti-country, multi-sectordynamic CGEmodel. This model, In thissectionwepresent thepotentialeffects theUS–China aquantification on of Africaof Quantifying potentialimpacts Uganda, andtheDemocratic Congo, Republic of leading torisingpricesintheregion. 8- This means strictcomplementaritybetween value-addedandintermediateinputs. and regions (Aguiar, Narayanan, McDougall2016). 7 - The GTAP 10 databaseisaglobalcontainingbilateral trade information, input–output, transportation, andprotection datafor141countries 6 -SeeBouëtandLaborde (2018) andBouëtetal. (2018). 5 -http://www.ifpri.org/blog/could-us-%E2%80%93-china-trade-war-lead-new-wave-land-grabs. the chapter. (https://www.thenational.ae/business/economy/how-africa-became-collateral-damage-in-us-china-trade-war-1.849843). 4 -Prices haveincreased by25percent intheregion inless than6months, movingfrom US$520toUS$650perton. We refer tometrictonthroughout is a Leontief function is aLeontief and onhouseholds’income. From thesupplysideineach sector, theproduction function collected onproduction, production, onfactors of onexports, onimports, onconsumption, In MIRAGRODEP, thegovernmentisexplicitly modeled. taxes Governmentincomeconsistsof with IMFoutcomes, andinvestmentdoesnotvarywithuncertainty aboutthe future. net investment. Itisnoteworthy that aCGEmodelisnotdesignedforbusiness cycles, incontrast theworld(asinasingle-country CGE model),with therest of andglobalsavingsequal In aglobalCGEmodel, regions respect theirbudgetconstraints, consideringfinancial relations markets, equilibriumalsoholdsinthelastmarket. particularly households and firms. Walras’s the there is equilibrium in all but one of law holds: if framework anditstheoretical structure economicagents, isderivedfrom optimizingbehaviorof through priceadjustment. Like otherCGEmodels, MIRAGRODEP isbasedonaninput–output markets forproductive factors. The modelisusuallysolvedforanequilibriumonallmarkets the economicinterdependence betweenproductive sectorsandbetweenthese representation theworldwithnregions andmsectors. of This representation accountsfor A multiregion, multisectordynamiccomputableglobalCGEmodelisaneconomic implemented in2018andtheresults are reported fortheyear 2020. 8 of value-addedand intermediate inputs, of andtheintermediate inputs 5 Another potential consequence of thetensions, Another potentialconsequenceof especiallyfor Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 118 7 The trade warshockis 6 Inthe 4 In exchange rate. The thecurrent the fixed accountbalance ismaintainedthrough levelof real anadjustmentof current accountbalanceisfixed (inthemodelitis expressed globalGDP). asapercentage of capita constant. With respect totheexternal account, weassumeinthesimulations that the revenue soastoleave publicbalancetoGDPconstantandexpenditure theratio of per customs an additionalconsumptiontaxisleviedtocompensate ineach countryforthelossof The thepublicbalanceisalwaysanimportant closure assumption. of Here itisassumedthat sectors, 8industrialsectors, and5servicesectors. regions. The 31sectorscomprise16agricultural–food sectors, 2primarynon-agricultural sectors (see Appendix). The 21 regions include China and the United States, and also 9 African The modelishere calibrated onarepresentation theworldeconomywith21regions and31 of assumed tobethesameacross regions. the goods. Inthisstudy, Armington elasticitiesare drawn from theGTAP10 database andare skilled laborandcapital. “Value-added” unskilledlabor, isaCESfunctionof land, natural resources, andabundleof 10 - The Armington (1969) assumptions statethatimported products anddomestic products are imperfectsubstitutes. 9 - This substitutionbetweencapitalandskilledlaborcompared specification allowsustohaveadifferent tocapitalandunskilledlabor. elasticityof 2019). The S2-TW2 scenariois, therefore, atoughertrade warbetweenthetwocountries. S1-TW1 plusthebilateral customsdutyincreases declared bythetwocountriessince April 1, products, observed between the 2016 US elections and April 1, 2019) and S2-TW2 (scenario called S1-TW1 (increases inUScustomsdutiesonChineseproducts andChinesedutiesonUS trade policies.of We trade warbetweenChinaand theUnitedStates, studytwoscenariosof First, letuspresent theresults related tothree scenarioswhere Africa hasnoreaction interms APassive Africa used in MIRAGRODEP is a nesting of fourCES–Armingtonfunctions used inMIRAGRODEP isanestingof This impliesthat consumptionhasanon-unitaryincomeelasticity. The sectorsub-utilityfunction Preferences between goodsare represented byalinear expenditure system(LES)–CESfunction. to saveisconstant. The thenational rest incomeisusedtopurchase of finalconsumption. The demandsideismodeledineach region through arepresentative agentwhosepropensity same regardless thesector. of by assembling intermediate inputs according to a specific combination. The capital good is the Capital inagivenregion, whatever itsorigin(domesticorforeign), isassumedtobeobtained mobile betweenagricultural sectors. transformationaccording (CET)function. toaconstant elasticity of Landisalsoimperfectly Unskilled laborisimperfectlymobilebetweenagricultural andnon-agricultural sectors, are sectorspecific. Newcapitalisallocated amongsectorsaccording toaninvestmentfunction. Skilled laboristheonlyfactorthat isperfectlymobile. Installedcapitalandnatural resources the real remuneration land. of theactivepopulation.following theevolutionof Landsupplyisendogenous, asitdependson fixed supply overtimeisnatural resources. Laborsupplygrowth rates are fixed exogenously The utilization productive rate factorsisassumedtobeconstant. of The onlyfactorwitha 9

Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 119 10 that defines the origin of that definestheoriginof

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 region (SADCandSACU): inrelative terms theseare theregions withthelargest gains. (Table 5.1)andGDP(Table 5.2). The gainsare particularly strong forthesouthern African are applied. These real therepresentative gainsare bothintermsof incomeof household African regions benefitfrom abilateral trade warwhetherornotthemost increasesrecent tariff But theselossesare concentrated indevelopedandnon-Africandeveloping countries. All S1-TW1, US$454.6billion. foratotallossof income lossesat thegloballevelbecomemassive, multiplyingby59timesascompared to (S1-TW1) toUS$32.9billion(S2-TW2). thetrade warbecomesmultilateral If (S3-Nash), real 1, 2019, real multiplybymore than4times the lossof incomeworldwide, from US$7.7billion The trade wariscostlyfortheentire world:inparticular, theincreases announcedafter April equilibrium, adopt theirbestresponse (i.e., that thetariff maximizestheirwelfare). Itis, therefore, aNash We alsostudyanadditionalscenariothat mayillustrate amultilateral trade war:allcountries 12 - These variousRECsoverlap. thesixRECsisnotequaltogainfor therealAfrica. This incomesgainsof explains whythesumof theotherplayers. each playerisoptimalagainstthoseof The strategy atthatpointof 11 -IngametheoryaNashequilibriumis a situationsuchthateach player’s strategy maximizeshispayoff, othersisheldfixed. giventhatthestrategy of Africa CustomUnion, ECCAS =EconomicCommunity forCentral African States. African Development Community, COMESA = Common Market for Eastern and Southern Africa, SACU = Southern area. AMU = Arab Maghreb Union, ECOWAS = Economic CommunityWestern of African States, SADC = Southern countries adoptwelfare-maximizing tariffs; S4-AfCFTA istheS1-TW1 trade warscenario, plusacontinentalfree trade scenario S1-TW1 plusthebilateral customsdutyincreases declared after April 1, 2019;S3-Nashisascenariowhere all Note: S1-TW1 isatrade warscenariowithchangesintariffs observedfrom January 1, 2018to April 1, 2019;S2-TW2 is Source: Authors’ calculations from simulations. regional economiccommunities, household from different regions: Africa asawhole, theSahara, Africa southof six African Table thedifferent 5.1presents theimpactsof scenariosontherealrepresentative incomeof Table scenariosonreal 5.1Impactof householdincome(millionsUSD), 2020 discussed insection5.3.2. thesameregions.on theGDPof Bothtablesalsoincludeascenario(S4-AfCFTA) that willbe developing economies.and the group of Table the same scenarios 5.2 shows the impact of Developing w/o Africa Developing Developed World ECCAS SACU COMESA SADC ECOWAS AMU Sahara Africa southof Region Africa 11 andwetermittheS3-Nashscenario. −11,163.1 −7,716.3 3,008.5 12 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? S1-TW1 theworldasawhole, developedeconomies, thegroup of 205.6 346.2 438.3 15.0 51.8 57.8 96.6 92.1 120 −15,967.8 −32,880.6 −18,170.8 1,258.0 S2-TW2 200.6 118.7 319.4 330.3 524.7 927.7 46.4 −258,735.3 −454,601.2 −187,645.7 −3,956.4 −1,281.3 −1,613.7 −3,357.5 −6,606.5 −8,220.2 S3-Nash 189.3 438.6 −16,236.1 −30,599.2 −18,040.7 S4-AfCFTA 1,465.3 1,048.7 1,030.9 2,629.0 3,677.7 −61.7 102.2 585.3 Table scenariosongross domesticproducts 5.2Impactof (%), 2020 13 - These variousRECsoverlap. the6RECsisnotequaltogainfor therealAfrica. This incomesgainsof explains whythesumof minerals, whichfallby0.1percent and0.5percent, respectively, inscenario S2-TW2. wars between the United States and China on primary energyAfrican exports goods and of The assessmentmadewiththeMIRAGRODEP modelconfirmsthenegative trade effect of diversion: African exports toChinacouldsubstituteforUSexports insomesectors. primaryenergy goodsandminerals,of butalsohaveapotentialpositiveeffect, through trade the slowdownineconomicactivity(particularly inChina)whichwould reduce African exports In section5.2wementionapotentialnegative trade effect warson of African exports dueto indicate here onlythemostimportant flowsfor Africa, oronlythosewithsignificantvariations. Table5.2 scenariosS1-TW1 showstheimpactof andS2-TW2 onbilateral trade invalueterms. We developedcountriesby2.8percent.by 1.5percent andthoseof exports isparticularly strong (+0.9percent), goodsfall thesametypeof whileworldexports of 0.4 percent, with a positive figure the six for regions.each of For Africans, theincrease incrop In scenarioS2-TW2, whileworldexports fallinvalueby1.2percent, African exports increase by trade flowsare diverted andtheirown exports increase, withaknock-on effect ontheeconomy. In contrast, abilateral trade warcanopenupexport opportunities for Africans, whobenefitas COMESA, andSACU. worldwide withlowlossesfortheECCAS andECOWAS communities, but highfor AMU, Africa, withmajorimpactsonglobalmarkets. Inthisscenario, GDPis1.02percent thelossof Nevertheless, amultilateral trade war(scenarioS3-Nash)iscostlyforeveryone, including Southern Africa Customs Union, ECCAS =EconomicCommunity forCentral African States. Southern African DevelopmentCommunity, COMESA =Common Market forEasternandSouthern Africa, SACU = trade area. AMU = Arab Maghreb Union, ECOWAS =EconomicCommunityWestern of African States, SADC= all countriesadoptwelfare-maximizing tariffs; S4-AfCFTA istheS1-TW1 trade warscenario, plusacontinentalfree scenario S1-TW1 plusthebilateral customsdutyincreases declared after April 1, 2019;S3-Nashisascenariowhere Note: S1-TW1 isatrade warscenariowithchangesintariffs observedfrom January 2019to April 1, 2019; S2-TW2 is Source: Authors’ calculations from simulations. COMESA SADC ECOWAS AMU Sahara Africa southof Africa Region Developing w/o Africa Developing Developed World ECCAS SACU Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? S1-TW1 −0.04 −0.02 −0.03 0.01 0.01 0.01 0.02 0.01 0.01 0.02 0.01 S2-TW2 −0.08 −0.10 −0.09 121 0.02 0.04 0.03 0.05 0.03 0.02 0.04 0.03 S3-NASH −0.04 −0.99 −0.68 −0.28 −0.11 −0.67 −0.43 −0.50 −1.32 −0.88 −1.02 13 S4-AFCFTA −0.08 −0.10 −0.09 0.02 0.04 0.03 0.04 0.03 0.02 0.03 0.03

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table scenariosS1-TW1 5.3Impactof andS2-TW2 onbilateral exports (%)—Value, 2020 are agriculture andagri-food. significant growth in exports tothe United States. The sectors withthehighest export growth and COMESA regions, whilethe AMU, COMESA, andSADC regions benefitfrom themost by more than African countries. Exports toChinaare increasingly mainlyfrom theECOWAS Asian developingcountriesoutsideChina, are increasing theirexports totheUnitedStates countries (1.7percent and 3.5percent, respectively). Manydeveloping countries, particularly from developingcountries outside Africa, however, are increasing moreAfrican thanthoseof to Chinaandby0.4percent (respectively 2.2percent) totheUnitedStates. Exports toChina scenario S2-TW2, intotal, African exports increase by1.4percent (respectively 2.6percent) this opportunity toincrease theirexports tothesetwodestinations: inscenarioS1-TW1 and largest goodsintheworld. importing countriesof All African regions are takingadvantageof opportunities exports are tothetwo theworldintermsof openingupforotherregions of percent and−80.1percent, respectively). Underthesecircumstances, itisunderstandablethat by 12.0percent and23.5 percent, respectively, mainlyduetothefallinChina’s exports (−37.0 respectively), whileexports from developingcountriesoutside Africa totheUnitedStates fall respectively, mainlyduetothesharpdeclineinUSexports (−35.1percent and−64.4percent, scenario S2-TW2, developedcountries’ exports to Chinafallby6.5percent and 13.2percent, TW2 substantiallyaltertrade betweentheUnitedStates andChina. InscenarioS1-TW1 and But italsoconfirmsapositiveeffect through trade diversion. ScenariosS1-TW1 andS2- 14 - These variousRECsoverlap. the6RECsisnotequaltogainfor therealAfrica. This incomesgainsof explains whythesumof nomic Community forCentral African States. COMESA =Common Market forEasternandSouthern Africa, SACU =Southern Africa CustomsUnion, ECCAS =Eco- ECOWAS =EconomicCommunityWestern of African States, SADC=Southern African Development Community, scenario S1-TW1 plus the bilateral customs duty increases declared after April 1, 2019. AMU = Arab Maghreb Union, Note: S1-TW1 isatrade warscenariowithchangesintariffs observedfrom January 2019to April 1, 2019;S2-TW2 is Source: Authors’ calculations from simulations. Africa Developing w/o Africa Developing Developed World ECCAS SACU COMESA SADC ECOWAS AMU Sahara Africa southof Exporter Africa

−0.1 −0.1 −0.1 −0.2 −0.1 −0.1 −0.1 0.0 0.0 0.5 0.1 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 14 China Importer S1-TW1 −3.1 −6.5 1.1 1.2 1.7 1.4 1.9 1.4 2.3 1.4 1.4 122 USA −12.0 −4.1 −0.5 0.2 1.2 1.5 1.3 0.1 0.0 0.0 0.4 Africa −0.1 −0.1 −0.4 −0.4 −0.4 −0.2 −0.3 −0.3 0.9 0.4 0.1 China −13.2 Importer S2-TW2 −6.3 2.2 2.6 3.5 2.7 3.2 2.7 3.0 2.5 2.6 USA −23.5 −7.3 0.7 4.8 2.3 6.5 3.5 0.4 1.3 2.2 4.2 Table scenarioS2-TW2 5.4Impactof onagricultural value-addedinvolume(%), 2020 represents forproducers theworld. intherest of 5.2.3). This highlights the potentialwindfalleffect that Chinese retaliation onthisproduct United States wasthelargest soybeans exporter andChinathelargest of importer (seesection its value-addedinvolumeby1.6percent inthisscenario. Itisusefultorecall that, in2017, the Africa.of This isparticularly truefortheoilseedsectorandSADCregion, whichincreases war opensupopportunities thesesectors and inmostregions for African farmersinmostof scenario S2-TW2 on real value-added in agriculture in the different African regions. This trade can therefore represent anopportunity for African agriculture. Table 5.4showstheeffects of A bilateral trade war, suchas that represented byeithertheS1-TW1 orS2-TW2 scenario, 15 - These variousRECsoverlap. the6RECsisnotequaltogainfor therealAfrica. This incomesgainsof explains whythesumof Africa CustomsUnion, ECCAS =EconomicCommunity forCentral African States. African DevelopmentCommunity, COMESA =Common Market forEasternandSouthern Africa, SACU =Southern food. AMU = Arab Maghreb Union, ECOWAS Western =EconomicCommunity of African States, SADC=Southern Sahara; Veg. &fruits= Vegetable and fruits; Dairy =products; Veg. Oils= Vegetable oils;Proc. Food =Processed scenario S1-TW1 plus the bilateral customsduty increases declared after April 1, 2019. Africa SoS= Africa southof Note: S1-TW1 is a trade war scenario with changes in tariffs observed from January 2018 to April 1, 2019; S2-TW2 is Source: Authors’ calculations from simulations. Region Africa ECCAS SACU COMESA SADC ECOWAS AMU Africa SoS 2020 Table scenarioS2-TW2 5.4(continue)Impactof onagricultural value-addedinvolume(%), ECCAS SACU COMESA SADC ECOWAS AMU Africa SoS Africa Other crops Rice 0.2 0.3 0.2 0.1 0.2 0.2 0.2 0.3 0.9 0 0 0 0 0 0 0 Red Meat Wheat −0.1 0.2 0.3 0.1 0.1 0.1 0.1 0.1 0.1 0.3 0.1 0.2 0 0 0 0 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? White Meat −0.1 Corn 0.1 0.2 0.1 0.2 0.3 0.1 0.1 0.2 0.2 0.1 0.1 0.3 0 0 0 123 Veg. & Fruits 0.1> Dairy 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.2 0.1 0.2 0.1 0 0 Oil seeds Veg. Oils −1.3 −0.1 −0.1 −0.2 0.3 0.2 1.6 0.6 0.5 0.4 0.1 0.2 0.2 0 0 0 15 Proc. Food Sugar 0.2 0.1 0.1 0.2 0.2 0.1 0.1 0.1 0.2 0.5 0.2 0.2 0.2 0.3 0.1 0.2 Fibers 0.4 0.5 0.4 0.6 0.3 0.3 0.1 2

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table scenariosS3-NashandS4-AfCFTA 5.5Impactof onbilateral exports (%)—Value, 2020 by 5.4percent, COMESA by25.1percent, SACU by29.8percent, etc. change intheregion’s internaltrade tariff. Inthisscenario, internaltrade inECOWAS increases Second, each region onimports if setsatariff from othercountriesorregions, there isno Africa because African countries have lower market power, whichimplieslower optimal tariffs. intra-African trade increases by14.3percent, fortworeasons. First, increases tariff are lowerin China, 15.9percent toEurope, and13.6percent to theUnitedStates. Ontheotherhand, related theworld. declineinactivityallregions of African exports fallby7.4percent to Overall, Africa’s totalexports fallby10.1percent, duetoareturn toprotectionism anda Trade Association, EFTA) trade. isaddedbecauseitanimportant destination intermsof countries or regions. Compared to the previous table, the European region (European Free other imposes thecustomsdutythat theoptimaltariffs maximizesitswelfare of onthebasisof scenario S3-Nash. It should be recalled that this is a multilateral trade war where each country The showsthevariations inbilateral left sideof merchandise trade flowsbetween regions in African countries’exports fallbyonly9.9percent. global level(−27.5percent), andevenmore sofordevelopedcountries(−31.5percent), while costly distortions. IntheS3-Nashscenario, trade declinesare particularly significant at the itspartners),(and the exports of butthe tariffs each countryimposes at itsborders are also tries. Notonlydoeseach country’s GDPdecline, whichnegatively affects itsimport demand and onGDPineach region issostrong that theoverall impactbecomesnegative forallcoun- On theotherhand, thetrade warbecomesmultilateral, if thedepressive effect onworldGDP 16 - These variousRECsoverlap. the6RECsisnotequaltogainfor therealAfrica. This incomesgainsof explains whythesumof Southern Africa, SACU =Southern Africa CustomsUnion, ECCAS =EconomicCommunity forCentral African States. ern African States, SADC=Southern African DevelopmentCommunity, COMESA =Common Market forEastern and scenario, plusacontinentalfree trade area. AMU = Arab Maghreb Union, ECOWAS =EconomicCommunityWest of - Note: S3-Nashisascenarioinwhichallcountriesadoptwelfare-maximizing tariffs; S4-AFCFTA istheS1-TW1 trade war Source: Authors’ calculations from simulations. Developing w/o Africa Developing Developed World ECCAS SACU COMESA SADC ECOWAS AMU Sahara Africa Southof Africa

Exporter −11.1 −14.5 Africa −9.9 19.2 18.2 10.4 26.1 12.7 14.3 2.8 3.0 Importer S3-Nash China −37.9 −23.7 −10.5 −26.8 −47.5 −8.1 −2.1 −7.1 −7.4 −5.6 4.0 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 124 −22.0 −14.8 −13.7 −15.9 −31.7 −28.9 −18.7 −34.7 −31.6 EFTA −4.4 −7.4 −16.8 −12.1 −13.4 −13.6 −43.5 −37.3 −15.8 −50.4 −39.9 −4.0 −7.7 USA Africa −0.6 −1.1 20.4 35.2 34.8 17.8 30.5 50.6 82.2 8.7 3.1 China −13.2 −6.4 −2.1 S4-AfCFTA 2.9 2.3 0.9 1.5 2.5 2.6 0.6 3.5 Importer EFTA −1.0 −1.1 −2.0 −1.3 −0.7 −0.6 −1.6 −2.9 1.6 1.6 2.3 −23.5 −0.2 −7.3 −2.2 −1.4 USA 6.4 3.1 1.1 0.9 4.4 4.2 16 on USimports (scenario3). countries offsets tariffs removal thenegative thetrade effects of warevenintheabsenceof of the trade waris the worst option for developing countries unilaterally liberalize tariffs onimports from theUnitedStates. The results showthat joining trade agreements (RTAs) with all regions outside the United States; and (4) option (3) and responses bydevelopingcountries:(1)jointhetrade war;(2)donothing;(3)pursueregional Studying theUS–China trade the effects war, of Devarajan etal. (2018) consider four possible Our results are inaccordance withprevious studies, particularly Devarajan etal. (2018). ECOWAS countriesandtrade inagricultural andagri-foodproducts. in trade within Africa (+34.8 percent), includingrelatively strong growth intheexports of between regions inscenarioS4-AfCFTA. This scenarioimpliesaverysignificantincrease TheTable right-handsideof 5.5showsthevariations inbilateral merchandise trade flows percent by0.1percent inthisscenarioinstead inS1-TW1. of increases byUS$0.4billion. byUS$3.7billioninstead of Africa’s totalexports increase by3.1 percent by 0.01 percent, instead of and the real the representative income of consumer countries can make from a bilateral trade war: GDP at the continental level increases by 0.03 As andshow, afree trade theestablishmentof area in Africa amplifiesthegainsthat these considered asindicative. This scenarioisentitledS4-AfCFTA. some memberswithnon-Africancountries. Therefore, themodelingexercise here shouldbe products, origin, rules of or potential most favored nation clauses in bilateral agreements of theagreement,do notgointothepotentialdetailsof suchasexcluded products, sensitive eliminating alltariffsthe consequencesof ontrade ingoodsbetween African countries. We We propose thisfree here trade anon-detailedassessment of area. We onlyaccountfor force onMay30, 2019. the African UnionCommissionChairperson of (AUC). Therefore, theagreement entered into signed theagreement, ratification amongwhich22haddepositedtheirinstrumentof withthe same year theywere joinedbyfiveadditionalcountries. Bylate April2019, 52countrieshad providing forthecreation afree trade of area coveringtheentire African continent;in July the In March 2018, in Kigali, Rwanda, 44 African countries signed a framework agreement agreement isinaddition to scenarioS1-TW1, thebilateral theleast trade seriousof wars. free trade area? We study here these potential consequences in a scenario where this WhatAfrican countrieshaveaproactive happensif strategy anddecidetosetupacontinental A proactive strategy for Africa 19 -Exportsincrease upto2.5percent andGDPincreases upto1.3percent. 18 - African exports declineupto−0.6percent andGDPfallsupto−0.2 percent. The- agreement ratification. wassettoenterintoforce 30daysafter the22ndcountryhasdepositeditsinstrument of 17 This happenedon April29, 2019. regions andliberalizing tariffs on USimports isthe best. 17 Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 125 19 Regional integration indeveloping 18 while forming RTAs with non-US

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 and Chiang2019). confidence, causingthedepreciation localcurrencies andfallsinstockmarkets of (Devermont For example, ithasincreased uncertainty inthebusinessclimate anddiminishedinvestors’ this trade turmoilhasotherconsequences for Africa that are notwellcaptured bythiswork. such as the upcoming African continental free trade area. It is, nonetheless, worth noting that thecontinentadoptsaproactive strategy,be amplifiedif withdeeper regional integration the newopportunities intheUnitedStates andChinesemarkets. The gainsfor Africa could Developing countriesoutside Africa (mainly Asia) are likely tobethemainbeneficiariesof 2019, total African exports toChinafallowingthisnegative spillovereffect. the secondscenario, changesinChinaandthe UnitedStates whichincludestariff after April to Africa inoffsetting thenegative lowergrowth, spillovereffects of especiallyinChina. Under 2019. Inthiscase, thetrade benefit diversion betweentheUnitedStates andChinacouldbeof China underthefirstscenario, whichdepictsthechangesintariffs from January 2018until April thenewopportunity offeredof tothemincrease theirexports inboththeUnitedStates and thetrade war.countries dependingontheintensityof African countriescantake advantage a more nuancedconclusion: Africa willregister anetgainorlossinexports totheselarge Chinese imports (mainlycommodities), andwouldlowerpricesfor Africa’s exports. We cometo important trading partner, lowerexports andlowergrowth inChinawouldimplyareduction in to havenegative impactson Africa. These observersconsiderthat, asChinais Africa’s most Many experts andanalystsexpect thetrade conflictbetweentheUnited States andChina the strong trade linkages between Africa andChinainparticular. major playersintheworldeconomycouldaffect Africa. These concernsare legitimate given similarly, there are risingconcernsabouttheextent towhichthistrade warbetweenthetwo protectionism. A popularproverb in Africa states that whenelephantsfight, thegrass suffers: triggered bytheUnitedStates, thisnewwaveof thebestillustrations of constitutesoneof to protect domesticindustries. The bilateral trade warbetweentheUnitedStates andChina, Laborde 2012), the2016–2019 years havebeenmarked byrisingtensionsontheimport side export sidetoprotect thefoodpricespikes domesticconsumersinthewake (Bouëtand of While thelate 2000s were characterized by emerging non-cooperative trade policiesonthe Conclusions 20 -InSouth Africa, forinstance. two countrieshavenotbeen “punished”yet, thispossibilitycannotbe disregarded in thefuture. that the same decision on US products was taken by both Tanzania and Uganda, these and if the duty-free accesstoitsmarket forRwanda’s textile products under AGOA. Itisworth noting hand clothestoprotect itsdomesticproduction, inMarch 2018, theUnitedStates suspended response toanincrease inRwanda import second- dutiesfrom US$0.25toUS$2.5perkgof Act (AGOA). thisistheUS–RwandaAn illustration disputeoversecond-handclothes. of In countries wouldhavetocontendwithloomingthreats tothe African Growth andOpportunity clear challengetomultilateralism from thenewprotectionist USpolicy. For example, African important as, inadditiontothetrade disputebetweenChinaandtheUnitedStates, there isa Deeper integration in Africa whiletheworldbecomesmore protectionist wouldbeparticularly with SACU being the most affected region, although intra-continental trade would increase. relevant. Indeed, amultilateral trade inthecaseof war, African exports wouldfallsignificantly, these newopportunities for African countries intheUnitedStates andChinawouldcease tobe Furthermore, thewholeworldwere thetrading tobecomemore systemof if protectionist, 20

Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 126 wins. Countries like South Africa andDjibouti win” partnerships with Africa, while theUnitedStates isfocusedonitsowninterests andeasy are disseminating the messagethat theyaloneare interested indevelopinglong-term“win– by employinganti-Americanrhetoricintheirdialoguewith African leaders. Chineseauthorities its relationships with Africa. Chineseauthoritiesare reinforcing USactions thisperception of long-term development, undermining the country’s reputation and pushing China to deepen The mainriskhere fortheUnitedStates istoappear relatively unconcernedabout Africa’s Africa or Kenya, with potential retaliatory measures in case the partner turns the offer down. deals with Africa andenvisagesproposing newtrade deals with African countriessuchasSouth The UnitedStates isalsotryingtomovetoward less asymmetrical andnon-reciprocal trade guelleh-personne-dautre-chinois-noffre-partenariat-a-long-terme-a-djibouti/. thePresident Djibouti: JeuneAfrique.com,21 -Seetheinterviewof of April 4, 2017, https://www.jeuneafrique.com/mag/421096/politique/ismail-omar- 8640, WorldBank, Washington,DC. Developing Countries’ Response to Trade Disputes. Policy Research Working Paper Series Devarajan, S., D. S. Go, C. Lakatos, S. Robinson, andK. E. Thierfelder. 2018. Traders’ Dilemma: EconomicResearch,of Cambridge, MA. Theory andEvidence fortheLast Two Decades.” NBER Working Paper 21768, National Bureau Caliendo, L., R. C. Feenstra, J. Romalis, and A. Taylor. 2017. “Tariff Reductions, Entry, and Welfare: Paper 19-7, thePeterson InstituteforInternational Economics, Washington D.C. Bown, C. 2019. The US-China Trade Conflict After 40 Special Years of Protection.PIIE Working and EconomicDevelopment27(1):25–53. Partnership Agreement: SmallImpactandNewQuestions.” The International Journal of Trade Bouët, A., D. Laborde, D, andF. Traoré. 2018. “TheEuropean Union-West Africa Economic its Partners Lose Again.” The WorldEconomy 41(9):2276–2319. ———. 2018. “U.S. Trade Wars inthe21st Century withEmerging Countries: Make America and Trade Policies.” ReviewWorld of Economics(Weltwirtschaftliches Archiv) 48(1):209–233. Bouët, A., andD. Laborde. 2012. “Food CrisisandExport Taxation: The Non-cooperative Cost of IMF StaffPapers, 16, pp. 159–178, IMF, Washington D.C. Armington, P. S. 1969. A DemandforProductsTheory of Production DistinguishedbyPlaceof . and Welfare. CEPRDiscussionPaper DP13564, CEPR, Washington D.C. Amiti, M., S. J. Redding, andD. Weinstein. 2019. the2018 The Impactof Trade War onUSPrices Base.” GlobalEconomic Analysis 1(1):181–208. Journal of Aguiar, A., B. Narayanan, andR. McDougall. 2016. “An the GTAP Overview of 9 Data AfDB (AfricanDevelopmentBank). 2019. “African EconomicOutlook2019.” Abidjan: AfDB. in Africa.”Opportunity FinalReport. Accra: ACET. ACET (AfricanCenter forEconomic Transformation). 2014. “TheSoybean Agri-Processing References could be joined by many others if theUnitedStates doesnot rethinkcould bejoinedbymanyothersif itsstrategy toward Africa. Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 21 are already receptive tothisdiscourseand 127

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Washington DC: World Bank. World Bank. 2019. grabs? http://www.ifpri.org/blog/could-us-–-china-trade-war-lead-new-wave-land-grabs. Laborde, D. andC. Smaller. 2018. Could aU.S.-China land trade warlead toanewwaveof MPRA Paper No. 87764, MPRA, Munich. Kohnert, D. 2018. Trump’s Tariff’s Impacton Africa andthe Ambiguous RoleAfrican of . Agency 142–153. Johnson, H. G. 1953. “Optimum Tariffs and Retaliation.” Uncertainty. World EconomicandFinancial Surveys. Washington, DC:IMF. ———. 2019c. Regional EconomicOutlook. Sub-Saharan Africa: Recovery Amid Elevated and Financial Surveys. Washington, DC:IMF. ———. 2019b. World EconomicOutlook. Growth Slowdown, Precarious Recovery. WorldEconomic external/pubs/ft/weo/2019/01/weodata/index.aspx. ———. 2019a. World economicoutlookdatabase. April 2019Edition. https://www.imf.org/ Investment”, Washington, DC:IMF. ———. 2018. “Regional EconomicOutlook:DomesticRevenue Mobilization andPrivate Notes 5. Washington, DC:IMF. IMF (International MonetaryFund). 2016. Spilloversfrom China:Financial Channels. Spillover Current Income of Trade Disputes. MTI Practice Note, Number 2. Washington, DC: World Bank. Freund, C., M. J. Ferrantino, M. Maliszewska, andM. Ruta. 2018. ImpactsonGlobal Trade and Protectionism, Working Paper 25638. National Bureau Economic Research, of Cambridge. Fajgelbaum, P. D., P. K. Goldberg, P. J. Kennedy, and A. K. Return to Khandelwal. 2019. The African Economies,” CSISBriefs, April, CSIS, Washington, DC. Devermont, J., andC. Chiang. 2019. “InnocentBystanders. Why theU.S.-China Trade War Hurts Global Economic Prospects: Heightened Tension, Subdued Investment. Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 128 Review of Economic Studies 21 (2): Review of Table A5.1 Geographic disaggregation Appendix: Source: GTAP10 database andauthors. TZA xSADC xSADCOM xCOMESA ECCAS ECOWAS xUMA xUMACOM Gulf CIS EFTA CAM LAC USA xNAFTA Sasia SEAsia Easia CHN Oceania Region code SACU IRN (Iran), TUR (Turkey), ISR(Israel), JOR (Jordan), ARE (United Arab Emirates), BHR MAR (Morocco), NorthXNF (Rest of Africa) EGY (Egypt), TUN (Tunisia) GEO (Georgia) (Mongolia), FormerXSU (Rest of SovietUnion), ARM (Armenia), AZE (Azerbaijan), Europe), Europe),XER (Rest of KAZ (Kazakhstan), KGZ (Kyrgyzstan), MNG ALB (Albania), BLR(Bulgaria), RUS(Russia), UKR(Ukraine), Eastern XEE (Rest of XTW theworld) (Rest of NOR (Norway), EFTA),XEF (Rest of BGR(Bulgaria), HRV (Croatia), ROU(Romania), (Slovenia), ESP(Spain), SWE(Sweden), GBR(UnitedKingdom), CHE(Switzerland), MLT (Malta), NLD(Netherlands), POL (Poland), PRT (Portugal), SVK (Slovakia), SVN (Hungary), IRL (Ireland), ITA (Italy), LVA (Latvia), LTU (Lithuania), LUX (Luxembourg), EST (Estonia), FIN(Finland), FRA (France), DEU(Germany), GRC(Greece), HUN AUT (Austria), BEL (Belgium), CYP (Cyprus), CZE(CzechRepublic), DNK (Denmark), JAM (Jamaica), PRI(Puerto Rico), TTO (Trinidad & Tobago), XCB (Caribbean) dor), HND(Honduras), XCA Central (Rest of America), DOM(DominicanRepublic), CRI (Costa Rica), GTM (Guatemala), NIC(Nicaragua), PAN (Panama), SLV (ElSalva- South America) of (Ecuador), PRY (Paraguay), PER(Peru), URY (Uruguay), VEN (Venezuela), XSM (Rest ARG (Argentina), BOL (Bolivia), BRA (Brazil), CHL (Chile), COL (Colombia), ECU USA (UnitedStatesAmerica) of CAN (Canada), MEX (Mexico), XNA North (Rest of America) South (RestAsia) of BGD (Bangladesh), IND(India), PAK (Pakistan), LKA (SriLanka), NPL (Nepal), XSA THA (Thailand), VNM (Viet Nam), Southern XSE (RestAsia) of People’s Democratic Republic), MYS(Malaysia), PHL (Philippines), SGP(Singapore), TWN (Taiwan), XEA East (RestAsia), of KHM(Cambodia), IDN(Indonesia), LAO (Lao JPN (Japan), KOR (Korea Republic of) CHN (China), HKG (HongKong) AUS (Australia), NZL (NewZealand), XOC Oceania) (Rest of GTAP regions TZA (Tanzania) MOZ (Mozambique) (Zimbabwe), Eastern XEC (RestAfrica) of MDG (Madagascar), MWI(Malawi), MUS (Mauritius), ZMB(Zambia), ZWE ETH (Ethiopia), KEN(Kenya), RWA (Rwanda), UGA (Uganda) CMR (Cameroon), XCF (Central Africa), XAC (SouthCentral Africa) d’Ivoire), GHA (Ghana), GIN(Guinea), TGO (Togo), XWF (RestWestern of Africa) NGA (Nigeria), SEN(Senegal), BEN(Benin), BFA (BurkinaFaso), CIV (Côte of Western of Asia) (Bahrain), KWT (Kuwait), OMN(Oman), QAT (Qatar), SAU (Saudi Arabia), XWS (Rest BWA (Botswana), ZAF(South Africa), NAM(Namibia), South XSC (RestAfrican of Customs Union) Geographic andSectorDisaggregation Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 129

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table A5.2 Sectoral disaggregation Source: GTAP10 database andauthors. Rice Corn Wheat Sector Code Dairy products White meat Red meat Other crops Fibers Sugar Oil seeds fruits Vegetables and GTAP Sectors RMK, MIL OAP, OMT CTL, CMT OCR PFB C_B, SGR OSD V_F GRO WHT PDR, PCR rubber products Chemical and leum products Coke andpetro - ducts and paperpro- Paper, lumber, Textiles Processed food Vegetable oils Minerals Energy Primary Fish Forestry Wool Sector Code Chapter 5-A Global Trading System in Turmoil: What isat Stake for Africa? 130 CRP P_C LUM, PPP LEA TEX, WAP, OFD, B_T VOL OMN, NMM GAS COA, OIL, FSH FRS WOL GTAP Sectors Other services Transport Trade Construction Utilities Capital goods factured goods Other manu- equipment Transportation metal products Metals and Sector Code GTAP Sectors OSG, DWE OBS, ROS, CMN, OFI, ISR, OTP,WTP, ATP TRD CNS ELY,GDT, WTR OME ELE, OMF MVH, OTN I_S, NFM, FMP

6 Regional Trade Integration in Eastern and Southern Africa

Albert Makochekanwa and Greenwell Matchaya Africa Agriculture Trade Monitor / Report 2019 This chapter also highlights the possibility of usingincreasedThis chapter also highlights the possibility of intraregional trade within member states are mostlytrading withthird countries, rather thanwithregional counterparts. may beattributable tohightrading costsintheregion. There isalsoevidencethat COMESA Intraregional trade flowsare still lowevenwhenICBT statistics are taken intoaccount, andthis trade costindicators reveals that COMESA islaggingbehindothercontinentalcounterparts. trade arrangements didnotachievethedesired outcomes. bothtrade flowsand Analysis of theregionalThe blocsinESA originsof date tothe1960s. However, wefindthat the regional mechanisms inorder toimprove them. exist intheESA region. The objectiveistounderstand thestrengths these andweaknesses of using thelimiteddata available, anddocumentedthemajorICBT monitoringmechanismsthat Consequently, the study also examined informal agricultural the magnitude and trends trade, of totaltradefraction (Gelanetal. of 2010). in some studies, which have shown that informal trade may sometimes constitute a significant various otherindicators. This pointisimportant, especiallywhenevaluated againstthefindings trade, balanceof statistics necessaryforthecomputation national of accountscompilation, and informal cross-border trade (ICBT)data canprovide completeandcomparable external trade Countries engageinbothformalandinformaltrade intheESA region. When available, integration process. trade arrangements intheregion, provides important information formonitoringtheregional Analyzing trade flowsandtrade costsindicators, aswelltracing theregional experiences of costs, toseewhetherthere wasprogress trade flow expansion andcost intermsof reduction. the periods1960–1993and1994–2018. trade flowsandtrade Italsoanalyzesindicators of (ESA) region, notablytheCommon Market forEasternandSouthern Africa (COMESA), for regionaldocuments theexperiencestrade of arrangements intheeastern andsouthern Africa There is, therefore, aneedtomonitorandevaluate regional integration processes. This study globalization challenges. Regional trade countriesisregarded cooperation of byUNECA asakey strategy toconfront vulnerability through increasing bargaining powerand, inturn, improves living. standards of countriesprovides ahugemarketof fornewindustrialdevelopmentwhichreduces external fostering intraregional trade, infrastructure, andinvestment(McCarthy 1996). Cooperation asserted that regional integration promotes economicgrowth andindustrialization through development andincrease theirparticipation intheglobaleconomy. Inaddition, UNECA has that regional integration andtrading blocsare criticalfor African nations toachievesustainable integration. The UnitedNations EconomicCommission for Africa (UNECA, 2017)hassuggested makers, researchers, andpoliticalleaders that Africa coulddevelopfasterthrough regional developing countries in the last three decades (Jones 2002). There is consensus among policy levels, economic cooperation the fundamental policy options for many has been one of increased national incomeandbargaining power(Balassa 1961). At regional andsubregional parallel newindustriesandminimizesexternal marketshocks through forthedevelopmentof Regional integration isoften seenasapowerfuldevelopmentstrategy that provides alarge Introduction This chapterhasbeenupdatedsinceitsinitialpublication. member countries, evenundercurrent production conditions. COMESA as a means toraise domestic food markets theresilience to shocks of across their Chapter 6-Regional Trade Integration inEasternandSouthern Africa 134 1

that grew outsidetheLPA include: Border Initiative (CBI) are theblocs that fit into the LPA. The regional integration arrangements importance placed upon them for political and socioeconomic reasons. The PTA and the Cross- the LPA (Table 6.1). The regional existence blocsbefore of andoutsidetheLPA indicates the into theLPA adoptedin1980, andthosethat were eitherinexistence orcameaboutoutside The regional arrangements inthe ESA region canbedividedintotwocategories: thosethat fit by COMESA in1994. theLPA,of thePreferential Trade Area (PTA) wasformedin1981andeventuallyreplaced Communauté EconomiquedesPays desGrands Lacs)in1976. Following therecommendations theGreat theEconomicCommunity of Lakesand of Countries (CEPGL fortheFrench acronym: (EAC) in1967, theSouthern African CustomsUnion(SACU) of in1889(revamped in1969), LPA in 1980, theESA region hadalready witnessedthecreation theEast African Community of Africa, allcharacterized bymultipleandoverlappingmembership. the Before thelaunchof The ESA region registered regional economiccommunities(RECs)in thehighestnumberof Central Africa, andtheGreat Lakes region. vergent andoverarching regional arrangements infour African subregions: ESA, West Africa, African Unity(nowthe of African Union)in1980. This ledtothecreation separate butcon- of UNECA promulgated Action (LPA) theLagosPlanof whichwaslaunchedbytheOrganisation thecontinentintoregionsdevelopment andproposed inthe1960s. thedivisionof As aresult, UNECA regional integration becamethechampionof economic in Africa forthepurposesof Africa ments in in eastern and southern regional tradeHistory of agree- food markets are explored insection6.9. We concludethechapterinsection6.10. trade regional expansion isprojected thevolatility of insection6.8andtheimplications of the scopeforcross-border trade expansion insection6.7. The future outlookforintraregional trade tostabilizefoodmarkets ispresented insection6.6. Itisfollowedbyanassessmentof section 6.5 isICBT.dedicated to the importance of the potential for regional An analysis of ICBT intheregion, andasmanyinitiatives havebeenlaunchedtomeasure thisphenomenon, costs insection6.3, andonebasedon trade flowsin section 6.4. Asthere isconsiderable 6.4 provide measurementstrade integration of intheregion, usingameasure basedontrade regionalSection 6.2presents trade ahistory of agreements (RTAs) inESA. Sections 6.3 and similarly modestincrease incrop yields, barrierstotransborder ortheremoval of trade. food markets wouldbeboosted through amodestreduction trading, intheoverall costof a It demonstrates expanding regional that thepaceof trade andcreating more resilient domestic • EAC; replaced bytheSouthern African DevelopmentCommunity (SADC)in1992; • The Southern African Development Coordination Community (SADCC), whichwas • SACU; Chapter 6-Regional Trade Integration inEasternandSouthern Africa 135

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table 6.1Regional trade arrangements ineastern andsouthern Africa regions Framework, whichwasannouncedin2008. The otherstate-of-the-art regional trade arrangement istheCOMESA-SADC-EAC Free Trade SADCC its associated monetaryunion(the Common Monetary Area, CMA), theCEPGL 1976, of andthe Within the ambit of the PTAWithin the ambit of forthe ESA region were theEAC and Southern Africa Region from 1994to2018 Regional Experiences of Trade Arrangements intheEastern Source: Compiled byauthors. 3 - The SADCC wassetupasarelatively informal organization by“frontline states”, anditsaimwastoreduce dependence onSouth Africa. Community (1967–1977). theEast 2 -ConsistingAfrican HighCommission of (1948–1961), theEast African Common ServicesOrganization (1961–1967), andtheEast African Outside LPA Action (LPA) Lagos Planof • The IndianOcean Commission (IOC). • CEPGL;and superseded bytheIntergovernmental Authority onDevelopment(IGAD)in1996; • The Intergovernmental Authority on Drought andDevelopment(IGADD), whichwas 3 of 1980. of These RECswere already inexistence whentheLPA waslaunched in1980. 1 (EAC I)1967 Community East African Monetary AreaCommon 1969 (originally1889) Customs Union(SACU) Southern African 1960s and1970s Chapter 6-Regional Trade Integration inEasternandSouthern Africa 136 Commission (IOC)1984 Indian Ocean (SADCC) 1980 Coordination Conference Development Southern African 1980s (PTA) 1981 Preferential TradeArea (IGADD) 1986 and Development Authority onDrought Intergovernmental 2 of 1967, of 1969 with theSACU of (SADC) 1992 Development Community Southern African 1993 Cross Border Initiative (CBI) (COMESA) 1994 Eastern andSouthern Africa Common Markets for (EAC II)1999 East African Community II Zone) 2008 Trade Area (AfricaFree Trade COMESA-SADC-EAC Free Development (IGAD)1996 Authority onDrought and Intergovernmental 1990s and2000s Table 6.2Regional trade arrangements ineastern andsouthern Africa, 1960s–1993 is givenin Table 6.2. the regional trade arrangements intheESA region andtheirachievementsstatus by1993 1993, summarizingthetrade arrangements each memberstate concluded. all A summaryof the regional trade arrangements withinthegeographical area thePTA of fortheperiod1960– on Drought andDevelopment (IGADD)in1986. This sectionaddresses theexperiences of thePTASome membersof later joinedthe IOCin1984ortheIntergovernmental Authority IOC1984 PTA 1981 SADCC 1980 1976–1994 CEPGL (originally 1889) SACU 1969 year formed Regional bloc 1967–1977 EAC 2 Tanzania Zimbabwe Mozambique Sudan Zambia Uganda Seychelles Namibia Somalia Malawi Mauritius Lesotho Madagascar Ethiopia Kenya Eritrea Eswatini Comoros Djibouti Angola Burundi Zimbabwe Tanzania Zambia Namibia (1990) Malawi Mozambique Eswatini Lesotho Angola Botswana Rwanda DRC Burundi, South Africa Namibia (1990) Lesotho Eswatini Botswana Uganda Tanzania Kenya Seychelles Madagascar Mauritius Comoros Countries involved and monetaryaffairs communications, agriculture, transport and customs, industrialization, particularly trade and areas economicactivities, of integration coveringall Promote cooperation and impact with national and regional projects andprogramsof South Africa.Implementation dependence onapartheid Reduce memberstates’ international trade personsand movement of member states through free social developmentamong Promote economicand outside SACU thecountriesfrom any of ongoodsentering nal tariff goods withacommonexter Duty-free movementof balanced economicgrowth publicservicestoachieve of customs tariff, andarange common market, acommon member states through a political tiesbetweenthe Strengthen economicand and trade on diplomacy, environment, opment through cooperation Promote sustainabledevel- Main objective/aim Chapter 6-Regional Trade Integration inEasternandSouthern Africa 137 - 1993 Superseded byCOMESA in persons. vehiclesand movement of checks tofacilitate Yellow Card andtravelers’ declaration document. Single road customstransit interstate infrastructure. Rehabilitate andupgrade Reduction intariffs by60%. community (SADC)in1992 effective andrecognized Transformation toan Admitted Namibiain1990. community. a regional integration Formed foundation for trustamongthem lack of member states, leading to conflicts withinandbetween Collapsed in1994owingto Admitted Namibiain1990 1974. etary Area establishedin Union, andaCommon Mon- Fully operational Customs lasted until1999 November 1993which Co-operation Treatyin Signed theEast African political disparities. Collapsed in1977 owingto initiatives to implementregional regional infrastructurelack of capacity, connectivityand been madeby1993;limited No significantprogress had Achievements/ statusby1993

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 communications, andmonetaryfinancialcooperation include: thePTAAchievements of trade liberalization intermsof andpromotion, transport and (7) promoting industrialization andagricultural development. arrangements topromote trade; (6)developingcoordinated andcomplementarypolicies; treatment; (4) granting transit rightstoalltransporters; (5)introducing clearing andpayments regulations; origintodeterminewhichgoodsshouldreceive (3)introducing preferential rules of barriers; (2) simplifying and harmonizing customs and trade documents procedures and To achievetheseobjectives, thePTA strategy included:(1)reducing andeliminating trade contribute totheprogress allothercountriesin Africa. anddevelopmentof goods,2000 to allow the free movement of capital, and labor within the subregion; and (4) region byfosteringcloserelations amongmembers;(3)create acommonmarket bytheyear natural resources, the and monetary affairs; the people of (2) raise livingof the standards of economic activity, inparticular trade, customs, industry, transport, communications, agriculture, thePTAThe objectivesof were to:(1)promote cooperation anddevelopmentinallfieldsof treaty establishingtheESA PTA wassignedby16countries Zambia, successfullynegotiated atreaty thePTA fortheestablishmentof fortheregion. The The Multinational Programming andOperational Centres (MULPOC)forESA, basedinLusaka, cratic theCongo. Republic of Indian Ocean Commission, IGADD=Intergovernmental Developmenton Drought andDevelopment, DRC=Demo- toms Union, SADCC =Southern African DevelopmentCoordination Conference, PTA =Preferential Trade Area, IOC= and Southern Africa, CEPGL =Communauté EconomiquedesPays desGrands Lacs, SACU =Southern African Cus- Notes: EAC = East African Community, ESA = Eastern and Southern Africa, COMESA = Common Market for Eastern Source: Compiled byauthors. Zambia, andZimbabwe. 4 -Burundi, Comoros, Djibouti, Eswatini, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Somalia, Eswatini, Tanzania, Uganda, IGADD 1986 introduction of asingleroadintroduction customstransit of declaration document; • Simplification and harmonizationroad customstransit of documentsthrough the the PTA third-party motorvehicleinsurance scheme(Yellow Card) in1987; • Facilitation vehicles withinthesubregion through movementof theimplementation of of links; • Rehabilitation interstate roads, andupgrading of railways, ports, andtelecommunications country’s exports, imports, andtenders; points ineach memberstate providing information onenterprises ineach country, andthe acomputer-based• Establishmentof subregional trade information network, withfocal is at least 45percent; criteria havebeenappliedwithacommodityoriginating itsvalueadded inthesubregion if themajoritylocalequityandmanagementclause.investment; deletionof Value-added • Streamlining theProtocol of Origintofacilitate intraregional ontheRules of trade and originating withinthesubregion; could betraded at reduced rates, tariff resulting inpreferential allcommodities exchange of theCommon Listwhichstated• Elimination theproducts of ineach memberstate that • A 60percent average reduction tariff ongoodsoriginating inthesubregion; Uganda Somalia Sudan Ethiopia Kenya (1993) Djibouti Eritrea on foodsecurity Africa subregion withafocus development across East in managingdrought and Provide coordinated efforts Chapter 6-Regional Trade Integration inEasternandSouthern Africa 138 4 inLusaka in1981. mitment bymemberstates com- to conflictandlackof been madeby1993owing No significantprogress had decision Treaty while allowingotherstojoininlater onareciprocal basis. Whereas thePTA emphasized more memberstates canagree toaccelerate the specificprovisions theimplementation of of Eswatini. COMESA multi-speeddevelopmentbywhichtwo or isbasedontheconceptof 1994. COMESA isthelargest trading blocin Africa and has21memberstates, from Tunisia to about fullmarket integration, thePTA beginningwiththetransformation of toCOMESA in to cooperate inbringingaboutsustainable growth and development. Itaimedtobring The strategy for the 1990s was based on past experiences andmember states’ determination are detailedin Table 6.3. COMESA memberstates in1994–2018. The each regional experiences of trade arrangement This the regional sectiondocumentstheexperiencestrade of arrangements involving held inBujumbura theeconomiccommunity. in2007decidedtorelaunch theactivitiesof inactivity, underpressure CEPGL from Ministersof theinternational community:theCouncil of and entered intoforce in July 2000. The CEPGL wasregenerated after more than13years of and 2007, respectively. The EAC wasre-established after a treaty wassigned in November 1999 created in 1993–1994. The EAC and the CEPGL, which had collapsed, were regenerated in 1999 PTA whileIGAD replaced IGADDin 1996. SADCreplaced SADCC in1992andtheCBIwas regional economicintegration intheESA region. COMESA wascreated in1994toreplace the The periodfrom 1994to2018witnessedsignificantcreation and interestresurgence in of and Southern Africa Region from 1994to2018 Regional Experiences of Trade Arrangements intheEastern economies tendingtomaximizetheirexports weaker at theexpense of nations. the members, militating againsttheregional integration process; andmore advanced economic integration; (3)disparitiesintheeconomicactivitiesand(4)developmentof complementarity inproduction, trade, andconsumptioninthePTA, retarding trade and Some challengesremained: (1)hightransport costsandborder tolls;(2)lackof sustainable growth. to address problems andsoenhancemarket integration andeconomictransformation for thePTA• Adoption of Trade andDevelopmentStrategy in1992toenablememberstates theirbusinesstoit;and companies cede10percent of foreign paymentsoverseas. outflow of exchange intheformof Zep-Re demandedthat thePTA• Establishmentof Reinsurance Company (Zep-Re) inSeptember1992tocontrol process; paving the way for monetary union establishment to facilitate the regional integration thePTA• Launchof MonetaryandFinancial Harmonisation Programme inNovember1990, subregion totravel withouthavingtouseforeign currency; PTA• Introduction of travelers’ checks, UAPTA, in August 1988 toenable citizens within the facilitate theclearing operations housebyestablishingrelationships of betweenbanks; • Formation thePTA of CommercialAssociation of Banks (BAPTA) inNovember1987to 1985; thePTA• Establishmentof Trade andDevelopmentBankforESA (PTA Bank)inNovember aclearing housein1984; • Establishmentof Chapter 6-Regional Trade Integration inEasternandSouthern Africa 139

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 in thePTA: Court Justice. of COMESA embodiesthefollowingprincipalelements whichare notcontained COMESA thePTA, maintainedthestructures of althoughthe Tribunal wasreplaced bythe COMESA atwo-thirds majoritywillprevail where consensuscannot bereached. by consensus(andsoprograms were peggedtotheslowest-movingmemberstates), under over 500motorvehiclescrossed theborder betweenEthiopiaandDjibouti using Yellow involved andover200,000 interstate motoristsusethe Yellow Card. For instance, between a successstoryforCOMESA market integration. More than200insurance companiesare • The Yellow Card scheme, providing regional third-party motorinsurance cover, whichis Market Exchange System (CEMES). Facilitation System (CVTFS)andtheonlinetrading systemknownastheCOMESA Electronic resulting in drastic doing business: COMESA reductions in the cost of Virtual Trade newtrade facilitation instrumentsthat• Launchof are creating aborderless economy, implemented. • In2009, COMESA being launchedthecustomsunion whichwasintheprocess of other African trade blocs, theEAC, andtheSADCtoforman African free trade zone. • In2008, COMESA agreed toanexpanded free the trade zoneincludingmembersof Comoros andLibyain2006, Seychellesin2009, and Tunisia andSomaliain2018. Mauritius, Sudan, Zambia, andZimbabwe). Rwanda andBurundijoinedin2004, the • Nine member states formed a FTA in 2000 (Djibouti, Egypt, Kenya, Madagascar, Malawi, Regional Investment Agency, inadditiontothoseadoptedfrom thePTA. in BusinessEasternandSouthern Africa (FEMCOM); COMESA BusinessCouncil; and such astheCOMESA CourtJustice; Federation of National of WomenAssociations of theinstitutionsthat support regional• Establishmentof integration across memberstates, the COMESA regional bloc. • Increasingmemberstates from thenumberof 19to21, whenSomaliaand Tunisia joined the followingsinceitsinceptionin1994: environment forbusinesstoinvestandproduce more efficiently. The blochasachieved regional integration.advantages of memberstates seektocreate Governmentsof an COMESA isdesignedspecificallytosupport thebusinesscommunityintakingmaximum settlement. lishment and(eventually)therightof • Free persons and common visa arrangements, estab- movement of including the right of • aCOMESAA paymentsunionandeventualestablishmentof monetaryunion. domestic investment. more favorable environment forforeign direct investment, cross-border investment, and • Free capitalandfinanceacommoninvestmentprocedure movementof tocreate a acommonexternal onimports tariff fromand theadoptionof non-COMESA countries. • A customsunioninvolvingzero tariffs onallproducts originating inthecommonmarket, barriers. non-tariff goodsandservicesproduced withinthecommonmarketment of all andremoval of • A fullfree trade area (FTA) involvingtrade liberalization underwhichthere isfree move- Chapter 6-Regional Trade Integration inEasternandSouthern Africa 140

1994 to2018 Table regional trade arrangements intheeastern andsouthern 6.3Experiencesof Africa region from be workingagainstregional integration efforts: Although COMESA achievements, hasamassedanumber of thefollowingchallengesseemto SACU 1969 SADC 1992 IOC 1984 year formed Regional bloc integration through interconnectivity hasbeenlow. • investmentsininfrastructureThe levelof andenergy toenhancesocialandeconomic treatment in the corresponding memberstates. reciprocity, where onecountryrelaxes itsvisarulesbuttheirnationals donotenjoysimilar people(Burundi,movement of Rwanda, Kenya, andZimbabwe). This isduetotheissueof people.free movementof Onlyfourmemberstates free havesignedtheprotocol of as memberstates are tooslowtoratify protocols already inplacethat shouldallowthe • Free people between member states remains movement of a challenge, not impossible, if COMESApulling outof forfailingtocuttieswithotherblocs. to COMESA aims. This hasalsoledtosomeformermemberstates (suchas Tanzania) variouscountriesislimitingfullattention andcommitment • Overlappingmembershipof adigitalFTA,• Launchof itskindin Africa. thefirstof Djibouti fortheperiod2012–2017(COMESA 2014). Cards andoverUS$3millionincompensation hasbeenpaidtoroad accidentvictimsin Countries involved Zambia Zimbabwe Africa Tanzania Seychelles South Mozambique Namibia Malawi Mauritius Lesotho Madagascar Comoros Eswatini Angola Botswana Seychelles Madagascar Mauritius Comoros South Africa Namibia Lesotho Botswana Eswatini Chapter 6-Regional Trade Integration inEasternandSouthern Africa the southern African region and eradicate poverty within Achieve regional integration environment, and trade cooperation ondiplomacy, development through Promote sustainable outside SACU thecountriesfrom any of ongoodsentering nal tariff goods withacommonexter Duty-free movementof Main objective/terms 141 - in 2017) 15 to16(admitted Comoros Increased membershipfrom Gender andDevelopment. Adopted theProtocol on zone in2008. Joined the Africa free trade in 2008. Launched afree trade area IGAD, andCOMESA Programme includingEAC, Regional Integration Support Madagascar. between Mauritiusand Preferential trade regime 2002 common industrialpolicyin and regional policies, e.g., national Harmonization of union. customs unionandmonetary Established free trade area, Achievements by2018

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 IGADD =Intergovernmental Authority onDevelopment, DRC=Democratic theCongo. Republic of Common Market forEasternandSouthern Africa, CBICB= Cross-Border Initiative, IOC=IndianOcean Commission, Countries, SACU =Southern African CustomsUnion, SADC =Southern African DevelopmentCommunity, COMESA = Notes: EAC =East African Community, ESA, EasternandSouthern Africa, CEPGL theGreat =Community of Lakes Source: Compiled byauthors. CEPGL 2007 COMESA 1994 EAC 1999 IGAD 1996 CBI 1993 Rwanda DRC Burundi Zimbabwe Uganda Zambia Sudan TunisiaSomalia Mauritius Seychelles Madagascar Malawi Lesotho Libya Kenya Ethiopia Eritrea Eswatini Djibouti Egypt DRC Burundi Comoros South Sudan(2016) Uganda Tanzania Rwanda (2007) Kenya Burundi (2007) Uganda Somalia Sudan Ethiopia Kenya Djibouti Eritrea (1993) Zambia Zimbabwe Tanzania Uganda Rwanda Seychelles Mauritius Namibia Madagascar Malawi Eswatini Kenya Burundi Comoros Chapter 6-Regional Trade Integration inEasternandSouthern Africa international trade personsand movement of member states through free development among economic andsocial Promote peace and itspeople standards of and programs toraise living macroeconomic policies activity andadoptionof economic in allfieldsof Promote jointdevelopment balanced economicgrowth public servicestoachieve customs tariff, andrange of common market, common member states through and politicaltiesbetween Strengthen theeconomic cooperation through increased achieve regional integration efforts memberstates to of and complementingthe and integration byassisting Promote peace, prosperity, labor, andcapital goods,flows of services, barriers tocross-border activity byeliminating Facilitate cross-border 142 region people andgoodswithinthe Facilitation movementof of Great Lakes countries. Sustainable peace inthe Somalia 22 byadmitting Tunisia and Increased membershipto area. Launched digitalfree trade 2009. customsunionin Launch of 2008. COMESA Free Trade Zone in Agreed totheSADC-EAC- Proposed acustomsunion. Free trade area in2000. trade zone Acceded to Africa’s free eration by2013. elected apresident forfed- ing presidency in2011, and Established a3-year revolv- union, andcommonmarket. Free trade area, customs states member ing environments of investment, trade, andbank Initiatives toimprove the establishing free trade area. Significant progress toward ration form single goodscustomsdecla- and Transit Documentanda Road Customs Launch of charges. roadHarmonization transit of - so far. FTA. IGADhasproposed implementingtheFTA, butnosignificantprogress hasbeenmade SADC only Angola andtheDemocratic Congo Republic(DRC)are of notparticipating inthe In COMESA, 21memberstates are 16of already participating intheestablishedFTA, whilein integration compared tootherRECs. COMESA andSADCare yettoachieveafullFTA status. The analysissuggeststhat EAC andSACU havemade significantstridesinpromoting regional Development. Community, COMESA =Common Market for EasternandSouthern Africa, IGAD=Intergovernmental Authority on Note: EAC = East African Community, SACU = Southern African Customs Union, SADC = Southern African Development Source: Compiled byauthors. Africa region Table overall regional progress economiccommunitiesintheeastern andsouthern 6.4Summaryof of The overall progress theRECsinESA issummarizedin of Table 6.4. Political Pact Currency Union Common Market Customs Union Free TradeArea Activity Visa free - - 2018 Proposed for - 2009 Launched in Progressing COMESA - - 2015 Proposed for 2010 Proposed for Progressing SADC Proposed for2016 Chapter 6-Regional Trade Integration inEasternandSouthern Africa 143 2023 Proposed for 2018 Proposed for 2015 Proposed for Fully inforce Fully inforce EAC 2024 Proposed for - - - Stalled Proposed IGAD - - - - Fully inforce Fully inforce SACU participate Four countries

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 expansion. members intotheblocs. SACU, IOC, CEPGL, andCBIhavenotexperienced membership and IGADhaveexperienced other agrowth inmembershipas they witnessedadmissionof thePTAof COMESA) (aprecursor whichwantedtoregain of itsstatus inthebloc. SADC, EAC, constraints asthemajorcausesforwithdrawal from COMESA. Somaliawasaformermember revenue implications,because of andNamibiacitedunfairtrade competitionandfinancial also joinedthebloc(Egypt, Libya, Seychelles, Somalia, and Tunisia). Tanzania withdrew (Angola, Lesotho, Mozambique, Namibia, and Tanzania), whilefivenewmemberstates have COMESA is the onlyRECthat has experienced the departure fiveformer memberstates of theCongo.Republic of Market forEasternandSouthern Africa, IGAD=Intergovernmental Authority onDevelopment, DRC=Democratic Note: EAC =East African Community, SADC=Southern African DevelopmentCommunity, COMESA =Common Source: Compiled byauthors. Table thechangesinselectedregional blocsintheeastern andsouthern 6.5Summaryof Africa region (Table 6.5). tradeA arrangements numberof intheESA region are expanding theirmembership regional economiccommunities Changes inthemembershipof regional economiccommunities Membership of COMESA Angola 1994–2007 Namibia Tanzania Mozambique Lesotho 1994–1997, Former states Somalia 2018 Libya 2006, Egypt 1999, Joined later Zambia, Zimbabwe Burundi, Comoros, Founding states1994 1994–2004, 1994–2000, 1994–1997, Tunisia 2018, Seychelles 2001, Rwanda, Sudan, Malawi, Mauritius, Madagascar, Ethiopia, Kenya, Eritrea, Eswatini, DRC, Djibouti, SADC Comoros 2017 Madagascar 2005, (withdrawn Seychelles 1997 DRC 1997, Mauritius 1995, 1994, South Africa Namibia 1991, Joined later Zambia, Zimbabwe Tanzania, Angola, Botswana, Founding states1980 re-joined 2008), 2004–2007 and Mozambique, Lesotho, Malawi, Eswatini Chapter 6-Regional Trade Integration inEasternandSouthern Africa 144 EAC South Sudan Rwanda 2007, Burundi 2007, Joined later Uganda Tanzania, Kenya, Founding states 2016 2001 IGAD South Sudan Eritrea 1993, Joined later Sudan, Uganda Kenya, Somalia, Djibouti, Founding states 2011 Ethiopia, 1986

Area, DRC=Democratic theCongo. Republic of for EasternandSouthern Africa, ESA =EasternandSouthern Africa, CBI=Cross Border Initiative. FTA =Free Trade IGAD=Intergovernmental Authority onDevelopment, CMA =Common Monetary Area, COMESA =Common Markets ern African CustomsUnion, SADC=Southern African DevelopmentCommunity, IOC=IndianOcean Commission, Notes: EAC =East African Community, CEPGL =Communauté Economique desPays des Grands Lacs, SACU =South- Source: Compiled byauthors. Table each regional economiccommunityintheeastern andsouthern 6.6Membershipof Africa region Mozambique, belongstomore thanoneREC. overlapping membership. Table 6.6showsthat everycountryintheregion, except for ESA registered RECsin Africa, thehighestnumberof allcharacterized bymultipleand Overlapping membershipintheeastern andsouthern Africa region Burundi Kenya Ethiopia Eswatini Eritrea Djibouti Botswana Angola DRC Comoros Mozambique Mauritius Malawi Madagascar Lesotho Rwanda Namibia Tanzania South Sudan Sudan South Africa Somalia Seychelles Total members Tunisia Libya Egypt Non-ESA countriesthatjoinedtheRECsinESA region Zimbabwe Zambia Uganda Countries × (FTA) × (FTA) × × × × (FTA) × × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) 21 × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × COMESA × (FTA) × (FTA) × × × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) × (FTA) 16 × (FTA) × (FTA) SADC Chapter 6-Regional Trade Integration inEasternandSouthern Africa × (CMA) × × (CMA) × (CMA) × (CMA) 5 SACU 145 × × × 6 × × × EAC × × × 7 × × × × IGAD × × × 3 CEPGL × × × 4 × IOC × × × × × × × × 14 × × × × × × CBI

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 states. exports from Egypt, Tunisia, andMalawifacehigherdutiesgloballycompared toothermember products) facerelatively highduties:11.7percent and12.6percent, respectively. Agricultural crude oilandpetroleum, whileexports from Kenya andMalawi(whichare mostlyagricultural duties globally. Exports from Libyaface0percent globallybecausetheyconsistprimarilyof concluded that merchandise exports from Libya, Eritrea, DRC, andZambia facethelowest When evaluating theaverage duties faced byexports from the COMESA region, itcanbe at 46.7percent, 45.3percent, and36percent, respectively. With respect totheagricultural sector, Egypt, Tunisia, andSeychelleshavehighimport duties historical role asatrading post, itseconomy. aswelllimitedproduction inmanysectorsof restrictions inDjiboutiare quiteinteresting andsomewhat counterintuitivegiventhecountry’s (21.7 percent), Tunisia (16.5percent), Sudan(15.6 percent), andDRC(15.4percent). High open inallsectorscompared toothermembers. Protection ishighincountriessuchasDjibouti by exports forCOMESA memberstates. Analysis showsthat LibyaandMauritiusare relatively Bouët, Laborde, andCosnard (2017)calculate theaverage duties appliedonimports andfaced imports. This impliesthat average import dutyonextraregional imports washigh. high at 6.9percent, ECCAS evenif andECOWAS charged higheraverage import duties onall (0 percent). However, inCOMESA theaverage import dutyonallimports remained relatively Centralthan in the EconomicCommunity of African States (ECCAS) (1.6 percent) and inEAC CommunityWest of African States (ECOWAS) (5.6 percent in 2015, 0percent now), but greater 1.9 percent, onaverage, whichislowerthaninSADC(3.8percent) andintheEconomic Chapter 3hasshownthat in2015, COMESA implementedlowtariffs onintraregional trade: Tariffs trade costindicators intheCOMESAsection givesananalysisof region. regional integration, buttheydonotmeasure theactualrealization regional integration. of This for regional integration are satisfied intheESA region. These indicators giveafirstof proxy process. thesecostsgivesaclear picture Examination of astowhethertheconditionsnecessary Tariffs, measures, non-tariff andtransportation costscandirectly impedetheregional integration Based on Trade Costs Measurement of Trade Integration the region. After RTAs presenting thehistoryof inESA, trade integration wenowevaluate thelevelof in regional convergence processes intheblocs. The multiplemembership hadresulted individedattention amongmembers, whichslowed 5 - These average importdutiesare for2007. Chapter 6-Regional Trade Integration inEasternandSouthern Africa 146 5 Figure 6.1Frequency index valuesandcoverage ratios bycountry(percentage) imports that are subjecttoNTMscompared tootherregional counterparts. Analysis showsthat Burundi, Egypt, Kenya, products andUgandahave highershares and of Figure 6.1showsthefrequency index valuesandcoverage NTMsforeach ratios country. of coverage ratio captures imports thepercentage that are of subjecttooneormore NTMs. index simplycaptures products thepercentage that of are subjecttooneormore NTMs. The index valuesandcoverage ratios for63nations overtheperiod2010–2012. The frequency and Development(UNCTAD) database (Gourdon 2014). The database coversfrequency database measures NTMsbasedontheUnitedNations Conference theincidenceof on Trade The Centre d’EtudesProspectives etd’Informations Internationales (CEPII)’s NTM-Map Uganda hasthelowestNTMs, at 0.1percent, followedbyRwanda (0.75percent). Tunisia NTMsonallmerchandise havehigheraverages aswellonagricultural of products. governments toprotect humanhealth byimposingfoodsafetyregulations. Egypt, Sudan, and are present intheCOMESA region. This supports thehypothesisthat NTMscanbeusedby Kee, Nicita, andOlarreaga (2009)andBouët, Laborde, andCosnard (2017) show that NTMs measures related tointellectualproperty origin. rightsandrulesof to trade (TBT), export measures, priceandquantitycontrol measures, trade remedies, and health. NTMsare sanitaryand phytosanitarymeasures Examplesof (SPS), technicalbarriers may applythemforpublicpolicyreasons aswell, humanandplant suchasfortheprotection of measures (NTMs). Although theseNTMsare appliedforprotectionist purposes, governments With regional economic integration, conventionaltariffs decrease, givingrisetonon-tariff MeasuresNon-tariff Source: Gourdon (2014). Coverage Ratio Frequency Index 0 20 40 60 80 100 120 Burundi 80 34 Egyyt Frequency Index 60 44 Chapter 6-Regional Trade Integration inEasternandSouthern Africa Kenya 82 63 Coverage Ratio 147 Madagascar 40 13 Mauritius 52 25 Uganda 98 69 Tunisia 31 13

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 fluctuating intheperiod2005–2017. intraregional trade inaregion’s totaltrade. Figure 6.2showsthat intra-COMESA trade hasbeen The simplestregional integration indicator, andtheonemostoften used, istheshare of Trade Shares Intra-Common Market forEastern andSouthern Africa measure theregional COMESA. integration of superior orrefined indicators that are usedforinternational comparisonsare alsousedto This sectiondiscussesintraregional trade flowsasmeasures regional integration. of More Based on Trade Flows Measurement of Trade Integration challenges that significantly reduce trade volumesinthe region. sexual harassment, stigmatization, extortion, andbriberybycustomsofficials. These are critical Zindiye (2012);andFAO (2017). The analysisindicates that, inparticular, thesetraders face Subregional Support Initiative forthe WomenAdvancement of (2012);Chiliya, Masocha, and sexual harassment facedbysmall-scaletraders hasbeen documented bytheEastern African that there small-scaletraders, isahighprevalence of especiallywomen. The highlevelsof abuse, theirpossessions. andconfiscation of Research conductedintheESA region alsoshows often amongvulnerable groups across thecontinent, astheysuffer sexual harassment, verbal small-scale traders are female: up to 70 percent–80 percent in some cases. Women traders are down procedures. According toBrenton and Soprano (2018), Africa’s thevastmajorityof share theclearance area withtrucks andothervehicles, whichincreases insecurityandslows Border infrastructure rarely small-scaletraders, caters fortheneedsof often forcing themto member states toimprove trade volumes(World Bank, 2019). to 336hours. Costs, range from US$60toUS$3,039. Efficiency issuesneedtobeaddressed for Border anddocumentary compliancetimewhenexporting orimporting ranges from 2hours Business indicators showsthat there ishighheterogeneity efficiency. intheregion intermsof a container, whereas ittookonly3hoursandcostUS$134 in Eswatini. Further Doing analysisof efficient. InDRC, in2018, ittook336hoursandUS$3,039inborder compliancecoststo import Eswatini andMauritiusare themostefficient countriesinthe region, andDRCistheleast compliance, anddomestictransport. According tothe World Bank“DoingBusiness”indicators, and imports in Africa. These includecostandtimespent ondocumentarycompliance, border There isalarge literature pointingouttheconsiderable timeandcostassociated withexports Chapter 6-Regional Trade Integration inEasternandSouthern Africa 148 Burundi, UgandaandZambia. regional aggregate share looks lowascompared totheintra-COMESA trade shares inRwanda, acustomsunionin2009.may beexplained bythelaunchof Table 6.7alsoshowsthat this to 14percent in2011and18percent in2015(Table 6.7). The regular increase intrade share Total intra-COMESA trade totalCOMESA asapercentage of trade rose from 9percent in2008 Source: Authors’ calculations from COMTRADE (2019). Figure 6.2 Total intra-common market exports foreastern andsouthern Africa (2005–2017) Value US$ millions 10000 12000 1400 2000 4000 6000 8000 0 2005 200620072008200920102011201220132014201520162017 Chapter 6-Regional Trade Integration inEasternandSouthern Africa 149

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Comparison betweenregions is possible. Moreover, the indicator increases, when the valueof itmeans that trade introversion increases. to theirsummation. A positivefigure showsthat the region ismore introverted than extraverted. presentation). thedifference Itistheratio of between intra- andextraregional intensity indexes and compares aregion’s share intrade theworld (see Chapter 3 for a detailed with the rest of This both intra- index is based on modifications and extraregional of trade intensity indices, Regional Trade Introversion Index thesecountriesiswithtradingtrade partners of outsidetheCOMESA region. intra-COMESA trade hasbeenbelow5percent forEgypt, Ethiopia, the andLibyaasthebulkof and Zambia hadarelatively trade highshare withotherCOMESA of memberstates. Incontrast, by UgandaandZambia at 21percent. For theperiod2008–2015, Rwanda, Burundi, DRCongo, Rwanda havingthehighestshare at 30percent in2015, followedbyBurundi(23percent), and The intra-COMESA share of trade intotalcountrytrade differs from countrytocountry, with and Southern Africa. DRC=Democratic theCongo. Republic of Note: Somaliaand Tunisia notincludedsincetheyjoinedCOMESA in2018;COMESA =Common Market forEastern Source: Authors’ calculations from COMTRADE (2019). (2008–2015) Table 6.7Intra-common market trade foreastern andsouthern totaltrade bycountry Africa asashare of COMESA Zimbabwe Zambia Uganda Sudan Seychelles Rwanda Malawi Mauritius Madagascar Libya Kenya Ethiopia Eswatini Eritrea Egypt Djibouti DRC Comoros Burundi 9% 7% 20% 19% 4% 7% 38% 8% 5% 3% 1% 13% 5% 15% 8% 3% 6% 16% 3% 26% 2008 11% 7% 19% 20% 6% 5% 29% 8% 7% 5% 1% 11% 4% 18% 22% 3% 10% 20% 5% 26% 2009 12% 7% 22% 21% 6% 5% 27% 12% 7% 6% 2% 12% 5% 5% 32% 4% 7% 21% 7% 26% 2010 Chapter 6-Regional Trade Integration inEasternandSouthern Africa 150 14% 6% 22% 21% 5% 4% 28% 15% 8% 5% 3% 12% 5% 4% 10% 3% 7% 19% 3% 15% 2011 12% 6% 19% 21% 7% 4% 31% 10% 5% 4% 2% 10% 4% 3% 6% 3% 5% 19% 4% 14% 2012 15% 7% 23% 21% 8% 7% 25% 8% 5% 4% 2% 13% 3% 4% 9% 3% 6% 25% 11% 17% 2013 16% 5% 21% 20% 6% 6% 30% 9% 6% 5% 3% 10% 3% 3% 5% 3% 5% 18% 4% 17% 2014 18% 6% 21% 21% 6% 9% 30% 10% 12% 5% 3% 10% 2% 5% 8% 3% 6% 16% 3% 23% 2015 does not receive the level of attentiondoes notreceive itdeserves, thelevelof andmonitoringefforts are scant. information onitsdimensions.be apaucityof sufficientThe data absence of means that ICBT The nature ICBT, of nevertheless, makes itsdata availabilitychallenging andthere continues to (Crush 2015). it remains asignificantfeature regional trade of andinternational mobilityinsouthern Africa trade regimes (FAO 2017). ICBTprevalence of inESA variesbetweencountries, butit iscommonwhere there are restrictive Uganda2016),Bank of whichunderscores itsimportance inUgandaanditsneighbors. The Uganda2010;UBOSand Uganda 2005;UBOSandBankof trade flows(UBOSandBankof regional trade, andaccountsfor between25percent formalintraregional and 40percent of UgandahaveestablishedthatStatistics ICBT andtheBankof isanimportantUganda’s part of in somecasestheproportion maybemuchlowerthanthis. SurveysbytheUgandaBureau of flows represent official upto90percent flows of (LesserandMoisé-Leeman 2009), although Cross-Border trade trade surveysindicate that, insome African countries, informal regional totalintra-SADCof trade, US$17.6billion(FAO withanestimated valueof 2017). 2015). For example, intheSADCregion, ICBT makes upanestimated 30percent–40 percent role inpoverty alleviation, foodsecurity, andhouseholdlivelihoodsinsouthern Africa (Crush There casestudyevidenceconfirmingthat seemstobeagrowing ICBT bodyof playsacritical elsewhere. are wellrecorded andthat canbetraced through national data systemsat border pointsor enterprise, andjobcreation. Formal trade describesthoseinternational transactions that smuggling, taxevasion(Lesser andMoisé-Leeman 2009), and illegality thanwithinnovation, trade or smuggling. In government circles, for example, ICBT is more often associated with 1996; Macamo1998;MindeandNakhumwa1998). Insome cases, ICBT isreferred toasparallel through official routes butare intentionallyunder-reported ormisreported (Ackello-Ogutu unofficial routes andavoid customs controls. The term also includes transactions that pass customs agenciesnorinacountry’s official trade data. Traders engagedinICBT often use ICBT describestrade transactions that, foronereason oranother, are nevercaptured byofficial cross-border trade The informal importance of Comoros andEthiopiawasdecreasing fortheperiod2000–2013. the introversion forcountries suchasEgyptandEritrea has beenincreasing, the whilethat of to betheleast introverted memberstate compared totheothers. Itcanalsobeconcludedthat Kenya, Rwanda, Uganda, and Zambia are more introverted toward the region. Libya appears memberstatesthe introversion toward of theregion fortheperiod2000–2013. Burundi, DRC, Bouët, Cosnard, andLaborde (2017)estimate regional COMESA introversion indicesof and regional blocs. than extroverted. The the introversionArab of Maghreb Union(AMU)istheleast amongthe indicators are veryclose forall African RECs, andthat alltheseRECsare more introverted selected African regional communitiesfortheperiod2005–2017. The analysisshowsthat these thisreport,In Chapter3of Figure 3.8illustrates theregional trade introversion indicesfor Generally, though, ICBT is significant in the EAC (Ogalo 2010), and Chapter 6-Regional Trade Integration inEasternandSouthern Africa 151

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 trade data, buttheseare often incomplete(Gelanetal. 2010). monitors The systemconsistsof humanitarian responses, andstrategic foodimport decisions. FEWSNET collectssomeinformal foodaid,in foodcommoditiesand toapplythisinformation and analysistotheplanningof FEWSNET wassetupin2004southern Africa tobetter understandregional trade flows countries. commodities across borders inMalawi, Zambia, Mozambique, Zimbabwe, Tanzania, andother (WFP), and theFood and Agriculture Organization (FAO) variousagricultural totrack pricesof efforts bytheFamine Early Warning Systems Network(FEWSNET), the World Food Programme themethodsabovenonethelessexist.combination of Inthesouthern Africa region there are compared withthedrivetocollectformaltrade data, several initiatives utilizingadifferent Although thedrivetomonitorandcollectICBT data isnotwidespread intheCOMESA region, The Famine Early Warning Systems Networkinitiative Intergovernmental Initiatives informal trade usingtheseapproaches are provided below. trade activitydeclinesappreciablyof (Ackello-Ogutu 1996). initiatives tomeasure Detailsof 1996). This approach iscombinedwithborder observation onnon-market dayswhenthelevel the neighboring countries.of This is done each day over all the selected days (Ackello-Ogutu and export goodsbrought figures tothemarket basedonthevolumeof bytraders from each along thefrontier roads betweencountries. The techniquerequires netimport quantification of Finally, thestocktaking techniqueismore suitableforopenborder markets commonlyfound official customs records (Ackello-Ogutu 1996). This provides anestimate forunrecorded trade. entry tothedeclared destination withtheintentiontocompare thefindingswiththosein through selectedborders, andsubsequentlycargo movementsare traced from theport of may beconductedonlyonasmallsample(forinstance, thetrucks 10percent)passing of thedocumentation proceduresmanipulation of (Ackello-Ogutu 1996). To achievethis, tracking unrecordedthe volumeof trade that passesacross theborder through misrepresentation or The tracking techniquecancomplementborder observation. The formeraimstoestimate under-declaration the goods being transported the true values and volumes of across borders.of Border observation alonemaynotgivearealistic unrecorded picture of trade asitmaymiss between twotrading partners (Ackello-Ogutu 1996). use suchestimates toapproximate unrecorded theannualvolume and valueof trade flows The secondstepistoestimate average monthlytrade volumesfrom observedfigures andthen weeks from12months(Ackello-Ogutuselected numberof each1996). monthoveraperiodof census techniquestocovermajoragricultural andindustrialcommoditiesduringarandomly enumerators.the postingof The monitorsmaythencarryoutborder monitoringbyapplying In general, border observation requires popularandaccessibleborder sitesfor selectionof the circumstances. open markets. These techniquesare appliedeitheralone, orincombination, dependingon border large monitoring;(2)tracking transport movement of vehicles;and(3)stocktakingat recommends three techniquesforcollectingprimaryICBT data: (1)border observation or because thetraders avoidcustomauthoritiesforonereason oranother. Ackello-Ogutu (1996) business.one countrytoanotherintheirnormalcourseof ICBT, however, isdifficult tocapture placed at variousofficial borders haveadutyandcapacitytocapture thetransactions from countries andovertime. Formal trade data are readily available becausecustomauthorities An inherent ICBT challengethat underminestheavailabilityof data ishowtomonitorICBT across Chapter 6-Regional Trade Integration inEasternandSouthern Africa 152 FEWSNET-ACTESA collaborative arrangement. constraints. The mapinFigure 6.3illustrates where borders are currently monitored withinthe crossing pointsorcrops that are considered criticalare currently monitored, owingtoresource quantities, andvalue)inthesameareas that FEWSNET monitors. However, notallborder Thus ACTESA works withFEWSNET countryoffices ICBT toenhancethetracking of (prices, through theInformalCross Border Food Trade MonitoringSystem (ICB-FTMS)initiative. 2011, ACTESA beencollaborating with WFP andFEWSNET incross-border trade monitoring initiatives instrategically important agricultural valuechains, trade, andinvestment. SinceMarch Understanding(MoU)withCOMESAof toserveasanimplementinginstitutionforregional COMESAagency of and was establishedin2008. In2010, ACTESA signedaMemorandum The Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) is a specialized informal cross-border foodtrade monitoringsystem The Alliance for Commodity Trade inEasternandSouthern Africa evaluation bodiesbi-annually(FEWSNET 2012). FEWSNETcountry nodesof present ICBT reports tofoodandnutritionsecuritymonitoring trends feedintoFEWSNET Regional andGlobalPrice Watch Bulletins(FEWSNET 2011). The Agriculture. Ministriesof feed intothefoodbalancesheetsof At theregional level, theICBT list withcopiespostedontheFEWSNET andotherwebsites. At thecountrylevel, thedata team produces monthlyorquarterly reports whichare disseminated through adistribution and thentransmits ittotheFEWSNET regional office. Atthe regional level, aFEWSNET/WFP country focalpoint. The focalpointpersonconsolidates thedata, makes apreliminary analysis, commoditieswhere possible,of andsubsequentlytransmit thedata weeklytotheFEWSNET border points. themonitorsistocollectdailyimportThe andexport jobof volumesandprices and humanitarian responses, andhence the approach relies on monitors placed at various better understandingregional(1996) withtheobjectiveof trade flowstohelpplanfoodaid FEWSNET collectssuchdata usingtheobservation techniquedescribedin Ackello-Ogutu disseminated. A monthlyreport isproduced at theregional levelusingthedata collected andiswidely research institutions, andinternational trade monitorsandhumanitarianagenciesforplanning. feeds into national and regional food balance sheets. It is also used by agro-business planners, the main food commodities. informal trade flows of Oncevolumes collected,of the information Zimbabwe, andSouth Africa. theinitiativeThe istoobserveandrecord goalof pricesand being placedat key border postsshared byMalawi, Mozambique, Zambia, Tanzania, DRC, Chapter 6-Regional Trade Integration inEasternandSouthern Africa 153

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table 6.8Borders monitored undertheFamine Early Warning Systems Networkprogram center isnotfullycaptured. foodshortages.of The result, unfortunately, trade that isthat takes theamountof placeinthe north, isthegrain Malawi. basket of FEWSNET chosetheseborders basedontheexpectation thelandislessfavorableis prone tofarming. tofamineasmostof The center, followedbythe being monitored inthenorthern region. The agrarian structure inMalawiissuchthat thesouth borders are inthesouthernregion; onlytwoare beingmonitored inthecenter, andthree are Table 6.8presents theborders that are beingmonitored byFEWSNET in Malawi. the Mostof The FEWSNET program monitorsmanyborders inMalawi, Zambia, Mozambique, and Tanzania. Source: FEWSNET 2015. Figure 6.3Borders monitored bytheFamine Early Warning Systems Network Source: FEWSNET 2015. North Chiponde/Kalanje—Mangochi/Mozambique Tengani—Nsanje/Mozambique Marine—Nsanje/Mozambique Marka—Nsanje/Mozambique Mkumaniza—Chikwawa/Mozambique Mwanza—Mwanza/Mozambique South Mqocha—Mzimba/Zambia Songwe—Karonga/Tanzania Mbirima—Chitipa/Tanzania Malawi border points Chapter 6-Regional Trade Integration inEasternandSouthern Africa 154 Center Nayuchi—Machinga/Mozambique Kolowiko—Phalombe/Mozambique Naminkhaka—Phalombe/Mozambique Muloza—Mulanje/Mozambique Makhanga—Nsanje/Mozambique Sankhulani—Nsanje/Mozambique South Dedza—Dedza/Mozambique Mchinji—Mchinji/ Zambia which would be inlinewithfi ndings from FAO (2017). regionalthe effect integration of (which encourages formal trade) inthe southern Africa region, ascribed todata collectionchallengesforICBT formaize. The observeddeclinemaypointto Figure6.5 givestheinformal maizeexports byorigin country. The seeminglylowerlevelmaybe trade accounts for between 4 percent and 15 percent and has been on the decline over time. Figure 6.4alsoshows that informalcross-border maizetrade expressed formal asashare of between cereal production andannualrainfall (see, forexample, Nhamo etal. 2019). explained by the erratic rainfall patterns over time, considering that there is a close relationship from under250,000metrictons(MT)in2009toaround 3millionMT in2011). This maybe general trend formal maizetrade hasbeenvolatile isthat overtime(ranging thevolumeof In general, informal agricultural trade data are scant and are available only from 2004. The MT forMetric Tons Note: ICBT forInformalCross-Border Trade; SADCforSouthern African DevelopmentCommunity; Source: Authors’ computation based onFEWSNET (2019). 2004-2013 Africa intotheSouthern African DevelopmentCommunity/Common Market forEasternandSouthern Africa, Figure 6.4Informalandformalmaizeexports byMalawi, Mozambique, Tanzania, Zambia, Zimbabwe, andSouth data. the availabilityof into SADC/COMESA. coverage are countriesandtheperiodof This determinedby sampleof formal maizeexports byMalawi, Mozambique, Tanzania, Zambia, Zimbabwe, andSouth Africa monitoring. Itshowstheinformalmaizeexports informalmaizeexports aswelltheratio to of Figure 6.4presents maizequantities, bothasreported formallyandastracked through ICBT constitutes thelargest thetotalquantity. share of Nevertheless, thekey commoditiesthat are fullyreported are maize, rice, andbeans. Maize soy, wheat, wheat fl our, green gram, European potatoes, cotton, maizeseed, andfertilizers. cassava, sweetpotatoes, millet, sorghum, pigeonpeas, cow peas, groundnuts, sunfl ower, commoditiesmonitoredThe include:maize, listof maize fl our, rice, beans, fresh cassava, dry Trade Volume -MT 1000000 1500000 2000000 2500000 3000000 3500000 500000 0 2004 200520062007200820092010201120122013 Ratio ofinformal/toformal(%) Formal maizeexports-MT Chapter 6-Regional Trade Integration inEasternandSouthern Africa 155 ICBT SADCexports(MaizeMT) 0 2 4 8 10 12 14 16 6

Share s%

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 sample, butdoes notcoverallborders theyear. orcollectdata everydayof Rwanda (NBR),National Bankof and WFP (FSNWG2017). The group monitors arepresentative and DRC. Data are provided bytheEast Africa Grain Council (EAGC), FEWSNET, FAO, the Tanzania, Burundi, Rwanda, Uganda, Kenya, Somalia, Djibouti, Ethiopia, Sudan, SouthSudan, on regional foodsecurity(FSNWG2017). Itmonitorsinformaltrade across selectedborders of monitors theICBT88foodcommoditiesandlivestock ineastern Africa toquantifytheimpact of The market the Food analysis sub-group of Security and Nutrition Working Group (FSNWG) Working Group The market theFood analysis sub-group of SecurityandNutrition sustainability mayalsobecalledintoquestion. As theprogram isdonorsupported andhasnotyetbeendomesticated innational budgets, its assorted itemspacked inthesamebags, aconsideration that data. compromises thequalityof example, at night, whentrade alsocontinues. Furthermore, itisnotpractical toexamine all not reveal allICBT. There are alsoother times that FEWSNET monitors cannot collectdata: for The program borders inthesecountries, coversalimitednumberof sothedata collectedmay price changesmaybeusefulfordecisionmaking. refl ICBT, ectthetotalityof thetrends computedfrom suchdata maystillbeinformative andthe the southern Africa region. trade captured the amount of under the program Even if may not The FEWSNET program isagoodeffort toward understandingICBT andpricedynamicsin Note: MT=Metric Tons Source: Authors’ computation basedonFEWSNET (2019) Figure 6.5Informalcross-border maizeexports intotheSouthern African DevelopmentCommunity, 2004-2013 Volume-MT 100000 120000 140000 160000 180000 200000 20000 40000 60000 80000 0 04 05 06 07 20 20 00 21 21 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 Malawi Zambia Mozambique Zimbabwe Chapter 6-Regional Trade Integration inEasternandSouthern Africa 156 Total South Africa Tanzania using monitors. Uganda(BOU)collaborate inmonitoringeffortsof at themainborder thecountry, crossings of Revenue Authority (URA)andotherauthorities. To collectthesedata, theUBOSandBank Rwanda, Tanzania, andSudan)that are notincludedintheofficial theUganda records of Uganda, ICBT surveyscollecttrade data betweenUgandaandher neighbors (Kenya, DRC, theUgandaBureauStatistics (UBOS)andtheCentral Under theleadership of Bankof National Initiatives theyear couldbecoveredall daysof owingtoresources constraints. and Nakhumwa1998). Shortcomings includedthat notallborders couldbecovered andnot and values. For comparability, allthecountrystudiesadoptedsamemethodology(Minde months. Trade volumesand valueswere obtainedby aggregating theweeklytrade volumes Zambia, andZimbabwe. 12 Monitoringwasdonefor2weeks permonthforaperiodof routes, andcrossing pointsalongtheborder regions inKenya, Malawi, Mozambique, Tanzania, The studybyMindeandNakhumwa(1998)involvedmonitoringfrontier markets, informal (Crush 2015). over5,500traderstransactions withcustomsofficials of andinterviewedover4,500traders 85,000 traders—passed through theborder postsbeingmonitored. The monitorsrecorded commodities. theexercise,of Duringthecourseof more than205,000people—including using an “origin and destination” survey tool which sought to trace origins and destinations goods declared andduties paid.and volumes of traders (3)Monitors interviewed a sample of tradersobserved theinteractions withcustomsofficials of and recorded thetypes, values, were monitored overa10-dayperiod, ICBT andthenumberof traders counted. (2)Monitors using athreefold methodology. (1) All peoplecrossing through theselectedborder posts The SAMP survey covered 20 land border posts connecting 11 southern African countries the nature ICBT informaltraders of and thecharacter across of theSADCregion (Crush2015). datasets were combined intoasingleregional dataset. This provides important insightsinto was produced bytheproject. For theGrowing InformalCitiesReport, theindividual country on migration, development, andpoverty reduction. individualcountryreportsA seriesof cross-bordera majorregional survey of trade insouthern alargerAfrica aspart project of In 2007–2008, theSouthern Africa Migration Program (SAMP)plannedandimplemented The Southern Africa Migration Program 6 -https://www.bou.or.ug/bou/publications_research/icbt.html. mode of transport Uganda 2005). mode of amongothers(UBOSand Bankof frontier in counter books or specially designed forms, specifying the item, quantity, value, and that are notrecorded bycustomsauthoritiesare captured crossing at thecustoms thepointof to enablethemrecord thecountry. allmerchandise movingintoandoutof All traded goods The direct observation technique entails enumeratorsstrategic atpositioning of border posts gathering data at border posts where conditionsare farfrom ideal. quantities forsomeselecteditems. The methodsusedare themostcost-effective wayof clearing agents, revenue officers, andsecuritypersonnel, and through weighingto ascertain Ogutu (1996)and, where necessary, verification isdonethrough inquiriesmadetotraders, The approach todata collectionat UBOShinges ondirect observation asdescribedin Ackello- 6

Chapter 6-Regional Trade Integration inEasternandSouthern Africa 157

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 provided below. account fornight trading activities. the trendsA ininformalcross-border snapshotof trade is border points. Currently allagencies monitorICBT between6am and7pm, andhencedonot unrecorded trade causedbyunder-reporting valueorvolume of ormisclassification at official informal trade can easily go unrecorded.volumes of Some ICBT surveys do not consider the Official border pointstend tobelocated next tounofficial border routes, hencesubstantial Malawian“surplus”maize intheearly 1980swasMozambican. and that muchof maizewere tradedof informallyannuallyfrom Zambia toDRC, costingZambia US$3million, extremely highinESA. For instance, Ackello-Ogutu (1996) estimated that 30,000–60,000tons Uganda 2016).and Bankof There were indications that unrecorded (informal)trade wasstill theinformaltrade over90percent transactions of betweenUgandaanditsneighbors(UBOS of By 2016, theICBT survey covered 20border pointsand4busterminals, representing coverage Source: Uganda2017. Adapted from UBOSandBankof Figure 6.6Border pointsmonitored Uganda2005)(Figuredays monitored) in10months(UBOSandBankof 6.6). Sudan andUganda–Tanzania 140days(each borders having14 formonitoringoveraperiodof the Uganda–DRC border, 2 along the Uganda–Rwanda border, and 1 each along the Uganda– The initialsurveysinvolved 14border stations: 4alongtheUganda–Kenya border, 6along statistics Uganda2005). intheBOPcurrent account(UBOSandBankof grossly informaltrade tooverall understate the contributionof international merchandise trade statistics. thesesurveys, Intheabsenceof estimates byBOPandnational accountscompilers Uganda2005),statistics (UBOSandBankof national accounts, payment(BOP) andbalanceof trade betweenUgandaandherneighborsinorder toimprove external trade thecoverage of unrecorded thesesurveysistoestablishandtrackThe themagnitudeof mainobjectiveof

Chapter 6-Regional Trade Integration inEasternandSouthern Africa 158 2004-2013 Figure Uganda’s 6.7Comparison of formal andinformal exports andimports–trade withneighbors – allgoods informalimports.declaration of formalimports.for asmallershare of Itisnotclear whetherthisdifference isduetounder- exports accountformore formalexports, than10percent of althoughinformal imports account Increasing informalexports canplayarole inreducing itstrade deficit. Interestingly, informal viewpoint, there isaneedforUgandatomanageitsimports tostabilizeitstrade balance. are dominated byformalimports. Inpassing, onecouldargue that, from amacroeconomic imports hasbeenunder10percent throughout theperiod, implyingthat Uganda’s imports under 10percent in2005 tojustover40percent in2009. The informalimports share tototal of at around 15percent. Prior to2011, informalexports theshare intotalexports of rose from informally. Generally, informalexports theshare intotalexports of hasstayedstablesince2011 totaltrade.for asmallbutsignificantshare of Uganda, however, exports more thanitimports that Ugandarunsatrade deficitannuallyanditisontheincrease. Informaltrade accounts important tonotethelarge andyetwidening gapbetweenexports andimports, whichimplies Although bothimports andexports have increased overtheperiodfrom 2005to2016, itis billion in2005tooverUS$62014before slightlydecliningtoUS$5billionby2016. 2016, whereas totalimports forallgoodsintoUgandahaveincreased from justaround US$2 over time. Total exports have increased from US$1 billion in 2005 to almost US$3 billion in Figure 6.7showsthat Uganda’s totaltrade (bothexports andimports) hasbeenincreasing Source: Authors’ computation Uganda(2005,2010, from UBOSandBankof 2016). Trade Volume-Million USD 1000 2000 3000 4000 5000 6000 7000 0 04 05 20 07 20 09 2010201120122013 2009 2004 200520062007 2008 Shares ofinformalexportsintotal (%) Total informalexports(millionUSD) Total exports(allgoods)(millionUSD) Chapter 6-Regional Trade Integration inEasternandSouthern Africa 159 Total informalimports(millionUSD) Total imports(all)(millionUSD) 0 10 20 30 40 50 60

Trade Shares-%

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 percent. The percentage iscomparable informalagricultural totheshare exports of intotal informal imports andhavebeenincreasing overtime. The thisshare range is20percent–60 of informal exports, informalagricultural imports accountformore thetotal than20percent of previously. While wenoteinthissectionthat totalinformalimports are much lowerthantotal government may be undertaking to reduce the conspicuous total trade deficit highlighted Increasing informalcross-border agricultural exports couldfurther complementanyeffort the informal agricultural imports, implyingthat Ugandahasaninformalagricultural trade surplus. have been increasing over time. It alsonotes that informal agricultural exports supersede Figure 6.8 clearly shows that both informal agricultural exports from and imports into Uganda mattresses, Uganda2016). etc.)(UBOSand Bankof soybeans, maize flour, etc.)andindustrialgoods(shoes, clothes, petroleum jelly, beers, The goodstraded informallyacross borders includeagricultural goods (maize, groundnuts, Source: Authors’ computation Uganda(2005, from UBOSandBank of 2010, 2016). 2005-2016 Figure informalagricultural trade 6.8Evolution (invalueandinshare) betweenUgandaandneighbors of worth US$790millionandUS$520million, Uganda2016). respectively (UBOSandBankof these countriesin2006. In2009and2010Ugandaninformalexports toitsneighborswere Sudan, and Tanzania represented itstotalrecorded US$224 millionor83percent of trade to Uganda2005,Bank of 2010and2016). Ugandaninformalexports toDRC, Kenya, Rwanda, exports, whereas informalimports official amount to about12.5percent imports of (UBOSand implies that informal(unrecorded) exports amounttoapproximately official 85.3percent of thesurvey formalimports withthefiveneighboringcountriesduringsameperiodof of million. formal(recorded)A comparisonwithUS$189.7millionof exports andUS$432.5million to US$162.0million, whereas informalimports were approximated tobeashighUS$54.2 The surveysforICBT intheinitialyears (2004–2005)showedthat informalexports amounted

Volume-Millions USD 100 150 200 250 50 0 2005 20062007200820092010201120122013201420152016 Share ofinformalagricultureimportsintotal(%) Shares ofinformalagricultureexportsintotal(%) Informal agricultureimports(millionUSD) Informal agricultureexports(millionUSD) Chapter 6-Regional Trade Integration inEasternandSouthern Africa 160 0 10 20 30 40 50 60

Shares-%

country coefficients are normalized bydividingthem by the regional coefficient. thetrend-corrected itsmembercountries(Koester,of variation coefficients of of 1986). Finally, regional cereal production volatility isderivedfortheCOMESA region asaweighted average is calculated asameasure cereal of production variabilityat countrylevel. Then anindex of through greater market integration. For that purpose, atrend-corrected variation coefficient of countries, againsttheregional average, toillustrate thepotentialforlocalmarket stabilization cerealThis the variability of production section presents in individual a simple comparison of pricevariation.likely amplitudeof shortage supplyingmarketsreducing and hencedecreasing duringperiodsof thecostof the to respond tofuture neededcarryoverstocks, shocks; and(3)lowering thesizeof thereby capacities andactivitiesinthemarketing sector, theprivate sector whichraise thecapacityof shocks;the effects (2)providing of incentivestoinvestinmarketing services, andexpanding increasing demandandsupplythat canbeadjustedtorespond thevolumeof toanddampen to absorblocalpricerisks by:(1)enlarging theareasproduction andconsumptionthus of regionalIntegration markets of through increased trade domesticmarkets raises thecapacityof domestic foodmarkets wouldreduce supplyvolatility andpriceinstabilityinthesemarkets. 2014). that isthecase, If expanding cross-border trade andallowinggreater integration of can beexpected tobemore stableat theregional thanat individualcountrylevels(Minot, other. To theextent that suchfluctuations are lessthanperfectlycorrelated, foodproduction individual countries. Moreover, fluctuations innational production tendtopartially offset each in policydecisions, etc.)are suchthat anentire region islesslikely tobeaffected thanare creditinefficiency andinsurance of markets, international prices, volatility of uncertainty low-income countries. productionThe variability (climate causesof variability, water availability, Variability indomesticproduction isamajorcontributortolocalfoodpriceinstabilityamong through trade domesticfoodmarkets tion of Regional potentialforstabiliza- Uganda2005). Bank of calendar year. This isnotpossibleinmanycases, owingtofinancial constraints (UBOSand that wouldcapture seasonal patterns, itwouldbedesirable that thesurveyscoverwhole single border. Nighttrade, forexample, islikely tobemissed. To generate realistic estimates every day. Thus, itisnotpossibleto collectdata onallthetrade that flowsthrough evena crossing, there would have to be a dedicated monitors 24 hours a day, monitor or group of Monitoring ICBT isresource intensivebecause, forcompletecoverage at aninformalborder trade. surveys undertaken insomeregions reveal that itrepresents alarge officially share of recorded trade intotaltrade. Although there are intra-Africa nosystematic trade, statistics onthisformof Adding ICBT toofficial figures forintra-Africa trade wouldincreaseof intra-Africa theshare et al. 2010). is due to the under-declaration informal imports often of reported in such studies (e.g., Gelan again, it isnot clear whether the differential in shares for informal imports and informal exports signifying that Uganda is increasingly relying on neighbors to meet its food demands. Once informal exports. Informalimports, therefore, are dominated by agricultural informalimports, Chapter 6-Regional Trade Integration inEasternandSouthern Africa 161

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 greater than0.75(12.5percent). This explains thedistributionwithin DRC’s bar. countries (12.5percent) forwhichthiscoefficient isbetween0.65and0.75, and2forwhichitis correlationcoefficient thesecountriesandDRCislessthan0.65, of betweenproduction of 2 are between0.65and0.75. For example there are 12 countries(75percent) forwhichthe moderatelysegment istheshare correlated of countryproduction levelswithcoefficients that highly correlated production fluctuations, withcoefficients that are higherthan0.75. Themiddle country’s ownproduction movements. The topsegmentrepresents countrieswith theshare of the region withproduction fluctuations that wedefineas relatively weakly correlated withthe correlationthe percentage of coefficients that are 0.65orless, othercountriesin ortheshare of production levelsforeach regional group. For each country, thebarshows the lower segmentof Figure correlation 6.10presents the distributionof coefficients betweenindividualcountry Source: Adapted from BadianeandOdjo, 2016. at least fivetimes higherthan the regional level (Eswatini, Malawi, Mauritius, DRC, Egypt, andUganda), andahigh-volatility regional sub-group withvolatility levelsthat are lessthantwicethe normalized coefficientsregional average of (includingBurundi, Comoros, level volatility. COMESA countriescanbedividedintoarelatively low-volatility sub-group with The figure showsthat, inallcountries, national production volatility islarger than regional 1) orless(normalizedcoefficient lessthan1)volatile thanproduction inthe COMESA region. how muchindividualcountryproduction levelsare more (normalizedcoefficient greater than In Figure 6.9, thebarsrepresent variation, thenormalizedcoefficients of whichindicate by 7 Mauritiushasacoefficient thatismore than18timesthe regional averageof clarity. andisnotshownonthefigure forthesake (1980–2010) Figure 6.9Cereal production instabilityincountriesthecommonmarket foreastern andsouthern Africa the othercountriesinregion are lesscorrelated. potential here describedwillbegreater itsproduction whenthefluctuations andthoseof of supplies. However, thelikelihood that agivencountrywillbenefitfrom thetrade stabilization increasedthe biggestbeneficiariesof greater domestic regional trade intermsof stabilityof volatility.levels of The countries in the moderate- and high-volatility sub-groups would be Zambia, andZimbabwe). Betweenthetwogroups are Kenya andMadagascarwithmoderate

Normalized trend-corrected coefﬁcient of variation 0 1 2 3 4 5 6 7 8 ...... 0 0 0 0 0 0 0 0 0 Chapter 6-Regional Trade Integration inEasternandSouthern Africa 162

Eswatini 7 Rwanda, Sudan,

resource bases, withlittle room forfuture specialization. countries wouldexhibit similarproduction andtrading similaritiesin their patterns because of in production andtrade withinthe region. Often, itisassumedthat neighboringdeveloping trade flows acrossand of borders. This supposes that there is sufficient scope for specialization transborder trade; thesemeasures regional wouldstimulate theexpansionsupplycapacities of potential pointedoutabovewouldrequire measures tolowerthebarriersandbiasagainst regional markets from intraregional sources. The theregional exploitation stabilization of factors behindtheselowlevels.be ahostof These supplying factorsmayraise thecostof Despite recent upward trends, intra-Africa andintraregional levelsof trade are low. There may culture regional trade expansion inagri- The scopeforspecialization and Source: Adapted from BadianeandOdjo, 2016. and southern Africa (1980–2010) Figure production correlation coefficients 6.10Distributionof betweencountriesinthecommonmarket for eastern increase cross-border trade, aquestionthat isexamined inthenext section. and foodmarkets. Butthat isonlyonecondition:theotherthat there isactualpotentialto are suchthat increased trade maybeexpected tocontributestabilizingdomesticagricultural general, production thepatterns fluctuations anddistributionof across countriesinthe region reap alarge benefitfrom increased domesticmarketregional trade stabilization. intermsof In highvolatility andweakcombination correlation of suggeststhat countriesinthisregion would thecorrelation60 percent of coefficients for anygivencountryinthebelow 0.65category. The Figure weakly 6.10showsahighconcentration correlated of countryproduction levels, with

% share of corr. coefficients 100% 20% 40% 60% 80% 0% Sh Sh a a r r e e of of c c or or r r e e l l a a t t i i on on c c oe oe f f fi fi c c i i e e n n t t s s < > 0.65 0.75 Chapter 6-Regional Trade Integration inEasternandSouthern Africa Sh a r e of c or 163 r e l a t i on c oe f fi c i e n t s b e t w

e e n 0.65an d 0.75

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 compared countries within the region forallrelevant pairs of products ismeasured andranked. each product importanceThe or positionof isthen levelof in everycountry, therelative theproduction individualagricultural importance andtrade of of shocks. The firsttwoindicators are theproduction and export similarityindicesthrough which, between national production levelstoreduce domesticfoodmarkets thevulnerability to of for transborder trade expansion asastrategy toexploit theless-than-perfectcorrelation agricultural production andtrade. This willalsoallowustoseewhetherthere isreal scope Consequently, indicators specialization toassesstheactualdegree in weuse aseriesof of countries, thesefactors. are theinfluenceof agoodillustration of compared Sahelian totherestWest of Africa, Kenya orof compared toothereastern African as itresponds tolocaldemand. The relatively different Senegal specialization patterns of of patterns as wellother consumer preferences that affect localproduction the structure of distance to, andopportunity totrade with, distantmarkets; and(3)differences indietary accumulatedthus thelevelandstructure production of capacitiesandskills;(2)theeconomic countries. These factorsinclude:(1)differences inhistoricalinvestmentstechnologiesand There are, however, several factorsthat maylead todifferent specialization patterns amongsuch 8 SeeKoester, 1986. Source: Adapted from Badianeand Odjo, 2016. Africa, 2007–2011 Figure production patterns amongcountriesinthecommonmarket 6.11Similarityof foreastern andsouthern trade patterns, andhencescopefortransborder trade expansion intheregion. therefore, suggestthat there exists sufficient dissimilarityincurrent countryproduction and values. countrypairsfallwithinthe0–50range.The vastmajorityof The estimated index values, bar represents country pairsthat fallwithinthecorresponding index thenumberof range of indices usingFAO 150products. data fortheperiod2007–2011andcoveringatotalof Each Figures production 6.11and6.12present thecalculations andexport theresults of similarity of trade expansion. interpreted asindicating specialization patterns that are of compatible withhigherdegrees of specializationdegree betweenthetwocountries. around of Index 50andbeloware valuesof countriesbeingconsidered.the pairof theindices,The smallerthevalueof thegreater the 100,value of production whichwouldreflect ortrade completesimilarityof patterns between Number of country pairs 1 1 2 2 3 3 0 5 0 5 0 5 5 0 0 0 0 0 0 0 0 0 - 1 0 10- 2 0 20- 3 0 3 0-40 Chapter 6-Regional Trade Integration inEasternandSouthern Africa Pr 164 o d u ctio 40- n 5

0 s imila r 50-6 ity in 0 d ex 60- 8 . The indiceshaveamaximum 7 0 70-8 0 80- 9 0 90- 100

the Common Market forEasternandSouthern Africa, average 2007–2011 Table 6.9 The 20products withhighest normalizedrevealed comparative advantageindex valuesincountries scope fortrade expansion. the region. This suggeststhat countryspecialization patterns are sufficiently distincttoallow products, spread 19membercountries, across 9of accountforthehighest20indicators for reflect cross-country thedegree specialization of withinthe COMESA region. For instance, 13 All theproducts listedin Table 6.9havenormalizedRCA valuesabove0.98. The rankings tends toward 1. greater than 1andnegative otherwise. values are presented in Table 6.9. The normalizedRCA ispositiveforRCA indicators that are 70 percent haveavaluehigherthan1. The 20products withthehighestnormalizedRCA index 600 RCA indicators estimated forvariousproducts exported bydifferent COMESA countries, thecountryinexportingthe stronger theconsidered theperformanceof product. thenearly Of considered countryperformsbetter thantheworldaverage, andthat thehighervalueis, thesameproductwith that intotalworldexports. of A valuegreater than1indicates that the (Balassa, 1965) compares a given product the share in a given country’s of export basket tradeassess the degree specialization among of countries within the region. The RCA index A third indicator, the revealed comparative advantage (RCA) index, is computed to further Source: Adapted from BadianeandOdjo, 2016. 2007–2011 Figure trading patterns amongcountriesinthecommonmarket 6.12Similarityof foreastern andsouthern Africa, 9 The formulaforthenormalized RCA is(RCA-1)/(RCA+1), followingLaursen(2000). Cloves Commodity Coffee husks andskins Vanilla Vanilla Number of country pairs 1 2 3 4 5 6 7 8 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -1 0 1 0 -2 0 2 0 -3 0 3 0 -4 Chapter 6-Regional Trade Integration inEasternandSouthern Africa 0 E 9 x For veryhighRCA indicators, thenormalized value p o 4 r 0 t -5 s imilarity 0 165 5 0 index -6 0 6 0 Country Uganda Madagascar Comoros Comoros -7 0 7 0 -8 0 8 0 -9 0 9 0 -1 0 0

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 transborder trade withintheregion. countries outsidetheregion. Byredirecting suchflows, countriesshouldbeableto expand being imported (exported) byother COMESA membercountries, butinbothcases toandfrom countries. Inotherwords, somecountriesare exporting (importing) thesameproducts that are overlapping regional trade flows must, therefore, befrom different importing and exporting found inBadianeetal. (2014). cases, In thevastmajorityof theyare significantlyless than1. The TOI valuesobtainedbydividingcountry TOI valuesbythe TOI valuefortheregion canbe 25 percent for Africa aswholeandmuch21percent fortheCOMESA region. Normalized Table 6.10. Figure 6.13indicates that there isaconsiderable overlappingtrade degree flows: of The resultsTOI of and TEI calculations usingFAO trade data are presented inFigure 6.13and imports thesameproduct. (exports) of thecountry’sthe percentage of exports aproduct (imports) that of are matched bythecountry’s country bothexports andimports alltraded products byanequal amount. The TEI indicates exported oronlyimported bythecountry. Itwillbe1intheunlikely situation inwhichthe by acountry. The TOI variesbetween0and1. each individualproduct Itwillbe0if isonly where E individualproducts foracountryortheregion.of The TOI and TEI are calculated as: country ortheregion asawhole, whilethe TEI measures theoverlappingtrade flows at thelevel imports at the same time. The TOI measures the overall overlapping trade degree flows for a of trade patterns. They measurethesameproduct agivencountryexports howmuchof and are calculated to examine the potential to expand trade within the region based on current Two finalindicators, the Trade OverlapIndicator (TOI) andthe Trade Expansion Indicator (TEI), specialization inproduction agricultural andtrade products of among countrieswithinCOMESA. So far, dissimilarpatterns theanalysisinthissectionhasestablishedexistence of of Source: Adapted from BadianeandOdjo, 2016 Tea Skins, sheep, drysalted Cotton carded, combed Broad beans, horsebeans, dry Oilseeds, nes Tobacco, unmanufactured Sesame seed Cotton carded, combed Goat meat Coffee husks andskins Coffee, substitutescontainingcoffee Skins, sheep, drysalted Sesame seed Coffee husks andskins Oil essential nes Cloves ik andM ik denote the values of theexports anagricultural andimports product denotethevaluesof of Chapter 6-Regional Trade Integration inEasternandSouthern Africa 166 Rwanda Rwanda Burundi Ethiopia Ethiopia Malawi Eritrea Uganda Ethiopia Kenya Rwanda Ethiopia Ethiopia Burundi Comoros Madagascar Table 6.10 Trade expansion indicators, average 2007–2011 Note: COMESA =Common Market forEasternandSouthern Africa. Source: Adapted from BadianeandOdjo, 2016. Figure 6.13 Trade overlapindicators, average 2007–2011 scope fortransborder trade expansion intheregion. The factthat products withhigh TEI valuesalsohavehighRCA indicator valuespointstoareal the sameproducts presented inBadianeetal. (2014)are allgreater than1, except forbananas. highest TEI value for the region. The lowest indicator value in the region is 0.57. RCA values for overlapping tradebased on the degree flows. of Table 6.10 lists the20 products with the The TEI indicates whichproducts havethehighestpotentialforincreased transborder trade Waters, ice, etc. Anise, badian, fennel, coriander Cereal preparations Pineapples Cake, cottonseed Groundnuts, shelled Fruit, prepared Sugar, raw centrifugal Spices Cigarettes Juice, fruit Vegetables, preserved Sugar confectionery Beans, dry Commodity

Trade Overlap Index 0 0 0 .2 .1 .0 0 0 0 . . . 5 5 5 3 2 1 0 2 0 0 7 2 0 0 8 Chapter 6-Regional Trade Integration inEasternandSouthern Africa

A fr i c a 2 0 167 0 9 CO M E S A 2 0 1 0 TEI value 0.655 0.655 0.665 0.677 0.680 0.700 0.703 0.716 0.716 0.782 0.819 0.819 0.821 0.825 2 0 1 1

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 on intraregional trade. base year, and2025. The changeincross-border exports theimpact isusedasanindicator of the-board 10percent increase inyields. These changesare to take placebetween2008, the cross-border trade barriers (that is, a reduction equivalent to 0); and (3) an across- in their tariff 10percenta reduction trading intheoverall across of costof all theeconomy;(2)aremoval of following three different changestoexamine theirimpactsonregional setsof trade levels:(1) changes undertheremaining threeimpact of scenarios. The latter scenariosintroduce the cultivated areas, outputs, and GDP until 2025. It is used later as a reference to evaluate the assumes that current each countrymaintainsacontinuation trends of inpopulation, yields, Four different scenariosare simulated usingtheEMM. The firstisthebaselinescenario, which Model (EMM)describedinBadianeandOdjo(2016). changes areSimulations carriedout usingIFPRI’s of regional Economy-wideMultimarket trade. This sectionsimulates theimpactonregional changesinthat direction. trade flowsof measures trading tolowerthegeneral and remove costof additionalbarriers tocross-border countries. A strategy toexploit theregional stabilization potential, therefore, hastoinclude infrastructure, trade thelevelanddirection are among of majordeterminantsof African movinggoodsacross domesticandtransborderof markets, andoutwardly biasedtrading regional trade domesticmarkets toenhancetheresilience tosupplyshocks. of The highcost The preceding analysis presents evidence showing that African countries could use increased under alternative scenarios border trade andmarket volatility The outlookforregional cross- scenario that wouldcontinuethesetrends. trade flowsupto2025historicaltrendslevel andvolatility of andoutcomesunderabaseline alternative policyscenariostoboostintraregional trade, andbycomparingtheeffects onthe regionalon thevolatility foodmarkets of overthenext decade. This isdonebysimulating chapter, therefore, analyzestheoutlookforintra-trade expansion and theexpected impact beyond current levels, even with current production and trade patterns. The this remainder of These a findings point to the realexistence of potential to expand intra-trade within COMESA included, astheyrelate tore-export trade. Note: Two products withhightrade expansion indicators (TEI)butwhichare notbeingproduced intheregions are Source: Adapted from BadianeandOdjo, 2016. Orange juice, singlestrength Pepper Tobacco products Bran, wheat Bananas Cheese, wholecows’milk Chapter 6-Regional Trade Integration inEasternandSouthern Africa 168 0.566 0.578 0.586 0.586 0.592 0.604 Figure 6.14Regional exports outlook, baseline, 2008–2024 general. result insmallerchangesincentives. Cereals seemtorespond better thanotherproducts in equivalent tariffs producer constituteasmallerfraction prices;hence, of changesinbarriers and yieldsthantochangesincross-border barriers. This maybeexplained bythefactthat the baseline. Intraregional trade seemstorespond more trading tochangesinoverall costsof regional tradeof ismuchhigher, ranging from 1millionMT tomore than5millionMT above in proportional termsbut, initiallyhigherlevels, becauseof theaccumulated additionalvolume community cereals trade levelsinCOMESA tendtorespond lessthantrade inroots andtubers roots andtubers, themainfoodcrops, inresponse tochangesintrading costsandyields. Intra- MT. The results invariablyshowconsiderable increases inintraregional trade incereals andin thebarsindicate thecorrespondingand thenumbersontopof absolutechangesinthousand trade barriers, andanincrease inyields. The barsrepresent theproportional changesinpercent the baseline, whichwouldresult from areduction intotaltrading cost, transborder removal of Figure 6.15showsthecumulated changesinintraregional export levelsby2025compared to declines insomecountriesare eventuallyoutweighedbyincreases inothers. from 2019forEthiopia. The result isaU-shapedpattern inCOMESA cereals exports, asexport Ethiopia, results inrisingexports from thesecountries, starting from 2011for Tanzania and Malawi. At thesametime, fastergrowth inseveral othercountries, particularly Tanzania and continuingdeclineinexportsis aresult from of thetwomaintraditional suppliers, Egyptand regionalthe sources exports. of The fallinregional theperiod trade levelsat thebeginningof The thecereals projected evolutionof trade reflects different countrydynamicsandashift in in trade volumeswouldbereversed, butnotenoughtobringthembacktheirinitiallevels. would continuetostagnate, cereals. except inthecaseof Even inthelatter case, thedecline population, andnon-farmincomeare sustainedto2025, intra-COMESA thelevelsof trade 2008 to2025are shown in Figure 6.14. thecurrent growth rates If inyields, of cultivated areas, The results are presented inFigures 6.14and6.15. The the baselinescenariosfrom results of Source: Adapted from Badianeand Odjo, 2016

Thousand metric tons 1000 1200 1400 1600 200 400 600 800 0 2008 CE R E A LS 2010 R O O TS 2012 O TH E R

FO 2014 . Chapter 6-Regional Trade Integration inEasternandSouthern Africa OD CR O P S 2016 169 A LL STA 2018 P LE CROP S 2020 O TH E 2022 R

CR O P S 2024 M E A T

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Figure 6.15Changesinintraregional exports by2025resulting from three costandyieldscenarios the three scenarios. the x-axis country positions to the left Theindicates of tilted distribution of compared tothebaseline. The different different dotsindicate thepositionof countriesunder exports thetrade andproductivity (y-axis) byindividualcountriesundereachof of scenarios exports by individualcountries. Figure 6.16 shows changes in volatility levels (x-axis) and shares volatility, changes inthelevelof by thecombinedeffect of cross-border aswellbyshares of intraregional changesinthelevel of direction trade volatility andmagnitudeof are determined productivity scenariowithexpected volatility levelsunderthebaseline scenario. Furthermore, the comparison is, therefore, tocontrast changesunderthetwotrade policyscenariosandthe volatility levels inthe region are expected to declinecompared tohistorical trends. A better intraregionalThe current risingvolumesof numbersalsoshowthat trends trade if continue, of historical trends. changes is,The magnitude of however, rather small across all three scenarios. seen from thenumbersintable, volatility levelsare lowerunderallscenariosthan volatility,with thehistoricallevelsof withthedifference expressed inpointchanges. As canbe (ITC, 2016). In Table 6.11, simulated volatility levels under the various scenarios are compared under historicaltrends are basedontheInternational Trade Center’s Trade Mapdatabase thealternative scenarios,in each of are reported in Table 6.11. Calculations volatility levels of cross-border volatility of tradelevels of infoodstaplestheregion underhistoricaltrends, and futurean indexexport of volatility at countryandregional levels. The historicalandsimulated Under each scenario, intraregional model-simulated quantities of exports are used to estimate alternative policyscenarios Regional market volatility under and nuts. the following crops: fruits and vegetables,include all or a subset of cotton, sugar, cocoa, coffee, tea, tobacco, spices, Note: Figures bars indicate cumulative increases on top of in regional export supply in 1,000 metric tons. Other crops Source: Adapted from BadianeandOdjo, 2016. % of baseline quantity -10 10 20 30 40 50 60 70 80 90 0 10% r 1933 e duc CE t 1077 R i on E A i LS n 5259 t r a d e c os 134 t s R O 33 O TS 165 R e m oval O 448 Chapter 6-Regional Trade Integration inEasternandSouthern Africa of TH c 170 CR E r o R 161 s O

s FO P -b S O or 633 D d e r trade 2514 A b LL STA a CR r r 1271 i O e r P s P S LE 6129 O 40 TH 10% E R 456 i

CR n c r O e 204 a P s S e i n c r op 145 yi e M l d 46 E s A T - 32

countries to changes in the level of volatility in regionalcountries tochanges inthelevelof foodmarkets. individual The thesechanges determinethecontributionof magnitudeanddirection of exports,well asinthelevelof andhenceintheshares inregional trade foreach country. patterns resulting from the simulated policy actions lead to changes in both the volatility as Only countriesthat haveexported historicallyare considered. Changes incountryproduction the scenariosare reported in Table A6.1 andpresented inFigures A6.1 to A6.3 in the Annex. The combined changes in export share and volatility for individual countries under each of Source: Adapted from BadianeandOdjo, 2016 Figure 6.16Changesincountryexport shares andvolatilitycompared tobaselinetrends Source: Adapted from BadianeandOdjo, 2016. scenarios (2008–2025) Table 6.11Changeinvolatilityintra-common market foreastern andsouthern Africa trade underalternative obstacles totransborder trade, staplecrops orraise inmembercountries. yieldsof policies that wouldreduce trading, theoverall costof eliminate administrative andregulatory that exportsvolatility underregional bymostcountrieswouldexperience alowerlevelof trend ity from historical Change involatil- Volatility index -2.0

10% r e duc -1.5 � on (1996–2012) Historical i n trend t r a 0.682 d e c os t -1.0 (2008–2025) Baseline R e trend s m Ch −0.132 h oval ar an Chapter 6-Regional Trade Integration inEasternandSouthern Africa 0.55 e g of i e n c i % n r

o p ex s -0.5 s oin (2008–2025) p reduction in -b trade costs or or ts t d 10% −0.178 e 171 r 0.505 trade b -8.0 -6.0 -4.0 -2.0 ar 0.0 2.0 4.0 6.0 r Removal of cross-bor Removal of i e 0.0 r der trade barriers s (2008–2025) 10% −0.132 i n 0.551 c r v e Ch ol a s a� an 0.5 e i - n g l ity c e r in 10% increase incrop

op yields (2008–2025) i n

yi p oi p e l or n d s ts t −0.234 1.0 0.449

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 bigger picture. a particular country, asinaccuracy canlead tooveremphasis elsewhere the at theexpense of to identifykey borders in amannerthat canaccurately represent informaltrade in theextent of Monitoring allborders hasfinancialimplications; hencethere isneedfor monitoringagencies specific borders between countriesmaybehelpful. surveysof one-off be valuable. To establish solid baselinesforfuture monitoring, implementing comprehensive required. Thus, makingadeliberate effort theexisting tostrengthen initiatives could aspectsof informal trade,assessment of along-termmonitoringprogram at manyborder postsis thetradetrade data remain butmuchof unrecorded. Itwould appear that, foraquantitative A fewagenciesandsurveys in theregion havemonitored orattempted tomonitorinformal regional counterparts. evidence that COMESA memberstates are mostly trading withthird countries, rather thanwith compliance requirements, small-scaletraders andharassment intheregion. of There isalso attributable tohightrading costs, asevidencedbytariffs, NTMs, thepresence of strictborder Monetary Community (CEMAC). Intra-trade flows are stilllowinthe region, andthiscouldbe behind other continental counterparts such as ECOWAS andthe Central African Economicand bothtradeThe flowsandtrade analysisof costindicators reveals that COMESA islagging against thedesired progress, asweaker states loseouttostronger states ineach bloc. memberstates.the cooperation of The states heterogeneity alsoseemstobeworking of achieve thedesired outcomes, owingtoproblems suchasmultiplemembership, whichlimited the COMESA-SADC-EAC free trade zonein2008. The regional trade arrangements didnot operational intheSACU bloc. COMESA launchedacustomsunionin2009after accedingto arrangements, only COMESA, SADC, and SACU have FTA status, but these are only fully that collapsedintheprevious periodbeingregenerated. theestablishedregional trade Of The RECsintheESA period1994–2018sawgrowth region, inthenumberof withthose formally recognized regional communityin1992. these were inheritedfrom thecolonialera. SADCwasalsotransformed from aconference toa Eritrea in1993). We alsolearn that onlySACU achievedfullFTA andcustomsunionstatus: except forSACU andSADC(whichadmitted Namibiain1990), andIGADD(whichadmitted 1994, theregional trade almostnoneof arrangements recorded membership expansion, some RECs, forinstanceEAC andCEPGL, whichfellapart in1977and1994, respectively. Before between themselves. These conflictsledtosluggishperformanceandeventhecollapseof political rather than economic reasons, thestates had conflicts withinand asthe majority of The regional trade arrangements that existed betweenthe1960sand1993were created for cooperation ineconomic, social, andpoliticalspheres. feature among all the RECs is that their main aims converge toward regional integration and on private sectorinvolvementinpolicyformulation andimplementation. The common CBI wasestablished by 14countries in 1993as an approach toregionalism, with an emphasis IOC, whichwasfoundedin1984. SADCC, SADC, aprecursor of wasestablishedin1980. The PTA were alsojoinedbyIGADDin1986;thiswasreplaced in1996byIGAD, aswellbythe the EAC, SACU, andCEPGL groupings existed before theLPA 1980. of the The membersof created theLPA asaresult of toservetheESA region. Within thegeographic areathePTA, of those that grew outside theLPA. The PTA, whichwassupersededbyCOMESA in1994, was The RECsintheESA region canbedividedintotwocategories: thosethat fitintotheLPA, and Conclusions Chapter 6-Regional Trade Integration inEasternandSouthern Africa 172 Secretariat. COMESA. 2014. AnnualReport: Inclusive andSustainable Industrialization. Lusaka: COMESA traders trading in South Africa: A literature. review of Chinese Business Review, 11(6): 564-570 Chiliya, N., R. Masocha, andS. Zindiye. 2012. Challenges facingZimbabwean cross-border How itShouldBeSupported.” BridgesAfrica, 7(4):4-6. Brenton, P., andC. Soprano. 2018. “SmallScaleCross-border Trade Africa: Why itMatters and Discussion Paper 01667. Washington, DC:International Food Policy Research Institute. Bouët, A., L. Cosnard, andD. Laborde. 2017. Measuring Trade Integration in Africa. IFPRI Manchester School33.2:99–123. Balassa, B. 1965. “Trade Liberalisation and“Revealed” Comparative Advantage.” The Balassa, B. 1961. “Towards a EconomicIntegration” Kyklos 14.1:Theory of 1-17. Knowledge Support Systems. Washington DC. in Africa. ResilienceAnnual Trends andOutlookReport. Regional Strategic Analysis and Badiane, O., T. Makombe, andG. Bahiigwa. 2014. Promoting Agricultural Trade toEnhancing 007%2F978-3-319-28201-5 10.1007/978-3-319-28201-5_16. Chapter 16, pp. 385-412. http://link.springer.com/book/10.1 Kalkuhl etal. (eds.), Food Price Volatility andItsImplications forFood SecurityandPolicy, DOI Badiane, O., and S. Odjo. 2016. Challenges. UK:Palgrave Macmillan. Asante, S. K. B. 1997. Regionalism and Africa’s Development:Expectations, Reality and SD Publication Series. SustainableDevelopmentBureau Office of for Africa. Neighbors MozambiqueanditsNeighbors. Technical Paper No. 29. Washington, DC:USAID and Southern Africa: Kenya/Uganda Border Tanzania anditsNeighborsMalawi Ackello-Ogutu, C. 1996. MethodologiesforEstimating InformalCrossborder Trade inEastern References domesticfoodmarketsvulnerability toshocks. of to promote transborder trade wouldreduce volatility inregional markets andhelplowerthe to transborder trade. More importantly, simulation results alsosuggestthat suchpolicyactions trading,the overall costof asimilarlymodest increase incrop yields, barriers ortheremoval of contribution tocreating more resilient domesticfoodmarkets, through amodestreduction in reveal thatregional trade it is possible to significantly boost the pace of expansion, and thus its trends intraregional wouldsustainthe expansion of trade flows inthe region. The findingsalso localfoodmarkets.of The themodelingexercise results of indicate recent that continuation of suggest that itisindeedpossibletoraise cross-border trade instability toreduce thelevelof specializationpatterns inproduction agricultural of andtrade products of across countries, member countries. The distributionandcorrelation production volatility, of aswellthecurrent COMESA asameans toraise domesticfoodmarkets theresilience toshocks of across their This chapter has also examined the existing potential to use increased intraregional trade within Regional trade and volatility in staple food markets in Africa. In Chapter 6-Regional Trade Integration inEasternandSouthern Africa 173

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 http://dx.doi.org/10.1787/225770164564. Reform inSub-Saharan Africa. OECD Trade Policy Papers No. 86. Paris: OECDPublishing. Lesser, C. and E. Moisé-Leeman. 2009. InformalCross-Border Trade and Trade Facilitation from Advanced Countries, Cheltenham:Edward Elgar. Laursen, K. 2000. Trade Specialisation, Technology andEconomicGrowth: Theory andEvidence countries. IFPRI. Research Report 53. Washington DC. Koester, U. 1986. Regional cooperation toimprove foodsecurityinSouthernandEastern African Economic Journal 119:172–199. Kee, H. L., A. Nicita, andM. Olarreaga. 2009. “Estimating Trade Restrictiveness Indices.” Development Review 14(1):18–47. Jones, B. 2002. “EconomicIntegration andConvergence Per of Capita Incomein Africa.” African Index.aspx ITC. 2016. Trade Statistics forInternational BusinessDevelopmemt. https://www.trademap.org/ Internationales. Measures. Gourdon, J. 2014. CEPII NTM-MAP: A Non-tariff Tool for Assessing the Economic Impact of Africa (ReSAKSS-ECA). USAID bytheRegional Strategic Analysis andKnowledgeSupport System, EastandCentral A Methodology for Tracking Trade In Selected Staple Food Products. Nairobi: Project Report for Gelan, A., S. Gbegbelegbe, J. Wanjiku, and J. Karugia. 2010. Intra-Regional Trade inCOMESA: FSNWG. 2017. East Africa Cross-border Trade Bulletin. Nairobi: FSNWG. FEWSNET (2019). http://fews.net/fews-data/337, accessedon April, 1st, 2019. southern-africa/food-security-outlook-update/june-2015 ———. 2015. Southern Africa Food SecurityOutlookUpdate September. africa/food-security-outlook-update/september-2012 ———. 2012. East Africa Food SecurityOutlookUpdate September2012http://fews.net/east- price-watch-may-2011-food-prices FEWSNET. 2011. Price Watch –May2011Food Prices. https://reliefweb.int/report/world/global- impacts. Rome: FAO. FAO. 2017. Formalization informaltrade in of Africa. Trends, experiences andsocio-economic Community: An Action Research. EASSI, Kampala, Uganda. Women InformalCross Border Traders: Opportunities andChallengesintheEast African Eastern African Sub-regional Support Initiative forthe WomenAdvancement of (EASSI). 2012. Migration Programme (SAMP). Cape Town: International Migration Research Centre (IMRC). Crush, J.2015. http://comstat.comesa.int/Home.aspx. COMTRADE, 2019. http://data.un.org/browse.aspx?d=ComTrade, accessedon April, 1 Working Paper 2014–24. Paris: Centre d’Etudes Prospectives et d’Informations Calibrating InformalCross-border Trade inSouthern Africa.Southern African Chapter 6-Regional Trade Integration inEasternandSouthern Africa 174 http://fews.net/fr/ st , 2019.

Washington, DC: World Bank. World Bank. 2019. DoingBusiness2019:Measuring Regulatory QualityandEfficiency. Bank,Development AddisAbaba,Ethiopia Trade Area About, United Nations EconomicCommission for Africa, African Union and African UNECA, 2017, Assessing Regional Integration in Africa VIII: BringingtheContinental Free ———. 2017. InformalCross Border Trade SurveyReport 17, UBOS, Kampala. ———. 2016. InformalCross Border Trade SurveyReport 2015–2016, UBOS, Kampala. ———. 2010. InformalCross Border Trade SurveyReport 2009–2010, UBOS, Kampala. UBOS, Kampala. Uganda.UBOS and Bank of 2005. Informal Cross Border Trade Survey Report 2005–2006, Development. Working paper. Nairobi: CUTS African Resource Centre. Ogalo, V.,2010. Southern Africa, Agriculture(9),1-17 (2019). Cereal Production Trends underClimate Change:Impactsand Adaptation Strategies in Nhamo, L., Matchaya, G., Mabhaudhi, T., Nhlengethwa, S., Nhemachena, C., andS. Mpandeli Policy 45 (2014):45-56. Minot, Nicholas. “Food price volatility in sub-Saharan Food Africa: Has it really increased?.” Neighbours. Technical Paper No. 90. AMEX International, Inc, USAID, Washington D.C. Minde, I., and T.O. Nakhumwa. 1998. Unrecorded Cross-border Trade BetweenMalawiandher ed., Africa now:Policies, People, Institutions.London: James CurryLtd. McCarthy, C. 1996. Regional Integration: Part theSolutionorPart of theProblem?, of inEllis, S., for EasternandSouthern Africa: USAID, Washington D.C., Technical Paper. Neighbours: Implications for Food Security. Regional Economic Development Support Office Macamo, J.L.1998. Informal Cross-Border Trade inEAC Implications forRegional Integration and Estimates of UnrecordedEstimates of Cross Border Trade betweenMozambiqueandher Chapter 6-Regional Trade Integration inEasternandSouthern Africa 175

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 Table stapleexports underalternativescenarios,A6.1 Changesinvolatilityandshare of 2008–2025 Annex Congo, MD=Madagascar, MW=Malawi, SW=Eswatini, ZB=Zambia, ZW=Zimbabwe Note: EG=Egypt, ER=Eritrea, ET=Ethiopia, KN=Kenya, LY=Libya, SD=Sudan, DRC=Democratic the Republic of Source: Adapted from Badianeand Odjo, 2016. Figure A6.1 Changesincountryexport share andvolatilityunder10%reduction intrade costscompared tobaseline Note: DRC=Democratic the Congo Republic of Source: Adapted from BadianeandOdjo, 2016.

Zimbabwe Zambia Malawi Madagascar DRC Sudan Libya Kenya Ethiopia Eswatini Eritrea Egypt -1.6 reduction in trade −0.039 −0.170 −0.107 −0.162 −0.182 −0.001 −0.002 −0.129 Change involatilitycompared tobaseline 0.007 0.006 0.052 0.075 10% cost -1.1 trade barriers cross-border Removal of Removal of −0.290 −1.464 −0.757 −1.423 −1.232 −0.020 0.037 0.081 0.005 0.043 0.001 0.071 (points) DRC s Ch M h D ar an -0.6 Z e B g i e n % Chapter 6-Regional Trade Integration inEasternandSouthern Africa i n Z

poi crop yields W ex increase in 176 p -0.543 -1.168 -0.557 -1.695 -0.730 -0.004 -0.016 -0.102 n 0.020 0.041 0.125 0.547 or 10% ts t M LY E W G -0.1 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0 Change inshare compared tobaseline(%points) duction in trade cost 10% re- −1.456 −0.009 −0.091 −4.669 −0.007 2.557 0.030 0.002 0.781 0.007 0.004 2.315 E T SD SW 0.4 trade barriers E cross-border R Removal of Removal of −0.918 −0.114 0.368 0.453 0.004 0.014 0.003 0.001 0.001 0.000 0.001 0.701 KN v Ch ol ati an l g i ty e

i i n n

ex p oi 0.9 p or n increase in crop yields ts t

-2.175 -0.016 -0.203 -7.018 -0.008 -0.022 4.261 0.000 0.005 0.006 0.360 1.876 10%

Figure A6.3 Changesincountryexport share andvolatilityunder10%increase incrop yieldscompared tobaseline go, MD=Madagascar, MW=Malawi, SW=Eswatini, ZB=Zambia, ZW=Zimbabwe Note: EG=Egypt, ER=Eritrea, ET=Ethiopia, KN=Kenya, LY=Libya, SD=Sudan, DRC=Democratic theCon Republic- of Source: Adapted from BadianeandOdjo, 2016. to baseline Figure cross-borderA6.2 Changesincountryexport share andvolatilityunderaremoval trade of barrierscompared Congo, MD=Madagascar, MW=Malawi, SW=Eswatini, ZB=Zambia, ZW=Zimbabwe Note: EG=Egypt, ER=Eritrea, ET=Ethiopia, KN=Kenya, LY=Libya, SD=Sudan, DRC=Democratic the Republic of Source: Adapted from Badianeand Odjo, 2016. -1.6 -1.6 Z Z B B M M D D DRC DRC -1.1 -1.1 M M W W -0.6 -0.6 s Ch s Ch Chapter 6-Regional Trade Integration inEasternandSouthern Africa h

h ar ar an an e e g g i i e e n % n % Z Z W W i i n n

poi poi ex ex p p n n or or E E ts ts G G t t 177 -0.1 -5.0 -4.0 -3.0 -2.0 -1.0 -5.0 -4.0 -3.0 -2.0 -1.0 -0.1 0.0 1.0 2.0 3.0 4.0 5.0 0.0 1.0 2.0 3.0 4.0 5.0 LY LY E E E E T T R R SD SD SW SW 0.4 0.4 KN KN v v Ch Ch ol ol ati ati an an l l g g i i ty ty e e

i i i i n n n n

ex p p oi oi p p 0.9 0.9 or n or n ts ts t t

Africa Agriculture Trade Monitor / Report 2019 Africa Agriculture Trade Monitor / Report 2019 changes observed in China and the United States after April 2019. The chapter further clarifies However, total African exports toChinawould fallunderascenariothat reflects thetariff under ascenariobasedon thechangesintariffs observed from January 2018to April 2019. Clearly, African countriescould increase theirexports toboththeUnitedStates andChina model, thechapter findsthat thetrade theimpacton war. Africadependsontheintensityof 5 focusedonthetrade warbetweentheUnited States andChina. Usingaglobaleconomic Assessing thelikely emerging effects protectionist of threats on Africa’s worldtrade, Chapter exports is mainly driven by non-African demand for unprocessed and semi-processed products. is decliningincoffee andgrapes. The chapterindicates that theincrease in African agricultural some valuechains, suchassesameseedsandlegumespulses, butcomparative advantage or semi-processed products and notinprocessed products. Competitiveness isveryhighin UMA,than that of CEMAC, orECCAS. The continentisgenerally competitiveinunprocessed years. This trend ECOWAS, mainlyreflects theperformanceof SADC, and COMESA rather showing that Africa’s comparative advantageinagriculture hasstrengthened inveryrecent competitivenessin keyChapter 4examined commodityvaluechains in theevolutionof Africa, and ECCAS theleast introverted. extraverted, finding SADC, ECOWAS, ECA and COMESA to be the most introverted, and AMU Asian counterparts. Chapter3confirmsthat Africa’s agricultural trade ismore introverted than same REC isrelatively high. As a result, African RECs face lengthier times to export than their the in intra-African NTMsfacedinaRECandimposedbycountriesof trade andtheextent of port infrastructure, isbelowtheworldaverage levelsacross allRECs. Strikingly, NTMsabound the-border barrierstotrade. tradeThe andtransport-related qualityof infrastructure, including boosted intraregional trade duetodeficientinfrastructure, costlyNTMs andimplicitbehind- perspective, that is, at the REC level. Across all RECs, low applied tariffs have not significantly These findingsare confirmedinChapter3, whichinvestigated Africa’s trade from aregional relatively low. integration, withadministrative barriers playing an important role, barriers are whiletariff concludes that measures non-tariff (NTMs)are themainobstacletoimproving Africa’s trade lowerGDPlevelsin poorintegrationAfrica. butalso(andespecially)of not onlyof The chapter economic activity, and other factors. The low intra-African trade share is therefore theresult intraregionalof trade intotaltrade dependsnotonlyontrade barriers, butalsoongeography, that African trade ismore introverted thanextraverted. Chapter2demonstrates that theshare compared withotherregions, intra-African trade thelevelof appears relatively high, meaning intraregional trade in Africa isadmittedly lowasaproportion totaltrade, of especiallywhen relatively products, smallnumberof generally raw orsemi-processed commodities. Although theworld.with therest of African trade ischaracterized exports byahighconcentration ina of trends are linked tothefastpopulation andeconomicgrowth rates in Africa ascompared in globalagricultural GDPhasbeenincreasing since1995, asshowninChapter2. These Africa’s agricultural trade deficithasbeendecliningsince2012, andthecontinent’s share trade among African countries. findings and recommends policyactionsthat couldimprove regional integration andboost emergingperformance inthecontext protectionism. of This chaptersummarizesmajor trade, broader andevaluated integration thepotentialimpactof onthecontinent’s trade effective regional trade arrangements havebeeninboostingintegration andintra-African This 2019 AATM Africa’s hasassessedtheperformanceof agricultural trade, explored how Summary andconclusions 178 reduction. trade integration,success intermsof economicactivity, growth of development, andpoverty investment inreform willnewregional integration initiatives, suchasthe AfCFTA or TFTA, bea cost created byNTMsandthuslead toeasier andmore efficient implementation. Onlywith crucial tomake rulesandprocedures more transparent oncustomswebsitestoreduce the origin,harmonizing therulesof standards, andproduct normsacross different RECs. Itisalso but will require ambitious reforms barriers by non-tariff such as addressing the issue of In sum, strengthening regional integration in Africa canbringconsiderable economicbenefits to theCOMESA-SADC-EAC free trade zonein2008. fully operational intheSACU bloc. COMESA launched acustomsunionin2009after acceding regional trade arrangements, only COMESA, SADC, and SACU have FTA status, and this is only grew, withthose that collapsedintheprevious periodbeingregenerated. theestablished Of in 1977and1994, respectively. From 1994to2018, RECsintheESA region thenumberof someRECs,performance andeventhecollapseof notablyEAC andCEPGL, whichfellapart thestates facedconflictswithinandamongthemselves.of These conflictsledtosluggish between the1960sand1993were created forpoliticalrather thaneconomicreasons, asmost region. The chapterindicates that theregional trade arrangements that existed intheregion Chapter 6focusedonregional integration experiences intheEasternandSouthern Africa challenge tomultilateralism from thenewprotectionist USpolicy. because, inadditiontothetrade disputebetweenChinaand theUnitedStates, there isaclear increase. Deeperintegration within Africa wouldbeparticularly important inthisscenario fall significantly, with SACU the mostaffected region, although intra-continental trade would Furthermore, theworldwere tobecomemore much of protectionist, if African exports would regional integration, suchastherecently signed African continentalfree trade agreement. thecontinentadoptsaproactive strategyAfrica couldbeamplifiedif that includesdeeper thenewopportunities intheUSandChinesemarkets.of More interestingly, thegainsfor that developing countries outside Africa (mainly Asia) are likely to be the main beneficiaries 179 SUMMARYCONCLUSIONS AND

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