Trade NegotiationsInsights

Issue 9 Volume 10

December 2011

Available online

www.ictsd.org/news/tni www.acp-eu-trade.org/tni

Rashid S. Kaukab

The ten year long saga of the WTO Doha Round continues. While some claim that the Round is practically dead and hence should be buried to avoid putrification of the corpse, others remain optimistic.1 There is also a growing view that continued viewing of the WTO through the prism of a stalled Doha Round will irrevocably damage the credibility of the multilateral trading system.2 Views and analysis also abound on the reasons for the failure to conclude the Doha Round and many suggestions are on hand to address these. This article is certainly not an attempt to even summarise all these commendable efforts and opinions.3 Instead, it aims to present a broad view of the situation in relation to the WTO and the Doha Round with a view to making some recommendations in preparations for the forthcoming WTO Ministerial Conference scheduled to be held in Geneva, Switzerland from 15-17 December 2011. The article starts with some history, goes on to objectively analyse the outputs and outcomes of the Doha Round so far in a changing global scenario, and then looks at the critical role of the WTO with or without a Doha Round.

To better understand the reasons for the current stalemate, it is useful to re-visit some of the debates that preceded the launch of the Doha Round.

• FromthefirstWTOMCinSingaporein1996untill the adoption of the Doha Ministerial Declaration launching the Round in December 2001, many developing countries were against the launch of the Round. They argued that the so-called built-in agenda of the WTO (negotiations on agriculture and services

Continued on page 3

Regulars

2 Editorial

2 News and publications In brief

13 WTO Roundup

14 EPA Update

16 Calendar and resources

Features

1 To have or not to have a round: the WTO at a crossroads

Rashid S. Kaukab

4 Can Kenya become a global exporter of business services?

Nora Dihel

6 PACER Plus progress and promise: Regional integration challenges and opportunities in the Pacific

Chris Noonan

8 The establishment of standards for international agricultural trade: Promoting Africa’s participation

Gbadebo Odularu and Emmanuel Tambi

10 Fostering industrial development in Africa in the new global environment: Key policy recommendations

Bineswaree Bolaky

12 Agriculture liberalisation and economic integration in Africa

Manitra A. Rakotoarisoa

To have or not to have a round: the WTO at a crossroads

Last issue of TNI: ICTSD introduces BRIDGES Africa, and ECDPM presents GREAT insightsDear TNI / Eclairage reader,

After ten successful years, we have decided to stop producing Trade Negotiations Insights and Eclairage at the end of this year. This is the final issue. We thank you for your interest in our coverage of (nearly!) everything related to trade and sustainable development, and hope that TNI / Eclairage were helpful for your work.

Butthereisreasontorejoice!FromJanuary2012,TheEuropeanCentreforDevelopmentPolicyManagement(ECDPM)andtheInternationalCentreforTradeandSustainableDevelopment(ICTSD)willprovideTNI/Eclairage readers with new publications. We feel they will serve you better by more effectively addressing the regional and global trade and sustainable development reality as it has evolved over the past decade.

ICTSDwillexpanditscoverageoftheAfrican,CaribbeanandPacificregions,respondingtoreaderdemandsfor more detailed and region-specific analysis. African issues will be covered in a new monthly periodical called BRIDGES AfricainEnglish;andwewillalsocontinueproductionofouruniqueFrancophoneAfricanpublication Passerelles. As a complement to these analyses we will produce a continuous flow of insightful newsrelatedtoAfricantradeanddevelopmentissuesavailableonlinestartinginJanuary2012.(http://ictsd.org/news/bridges-africa/)

ICTSDwillalsoexpanditscoverageoftheAsiaPacificregionwithBRIDGES Asia Pacific while coverage of the Caribbean region will continue through Bridges and Puentes. In addition a new thematic news stream BRIDGES Integration will cover regional and bilateral trade and integration agreements globally. Each of these publications will bring you original and top quality analysis from the regions with the cross cutting analysis and context that readers expect from the Bridges series.

ECDPMintroducesGREAT Insights, a new monthly which will focus on Governance, Regional integration, Agriculture and Trade issues in Africa and other developing countries, hence broadening the scope of the current TNI. Naturally, trade and development issues will continue to feature prominently, and the regular EPAUpdatewillremain.GREATInsightswillgatherexpertanalysisandcommentaryfromawidevarietyofstakeholderswithdifferentperspectives.WewillreleasethefirstissueinlateJanuary,andcovertheAfricanUnion Summit on Intra-African trade (www.ecdpm.org/great)

As a TNI subscriber, you will continue receiving BRIDGES Africa and GREAT insights. If you are not a current subscriber these publications, you can subscribe for BRIDGES Africa or for GREAT Insights. You can also register for ICTSD new resources here or ECDPMresources.

2 Issue9|Volume10|December2011

Editorial

Rashid Kaukab opens this month’s TNI on a somewhat positive note. A week away from the WTO ministerial, he reminds us that the Doha round and the WTO are two separate things. The lessons and achievements of the Doha round, regardless of its success or failure, can be used to strengthen the Multilateral Trading System. According to him, the MC 8 should therefore not focus exclusively on Doha or ignore it completely, but find ways in which Doha can strengthen the overall MTS.

Nora Dihel from the World Bank analyses the characteristics of the professional service exporters in Kenya based on an in-depth study of 52 exporters, including their export strategies. The author identifies the key challenges faced by current and potential exporters of professional services and proposes policy recommendations.

ChrisNoonan,AssociateProfessorattheUniversity of Auckland and former Chief Trade Adviser at the Office of the Chief Trade Adviser fortheForumIslandCountries,focusesonthePACER plus negotiationsinwhichthePacificForumIslandCountriesarenowengaged.The article takes a closer look at the lack of consensus,amongtheFICsthemselves,ontheapproach needed to tackle the trade issue with Australia and New-Zealand, and insists on the idea that, without an agreed vision, PACER plus may tend to be out of touch and represent no gainfortheFICs.

ManitraRakotoarisoafromtheFAOexplainsthe rationale for deeper regional integration in the face of increased economic liberalisation and trade. Better integration would, the author argues, open up new opportunities to improve food security and enhance development capacity.

In a joint article, Gbadebo Odularu, regional policiesandmarketsanalystatForumforAgriculturalResearchinAfrica’s(FARA),andEmmanuel Tambi, Director of Advocacy and PolicyatFARA,definenon-tariffsbarriersascritical to African smallholder farmers; food safety and quality issues are crucial for their participation in regional and global markets. Thus, the authors argue for more adequate policies that would let Africa be further involved in the establishment of standards for international agricultural trade.

Bineswaree Aruna Bolaky from UNCTAD examines new strategies for industrial development in Africa, with particular reference to a recent Report published by UNCTAD and UNIDO. The author puts a particularly strong emphasis on entrepreneurship and regional integration as well as the use of effective monitoring and performance criteria.

We hope you will enjoy reading this the last edition of TNI (see message on the front page ). TNI editorial team would like to thank you for your interest through all these years and we wish you a happy end of the year!

Foranyquerypleasecontactusattni@ictsd.ch

World Bank publishes “Unfinished Business?, The WTO’s Doha Agenda”

The World Bank, in association with the Centre for EconomicPolicyResearchinLondon,publishedinNovember 2011 a book in which the conclusions differ from the strained and frustrating 10-year-long Doha Round negotiations. Will Martin and Aaditya Mattoo, editors of the volume, insist on the substantial economic benefits and development improvements, which could emerge from a success in concluding the WTO Doha Round. The book highlights the gains of a much-needed liberalisation of world markets. By advocating for the setting of a more ambitious agenda, which would take in account the realities of the 21st century, such as climate change or food security issues, Unfinished Business ?, The WTO’s Doha Agenda offers what is severely lacking in the current process: solutions.

Formoreinformation,ortodownloadthebook,please visit the World Bank website.

New EU study shows significant economic benefits from a Doha deal

The European Union published on the 31st of October a new study showing that reaching a Doha deal would imply a significant increase of world exports. The conclusions provided by the study further strengthens the idea that failing in concluding the current DDA negotiations would represent a dramatic missed opportunity for the international trade community. According to the study, by reaching a deal on the liberalisation of industrial goods, agriculture and services, as well as on the trade facilitation, the gains for the countrieswouldriseupto$359billionannually,and could even reach $505 billion if an agreement on sectoral liberalisation of industrial goods was also implemented.

The study offers a strong analytical basis to policy makers, highlighting the importance of a successful DDA at different levels. Developing, emerging and developed countries would all profit from an ambitious agreement; It shows that such a success in negotiations would represent 0.2 percent of additional global economic growth, while barely affecting EU workers’ wages. In the meantime, contrary to a common perception, the realization of Doha would lead to increased tariff revenue for some regions, and especially Sub-Saharan Africa.

More key findings of the study on the EU website

EU begins modernization review of Trade Defense Instruments

On the 28th October, the European Commission announced that a review of how it effectively supports and protects European companies facing unfair competition from across the globe would be launched soon. The objective is to improve the efficiency of the so-called Trade Defence Instruments,whoselastrevisiondatesfrom1995.Protectionprovidedbysuchasystemisdefinedas“vital” by Karel De Gucht, EU trade commissioner, “in the face of challenges from an increasingly globalized economic environment”.

Through a wide consultation and open evaluation process, the European Commission should be able to deliver a reform proposal in autumn 2012, based on the input from all stakeholders involved in EU trade, including producers, importers and exporters, as well as business organizations, EU capitals or the EU parliament. These results, along with the ones provided by a Trade Defence Evaluation due to be completed by independent expertsinJanuary2012,shouldbringcleardirections to the reshaping of EU’s Trade Defence System, and ensure that the system is still efficient in tackling unfair trade threatening EU companies.

More information on this issue on the EU website

Release of World Bank and IFC Doing Business 2012 report

Doing Business 2012 is the ninth in a series of annual reports benchmarking the regulations that enhance business activity and those that constrain it. 183 economies falls under the scope of the research, which is focusing on 11 crucial areas of the life of a business, such as dealing with construction permits, getting electricity, registering property, protecting investors or paying taxes. According to the report, Singapore, Honk-Kong, New-Zealand and the United States trust the first four places on the ease of Doing business in 2012. But in term of improvements made between 2010 and 2011, Morocco is leaderthisyear,climbing21placesto94th.Onthe other hand, sub-Saharan Africa is the region where making business is the most difficult; economies in the region are the most likely to have both weaker legal institutions and more complex regulatory process. Although, sub-Saharan countries are working on improving their business environment; between 2005 and 2011, the rate of African countries having implemented at least one reform suggested by Doing Business has grown from 33 percent to 78 percent.

More key findings of the report here

The World development report 2012 focuses on gender equality and development

During the last two decades, women have benefited from significant gains in rights, education and health, as well as in access to jobs and livelihoods. During this period, more than 136countrieshaveshownthepoliticalwilltotackle gender equality between men and women by guaranteeing it through their constitutions. Sub-saharan Africa is one of the regions suffering the most from gender inequality. By addressing directly gender inequalities in its last publication, the World Bank is clearly setting the issue among the ones leading the global agenda. “Gender equality is not a developing country problem; it’s a global issue”, said Sudhir Shetty, co-director of the report. If growth doesn’t necessarily implies gender equality, the report clearly shows that gender equality leads to it; countries that have been able to set policies that tackle gender inequalities show significant competitive advantage compared to the others.

More information on the report here

News and publicationsIn brief

from 2000 and several reviews of other agreements already mandated) were enough to keep all “busy” and to keep the liberalisation agendamovingforward.Furthermore,theWTO was a permanent institution with its clear mandate including on negotiations, unlike its predecessor the GATT which was a provisional arrangement and hence required a mandate of itsContractingPartiestolaunchanynegotiations.The main demandeurs were the agriculture-centric countries – on the one hand the EU, supported by some other European countries andJapanwhowantedadditionofotherissuesto sweeten the bitter pill of agriculture in the built-in agenda, and on the other the main agricultural exporters of the Cairns group who apprehended only marginal improvements in agricultural trade reform if other issues were not added to make it palatabletotheEU,Japan,et al.

• TheprimaryroleandresponsibilityoftheWTO,it was stated repeatedly, was to provide a stable, predictable and conducive environment for the conduct of international trade. Hence the critical role of its regular Councils and CommitteeincludingtheTradePolicyReviewBody(TPRB),theDisputeSettlementBody(DSB), the General Council (GC), and the two-yearly Ministerial Conferences (MCs). Negotiations for further liberalisation and updating of the WTO rulebook were only meant to strengthen this primary function.

• Therewasalsosomedisquietregardingtheconcept of a single undertaking (SU), its practical implication being that all Members, big or small, were required to participate in all WTO discussions and negotiations, and undertake commitments. While conceptually sound and a bulwark against free riding by some, it was difficult to imagine how such a principle could operate without either everyone agreeing to move at the pace of the slowest Member or messy and prolonged negotiations among all.

The above recap is intended to link the current debate with a longer and complex history. However, it is also true that the decade-long Doha Round negotiations offer invaluable experience and lessons which should be weaved with history to chart a better way forward. Moreover, this has not been a wasted effort.

It may not be common knowledge but there are areas in which the Doha Round has already yielded some concrete negotiated results though some of them may not have been fully implemented yet. A non-exhaustive list of these positive outcomes includes:

• GeneralCouncilDecisionof30August2003,andthesubsequentamendmentintheTRIPSAgreementunderaDecember,6,2005Decision related to flexibilities to deal with public health issues

• InprincipleagreementtoestablishaMonitoring Mechanism for special and differential (S&D) treatment provisions

• ATransparencyMechanismforregionaltradeagreements (RTAs) established through a GeneralCouncilDecisionofDecember2006and operationalised on a provisional basis

• AgreementattheHongKongMinisterialConference in 2005 to ensure the parallel elimination of all forms of agricultural export subsidies and disciplines on all agricultural export measures with equivalent effect by the end of 2013

There are several other less visible achievements. One, the painstaking negotiations have dealt with a number of new concepts, built an impressive inventory of technical work, and have already led to many political compromises. There are examples of such achievements in all areas of negotiations,SpecialProducts(SPs)andSpecialSafeguard Mechanism (SSM) in agriculture, hybrid approach to identify environmental goods and services in trade and environment, mandatory technical and financial assistance in trade facilitation, measures to deal with preference erosion in agriculture and non-agricultural market access (NAMA), and special provisions for Small, Vulnerable Economies (SVEs) in agriculture and NAMA, to name some. All these required a lot of substantive work as well as political compromises many of which were not even on the table when the Doha Round was launched.

Two, while adhering to the principle of single undertaking, the diversity in the needs and capabilities of various Members has been taken into account through proposed differentiated treatment for various groups of countries (and even individual Members in some cases) in various draft modalities. It can be regarded as a key departure from earlier practice and its importance for the future cannot be belittled.

Three, the Doha Round has contributed to the capacity of developing countries to deal with trade policy issues both at the national and multilateral levels, including negotiations. These improvements in capacity have resulted from greater investment in trade-related capacity building by both the developing countries and their development partners, often in the context of the Doha Round.

The above is not to claim that the Doha Round has been a success. Instead, it is an effort to point out the valuable substantive, political and capacity improvements that can be linked to the Doha Round but also have relevance beyond the Round and should be capitalised to strengthen the multilateral trading system.

It is critical to recognise in this context that the multilateral trading system (MTS) and the Doha Round, though institutionally linked, are not one and the same. In fact, at the time of the launch in 2001, the MTS as represented by the WTO was the main enterprise - with the Doha Round being only one if its initiatives, though perhaps the most important one. As briefly outlined earlier in this article, the WTO as an international organisation has several important functions, including providing a permanent forum for negotiations

among its Members for mutually advantageous outcomes. The WTO framework also provides sufficient flexibility and room to deal with new situations.ForexampletheTradePolicyReviewMechanism mandate relates to the periodic, peer review of WTO Members’ trade and related policies but it has been innovatively and effectively used to provide a means to monitor Members’ “protectionist” responses to the economic crisis since 2008. Rounds of negotiations can support these functions but should not be allowed to supplant them.

In conclusion, when ministers meet at WTO MC8 in Geneva in December this year, they should neither focus exclusively on reviving the Doha Round nor pretend to ignore it (as was attempted atthelastWTOMCinDecember2009).Instead,a balanced and calibrated approach is needed to strengthen the MTS. Viewed from this perspective, the following issues should be on the agenda of the MC8:

• Regular WTO work: Informed and structured discussion of the regular work of the WTO with a view to giving it more prominence and substance. As argued in the article, this work is valuable and must be put on the forefront.

• Doha Round: Identification of negotiated outcomes from the Doha Round, with a focus on development, that can be accepted by all for implementation (with particular emphasisonissuesofinteresttoLDCs);andidentification of issues where negotiated outcomes can be expected in the near future. This should be complemented with guidelines on a methodology that is derived from the experience of the Doha Round.

• Systemic strengthening of the MTS: Inventorisation of important outputs, outcomes and lessons – including both the technical substance and political compromises – from the Doha Round. This will preserve the achievements and allow for appropriate capitalization to strengthen the MTS at an appropriate time. This agenda item should also include identification of systemic issues of relevance to the MTS with a mechanism to debate these in the WTO

Author Rashid S. Kaukab is Associate Director and Research

Coordinator, CUTS Geneva Resource Centre. This contribution is based on a Commonwealth Secretariat paper of the same title, published in October 2011 and available at www.thecommonwealth.org. This contribution is based on his personal experience of involvement with the WTO and Doha Round in the last 16yearsandhasbeenwritteninapersonalcapacity:itdoes not in any way reflect the views of CUTS.

Notes:1 See,e.g.Jean-PierreLehmannintheFinancialTimesof24

August 2011.2 Forexample,seeastatementbyPradeepS.Mehta,

Secretary General CUTS International.3 See, for example, arecentBriefingPaper by CSEND

entitled “Doha stalemate: Implications and ways forward”, Bhagwati and Sutherland Report (2011), “The Doha Round: Setting a deadline, defining a final deal”, PatrickMesserlin’s“PollyWantsaDohadeal”, and Ambassador Ujal Bjatia note.

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Continued from front page

Kenya’s potential to export business services is vast. Business services are generally provided on a private sector basis and require a high level of skills that are usually certified. Business services include accounting, architectural, engineering, legal services, business process outsourcing (BPO),informationcommunicationtechnology(ICT), information communication technology enabled services (ITeS), and more.

Kenya is in a unique position to export such services throughout East Africa and to the rest of the world. Kenya’s recent “ICT revolution” epitomized by the success of Safaricom has expanded mobile phone and Internet access to millions of people, and Kenya’s ICT services firms such as KenCall have had substantial success in the domestic as well as the international market. However, as described in the World Bank’s 2010 Kenya Economic Update, exports represent Kenya’s “weak engine”. Increasing exports of services, especially high value added business services, therefore represents an important opportunity to drive economic growth in Kenya.

Despite a moderate growth in Kenya’s services exports during the last decade and a stronger revealed comparative advantage in transport, travel and communication services, anecdotal and empirical evidence show that Kenya has an important potential in exporting business services. While most developing countries tend to export basic business services such as back office tasks or low value offshoring, Kenya has several world class firms that provide and export higher value offshoring services such as product development, R&D business ventures and transformational sourcing. Therefore, there are substantial gains for Kenya’s economy from expanding the number of exporting firms and the number of firms that progress to the higher value offshoring and partnership segments.

This article describes the characteristics of the professional service exporters in Kenya based on an in-depth study of 52 exporters, including their export strategies. Second, it identifies the key challenges faced by current and potential exporters of professional services. Third, it proposes policy recommendations to address those challenges that will help establish Kenya as a desirable offshoring destination for international clients.

Kenyan service exporters’ characteristics

Kenyan service exporters come in all sizes, but the majority employs less than 100 workers. The majority of the surveyed Kenyan services exporters have less than 10 years of exporting experience. The sub-sectors with greatest export turnover are insurance, accounting, non-banking financialandBPOservices.

Modes of delivery1

Almost all Kenyan service exporters deliver some of their exports through cross-border supply (mode 1 in GATS). Service exports delivered through the movement of natural persons (mode 4inGATS)arealsoquiteprevalent,occurringfor60percentofthesurveyedexportersinKenya.Commercial presence (mode 3 in GATS) is used by44percentofthesurveyedKenyanservicesexporters to deliver their services abroad. The least used mode of supply by Kenyan service exporters is consumption abroad (mode 2 in GATS).

Export clients and destinations

The regional markets of the East African Community (EAC) tend to dominate the export flows of Kenyan professional service firms. Multinational and private corporations are the main clients for more than half of Kenyan exporters.Ingeneral,BPO,ICT,financialadvisory,and logistics services are the services that are typically exported outside Africa.

Exported services: In accounting, Kenyan firms export accounting services, tax services, consulting services, and auditing services. In architecture, Kenyan firms provide architectural consulting services such as master planning, urban planning, land use planning, site planning, but also interior planning, and project management.InBPO,Kenyanfirmsexportanarray of services ranging from inbound/outbound customer voice, email, or SMS support, inbound and outbound sales via phones, customer satisfaction surveys, and back-office support, to database management such as updating changes to information portals or live updates of stock markets, safe data storage and back-up facilities, transcription from voice to text or video sub-titling, to entertainment or professional service chat support. In ICT/ITES, Kenyan firms export design services such as animations of

web-advertising, user interface systems, icon and banner advertisements, but also high-end corporate and technology solutions such as hardware and disaster recovery.

Customization: The services exported by Kenyan firms are subject to some degree of customization relative to the services sold domestically in order to suit client demands. Box 1 provides examples of exported business services by Kenyan firms and the necessary modifications to the domestic services to make them exportable.

Challenges for Kenyan services exporters

The factor that constrains most service providers from exporting is a widespread lack of knowledge about exporting opportunities, markets, and processes, and a lack of awareness as to how to acquire such knowledge. Very often Kenyan service providers - especially smaller ones - lack international networks and find it very difficult to obtain market intelligence on foreign market. Another important constraint identified by the surveyed firms is the difficulty in penetrating foreign markets. Kenya has low international brand equity as a business service provider. Skills mismatches and skills shortages pose a significant challenge to many Kenyan exporters.

Policy recommendations

The Government of Kenya can, through its trade supporting institutions and in collaboration with business and professional associations and the private sector, develop a Services Export Strategy and play an important role in helping reduce the barriers that Kenyan service firms face in their export development efforts.2 Most Kenyan service exporters feel that direct incentives to

Can Kenya become a global exporter of business services? Nora Dihel

Box 1: Examples of exported services by sector

Sub-sector Domestic Services Modifications to Domestic Services to Make Them Exportable

Engineering Engineering consulting Specifications are changed for the client country; converting units in drawings depending on whether measurements in the client country are based on the imperial (feet and inches) or metric (meters and centimeters) systems. Drawing text must be translated if in a different language than client’s.

Environmental impact assessments

Construction materials testing

Insurance Insurance products (general, life crop, health, micro-insurance)

Servicesaretailoredtoindividualclientcountriesandmarkets.Forexample,private vehicle insurance is not mandatory in Sudan whereas the public vehicle insurance market is quite large. These types of dynamics will alter the way in which firms market insurance products.

4 Issue9|Volume10|December2011

Sub-sector Domestic Services Modifications to Domestic Services to Make Them Exportable

Accounting Accounting services Modifications are made with respect to tax regulations in the foreign country and the client firm’s accounting program. Forworkondonorfundedprojects,Kenyanfirm’scanconduct technical and social audits that include project impact assessments.

Audit & Assurance services

Tax services

Consulting services

Architecture Urban planning Only slight modifications: foreign clients often want more detailed designs than local clients; more work is done emails; projects must adhere to regulations in client’s country.

Landuseplanning

Site planning

Projectmanagement

BPO Inbound/outbound sales All services can be exported; delivery of exported services can be fully conducted online (mode 1). However, employ ee training must be up to international standards. This in cludes developing strong customer service skills, and learning how to speak with a “neutral” accent.

Customer satisfaction surveys

Back office support

Database management

Transcription

Technology support

Engineering Engineering consulting Specifications are changed for the client country; converting units in drawings depending on whether measurements in the client country are based on the imperial (feet and in ches) or metric (meters and centimeters) systems. Drawing text must be translated if in a different language than client’s.

Environmental impact assessments

Construction materials testing

Freigth-forwarding Customs brokerage Small modifications are made when exporting, such as adapting to to changing regulatory requirements. An additional service that is provided to foreign clients is to walk them through the numerous Kenyan documentation processes and procedures.

Documentation processing

Logisticsplanning(transportation,warehousing, material handling, ships agency, cargo depot)

ICT Digital design for web advertising ICT services are typically exported by telecommunications (mode 1). Employees must be able to communicate effectively with email and so must often receive computer training.

Advanced technical support

Website solutions/design

Web-based marketing

Insurance Insurance products (general, life crop, health, micro-insurance)

Services are tailored to individual client countries and markets. Forexample,privatevehicleinsuranceisnotmandatoryinSudanwhereas the public vehicle insurance market is quite large. These types of dynamics will alter the way in which firms market insurance products.

Pensions;assetmanagement

Legal Corporate/commercial law All services can be exported as long as the lawyer is registered and admitted to the foreign bar association. Services pertaining to Kenyan law do not require registration in the export country. Modifications to services are small and generally have to do with the way documents are presented, especially regarding court documents.

Intellectual property

Familylaw

Criminal law

Legaladvisoryservices

Non-banking financial

Privateequity/venturecapital(investment, guidance & strategy)

Some clients have their own specific standards due to global regulations and oversight from headquarters, and services may be alteredtoadheretothesefactors.Formergersandacquisitionsadvisory services, modifications are made on a case-by-case basis.

exports, such as tax incentives for example are unnecessary. Rather, what they consider to be crucial is that the government facilitates the access to foreign markets.

Address lack of knowledge about export opportunities

TheExportPromotionCouncil(EPC)couldcollectand disseminate to Kenyan service firms market research information (e.g., country profiles, sector rules and regulations, tax issues, and general working conditions in foreign markets) and highlight available opportunities for services exports.TheEPCcanestablishlinkswithotherinternational trade support institutions to create a greater pool of information on businesses opportunities available in other countries as well as profile companies that can deliver those services.

Business and professional associations should be more active in hosting international seminars to educate the industry and increase networking opportunitiesforlocalexperts.TheEPCcouldassist financially Kenyan service firms - especially small firms - in their incursion in international markets for example through participation in international fairs and expositions (perhaps throughaco-sharedeffort).TheEPCshouldalso be able to assist individual Kenyan service exporters or potential exporters with marketing and branding efforts when participating in international expositions (e.g., ensure that Kenyan delegations have top of the line display stands).

Address regulatory and branding issues

The liberalization of advertizing in various professional services sectors would enable current and future exporters in Kenya to use an important channel for targeting foreign clients. Given the likelihood of strong informational asymmetries, allowing advertizing that is relevant, truthful and not misleading - as is currently done in accounting in South Africa, Malawi, and Zambia - would be the best combination to protect domestic and foreign clients.

The opening up of regional boundaries to allow free movement of EAC nationals without work permit requirements would be of great help to increase business opportunities within the region and boost service exports.

The establishment of mutual recognition agreements (MRAs) of professional qualifications and licensing requirements within the EAC in the areas of accounting, architecture, engineering, and legal services would likely benefit Kenyan service firms (as well as firms in neighboring countries) in their exports of services to the region. The creation of standards at the EAC level for the services delivered in the accounting, architecture, engineering, and even legal sectors could potentially benefit consumers in the EAC.

The Government of Kenya should lead the positioning and marketing of the country brand and key services globally showcasing professional services next to tourism, sports, horticulture, and other Kenyan products. Trade support institutions should conduct concerted marketing efforts with professional associations and government agencies such as the Kenya ICT board, the Kenya Tourism board, the Communication Commission of Kenya, to promote Kenyan services and build Kenya‘s reputation as an exporter of professional services.

Address skills mismatches and skills shortages

The availability of scholarships or partial funding forBPOagentstobeabletoaccessformaltraining in courses not readily available in Kenyan universities and colleges would improve the skills andthusthemarketabilityofKenya‘sBPOsector.The provision of rebates or the development of incentives for firms to conduct training – especially specialized training such as a certified fraud examiners course in the accounting sector – would help increase the quality and degree of specialization of the services offered by Kenyan firms.

Conclusion

The factor that constrains most Kenyan service providers from exporting is a widespread lack of knowledge about exporting opportunities, markets, and processes and a lack of awareness about how to acquire such knowledge. What Kenyan service providers consider to be crucial is for the government to facilitate access to foreign markets. Such facilitation would lead to an increase in employment, upgrades in the technology used, and improvements in the quality of services delivered to meet high international

standards.Possiblepolicyactionsforthegovernment of Kenya are summarized in table 1.

Author

Nora Dihel is Senior Trade Economist in the Africa Region of the World Bank. This article is based on a paper entitled “Can Kenya Become a Global Exporter of Business Services” by Nora Dihel, Ana Margarida Fernandes,RichardGicho,JohnKashangakiandNicholasStrychacz,AfricaTradePolicyNoteNo19,World Bank. The views expressed here reflect solely those of the author and not necessarily the views of the funders, the World Bank Group or its Executive Directors.

This work has been funded by the Multi-Donor Trust FundforTradeandDevelopmentsupportedbythegovernmentsofFinland,Norway,SwedenandtheUnited Kingdom.

References

EPC(ExportPromotionCouncil)andWorldBank.2009.“ServicesExportsStudy:AssessmentofKenya’sExportPotentialandSupplyCapacitiesinSelectedProfessionalServiceSectors.”EPC,Nairobi.

GovernmentofKenyaandEPC(ExportPromotionCouncil).2008.“StrategyforExportPromotionofProfessionalServicesinKenya.”EPC,Nairobi.

NoraDihel,AnaMargaridaFernandes,RichardGicho,JohnKashangakiandNicholasStrychacz,AfricaTradePolicyNoteNo19,Washington,DC:WorldBank.

Sudan,Randeep,SethAyers,PhilippeDongier,ArturoMuente-Kunigami, and Christine Zhen-Wei Qiang. 2010. The Global Opportunity in IT-Based Services: Assessing and Enhancing Country Competitiveness. Washington, DC: World Bank.

Notes

1 The four modes of supply of services in the GATS terminology are: Mode 1 - Cross-border Supply: services supplied from the territory of one country into the territory of another country; Mode 2 - Consumption Abroad: services supplied in the territory of one country to the consumers of another country;Mode3-CommercialPresence:servicessupplied through any type of business or professional establishment of one country in the territory of another(i.e.,FDI);andMode4-TemporaryPresenceofNaturalPersons:servicessuppliedbynationalsofonecountryintheterritoryofanother.Mode4includes both independent service suppliers, and employees of the services supplier of another country.

2 A complementary view on policy changes that can make Kenya a more attractive destination for offshore of IT and ITES sectors is provided by the examination of a location readiness index described in Sudan et al. (2010)

Address lack of knowledge about export opportunities

Address regulatory and branding issues

Address skill mismatches and skill shortages

• Collectanddisseminatemarketresearch information.

• DeveloptradedirectoriesofKenyanservice providers to be used for marketing to foreign firms.

• EncourageKenyanfirms’participationin international expositions.

• Enactregulatoryreformtoaddressdomestic regulatory barriers and encourage regional regulatory cooperation (free movement of EAC nationals, mutual recognition agreements, common EAC standards).

• CreateandmarketKenya’sinternational brand.

• Providebettercontinuingprofessionaleducation.

• Providescholarshipsforfurthertraining to improve skills and marketabilityoftheBPOsector.

• Providerebatesordevelopincentivesfor firms to conduct specialized training.

Table 1: Policy recommendations

Source: Authors’ compilation.

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ThePacificForumIslandCountries(FICs)1 are engaged in two major trade negotiations with developedcountries–theEPAnegotiationswith the EU and the more recently commenced PACERPlusnegotiationswithAustraliaandNew Zealand.

The negotiations were linked from the beginning.WhentheFICssoughttonegotiate a regional trade agreement among themselves, in preparation for theEPAnegotiations,AustraliaandNewZealand initially insisted on being parties. As acompromise,underthePacificAgreementonCloserEconomicRelations(PACER),theFICsundertooktonegotiateafreetradeagreement with Australia and New Zealand if theFICsenterednegotiationsfororconcludeda trade agreement with a third party, such as theEU.ThepositionoftheFICsintheEPAnegotiationshasbeenshapedbythePACER.

TheFICsweremostlyreluctanttocommencenegotiations for a comprehensive free trade agreement. Australia and New Zealand sought toreassuretheFICsthatthesenegotiations,dubbedPACERPlus,wouldnotbeliketraditionaltradenegotiations.TheFICs,however, face a number of challenges in negotiating a trade and economic agreement that is truly an instrument for development.

PACER Plus promise

AttheForumTradeMinisters’MeetinginJune2009,MinistersrecommendedtoLeadersthatPACERPlusnegotiationscommenceaftertheconclusionofthePacificIslandsForumLeadersMeetinginAugust2009.TheTradeMinisters’recommendation was however silent on the intended outcome and structure of the negotiations, perhaps reflecting the

officials’earlierfailuretoagreeonaJointRoadmapforPACERPlus.

InAugust2009,theForumLeadersagreedtocommencePACERPlusnegotiationsforthwith.LeadersalsodirectedthattheTrade Ministers should, inter alia, discuss aframeworkforPACERPlusnegotiationsincludingtimelines.ThedecisionofLeadersotherwise left open the objective, structure andcontentsofPACERPlus.Thesubsequentmeetings of the Ministers in October 2009andApril2010didnotdealwiththese matters. To guide the negotiations the officials only have had a few general statementsmadebyForumTradeMinistersduringtheirmeetingsin2009and2010,inparticular the Ministers:

• recognisedthecapacityconstraintsfacedbyFICswhenundertakingnegotiations,and the need for national consultations with all stakeholders;

• recognisedtheimportanceofdeepeningregional trade integration;

• affirmedthatPACERPlusprovidesthePacificregionwithasignificantopportunity to develop a truly innovative trade and economic agreement that takes account of the different stages of development of each nation;

• reflectedtheirintentiontobolsterthecapacityofallFICstotakeadvantageoftrade opportunities; and

• discussedthedevelopmentofaframework that enabled those countries ready to move ahead with negotiations to progress, while allowing other countries more time to prepare.

Office of the Chief Trade Adviser for Forum Island Countries (OCTA)

TheexperienceoftheFICtradeofficialsintheEPAnegotiationswillbehighlyvaluableforthePACERPlusnegotiations.The experience together with the assistance providedbytheEUthroughthePacificIslandsForumSecretariat(PIFS)toassist

PACER Plus progress and promise: Regional integration challenges and opportunities in the PacificChris Noonan

From PACER to PACER Plus

ThePacificIslandsForumLeadersendorsedthePACERon18August2001.Most,butnotall,FICshavesignedandratifiedthePACER.AccordingtoArticle2(1)ofthePACERtheparties“wishtoestablishaframeworkforthegradualtradeandeconomicintegrationoftheeconomiesoftheForummembersinawaythatisfullysupportiveofsustainabledevelopmentoftheForumIslandCountriesandtocontribute to their gradual and progressive integration into the international economy”. More specifically, Article 2(2)(a) of that agreement statesthatPACERwas“toprovideaframeworkforcooperationleadingovertimetothedevelopmentofasingleregionalmarket”.Thewords were deliberately chosen; a single region market includes not only trade in goods and services but also the freedom of movement of labour.

TheFICsarealreadywellintegratedintotheglobaleconomybymanyofthecommonmeasures,suchastradeandinvestmentflowsrelativetoGDP.However,littlehasbeendonetowardstheestablishmentofaformallegalbasisofasingleregionalmarketamongtheFICsandAustraliaandNewZealand,sincethe1980SouthPacificTradeandEconomicCooperationAgreement(SPARTECA).

ThePACERcontainsnotradeliberalisationcommitments,butArticles5and6ofthePACERprovidethatincertaincircumstancestheFICswillenterintonegotiationswithaviewtoestablishingareciprocal,GATTarticleXXIVcompliantfreetradeagreementwithAustraliaandNewZealand.Whennegotiationswereformallycommencedin2009,PACERPluswasseparatedfromthePACER.AsaconsequenceneithertheobjectoftheconsultationsunderthePACERnorthegeneralprinciplesintendedtoguidefuturenegotiationsbetweenthepartiesareautomaticallyapplicableinthePACERPlusnegotiations.

PACERPlusprovidesanopportunitytoconsiderwhetherthePartiesstillwishtoestablishasinglemarket,and,ifso,thenextstepstowardssuchamarkettobetakenunderPACERPlus.Anumberofchoicesfacetheparties.

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theFICstoparticipateeffectivelyintheEPANegotiationsconvincedtheFICsthatthey need an expert advisory body to assist in the negotiations independent of their negotiating partners. The membership ofthePIFSextendsbeyondtheFICstoinclude Australia and New Zealand, which madeitimpossibleforthePIFStosupporttheFICsinthePACERPlusnegotiations.The establishment of the OCTA to advise theFICs,andtheprovisiononfundingby Australia and New Zealand, was a preconditionfortheFICsagreeingtothecommencementofthePACERPlusnegotiations. The OCTA started operation in March2010andisbasedinPortVila,Vanuatu.

Exclusion of Fiji

FollowingthedecisionofForumLeadersinearly2009toexcludeFijifromparticipatinginForummeetingsinresponsetothefailuretoholdelectionsafterthe2006militarycoup,ForumLeadersdecidedinAugust2009thatFijiwouldalsonotbeabletoparticipateinthePACERPlusnegotiations.FijirespondedthatitsexclusionfromthePACERPlusnegotiationswasabreachofthePACER.TheAustralianTradeMinisterSimonCrean,however,respondedthatPACERPluswascompletelyseparatetothePACER.Thenon-participationofFijihasbeencriticisedbybusinessgroups.FijiisaneconomicandtransporthubintheEasternPacific.RegionalintegrationwithoutFijimakeslittlesenseandPACERPluswithoutFijiislikelytodistortregional trade flows. In September 2011, PacificForumLeadersagreedtopermitFijitoparticipateinPACERPlusmeetingsatofficials-levelonly,givenFiji’simportanteconomic role and links to prospects for broader regional economic integration. Without full rights of participation, progress towards regional integration is likely to be modest.

[...] little has been done towards the establishment of a formal legal basis of a single regional market among theFICsandAustraliaand New Zealand, since the1980SouthPacificTrade and Economic Cooperation Agreement

Common priority issues

Beyond general principles listed above, in the decision to launch negotiations inOctober2009,ForumTradeMinistersinstructed officials in the first 12 months to deepen understanding on common priority issues including, but not limited to: RulesofOrigin;RegionalLabourMobility(beyondMode4);DevelopmentAssistance,focusing on physical infrastructure for trade, trade development and promotion; and TradeFacilitation,includingSanitaryandPhytosanitaryMeasures,TechnicalBarrierstoTrade,StandardsandCustomsProcedures.ThesearekeyissuesfortheFICsandhavebecome the focus of negotiations since the first meeting of officials in April 2010.

InApril2010,ForumTradeMinistersnoted the fundamental importance of air and sea transport, telecommunications, and water supply infrastructure to increase trade in goods and services and agreed that these were also priority negotiating issues.

PACERPlusnegotiationshaveinvolvedtheexchange of papers between Australia and theFICs.ThelegaltextspreparedbytheOCTAonbehalfoftheFICs(andwelcomedby New Zealand) reflect an alternative approach to regional integration, which would not initially focus on the negotiation of a comprehensive agreement. The negotiations have produced a deepening of understanding on a number of issues, but so far no common negotiating texts.

Conclusions

SofarPACERPluslacksanagreedvisionofthe type of regional economic integration that should come out of, or at least be set in motion by, the negotiations, let alone the path that will be taken to that ultimate destination. The lack of direction risks prolonged negotiations and ultimately risks generating few benefits for the development oftheFICs.

Developed countries have over-promised onthebenefitslikelytoflowtoACPcountriesintheEPAandintheWTO’sDohaRound of negotiations. The Doha Round, after a decade, looks unpromising. The general pro-development promises, such asthoseagreedbyForumTradeMinistersinrelationtoPACERPlus,madebeforethe commencement of the negotiations have been hard to turn into concrete legal provisions. Australia and New Zealand have saidthatPACERPlusisanotatraditionaltrade negotiations, but do not appear to have thought through the full implications for negotiation processes and outcomes.

Substantive commitments on issues of importancetotheFICsmadeearlyinthenegotiations would help to build confidence in the process.

FormanyoftheFICsthebenefitsfroma traditional trade agreement would be relatively modest, especially if key issues such as labour mobility are not adequately addressed, whereas implementation and adjustment costs will likely be more immediate and significant. Insisting that developing states bend to fit the trade regime rather than bending the trade regime to assist developing states is not conducive to timely completion of negotiations.

The failure to account for differences between countries within a region in agreements with developed countries will also create intra-regional pressures. Insisting on a single undertaking can be an obstacle toregionalintegration.ThePACERPlusparties should be realistic about the difficulty to conclude and implement a comprehensive agreement. While some parties may wish to take risks and move swiftly, others will be more risk adverse. If a developing country region wishes to stick together, compromises will be necessary or more nuanced negotiating positions formulated. Negotiating partners can assist by looking at trade negotiations as about a relationship rather than a discrete event. A phased approach to economic integration, not insisting one-size fits all, and ensuring rules are matched with equally firm commitments to provide resources would assist.

The failure to account for differences between countries within a region in agreements with developed countries will also create intra-regional pressures.

Author

DrChrisNoonanisAssociateProfessorofCommercialLawattheUniversityofAucklandwasthe Chief Trade Adviser at the Office of the Chief TradeAdviserfortheForumIslandCountries(OCTA)until September 2011.

Notes

1 AllofthefourteenFICs,asPacificACPStates,arepartytotheEPAnegotiations,whilealloftheFICsexceptFijiarepartiestothePACERPlusnegotiations.

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The rapid reduction in tariffs experienced in the last half decade is increasingly being replaced by the use of non-tariff measures by most developed countries; ostensibly to protect consumers and producers from imported animal and plant products and materials that may be contaminated. Thus, non-tariff barriers such as Sanitary and Phyto-Sanitary(SPS)measuresarecriticalissues along various agricultural value chains for African smallholder farmers and agro-processors. Amidst its provision of an effective architecture for promoting global free trade, food safety and quality issues continue to assume an increasingly crucial dimension in African smallholder farmers’ participation in regional and global markets. This article offers strategic insights into workable and desirable policy options for strengthening Africa’s capacities to participate in the setting of standards and technical regulations for regional and international trade.

Given that African economies depend largely on agriculture and that smallholder producers are the driving force behind agricultural production, there is an increasing recognition of the importance to address agricultural policy and trade-related constraints that prevent smallholder agricultural producers and traders from accessing high value regional and global markets.

In this regard, standards1 and technical regulations have attracted increasing attention in ongoing regional and global trade policy dialogue as tariff and quota issues seem to assume a declining dimension. In other words, with the reduction in the applicability of tariff barriers, the adoption rate of standards as a trade restrictive strategy has increased significantly. This growing emphasis on non-tariff barriers, in the face of increased globalisation and rapid agricultural trade liberalisation, has attracted considerable public debate on the impact of standards on regional and international market access for agricultural commodities in Africa. In addition to hindering access to markets

for agricultural commodities produced by smallholder farmers in Africa, standards also raise the cost of agricultural exports, thus, serving as disincentives to smallholder farmers.

Opportunities for greater compliance and harmonization

AgreementsanddialogueonSPSmeasures2 and other related commercial regulations encourage African countries to participate in trade at all levels. They provide an international framework for exchange among and between African countries and the rest of the world, irrespective of each country’s political agenda, economic strength or technological capacity. They also reduce uncertainty about the conditions for selling to a specific market, thus, providing a variety of market destination options. Without such agreements, African countries will be at a disadvantage when challenging trade protectionist policies.

Ultimately, the measures help to ensure that agricultural commodities are safe for consumers, and prevent the spread of pest or diseases among animals and plants.

Infact,SPSmeasures,whichapplytodomestically, sub-regionally, and regionally produced/traded agricultural products, take many forms, such as requiring products to come from a disease-free area, inspection of products, specific treatment or processing of products, or permitted use of only certain additives in food products. Ultimately, the measures help to ensure that agricultural commodities are safe for consumers, and prevent the spread of pest or diseases among animals and plants.

Further,asanincreasingnumberofAfricancountries strive to meet these technical regulations, opportunities exist along the ongoingharmonizationofSPSmeasureswithin regional economic blocs in Africa. Some of the regional economic communities (RECs) which provide these opportunities include notably the Economic community of Central African States (ECCA), Union du Maghreb Arabe (UMA), the Intergovernmental Authority on Development (IGAD), the East African Community (EAC), the Community of Sahel-Saharan States (CENSAD), the Economic Community Of West African States (ECOWAS), the Common Market of Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC). These opportunities grow as more African countries and RECs effectively participate in international standardsetting.Further,someoftheseRECsprovide best practices that could be shared, up-scaled and out-scaled in Africa.

Identification of challenges

At the same time, being an increasingly strategic trade issue, mandatory standards and technical regulations have continued to attract considerable attention from African governments because they pose significant challenges to all smallholder farmers and agro-processors. In making frantic efforts to access regional and international markets for agricultural commodities, African smallholder farmers are confronted with the arduous hurdlesarisingfromSPSandfood-safetyissues such as the setting of standards; the costs of technical compliance; the cost of verification; and transitional arrangements.

FirstAfricadoesnothave a certified and well established database for its effective participation in standards setting process.

The establishment of standards for international agricultural trade: Promoting Africa’s participation

Gbadebo Odularu and Emmanuel Tambi

The rapid reduction in tariffs experienced in the last half decade is increasingly being replaced by the use of non-tariff measures by most developed countries; ostensibly to protect consumers and producers from imported animal and plant products and materials that may be contaminated. Thus, non-tariff barriers such as Sanitary andPhyto-Sanitary(SPS)measuresarecriticalissuesalongvariousagricultural value chains for African smallholder farmers and agro-processors.

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While recognizing that some progress has been recorded at national and regional levels, Africa’s participation in standards setting has remained limitedformanyreasons.FirstAfricadoesnothave a certified and well established database for its effective participation in standards setting process. Secondly, most African countries are not well represented and they are inadequately prepared before participating in meetings on standards settings, all the more since there is no forum where African experts can meet to discuss before meetings. There is moreover a low awareness of standard setting process across all levels in Africa, leading to inadequate ownership and recognition of standards by relevant stakeholders such as farmers and private sector. Scientific data are furthermore often inadequate to support an effective participation in international standards setting process. Available regulatory agencies in charge of standards and quality are similarly not adequately linked and human resources and infrastructure are often lacking to carry out risk analysisofagreeingwithcertainSPSmeasures.Finally,thereisclearlyashortageoffundingtosupport preparatory meetings for drafting and reviewing standards and for expert participation inSPSstandardssettingdialogues.

Conclusions and policy recommendations

SPSmeasuresareessentialforpromotingaccess to regional and international markets for agricultural commodities in Africa. Some of the benefits accruable to Africa if it adequately meetsSPSmeasuresinclude:enhancedconfidence among regional trading partners and consumers; enhanced access to regional and international markets for agricultural commodities; improved cooperation and integration among African countries and sub-regions; improved food safety, and animal / plant health; and speedy achievement of theoverallobjectiveof6percentagriculturalgrowthasenshrinedintheCAADP3 framework. MeetingSPSmeasuresalongagriculturalvalue chain in Africa is at the heart of the secondPillar4ofCAADPwhichisreferredtoas ‘improving rural infrastructure and trade-related capacities for improved market access’. Strategic policy recommendations in order to enhance Africa’s participation in standards setting fora include:

1. The establishment of online databases and mailinglistsofSPSexpertsatnationalandregional levels to provide a pool of expert resources for standard-setting processes.

2. Develop, support or strengthen regional policies that encourage linkages with national research institutions and universities. This should collaborate with National Agricultural Research Systems (NARS) in order to empower regulatory institutions to commission standards setting researches and projects.

3. EstablishmentofSPSstandards-settingcommittees in order to coordinate national and regional positions at international standards setting fora.

4. Governmentsatalllevelsshouldallocate funds to the accreditation of SPSlaboratories;createincentivesforprivate sector participation in funding initiatives; promote public-private partnerships including global partnerships in strengthening the capacities of laboratories; strengthening existing laboratories and identify centres of excellence for supporting accreditation activities. National governmentsincollaborationwithForumforAgriculturalResearchinAfrica(FARA)(see box 1) should formalize funding for relevantSPSresearchfordevelopmentalong agricultural value chains in Africa.

5. Strengthen capacities for risk analysis as a core component of the strategies forimplementationofCAADPcountryand regional compacts implementation processes.

6. Thereisadireneedfortheestablishmentofadatabaseoftrade-relatedSPSexpertamong member countries. This will provide a pool of experts on standards setting orotherrelatedissues.Further,membercountries need to enact or review existing SPSpoliciesinordertoalignitwithinternational agreements.

7. Government should allocate resources to the provision of creating awareness tools among stakeholders. Such tools include policy briefs, media, radio, leaflets, posters, et cetera. Along this recommendation

is the need for the establishment, operationalizationandpromotionofSPSenquiry points or nodes at community levels.

Authors

Dr.GbadeboOdularuisFARA’sregionalpoliciesandmarketsanalyst,FARA,Accra,Ghana.Dr.EmmanuelTambiistheDirectorofAdvocacyandPolicy,FARA,Accra, Ghana..

Notes

1 Standards and certification issues involve food safety standards, fair trade standards, organic standards, labour standards, and several kinds of environmental standards and labels.

2 SPSmeasuresmustbetransparent,non-discriminatory, and scientifically justified by harmonizing sanitary or phytosanitary measures with internationally agreed standards, guidelines or recommendations from the Codex Alimentarius Commission(CODEX),theInternationalOfficeofEpizootics(OIE),andtheInternationalPlantProtectionConvention(IPPC),oracountrymayundertake an individual and independent risk assessment. An importing country cannot impose different requirements on imports than on domestically produced goods (national treatment), nor can it favour imports from certain countries (most favoured nation). Members must adopt other approaches that will ensure safety insofar as the exporting member objectively demonstrates that its measures achieve the importing member’s required level of sanitary or phytosanitary measures if they have a significant effect on trade. However, under SPSAgreement,DCsareobligedtoprovidetechnicalassistance to Africa in order to help them comply withSPSmeasures.

3 Comprehensive Africa Agriculture Development Programme(CAADP)isapan-AfricanvehiclethattranslatestheNEPADPlanningandCoordinatingAgency(NPCA)’svisionintoanoperationalframework to guide agriculture-led development. CAADP’soverallgoalistoimprovelivelihoods,foodsecurity and environmental resilience in Africa’s largely agrarian economies.

4 FourpriorityareasoftheComprehensiveAfricaAgricultureDevelopmentProgramme(CAADP)areknownasPillars:Extendingtheareaundersustainable land management and reliable watercontrolsystems(PillarI);Improvingruralinfrastructure and trade-related capacities for improvedmarketaccess(PillarII);Increasingfoodsupplyandreducinghunger(PillarIII);andAgricultural research, technology dissemination and adoption(PillarIV).

FARA’sagriculturalresearchanddevelopmentagendaisaimedatreducingpovertyinAfricaasaresultofsustainablebroad-basedagriculturalgrowthandimprovedlivelihoods,particularlyofsmallholderandpastoralenterprises.FARA’sactivitiestowardsthedevelopmentanddeliveryofevidence-basedSPSpolicyoptionsandtoolsforinformeddecision-makinginclude:ARegionalDialogueon‘Meeting Requirements Relating to Technical Regulations and SPS Measures along the Agricultural Value Chain in Africa’inJuly,2011;andthreeSPSpolicystudiesonCountries’compliancewithselectedSPSmeasuresinEastandSouthernAfrica;WestandCentralAfrica;andframeworkandguidelinesforpromotingAfricansmallholderagricultural,livestock,fishproducers’andprocessors’compliancewithSPSmeasures.

Box 1. What is the Forum for Agricultural Research in Africa?

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The report advocates for African countries to embark on a new industrial policy centered on manufacturing development. By industrial policy is meant government measures that are aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation. Without manufacturing development, Africa cannot engage in the structural transformation from low- to high- productivity activities that economists have argued is necessary for sustained and high growth and significant poverty reduction. Such manufacturing development however cannot happen without deliberate government intervention due to the presence of both market and coordination failures.

Without manufacturing development, Africa cannot engage in the structural transformation from low- to high- productivity activities [...]

While the report recognizes that there have been numerous attempts and initiatives in the past to propel industrialisation in Africa, it advocates for an industrial policy that will be based on a new approach. Such a new approach must be strategic in design and yet tailored to specific country’s circumstances. It must not repeat mistakes of the past. It must make support by the State to the industrial sector conditional on good performance. It must be based on effective state-business relations and must incorporate a monitoring and evaluation mechanism that identifies lessons learnt from current policy to feed into the next policy-making stage. This feedback loop from current policy to future policy has been a crucial missing link in past industrial policies in Africa.

Manufacturing development in Africa: facts and figures

Africa still accounts for a very low share of global manufacturing value-added (MVA) and global manufacturing exports (1.1 percent and 1.3 percent respectively in 2008). Even more worrying is that Africa’s share of global low-technology manufacturing exports, a sector where it should have immediate comparative advantages, fell from 1.5 percent in 2000 to 1.3 percent in 2008, as opposed to East AsiaandthePacificwhereitrosefrom17percentto26percentoverthesameperiod. Africa has made some progress in boosting medium and high technology manufacturing activities in recent years. The share of medium and high technology (MHT) activities in total MVA in the region increased from 25 percent in 2000 to 29percentin2008anditsshareintotalmanufacturing exports rose from 23 percent in 2000 to 33 percent in 2008. However most of Africa’s MHT activities are heavily concentrated in the chemical industry.

Empirical analysis also reveals that African countries are very dependent on resource-basedmanufacturing.In2009,resource-based (RB) manufacturing accounted for about49percentofbothtotalMVAandmanufacturing exports in the region. Such dependence is problematic for the continent for several reasons. RB manufacturing involves relatively low value-addition, makes exporting countries highly vulnerable to external price shocks, exhibits lower productivity growth and have few linkages with the rest of the economy. In sum, resource-based manufactures show only very limited product differentiation and share the pitfalls that are characteristics of commodities on which many African countries depend. Manufacturing development should be viewed as an opportunity for Africa to lessen its dependence on commodities and engage in economic diversification as a way to reduce vulnerabilities to shocks. In this respect, there is thus a need to diversify away from RB manufacturing within the manufacturing sector in Africa.

Key policy recommendations

What is needed therefore is a new strategic approach to industrial policy-making. It could rest on six elements. It starts with an industrial diagnosis or thorough evaluation of the country’s present industrial base, followed by the design of an industrialization strategy, whereby governments have to decide, in coordination with the private sector, which existing manufacturing industries to strengthen (industrial deepening), which new industries to stimulate (industrial diversification) and in which industries they want to improve the internal integration of existing involvements (industrial upgrading). In designing such strategies, due consideration must be given to the challenges and opportunities posed by the new global environment such as new trade and investment rules, climate change, South–South cooperation and the potential of integrating into global value chains. It then moves to consider the industrial policies needed to implement the strategy. Such industrial policies have to be aligned with other policy areas that should complement the decisions taken, in particular macro-economic and financial policies. Another important feature of this strategic approach to industrial policymaking relates to the feedback loop from policymaking to the diagnosis stage. Essentially, it has to be ensured that a critical examination of prior policy decisions (i.e. an independent monitoring and evaluation process) identifies success stories and failures that can inform the next policymaking cycle. Through such monitoring and evaluation, a systematic process of policy learning can take place, enabling adaptation and better performance.

Key principles

This said and based on the consensus emerging from the current literature, one could identify key principles on which a successful industrial policy should rest on. These include:

(i) Supporting and challenging entrepreneurs. The idea here is that any support that businesses receive from the government should be made conditional

Fostering industrial development in Africa in the new global environment: Key policy recommendationsBineswaree Bolaky

In a special issue of its Economic Development in Africa Report this year, the United Nations Conference on Trade and Development (UNCTAD) collaborated with the United Nations Industrial Organization (UNIDO) to delineate strategies and policy options for Africa to foster its industrial development in the new global environment.

10 Issue9|Volume10|December2011

on the achievement of certain overall policy goals, such as increased investment or exports.

(ii) Encouraging experimentation, search and learning by both governments and the private sector. This means that industrial policy should be viewed as a social learning or search process in which the government interacts with the private sector to identify the key constraints facing domestic firms and how to overcome them.

(iii) Focusing on lifting binding constraints. This requires identifying the key binding constraints facing domestic firms as well as possible measures that could be put in place to lift or relax them.

(iv) The use of monitoring, evaluation and performance criteria to ensure that support is linked to performance, that errors are quickly identified and that quick and appropriate action is taken to correct such errors.

(v) Recognizing country heterogeneity. This refers to an understanding that industrial policy should be tailored to the needs and challenges facing each country. A one-size-fits-all approach will be counterproductive and unlikely to achieve desirable outcomes.

Encouraging effective state-business relations

Under the old approach, industrial policy was often viewed as a list of policy instruments to be set and implemented by government in a top-down mode. Under the new approach, on the other hand, there is a recognition that the state and the private sector need to be engaged in an effective state-business relations in which the government consults with the private sector when identifying new sectors and new activities. It is not about the government telling the private sector what to do. Rather it is a question of government providing and seeking information from the private sector and dispensing incentives and resources such that the private sector, through the pursuit of profit, behaves in a way that contributes towards the achievement of the national industrial development objectives.

Complementary actions

The new approach to industrial policy also recognizes that industrial policy is implemented through coordinated action in a number of different policy areas. It stresses the need for industrial policy to lay emphasis on (a) the promotion of scientific and technological innovation; (b) the creation of linkages in the domestic economy; (c) the promotion of entrepreneurship; and (d) the improvement of government capabilities.

Without scientific and technological innovation, African countries will find it difficult to compete with global exports in an increasingly competitive global environment. African countries therefore should provide more support for science and innovation by for example stimulating domestic production of technological knowledge through the provision of incentives to entrepreneurs, or facilitating accesstoexistingtechnologythroughFDI,licensing and purchasing capital equipment. African countries should also invest in education and skill formation to ensure that firms have reliable access to the skilled labour required to produce the high-quality goods that can survive competition in global markets.

African countries should give priority to the creation or development of linkages in the domestic economy to ensure that the promotion of industrial development yields positive spill-over benefits in other sectors of the economy. There are various ways to createdomesticlinkagesinaneconomy.Forexample the promotion of agro-industries is one way to develop domestic linkages between the industrial and agricultural sectorsofaneconomy.Furthermore,linkages can be created between domestic and foreign firms by building domestic technological capabilities. The report stresses the importance of fostering industrial development in conjunction with the development of other sectors. Industrial development should not be done at the expense of other sectors such as agriculture or services as this will compromise on the goals of reducing vulnerabilities to external shocks, limit the building of inter-sectoral linkages and in so doing reduce the benefits from industrialisation itself.

African countries should step up efforts to promote entrepreneurship by creating an economic environment that favours both domestic and foreign investment. In particular, they should reduce policy uncertainty, strengthen infrastructure provision and improve access to finance for firms, particularly SMEs. In promoting industrial development, African countries should ensure that the scope and degree of intervention takes into account government capabilities. Weak state institutions make it challenging for governments to successfully implement their industrial development programmes and policies. In this context, African governments should give priority to enhancing government capabilities to design, formulate and implement policies.

In addition, strengthening regional integration may be critical in fostering manufacturing development. The building of robust regional markets in Africa, through

regional integration, could unlock the manufacturing potential of the continent. African countries can target their regional markets as buyers of their manufactured products. Such an approach will permit African firms to exploit economies of scale and garner the experience they need to successfully face global competition. In addition regional integration can also facilitate the development of the other markets that Africa needs in order to support its industrial development objectives such as financial markets, transport and infrastructure. Regional integration can also contribute to reducing the regulatory burden facing African firms by, for example, harmonizing policies and serving as an external agency of restraint on domestic policies. In this context, the adoption of the WestAfricanCommonIndustrialPolicybythe Economic Community of West African States (ECOWAS) Council of Ministers is welcome.

African countries should step up efforts to promote entrepreneurship by creating an economic environment that favours both domestic and foreign investment.

Finally,complementarypoliciesshouldalsoput in place to increase the likelihood of success of industrial polices. The adoption of appropriate exchange rate, monetary and fiscal policies, policies to enhance domestic resource mobilisation, policies to strengthen infrastructure development and the achievement of political stability are deemed critical to the success of industrialization in Africa.

AuthorBineswareeBolaky,DivisionforAfrica,LeastDevelopedCountriesandSpecialProgrammes.Bineswaree Bolaky is an Economic Affairs Officer in the Africa Section of the United Nations Conference on Trade and Development. Her specialization is in International Trade, Economic Development and Institutional Economics.

This article is based on UNCTAD/UNIDO Economic DevelopmentinAfricaReport2011:Fosteringindustrial development in Africa in the new global environment

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Africa needs to accelerate regional economic integration to avoid the risks of agricultural (including food) ‘trade diversion’ and reap the benefits of full or reciprocal liberalisation under multilateral and preferential trade agreements. Although these agreements may improve market access and consumer welfare in least developed countries in Africa, they may also weaken these countries’ production sector and divert trade away from other developing countries, including their neighbors in the region. That is simply because tax-free imports from outside sources will be cheaper than the barrier-stricken imports from sources within the region. So, the more trade barriers remain among countries within the region, the more trade risks being diverted away and revenue and employment potentially lost in the region. The losses could weaken the regional agricultural sector that could have been a more efficient supplier had the intra-regional barriers not existed. A weak agricultural sector is no help for a continent struggling with high and costly food trade deficit and food insecurity and has to be avoided.

Agriculture liberalisation and economic integration: the challenges

Many initiatives to enhance regional integration have been taken but not followed through. In 2008 for instance, African regional groupings planned to move beyond regional borders to a full African economic integration by announcingthe‘AfricaFreeTradeZone’.Eachyear, regional groups such as the Southern Africa Development Community (SADC) and the Eastern African Community (EAC) announce more commitments towards deeper integration.Likewise,theComprehensiveAfricanAgricultureDevelopmentProgram(CAADP)hassetasoneofitsgoalsthepromotion of the regional integration that makes agricultural sector more competitive. This year, the EAC, SADC and Common Market for Eastern and Southern Africa (COMESA) have confirmed the tripartite agreement for a greater economic cooperation and towards economic integration. The question is why all these commitments and the many more before them have not been followed through at a faster pace?

The main stumbling block towards agriculture liberalisation and economic integration is the fear of losing both the revenues from the duties that are still imposed on certain products and the flexibility to use trade policy as a tool to address socio-economic or political challenges (e.g. protecting consumers against high food prices, protecting infant industry). Governments want to protect some ‘sensitive’ products, ‘sensitive’ meaning products of high tariff revenue or of great socio-economic or political importance. The protection is also targeted against highly subsidised exports from developed countries.

But while justifiably defending the sensitive product argument against subsidised foreign exports, African countries have unfairly extended the same argument against intra-regional suppliers. Not long ago, for some agricultural products, regional partners faced much higher applied tariffs than outside suppliers did. More importantly, many studies reported the high levels of non-tariff barriers within regions in Africa and cite examples of ‘border red tapes’ such as the lengthy periods to receive trade approvals, strict licensing requirements for importers or exporters, and a high number of unnecessary controls and road blocks. The question to be asked is whether or not all these intra-regional trade barriers have made the domestic agricultural sectors more competitive and solved food insecurity. Many analysts now agree that these barriers address neither issue.

The case for economic integration and regional policy

Theoretically, the mere threat of a competition with suppliers outside the region and the elimination of intra-regional barriers will encourage intra-regional agricultural sector to focus on competitiveness and release resources away from inefficient sub-sectors. A vigorous regional agricultural sector will raise and keep employment and value-added within the region and improve access to food. Regional savings from the increase in income and efficiency in the allocation of resources will lead to regional investments that will enlarge capacity in, say, infrastructure or research and enhance competitiveness further. But, to practically achieve all of that, current policy strategies need some reconsideration.

To start with, the trade-off between consumer and producer welfare or between national and regional interests has its own rationale, but over the years it has led to agricultural policies that are inconsistent and often erratic and which suppress thereby incentive of domestic andregionalproducers.Forinstanceitwasnotunusual that during the food crisis in 2008, many African governments have reneged on their commitment to free export by banning it. A clear priority on stakeholders’ welfare has to be established and once adopted the accompanying policies must stay the course.

The inconsistencies between national and regionalpoliciesarewhatthelikesofCAADPare aiming to reduce. True, interests among countries may differ a great deal but working on basic common goals such as regional food security and regional capacity building is a way forward. An example is the Economic Community of West African States/Agricultural Policy(ECOWAP)programbasedonidentifyingand matching national policies with regional policy to promote regional food security and agriculture markets.

Moreover, the growing unregistered cross-border trade in agricultural products between neighboring countries in Africa proves the impracticality of the official intra-regional barriers, and highlights the need for deeper regional integration and effective regional policy. Despite the barriers, herds of livestock, bags of paddy rice and sacks of maize still manage to cross national borders unrecorded. Such trade contributes to welfare and income increases for consumers, producers, and traders alike. At minimum, some, say, strict quality or sanitary controls should have been put on this cross-border trade to reduce the risks of a spread of animal or plant diseases, but such controls are better handled and coordinated at regional, rather than national, level because of the immensity of the task.

Conclusion

There is a consensus that deeper regional integration helps mitigate the risk and magnify the benefits of trade agreements. Admittedly, under multilateral trade negotiations there are valid arguments for African countries to maintain some minimal protections, especially when developed countries continue to support their producers and exporters. Nevertheless, the urgent step to take is to remove intra-regional trade barriers and trade distortions such as subsidies in order to open opportunities at the regional level to improve food security and enhance development capacity. Ultimately, the position that trade barriers can be lowered for distant suppliers and not for the next door neighbor is untenable.

AuthorManitra A. Rakotoarisoa is an Economist, Trade and MarketsDivision,FoodandAgricultureOrganisation

References

Morissey, Milner , Zgovu (2010). Designing Economic PartnershipAgreementstoPromoteIntra-regionalTradeinACPcountries.

KoromaMosoti,Mutai,Coulibaly,Iafrate(2009).Towards an African Common Market for Agricultural Products.Lapodini(2009).EtudedesBarrièresTarifairesàl’EchelleRegionaleetl’ImpactdesBarrièresNonTarifairessur le Commerce Intra et Extra Communautaire en Afrique de l’Ouest.

Ubwani Z (2011). East African Community’s Non-Tariff BarriersFaulted.

Agriculture liberalisation and economic integration in Africa

Manitra A. Rakotoarisoa

WTO Roundup

G-20 calls for new, “credible“ approaches on Doha

LeadersfromtheGroupof20majoreconomiesmetinCannes,France,on3-4November and reaffirmed their commitment to resolving the impasse in the WTO’s Doha negotiations. They have instructed their trade ministers to redouble one’s efforts by pursuing “fresh, credible” approaches in order to overcome current talks’ struggles. “It is clear that we will not complete the [Doha Development Agenda] if we continue to conduct negotiations as we have in the past”, leaders noted. In particular, they asked that such approaches should be geared toward issues relevant to least developedcountries(LDCs)and,“wherethey can bear fruit, the remaining elements of the [Doha] mandate”.

It is clear that we will not complete the [Doha Development Agenda] if we continue to conduct negotiations as we have in the past

Meanwhile, with the past several months seeing tensions ramp up over China’s currency valuation, many were watching to see how China would respond to criticism oftheyuanatthesummit.PriortotheG-20meeting, China’s yuan valuation has been the subject of intense debates in the US, leading to the US Senate’s vote in favor of a bill targeting countries practicing currency undervaluation, which could possibly provoke a trade war between China and the US, should the bill eventually become law. Nonetheless, G-20 leaders praised China’s recent decision “to increase exchange rate flexibility consistent with underlying market fundamentals”. “This is something we’ve been calling for some time, and it will be a critical step in boosting growth”, US PresidentBarackObamaaddedafterthesummit.

The G-20 also promised to mobilise additionalfundsfortheIMF,inordertoensure that the institution would “have resourcestoplayitssystemicrole”.LeadersagreedthattheIMFandtheEuropeanFinancialStabilityFund(EFSF),more

commonly referred to as the euro zone bail-out fund, could work in concert.

Concerning the widening use of protectionist measures and export restrictions in G-20 countries, as pointed out by a WTO report released in late October, leaders at the Cannes Summit committed to refrain from raising or imposing new barriers to trade and investment in goods and services. They also endorsed a decision takenbyG-20agricultureministersinJune2011, agreeing to remove export restrictions on food destined for humanitarian purposes viatheUNWorldFoodProgramme.

Russia quickly closes in on WTO entry

After an 18-year process, Russia now appears set to join the WTO; negotiations led to the definition of an accord on which trade ministers will vote during the upcoming December ministerial conference. WTODirector-GeneralPascalLamypraisedthe completion of negotiations, declaring: “In acceding to the WTO, Russia embraces a series of rules and commitments that are the foundation of an open, transparent, and non-discriminatory global trading system”.

After years of stop-and-go negotiations, WTO members and Russia finally agreed on “an unprecedentedly detailed” accession package, according to one Geneva-based trade expert. Russia has committed to fully apply all WTO provisions, and will be provided with a few transitional periods in some areas. The accession package includes 30 bilateral agreements on market access for services and 57 on market access for goods. Export duties have been bound for over 700 tariff lines. Regarding agriculture, the accord states that all agricultural export subsidies will be reduced to zero. And with regards to the WTO Agreement on Trade-Related Investment Measures (TRIMS), the accession accord states that all WTO-inconsistent measures, including preferential tariffs or tariff exemptions, will be eliminated by 1 July2018.

Russia’s accession has gained strong backing from the US and the EU these past few months. Barack Obama’s administration has been supporting the accession bid as part of a larger effort to “reset” its relations with Russia. Karel de Gucht, European commissioner for Trade, reminded that the EU played a “crucial role” towards achieving this goal, which is seen as “important step for Russia’s economic development and for the multilateral trading system”.

Now that Russia and already-WTO-member Georgia have reached a compromise resolving their differences over trade-monitoring in the disputed regions of Abkhazia and South Ossetia on 2 November, nothing stands in the way of Russia’s accession bid, which will be voted on at the upcoming WTO Ministerial Conference, along with Vanuatu’s, Samoa’s and Montenegro’s.

Russia has committed to fully apply all WTO provisions, and will be provided with a few transitional periods in some areas.

Cotton: African exporters seek subsidy freeze

In a recent WTO proposal, West African exporting countries have advocated for the freeze of trade-distorting support applied bytheUSandEUoncotton.TheC-4group,representingBenin,BurkinaFaso,Chad and Mali, argued that a “standstill principle” should be applied on support payments while a final negotiated solution is being reached on the cotton issue. The joint proposal has been sent to trade ministers, in order to ensure that the issue is tackled at the WTO’s eighth ministerial conference. The text calls for members to finally implement agreements on cotton that were reached six years ago in Hong Kong, at the global trade body’s fifth ministerial conference. However, the US has demonstrated no will in reducing subsidies inthelastfewyears.AtaJunemeetingofthe Trade Negotiations Committee, the US government insisted that all of the major developing country cotton subsidisers, such as Brazil and China, should also commit to reducing their distortions in order to join a consensus on the cotton issue.

This information has been summarized from Bridges Weekly

13Issue9|Volume10|December2011

Exchanges on EPAs during the 22nd session of the ACP-EU Joint Parliamentary Assembly

MEPsandMPfromACPStatesmetfrom21-23NovemberinTogo,Loméduringthe22ndsessionoftheACP-EUJointParliamentaryAssembly1.

EPAswerementionedduringtheJPA.BeforesittinginsessionwithEUParliamentarians,theACPParliamentaryAssembly,meetinginplenary, emphasized the need for “flexibility” in EPAnegotiations2.AfewMEPsthentooktheopportunity to raise questions to the Commission regardingitsrecentproposaltoamendtheEPAMarket Access Regulation 1528/2007. The new MAR would exclude from its remit countries that have not taken the necessary steps to ratify, and implementtheiragreementasfrom1stJanuary2014.

The Commission emphasized that the proposed amendments were not an “attempt to bully ourpartnersintosigningEPAs”,butaneffortto “(1) restore fairness between developing countries,inparticulartheACPthathaveseenthroughEPAcommitmentsandthosethatstilldon’t implement; [and] (2) to improve the legal certainty for economic operators, as the current regime is not sustainable ”, stating that this was alsointheinterestofACPcountries.3 When questioned on the types of flexibility the EU was willing to show in the negotiations to avoid that the proposal becomes a “gun to the head” to pressureACPcountriesintoratifyingimperfectEPAs”,theCommissionrepliedthatin,additionto the concession it has already made on provisions on export taxes and safeguards“ will continue to show flexibility in these talks, but we must ensure this actually helps us to close a deal.4“

ThenextJPAwilltakeplaceinDenmarkfrom28-30 May 2012.

ACP-EU Joint Ministerial Trade Committee to be held soon

TheACP-EUJointMinisterialTradeCommitteewill be held this year on 12 December in Brussels, prior to the Eighth WTO Ministerial Conference. It will be an opportunity to assess progressinthenegotiationsofEPAsaswellasto look at the monitoring and implementation of those agreements, when applicable. This joint meetingwillbeprecededbyACPmeetingsofAmbassadorsandSeniorTradeOfficials,the94thACPCouncilofMinistersandtheMinisterialTrade Committee.

West Africa progresses in the negotiations of its regional EPA with the EU

Technical negotiators from the EU and West Africa met in Accra from 15-18 November.

The parties exchanged views on the revised market offer submitted by West Africa (70% liberalisation schedule over a transitory period of 25 years). Discussions focused on the revision by West Africa of the joint statistical basis behind the offer, the new categorization of specific tariff lines (and the analysis that underpinned the categorization), as well as the level of tariff classification that should be considered for this offer(HS6vsHS10).

Unresolved issues in the negotiations include, inter alia, the question of the ‘additionality’ of development funding (now deferred to the political level), the definition of ‘third countries’ concernedbytheMFNclause,thenonexecutionclause, the community levy, subsidies and domesticsupport,aswellasArt.106addressingCustoms Unions between the EU and third countries.

Substantive progress has been made in the text onarticlesrelatedtotheEPADP.Thepartiesdecided to insert a reference to the EU Council Conclusions of 10 May 2010 and to delete the article that previously suggested to annex the EPADPtotheProtocole.

Themeetingwasfollowedon28-29Novemberby a two days experts meeting in the margins of a Ministerial Monitoring Committee (MMC) which consideredthestateofplayinEPAnegotiationsand the progress made by the Region’s two sub-regional organisations in the implementation of the recommendations of the last MMC5. Discussions mainly focused on the draft text of theEPA,onthequestionssurroundingtheEPADP,on the market access offer and its impact, the ProtocoleonRulesofOrigins,thesettingupoftheRegionalEPAFundandthestateofplayintrade in services negotiations. Considerations and recommendations on these matters were endorsed by Ministers who met on 30 November in the context of the MMC6.

Followingpressreleasesearlierthismonthannouncing the risk of Ghana “going solo” in theEPA,GhanaMinisterforTradeandIndustry,Ms Hanna Tetteh, reassured regional partners during the opening session of the meeting for trade experts.7 She cautioned against the risks of ending up in a situation whereby different countries will fall under different trade regimes, undermining regional integration processes8. Delegations of Ghana and Cote d’Ivoire have in this regard asked during the MMC to fast-track EPAnegotiationsinordertoreacharegionalagreement rapidly. The MMC invited the ECOWAS Conference of Heads of State to give political orientations to help the process move forward and suggested the organisations of a specialsummitofHeadsofStateonEPA.

A meeting on rules of origins will take place from 6-10February2012,andshouldbefollowedbytechnicalandSeniorofficialmeetingsonEPAsinBrusselsfrom13-17February2012.

Slow Progress in Central Africa

The technical level negotiations scheduled on 14-18NovemberinBrusselswerepostponedtoFebruary2012.NodatehassofarbeensetfortheCentralAfrica-ECEPARegionalpreparatoryTaskForce.

ESA and EU stakeholders hold joint technical meeting ahead of joint senior officials and ministerial meetings

ESA and EU stakeholders met for a joint technical working group meeting from 28-30 November 2011 in Mauritius to discuss outstanding issues in negotiations. According to sources close to the negotiations, progress has been made on provisions related to agriculture, competition policy, and trade in services. Regarding services, questions concerning market access, capital movement, and specific sectoral sections such as tourism or maritime services, were settled, among others.

Development support provisions, the question of includinganMFNclause(includinginservices),andthedefinitionof“enhancedMode4”remains to be discussed.

Similarly, the market access offer in goods is still under discussion, as some ESA countries are expected to submit new offers, and argue for more flexibility in this area. Unsettled issues such as export subsidies and refunds, special agricultural safeguards should be considered at the next technical level meeting. Others outstanding issues, such as export taxes, the questionofadditionalfundsforEPA,andafew unsettled trade-related issues, have been deferred to senior official level. Discussions also took place on Rules of Origins, but as TNI goes to press, no information was available on the outcomes of the discussions on this subject. As reported last month, a joint ESA-EU ministerial meeting will consider unresolved issues in the coming months.

EPA officials hold workshop to discuss communication and education around EPA implementation

On25-26October,CARIFORUMOfficialsmetin Antigua and Barbuda for a first regional discussion on how communication and public education could support the process of implementationoftheCARIFORUM-EUEPA,taking advantage of potential synergies with other EPACommunicationStrategiesintheregion,andsuggested creating an online virtual network of officials allowing the sharing of knowledge9.

EPA UPDATEMelissa Dalleau

14 Issue9|Volume10|December2011

In other news, Trade.com supported two missions undertaken by a group of Caribbean architects and engineers to Brussels. Both groups met with the respective European Professionalassociationsandprivatesectoractors, in preparation for negotiations of a mutual recognition agreement on professional qualifications. The mission was part of a wider attempt to figure out how to take advantage of the de jure market access that was granted to Cariforum service suppliers in theEPA,sometimeshamperedbydomesticEUregulations.

Lastly,TNIwasinformedthatanEPAspecialcommittee on customs cooperation and trade facilitation meeting has been scheduled for the second week of December.

EAC-EU experts clarify their positions ahead of the next full round of negotiations

FollowingthelastEPAnegotiatingroundthatwas held in Tanzania last September, EAC and EU experts met during inter-sessions meetings from 15-17 November in Kampala, Uganda, to address the issues of economic and development co-operation, agriculture and Rules of Origin. The objective of the meetings was to prepare for the next negotiating session that should be held in Brussels at technical and senior officials level from 12-15 December.10

Despite some remaining brackets, notably with regards to the overlap between the agriculture and the economic and development cooperation chapters, which should be tackled at the next meeting, substantial progress has been achieved on development cooperation with parties agreeing on removing the obligation for the EU to provide “additional resources”, and instead emphasizes the need for a joint mobilisation of resources.

On agriculture, the controversial issues of export subsidies and EU domestic support continue to oppose the two sides in the negotiations. As far as Rules of Origin (RoO) are concerned, the issue of asymmetry of rules between different negotiating blocks also requires further discussions. Harmonised rules would go a long way in improving the possibilities of intra-regional trade. It is worth recalling here that this meeting follows an EAC expert meeting, held in Nairobi in October, in which the EAC party already considered the revised protocol on RoO submitted by the EC. Quoted in the press, Director General of the EAC Customs and Trade Directorate,PeterKiguta,alsomentionedthatconsultations have been held with the COMESA Secretariat, to “implement the Council directive onharmonizingpositionsonEPArulesoforiginCOMESA and SADC“11.“TheEAC-EUEPAisoncourse”, he further stated.

SADC-EU negotiators meet in Johannesburg

The Southern African Development Community (SADC)EPAexpertsandseniorofficialsmettheirEUcounterpartsinJohannesburgfrom10-16NovembertodiscussunresolvedissuesintheEPAnegotiations.Thequestionsofmarketaccess, rules of origin, services and investment, development cooperation, geographical indications, as well as services and investment (onwhichBotswana,Lesotho,Mozambiqueand Swaziland have all expressed their readiness to take the discussions forward) featured prominently on the agenda. According to an EU press release, progress has been made on variousprovisionsoftheEPAtext,althoughthe question of market access, notably when it comes to the specific coverage of agricultural products, remains contentious.12

The next technical meetings are foreseen in theregionfrom30Januaryto3February2012and should be followed by a senior officials meeting.

AuthorMelissaDalleauisaJuniorPolicyOfficerfortheEconomicandTradeCooperationProgrammeatECDPM

Notes1 Link

2 ACPParliamentariansurge‘flexibility’onEPAs,protectionofdevelopmentfunds.ACPSecretariatPressRelease.19thNovember.

3 See Response by the Commission to Oral Question #7byMEPGabrieleZimmer.

4 SeeResponse by the Commission to Oral Question #8byMEPFionaHall

5 SeealsoECOWASPressReleaseN°:247/2011.West African Trade Ministers meet on negotiations with EU, link.

6 RegionalexpertsmeettopushfreetradepactwithEU.PANA.Link.

7 GovernmentlikelytogosoloinIEPA.2November 2011. Link.

8 Hanna Tetteh calls on trade experts to reach consensusonEPAnegotiations.GhanaNewsAgency. 28 November 2011. Link. See also.

9 CARICOMSecretariat.MeetingonEPACallsforActiononCommunicationsandPublicEducation.Pressrelease398/2011.1November2011. Link.

10 EPAFlashNews:EACandEUholdEPAexpertsmeeting in Kampala, Uganda. 23 November 2011. Link.

11 JosephOlanyo.EAC-EUtradetalksoncourse.7 November 2011. East Africa Business Week. Link.

12 EPAFlashNews-SADCEPAGroupandEUholdEPAtalksinJohannesburg,SouthAfrica,22November 2011

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Trade Negotiations InsightsCalendar and resources

EU Proposal to End Preferences of 18 African and Pacific States: An Assessment, LorandBartelsandPaulGoodison,CommonwealthSecretariat Trade Hot Topics Issue #91,November2011, www.thecommonwealth.org

Why Trade Facilitation is Important for Africa, Barbara Rippel, World Bank Africa Trade PolicyNoteNo:27,November2011, www.worldbank.org

Fact sheet on the interim Economic Partnership Agreements SADC EPA GROUP, DG trade, November 2011, ec.europa.eu/trade

Fact sheet on the interim Economic Partnership Agreements - WEST AFRICA: IVORY COAST AND GHANA, EC DG trade, November 2011, ec.europa.eu/trade

Europe, G20, and South-South Trade: Insights from European Approaches to Regional Integration in Africa, Sanoussi

Bilal, Isabelle Ramdoo, Quentin de Roquefeuil,EconomicPolicyPaperSeries, November 2011, www.gmfus.org

The World Trade Organization and the Post-Global Food Crisis Agenda: Putting Food Security First in the International Trade System, Olivier De Schutter, United Nations Special Rapporteur on theRighttoFoodActivityReport,November 2011, www.ohchr.org

Empowerment policies in SADC and their effect on agreement design, PaulKruger,Tralactradebrief, November 2011, www.tralac.org

International trade and inclusive growth: a primer for busy policy analysts, DanielLederman,WorldBankPolicyResearchWorkingPaper,November2011,www.wds-worldbank.org

Impact Evaluation of Trade Interventions: Paving the Way, OlivierCadot,AnaM.Fernandes,

JulienGourdon,AadityaMattoo,WorldBankPolicyResearchWorkingPaper5877,November2011, www-wds.worldbank.org

Trade Effects of Rules on Procurement for Commonwealth ACP Members,,AnnamariaLa,AnthonyButler,PeterTrepte,PeterPease,CommonwealthSecretariatEconomicPaperSeries92,November2011,www.thecommonwealth.org

Economic Partnership Agreements (EPAs) African, Caribbean And Pacific voices speak up for trade and development, EC DG trade, November 2011, trade.ec.europa.eu

Evaluating Aid for Trade on the Ground: Lessons from Malawi, JonathanSaidandJohnMcGrath Catherine Grant, Geoffrey Chapman,ICTSDIssuePaperNo.21, November 2011, www.ictsd.org

Regional Integration an Trade in Sub-Saharan Africa, United Kingdom Department for

InternationalDevelopment(DFID),Trade and Investment Analytical PapersTopic7of18,November2011, www.dfid.gov.uk

Global Imbalances: Trade Effects and Policy Challenges, PrzemyslawKowalski,MollyLesher,OECDWorkingPartyoftheTradeCommittee, November 2011, www.oecd.org

The EU GSP Rules of Origin: An overview of recent reforms, EckartNauman,TRALACWorkingPaper,November2011,www.tralac.org

Resources

Printed on 100% recycled paper

December

9 EU-CARIFORUMSpecial Committee on Customs Cooperation and TradeFacilitation,Santo Domingo

10 ForumIslandCountry Trade Ministers meeting, Brussels, Belgium

12 ACP-EUEPAJointMinisterial Trade Committee meeting, Brussels, Belgium

12-15 EAC – EU Senior and technical level negotiating session, Brussels, Belgium

15-16 EuropeanDevelopment Days, Warsaw,Poland

ACP-EU Events WTO Events

January 2012

TBC AU summit on boosting intra-African trade Addis Ababa, Ethiopia

February 2012

13 – 17 West Africa – EU technical and Senior official meetings onEPAs,Brussels,Belgium

TBC Central Africa – EU technical level negotiations, Venue TBC

December

1 - 2 General Council

9 WorkingPartyontheaccessionof Azerbaijan

15 - 17 Eighth Ministerial Conference

19 DisputeSettlementBody