Category: Trade Talk Tuesday

We are often preoccupied with what we lack and what we’re doing wrong when the topic of socioeconomic development comes up. With everything that we have collectively experienced in the past 15 months, who can blame people for getting stuck in a negative thought pattern? But, once in a while it is worth reflecting not on where we are but where we’d like to be. After all every good and every service traded is a solution to a problem. If not for hunger, we wouldn’t buy food. And if not for illness and disease health services would be redundant. So what are the opportunities that may arise from the recession and the pandemic? If we had to imagine our country as everything that she could be, what would Namibia look like?

In the years since globalisation took root in public policy, millions around the world have been lifted out of extreme poverty. Where extreme poverty prevailed and development dawdled, it has been observed that cross-border trade was minimal. To consider this from another angle; a strong positive correlation can be observed between the degree of trade by a country and its development. This phenomenon has been further entrenched as trade evolved bringing services to the foreground. High-value-services tend to be exported by advanced nations while underdeveloped countries remain dependent on commodity trade. The main pillar of globalization responsible for poverty reduction, peace & stability and economic development has been trade.

From trade comes competition which sparks productivity which spawns entrepreneurship, industrialisation and innovation. This in turn creates job, business and investment opportunities. Consumer welfare improves as product variety and affordability rise. Developing countries are able to leapfrog because of the access to new technology that they gained through trade. And because competitiveness requires it, infrastructural and human capital development is incentivised. Trade has direct and multiplier effects that ripple throughout the economy which is why a trade-centric development agenda can be considered as the stone that can kill multiple birds.

Both the recession and pandemic have disrupted supply chains the world over. On our continent, various supply chains are yet to be established. This raises a lot of questions. What will we need to overcome the health and economic crises? What is the world going to need coming out of the pandemic? What can we offer and where? Who are our potential domestic and external investors? How do we make use of our existing resources? How can we improve the quality of our trade negotiations e.g. our missions abroad? What resources e.g. skills do we need to import in the short-run? How do we align the skills that are being produced with our development agenda? Aside from mainstream industries, how can the SMEs in Namibia be mobilised and prepared to participate in the emerging value-chains? What are the potential obstacles e.g. unfavourable policies? Questions present problems and problems present opportunities – to improve and to trade.

So what does the Namibia that we hope for look like?

It looks like an environment that is conducive for investment and innovation.

It looks like business opportunities and youth employment.

It looks like a better standard of living for all.

While it is by no means a cure-all for everything that ails our economy and society, trade can bring us pretty close to the Namibia we imagine.

Why the implementation of a Single Window system should be a priority for Namibia

The Single Window (“SW”) system is described as “a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single-entry point to fulfill all import, export, and transit-related regulatory requirements.”  This is the globally accepted definition of the SW system. Article 10.4 of the the World Trade Organization (“WTO”) Trade Facilitation Agreement (“TFA”) has encouraged its member states to establish a SW system.  This is because the main purpose of a SW system is to provide a platform that allows for the exchange of information between traders (national, regional and or global) and government agencies to streamline relevant information on trade procedures. This platform allows for traders to submit and obtain trade documents such as (but not limited to) import and export permits; licenses; commercial invoices; and custom clearance documents. The biggest advantage it provides is for a more efficient and faster processing of trade related documents through the usage of a single-entry point submission point.

According to United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT) Recommendation and Guidelines on establishing a Single Window if effectively implemented a SW system can provide the following benefits:

1. “For Governments it can bring better risk management, improved levels of security and increased revenue yields with enhanced trader compliance.” 
2. “Trading communities’ benefit from transparent and predictable interpretation and application of rules, and better deployment of human and financial resources, resulting in appreciable gains in productivity and competitiveness.”

National and international trading stakeholders have long since supported the establishment of a SW system as it offers a simplified solution, whereby government agencies that deal with the movement of cross-border goods provide a streamlined and more efficient system that meet the needs of business (i.e. ease of doing business), while still maintaining the appropriate regulatory controls.  Due to the cost and complex software requirements to develop a SW system, developing countries such as Namibia do not necessarily have to develop high-tech information and communication technology system because at the most basic level, with the cooperation of all national agencies and authorities, it can be implemented in a manual environment.  The concept of a SW system has been promoted by several international organisations such as the United Nations Economic Commission for Europe (“UNECE”) that are concerned with trade facilitation. 

In Namibia, there is a lack of sufficient communication between the private and public sector. The private sector has for long felt as though policy drafters and regulators do not implement efficient mechanisms to create a more simplified and efficient business environment. By establishing a SW system, Namibia has an opportunity to gain huge financial benefits and increased financial revenue.  This is possible because by establishing trade facilitation tools such as a SW system, government authorities and agencies can collaboratively by data and analyse industry value chains thus positioning themselves in being able to identify hidden revenue opportunities. By creating a SW system, it also reduces the costs of maintaining a paper-based system that due to its complexities creates delays in trade procedures that increase costs where otherwise it can be reduced.

To conclude, the TFA further establishes the requirement that “Each Member of the WTO shall ensure that its authorities and agencies responsible for border controls and procedures dealing with the importation, exportation, and transit of goods co-operate with one another and co-ordinate their activities to facilitate trade.”.  Furthermore, the SW thus places greater responsibility on national authorities to manage the SW system and to ensure that the participating agencies provided with access to the information or are actually given the information by the managing authority. Such co-operation is cooperation is crucial for implementing a SW system.

The SW would eliminate the need for the traders to submit similar information to several different border authorities or agencies. As mentioned above, this inter-alia provides transparency of the complex regulatory processes in Namibia that govern the movement of goods and transport and greatly reduces the risk of corruption.

By

Petrus Shoopala – Trade Policy Consultant, NTF

Wouldn’t it be unfortunate if Uendji managed to get clients in Senegal for her graphic design services but had to pass up the opportunity in the end because she could not receive a deposit? Imagine if Khoetage & Sons Inc. won a bid to supply dairy products to a major Cameroonian retailer but due to limiting payment policies, they ultimately abandon the business venture. What if Zuri from Kenya, gained admission to UNAM but because her parents foresaw challenges with monthly remittances to their daughter, she had to further her studies elsewhere. These are real challenges that businesses and consumers at home and around the continent are facing. 

We’ve come a long way as a continent and yet still we have farther to go. In essence the continental free trade agreement should not only result in a higher volume but also a higher value of trade within Africa. But liberalising trade is complicated, even if it came down to the elimination of tariffs alone, which it certainly does not, it would be a challenge. There are other potential obstacles, a prime example being our payment systems.

Cash is by far the leading form of payment in our part of the world. But when it comes to cross-border trade, online and mobile money transactions are growing in popularity. Why? Because of an increasing access to technology (i.e. internet & cell phones) and convenience. Furthermore, the emergence of the Covid-19 pandemic has taken digital payments beyond a matter of convenience and into the realm of necessity as many businesses had to work around in-person transactions.

Successful continental economic integration therefore hinges, to a large extent, on payment system integration. In as much as payments pose a challenge to the AfCFTA, the agreement has brought forth its own solution – the Pan-African Payments & Settlements System (PAPSSS). The PAPSS project, spearheaded by the Africa Import & Export (Afrexim) Bank is meant to facilitate the processing, clearing and settlement of commercial transactions on the continent. Aside from reducing costs and time involved in the processing of cross border payments, other benefits of PAPSS include, “decreasing liquidity requirements of commercial banks; decreasing liquidity requirements of central banks for settlement as well as its own payments; and strengthening Central Banks’ oversight of cross border payment systems” (African Union).                           

For a country like Namibia continental integration presents a unique opportunity for the sourcing of investments and also for the growth of SMEs. Sadly, at this point in time financial sector regulations (and in some cases the lack thereof) could delay the benefits of trade negotiations. While safeguarding the value of our currency is important, we have to consider that some of those protection measures could be hampering the inflow of capital and export receipts. In which case we may be successful at maintaining a certain level of foreign reserves while foregoing the opportunity to diversify sources of export revenue and investments, and thereby losing the chance to sustainably increase our reserves.

At the moment PAPSS is being piloted in The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone and is expected to be rolled out by the end of 2021. In the meantime there are some interventions that can be made to be prepared for the opportunities that lie ahead. Namibia is among ten countries on the continent that achieved internet affordability in the ten years since 2010. Therefore, infrastructure needs to be enhanced to make the internet more accessible as well. Furthermore, there are exiting payment platforms that are recognised internationally and we could benefit from regulatory reform that factors in the advancements made in fin-tech especially where there’s potential for investment and trade.

Trade under the Africa Continental Free Trade Agreement (AfCFTA) was announced on 1 January 2021. The AfCFTA’s actual implementation is however, subject to the conclusion of on-going negotiations ending June 2021. There are minimum thresholds and set timelines by when the State Parties should progressively eliminate tariffs on goods. Conversely no such quantitative limits are applicable with services under the AfCFTA. “Substantial liberalisation” is the defining objective of the single services market agenda.

So, how does one measure substantial liberalisation in the continental context of services trade?

Admittedly, accounting for services trade or output can be quite difficult because of their multidimensional nature; some are traded as final products while others are considered as inputs. Distinguishing between the value of services and the goods they are used to create can be challenging.

To address this problem, services are broadly categorised in the AfCFTA according to the 12 services sectors of the WTO’s General Agreement on Trade in Services (GATS). During the first round of AfCFTA services negotiations communications, transport, business, tourism  and financial services are on the table. Furthermore, four modes of supply provide clarity on how services trade takes place, i.e. what it looks like. In the AfCFTA services will be supplied across borders, or through the establishment of commercial entities or the movement of natural persons to other countries. Another way services trade will be recognised is by consumption abroad.

GATS does not only suggest definitive characteristics for continental services trade but it also gives us a yardstick to determine what is considered as substantial.

A country that is also a WTO member can make offers within the AfCFTA that are GATS-plus (GATS+)or GATS-minus (GATS-). Obviously GATS+ is the aim because this means that each country must make an offer that liberalises more sectors or sub-sectors in the AfCFTA than they have under the WTO. It also means lowering or eliminating restrictions pertaining to market access and national treatment in the four modes of supply.

Countries that are AfCFTA members but not WTO members can still fulfil the obligation to substantially liberalise their services sectors. This can be determined by the extent to which they change domestic regulations to remove or reduce services trade barriers in the five priority sectors.

Free-riding by some or the potential for domination by larger economies in the free trade area were anticipated and to this end the services negotiations are based on the principle of reciprocity. Basically, while countries need not exchange like offers, they do have to make substantial offers as discussed above.

Beyond the promises made in the scheduled commitments, how can substantial liberalisation be observed?

Regulatory reform that removes impediments to services trade should ensue across the continent. To this end visa requirements among State Parties for work or even tourism purposes have to be relaxed. Also, there should be an increase in collaboration within the continent to better align qualifications and resolve issues that pertain to their recognition in other countries.

The majority (80%) of businesses in Africa’s private sector are SMEs. It follows that the lowering of barriers like red tape, limited access to capital and information asymmetry would signify enhanced trade in services  because it will allow for the participation of the SME majority in the free trade area.

Governments can also show real commitment to the services agenda by improving infrastructure and updating regulations to benefit from technological advancements. For example, accessible and affordable internet will broaden the offerings of a country in cross-border services trade and payments for those services will be facilitated by regulations that enable ecommerce. 

Of course, one cannot expect smooth sailing once negotiations are concluded. Disputes and challenges are bound to arise. Which is why provisions have been made within the AfCFTA agreement to report and resolve them.

To conclude, it was envisaged that the substantial liberalisation of services trade will drive economic diversification and subsequently growth in the AfCFTA. Therefore, there has to be a commonly understood objective and clearly defined means of evaluating its realisation. Furthermore, collaboration within and among State Parties is required to create a conducive environment for the substantial liberalisation of services trade.

Adapted from:

Tralac Trade Brief: Realising the One African Services Market through the AfCFTA by Dr Ify Ogo, Regional Coordination Specialist, UNDP

Jo Gutenburg invented the printing press in 15^th century Europe, sadly he will never know just how much he changed the world. Thanks to his invention, knowledge  and the power that comes with it travelled further and wider than ever before. 

Centuries later, this invention has inspired the stuff of dreams! Imagine scrolling through Pinterest, trying to find inspiration for a father’s day gift. Then you find the perfect mug. Now imagine that you could have a machine in your house on which you could upload the design of the mug and that machine goes on to “print” the exact mug that you liked. Well, no need to imagine because as we all know by now, three dimensional (3D) printing  is here! Here as in not just for industrial purposes but also for home use.

A few decades ago computers could only be seen in government and corporate offices but now they are everywhere. Similarly, 3D printers are entering a phase of mass production in fact there are 3D printers that can print other 3D printers. So how does this affect industrialisation as well as manufacturing, and other business activities?

Well, a rise in unemployment as an immediate consequence is a given whenever the productive capacity of machines improves. Not only are these printers employed in factories making vehicle & machinery components but as alluded to earlier, they can cut the manufacturer and even retailer out of the process altogether e.g. when people start printing consumables at home.

Widening disparities between the haves and have-nots is another foreseeable yet undesirable outcome because these machines, even when mass produced will probably only filter through to middle income households.

Then of course there’s the issue of regulating standards and quality assurance. If anybody can set up a 3D printer in their garage, it will be quite difficult to ensure compliance with standards on certain consumer products. Health and safety, for example, could be at risk if the situation isn’t monitored sufficiently.

Another shortcoming is that industrialisation and consequently international trade prospects of developing countries could be adversely affected. For so long the participation of so called third world countries in global value chains was limited to the supply of raw materials. In recent years there has been a significant push for developing countries to gain market access to global markets for their value-added goods. If development follows previous trends, 3D printing will be more widely used in advanced economies in the years to come compared to newly industrialised countries. This scenario could place developing regions like SS-Africa right back at the bottom of the value chain since developed countries would have had head start i.e. an alternative and cheaper source for the manufactured products coming from the developing world.

On the upside new markets will be created for example, these machines need resin, powder, dye and even food among other inputs to be able to print products. Opportunities beyond the supply of inputs also extend to the manufacture and maintenance services of the printers which will still require some human involvement at least until machines become as dexterous as us. One of the highest earning phases of production is design; the widespread use of 3D printers will lead to a higher demand for design services. It just so happens that creativity is one of Africa’s most competitive edges.

Product research and development (R&D) costs will also drop especially in the context of creating prototypes of parts and products allowing SMEs to penetrate markets that they had previously been barred from due to high R&D costs. SMEs that provide 3D printing services to other SMEs are another opportunity for the continent; they may not be affordable to the average small business but 3D printing cafés could be the new internet cafés in our communities.

Governments all other the world have a hard time building and maintaining infrastructure. The construction capabilities of 3D printing could very well improve the government’s service delivery.

As manufacturing takes place from large scale to micro level production, competition will rise which should result in higher efficiency. Consequently, consumer welfare could improve as people get access to a greater variety of products at more affordable prices. Producers can also focus on niche markets or avoid holding unnecessary stock because they’d have the capacity to customise their merchandise on demand.

Three dimensional printing is indeed a disruption to business as usual. Naturally there are more negative risks than have been discussed above. However, while it is impossible to stop progress, we can catch up, mitigate those risks and exploit the opportunities (of which there are also many more than have been discussed).

A foundation needs to be laid to make this happen. This foundation requires the rapid transfer of skills, wider electrification, IP protection, investment in SMEs and an overall progressive approach to policy making.

Vive la printing revolution!